How to Lead Multigenerational Ownership Companies

It can be hard to run a company when you’re dealing with the third and fourth generation of ownership. I’m talking about the grandchildren and great-grandchildren of the founder.

When someone founds a company, they put everything into it. Late nights, missed vacations, missed weekends. A lot of sacrifices go into starting and running a company, making it successful. When the second generation takes over, they usually know what it takes to keep it going.

They remember those days. The missed weekends, the missed ball games and concerts, the missed vacations. So when it’s their turn to run the company, they know what it took.

But when the third generation comes along, they’re usually the ones who kill a successful company. They’ll end up wrecking it by being fake. They’ll put in the time, but they’ll always skirt the hard stuff. It has been my experience — and you can point to several business case studies about it — that they just want to fart around and use the company as their source of fun money.

I remember at the end of my career at RobRoy, I told the third generation to pull their fingers out of their ass, or I was going to fire them. I was told I didn’t have the authority to do it, and I said, “Yes, I do.”

I was overruled, and as it turned out, I wasn’t able to fire the grandchildren of the owners. But the company has faced hard times ever since.

It starts with the original owners having the mental and emotional fortitude to let their kids fail. They have to be willing to sit by and let their kids make mistakes. But if those kids have a relief valve, and the parents constantly step in to save the kids, they won’t learn anything. The best lessons are the ones you can learn from failure.

Not surprisingly, Anheuser-Busch and Ford were able to escape this dilemma, but they’re huge organizations that are very big and very rich. They have entire boards whose job it is to keep things operational and to not let an owner go nuts with power.

You can also afford to give titles without accountability, and it really doesn’t show in the operations of the organization. But in a small org where every pair of hands counts, you’ve got to get the very best out of every pair of hands. The tendency in large companies is to surround the 3rd-generation screw-ups with people who will keep them on track. That’s how the big corporations manage to survive.

In those organizations, it takes a long time for a decision to be made, and you never know who made it. But in a small organization, a decision can be made today, and the outcome felt tomorrow.

So how do you lead that?

Carefully. But by holding everyone to the same standards as everyone else. No one gets special favors or is exempt from the rules.

In a small organization, you can’t have a majority of people who believe they’re exceptions to the rule. You have to have the same standard. Otherwise, people know who is potentially protected, so you have to hold your standards rigid and hold everybody to the same.

That means, if things go badly, you have to hold those people accountable, even if they’re grandchildren of the founders. Otherwise, they won’t be respected within the organization.

So what happened when I tried to fire the grandsons of the company owners? They were quickly yanked out of the organizational structure, sent off to a different part of the organization in a different city, and were given titles of Vice President of Acquisitions or Special Projects or something. They were really just counting paper clips, but they were put where they could do the least amount of harm. They were kept safe from me, they were kept safe from consequences, and kept safe from everyone’s respect.

The balancing act of trying to manage multigenerational operations is pretty interesting, because if the original founder doesn’t have the intestinal fortitude to slap them around, then it really doesn’t work, and you’ll never be allowed to fix the problem.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now, I help companies turn around their own business, including pivoting within their industry. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: Caliroi (Pixabay, Creative Commons 0)