Making outside work experience worthwhile

Many business families require NextGens to work outside their companies as a prerequisite for joining the family firm, believing it to be the best way for younger family members to gain legitimacy, to learn what work “is really like” and to make mistakes at no cost to the family business.

However, this requirement is often put in place without any clear plans to help the NextGen derive value from the experience that can be passed on to the family business. Given that these outside work mandates often lack a solid re-entry plan, it’s not surprising that NextGens often decide not to return to the family business.

When this happens, disappointed families often ask where they went wrong and what they could have done to keep their NextGens interested in the family business. As we highlighted in a recent Family Business article, NextGens with outside work experience are not necessarily better prepared than those who start their careers in the family business. In our research, we found that a NextGen’s success hinges on the family’s ability to have open conversations, as well as the NextGen’s motivation and talents.

Still, while these two factors can help keep promising NextGens interested in the family business, they alone are not enough. Two important elements are also needed: a plan to help them get the most out of their outside work experience and a process for re-entry into the business.

Making the Most of Outside Work

A successful process for allowing a NextGen to gain outside experience before joining or re-joining the family business can be broken down into three phases:

Phase 1: Preparation 

This phase begins with radically open conversations between the senior and younger generations. These conversations should start when younger-generation members are beginning to think about what they want to do professionally. During these discussions, the senior family members should articulate the requirements for joining the family business, the reasons why these requirements are in place and the skills that are necessary for NextGens to succeed. 

The relevance of these conversations for value creation is at least twofold. First, they help develop alignment and understanding between the generations. When different generations learn about each other and their points of view, they develop a shared understanding of the process for joining the family business. Second, having these conversations allows NextGens to have a voice in this process, enhancing their feelings of fairness, increasing their commitment and motivation and encouraging personal responsibility. Before NextGens begin working outside the family business, talk with them about their aspirations and discuss how outside work experience can help them achieve their goals. 

A second important element in the preparation phase is developing a set of expectations and a plan for outside experience. Expectations are essential to feelings of fairness, and creating a plan will help all involved to better understand what needs to be done, how long it will take, how this process will unfold, how goals will be measured and how a continuous connection between the next generation and the family business will be achieved. 

One way to start planning is with clear goals that answer the questions:

1.     Why are we asking the next generation to work outside? 

2.     What are we expecting them to learn or accomplish? 

3.     What do they need to learn or accomplish in order to be successful in the family business?

4.   How will outside experience benefit them, the family and the business? (What will it help us achieve?)     

It’s wise to document these goals. This tends to heighten their importance, which, in turn, makes success more likely. Discussing these questions might even cause you to reconsider the need for outside work altogether.

In considering these goals, family business leaders should also ask:

1.     What are the expectations for the next generation in the family and the business? 

2.     What do the next and current generations expect each other to do in the process? 

3.     How much say should and will the NextGen have in what they do and how they do it?

Determining the length of time required for outside experience is also crucial in the planning stage. Typically, families require NextGens to work elsewhere for two to five years. Given that many will have attended college, this means are already in their 30s by the time they return to the family business.

Make sure to discuss the critical markers that indicate readiness to join the family firm:

1.       What are the expectations regarding the duration of the outside experience? 

2.       Why is this amount of time necessary?

3.       What are the critical markers that will be assessed?

4.       Under which conditions can this timeframe change?

The last piece of the planning stage is tied to monitoring progress and requires families to consider these questions:

1. How will NextGens’ progress in gaining competencies be measured?
2. What happens when progress is not being made? When and how will the family support improvement?
3. How might we determine if it’s no longer worth pursuing development?
4. How often will progress be measured?
5. Who is responsible for the measurement? 

To make success more likely, NextGens should be invited to co-create the plan and help set expectations. Imposing a plan on them is no way to build a collaborative environment for the future.

Phase 2: Working Outside the Business

Having a plan does not, in and of itself, create value. NextGens’ outside experiences need to be designed with the end goal in mind and should be targeted to help them, the business and the family.

The first consideration is how to maintain regular contact between NextGens working outside the business and the leaders of the family firm, as well as with the family in general and with any family governance bodies that exist. For example, there can be monthly gatherings (perhaps for lunch, or coffee) where a senior-generation member meets with a NextGen to discuss:

1. What the NextGen has found interesting about their outside work
2. What they’ve learned from the experience
3. How the experience is shaping them to become a better professional
4. How their learnings can help the family business
5. Whether they have failed and, if so, how they recovered from that failure

During this time, families need to cultivate this ongoing connection between the family business and the NextGen. From our research, we know that one of the shortcomings of requiring outside employment is the lack of connection with the family business. For a NextGen to want to join the family business, they need to know it and feel connected to it. Business families benefit from creating experiences for NextGens to continue to learn and be involved in what the family business does. Examples of this include involvement through ownership activities (i.e., participating in the ownership council or joining quarterly ownership calls), through business governance (i.e., observing board meetings, shadowing board members), through business visits or through family governance (i.e., participating in the family council or specific committees).

Families must also consider these questions:

1. When will they know that the next generation is ready to come into the family business?
2. How will this be decided, and by whom?
3. How will any succession plan be impacted if the NextGen is either not ready or not willing to return?
4. What type of support will the NextGen have in deciding when and if to come back into the family business (e.g., discussions with family leaders, coaching, managerial assessments)?
5. How long might such a discernment process take?

These issues should be discussed throughout the NextGens’ outside work experience to facilitate the process and to enhance open communication between generations. 

Phase 3: Re-entry into the family business

If the NextGens ultimately decide to enter the family business, careful attention should be given to their onboarding. Coaches, mentors, senior family leaders and others can help NextGens determine how and when to bring knowledge gained from working elsewhere into the family business in a manner that enhances their credibility rather than detracts from it.

Questions to consider include:

1. How should a NextGen’s entry into the business be communicated to employees, family and others? Who should make that announcement, and when should it take place?
2. How much of the plan for the NextGen’s future in the family business should be communicated to those who are not already privy to it?
3. Who must the NextGen get to know and start developing relationships with, both before and after entering the business?
4. What should the expectations be regarding how quickly or slowly the NextGen will progress once in the company?
5. Will the NextGen be treated differently from non-family employees? If so, how? 

Final Thoughts

If your family chooses to impose a rule mandating that NextGens have outside work experience before being eligible for leadership positions, greater understanding of the purposes, goals and reasoning behind the requirement helps create alignment, enhance family unity and foster success. Open conversations at all stages of the outside work process help. Clarity and intentionality help. When all are clear about where they are going, why they are heading in a particular direction and what their shared values are, coordinated action leading to success becomes all the more likely.