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How multigenerational family businesses thrive

Amy Fontinelle

Posted on November 30, 2017

Amy Fontinelle is a personal finance writer focusing on budgeting, credit cards, mortgages, real estate, investing, and other topics.
Multigenerational family business

How do family businesses overcome the financial odds and survive for multiple generations? Take a look at the history of a store doing business in West Palm Beach, Florida.

It was there in 1895 that Gus Anthony and his brother James started Anthony’s Ladies Apparel, a clothing retailer in what was then a brand-new town. These founders passed the business on to younger brother Emile. By the early 1920s, the company was specializing in chic retail attire in resort towns and had stores in 13 cities, including a men’s store, with locations in Virginia, North Carolina, and Ohio.

Despite many challenges and transitions since, Anthony’s Ladies Apparel has survived and thrived.

Today, it’s the oldest business in the city and has 14 locations around Florida. Emile Anthony’s great-granddaughter, Kristin Anthony, is now carrying the business into its fourth generation along with her father, M. Pope Anthony, the company’s president since 1986, and her uncle, aunt, brother, and cousin. These three baby boomers and three millennials work together on different sectors of the business, “somewhat harmoniously,” joked Kristin, the company’s e-commerce manager since joining the business three years ago at age 26.

So what makes multigenerational family businesses like Anthony’s so successful? Here’s how those families, and the coaches and consultants who help them succeed, explained it.

Pride sources success

“Pride was key to me. I never wanted to let down my father, as I saw how hard he worked day in and day out to grow his father’s business,” said M. Pope Anthony.

Daughter Kristin expressed a similar sentiment: “I can really see and feel a different work ethic from the family because you want nothing more but to see the continuation of something your great-grandfather started and the previous generations worked so hard to make successful.”

Emily Brereton, marketing coordinator of Napkins-Only, a custom manufacturer of recycled napkins based in San Jose, California, represents the third generation of her grandfather’s business. It was founded as Eagle Business Products in 1985 to provide printing services to Silicon Valley companies. She said that working at a family business means her concerns are greater than herself.

“I care a great deal about providing quality work because my boss (my mother), my coworker (my sister), and the board members (my grandparents) depend on what I can produce. My work ethic directly impacts their well-being,” Brereton said. She thinks working for family causes everyone to work harder: “We are ultimately more productive because we have a vested interest in each other’s success.”

All of this sounds wonderful, right? But working for the family business may not always be so great.

Family limitations and problems

It’s rare for members of a family business to have all the skills they need to keep pace in this quickly changing world, said Karen Wylie of The Midlife Entrepreneur in Spruce Pine, North Carolina, in an interview. Wylie is a business consultant to entrepreneurs and business owners over the age of 50 who are preparing their businesses for succession or sale. She says family businesses need to outsource more. They need to look outside the family business for assistance to stay on top instead of following the traditional path of keeping things in-house and letting the business be shaped by the principal family members’ strengths and limitations.

How have Anthony’s Ladies Apparel and Napkins-Only dealt with these challenges? Kristin Anthony said that her family’s outsourcing efforts have been most successful when someone in the company already understood the work that needed to be done and just didn’t have the time to do it. That way, they could hold the contractor accountable and gauge whether they were actually generating a return on their company’s investment. (Related: MassMutual business solutions)

“We had a lot of issues giving these tasks out to marketing agencies before we had a good handle on it, because we couldn’t tell if what they were doing was actually working for us,” she said. Now that family business members understand those tasks, they can drive outsiders to produce better results for them while saving time.

Brereton echoed Kristin Anthony’s sentiments. She said running a successful business requires an incredibly diverse skill set, and that outsourcing projects such as search engine optimization and web design has helped Napkins-Only remain competitive and avoid sacrificing the business’s viability by attempting to handle these tasks in-house. No one inside the business has deep technical knowledge about these subjects, but seeing the need to fill these gaps in her company’s knowledge has caused her and her sister to study SEO in their spare time and inspired her to enroll in graphic design classes.

Older generations and technological change

Another area where multigenerational family businesses can struggle is with keeping current. They might fail to expand into e-commerce or have a poorly functioning website that looks like it was designed in 1998. Older family members who are in charge may resist changes that younger family members propose. The average CEO tenure in a publicly owned firm is six years, while family business leadership can endure for 20 to 25 years, creating challenges for multigenerational family businesses when it comes to shifts in technology, business models, and consumer behavior, according to the Harvard Business Review .

But multigenerationality can be a strength if family business members keep an open mind.

“I think every family member can learn from the previous generation — both what worked and what didn’t,” said M. Pope Anthony in an interview. “I think the best thing about a new generation coming on board is that they are more in touch with current trends and technology and they can really teach the older generation and help the business progress forward rather than stay static.”

Wylie agreed that each generation brings unique strengths to the business.

The baby boomer generation has strong interpersonal skills, making them good at customer service and team building, she said. They also tend to have more tolerance for structure and routine, which can help with creating procedures and systems. Millennials and Generation Xers are more up to date with new technology and social media marketing strategies, Wylie suggested, and they tend to work well without structure and can find novel solutions to problems.

The flip side is that each generation tends to have a specific Achilles heel, whether it’s neglecting to maintain the books and manage finances, which Wylie has found to be common among gen Xers, or being fiercely independent and failing to be a team player, as the case has been with many millennials in the businesses she’s worked with. (Related: Engaging millennials in the workplace)

She explained how one Generation X-er convinced his family that all the business’s finances needed to be online, in the cloud. He agreed to do the work himself, but because he disliked data entry, it didn’t get done. When tax time arrived, the business had to file an extension for the first time ever, which appalled the older, rules-oriented family members, while the Gen Xer saw it as no big deal. The experience deeply shook the family’s trust in him and made them reconsider his candidacy for succeeding the founder, she said.

Family businesses for the long term

Unlike Anthony’s and Napkins-Only, many multigenerational family businesses are publicly held: think Walmart, Ford, and Samsung. Others are privately held: think educational services company Follet (founded in 1873 and perhaps best known for operating college bookstores), Kohler (also founded in 1873; check your bathroom faucet for their name), and S. C. Johnson (founded in 1886 and maker of the Ziploc® bags in your pantry and the Windex® in your cabinet). For privately held family businesses, the lack of quarterly earnings reports and shareholder expectations can make long-term planning easier.

These companies don’t cut corners to make or save a few pennies because they don’t usually have investors or shareholders outside the family who expect consistently high returns, said family business advisor Justin Anderson of JSA Advising in the Minneapolis-St. Paul area. Anderson specializes in helping family businesses through complicated transitions and development initiatives.

Family business owners often understand the ebb and flow of business cycles and think long term during downturns or periods of lower earnings by continuing to invest in employee development and reinvest earnings into the business, Anderson explained.

Larger, nonfamily businesses, by contrast, will sometimes cut employees to preserve the bottom line, which can increase turnover and cost the company more in the long run, in addition to crushing morale, overworking employees, and creating a culture of fear instead of one of trust and merit, he suggested. Family businesses that keep their employees through thick and thin tend to have more loyal, harder-working employees thanks to their long-term outlook.

Family businesses are also less likely to use inferior materials in an attempt to save money because their names and legacies are tied to their businesses, Anderson argued.

Strong relationships and support

Strong relationships can be another benefit of a long-term focus.

“We recognize that we are all working to create something better for all of us, and this definitely goes beyond just the family — perhaps because we are a family business — to all of our employees,” said Kristin Anthony in an interview. Many of the company’s employees have become like family, she said: “We look out for them, and they look out and work hard for us.”

The company’s warehouse manager, Margaret, just turned 72 and has been with the company for over 50 years, longer than M. Pope Anthony. She said she plans to work for the company until the next generation — Kristin’s kids — comes around. (Related: Keeping key employees )

Anderson says he sees a higher level of trust and respect for coworkers, coowners, and partners in multigenerational family businesses. This attitude can go a long way toward creating a healthier culture and can minimize the jockeying for power and opportunities that goes on in larger organizations. He added that the multigenerational family businesses that tend to succeed long term are based around mutual trust and respect grounded in good communication, clearly defined roles and responsibilities, good processes, and an understanding of the various personalities within the organization.

Wylie said she’s found that because family members watch each other grow up or grow older, they often have more tolerance for each other’s idiosyncrasies, which leads to less stress, less resentment, more forgiveness, and a thriving team dynamic.

Intense emotions and family drama can sometimes interfere with business, though.

Family members may avoid difficult conversations about bad behavior, inadequate performance, finances, or even theft because they know they can never walk away from the relationship, said Derrick Mains, a consultant and trainer with AMP Business Systems who has worked with a number of closely held companies.

The solution is accountability, he said. It’s an invisible force that can manage on your behalf, in the same way that children will modify their behavior if they think Santa Claus is watching. Accountability comes in the form of clear, quantifiable, visible, and regularly reported expectations and measurements for everyone who participates in the company, from employees to partners to vendors, so that everyone can see everyone else’s contribution (or lack thereof). An accountability system can help everyone manage themselves to avoid letting the family down — sometimes with the help of an outside consultant who can play the bad guy.

Brereton added during an interview that multigenerational family businesses work best when all parties know their limits. “It is inevitable that some family drama will leak into the workplace; the key is stopping it before it becomes too much,” she said. For example, private arguments from the night before will follow into the workplace and complicate business productivity if they aren’t dealt with.

“I’ve found that in such situations, one needs to prioritize the family relationship in order for the company to flourish, even if that means taking short stints of time off,” Brereton said. Family members might need to cut the workday short to blow off steam, take a coffee break to deal with the personal issue, or even work remotely or leave the company if the conflicts are severe or frequent enough.

“Ultimately, the family business is only as strong as the family itself. Conflicts need to be dealt with or the business will implode,” Brereton said. “Some family members cannot work together. It is better for everyone, the business included, if this fact is noticed, acknowledged, and respected.”

Family experience

In a multigenerational family business, future employees are often involved in the business from childhood, giving them a level of experience and knowledge that no outsider can match.

Napkins-Only’s Brereton had this experience.

“Growing up, I knew what my parents did. I followed them to work. I listened in on phone calls with clients. I developed a detailed knowledge of our product line without needing to be trained,” she said. “When I began working full time, I did not require training to get up to speed; I’d been following along the entire time,” she said.

A possible downside of growing up in the business is younger family members’ sense of entitlement and older family members’ failure to scrutinize their qualifications. Kids need to earn positions in the company, not be handed them. Business mismanagement and resentment from nonfamily employees are major risks, as is failure to successfully transition the business to the next generation.

Pope Anthony said he thinks failure can be prevented by bringing in the next generation as early as possible, having them operate as employees, and working them around the company to find their strengths and ensure that they understand each sector of the business. Those in charge should know what younger family members are good at before putting them in charge of the entire company or giving them voting stock.

Wylie added that identifying and grooming successors from the next generation to take the helm takes time and shouldn’t be left until the managing family member becomes ill or dies. Instead, the managing family member should gradually train and delegate tasks to successors — and ideally, there will be more than one possible successor to give the business multiple options for continuing and thriving. (Related: Developing a succession plan)

The bottom line

Family businesses have inherent strengths: family pride, a long-term focus, lifetimes of experience, and strong relationships. Within these strengths lurk problems that can destroy family businesses: bickering, entitlement, and failure to evolve in step with technology and the broader culture. But the bottom line is this:

“We are stronger because we know each other so well, and our business is our mutual legacy,” Brereton said. “As a family, we have a common goal: to better the company for all of us. We are stronger because we are united both as a family and as a company.”

More from MassMutual…

Knowing the value of your business

How to make sure your heirs won’t fight

Selling your business: Planning for the proceeds

This article was originally published in November 2017.


The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own, and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.