Nora and Michael are classmates who are graduating from college in the spring; Nora with a degree in marketing, and Michael with a degree in supply chain and logistics. Both are excited to join their respective family businesses.
Michael’s family firm needs help right away in the purchasing department, so Michael will be joining the firm soon after graduation. Nora on the other hand, will be looking for a position in another company for a few years before returning to her family’s enterprise.
Nora’s plan, to gain outside work experience before joining the business, is often cited in the family business community as a best practice. A google search of “should family members have outside work experience before joining the family business” returns dozens of articles from experts, the majority of which will answer that question with a resounding “yes!”
With such widespread use today, where did the advice originate, and does the evidence support it?
The origins of the advice
The first written reference specifically about recommending outside work experience came in 1964 in a Harvard Business Review article titled “The Family Business” by Robert G. Donnelly. In 1964 family business scholarship was a fledgling field, and Donnelly’s article was one of the first to share the advice. Donnelly studied fifteen successful family companies and conducted personal interviews. His findings? “Several companies require that family members be successful elsewhere before entering the firm.” (Donnelly 1964)
Donnelly’s work was cited early on by the influential family business scholar and consultant Leon Danco. In Danco’s seminal book, “Beyond Survival” published in 1975, he unequivocally writes that “to offer employment in the family business to the heir right out of school is a bad idea” (Danco 1975). And with that it seems, a mandate was etched in stone for a generation of family business consultants. Indeed, Danco’s own reasons for recommending outside work experience (gaining self esteem, making mistakes on someone else’s time, among others) could be pulled right out of any article today.
None of that makes the advice bad, but it should be pointed out that a rigorous, empirical study of the “outside work experience” question has yet to be completed. That leaves advisors and families to rely on anecdotal evidence such as “everyone who has done it highly recommends it” (Harland, 2018: McClure and Ward, 2018: Greenberg, 2018).
What are the potential benefits of outside work experience?
Though hard evidence may be lacking, there are good reasons for Nora to consider gaining outside experience first. Here are some of the most common reasons in favor:
The next generation member will work hard to achieve success on their own merits; they will gain self-confidence and prove they can succeed without the help of family.
They will gain exposure to other business philosophies and management styles. They will see that hard work and effort is required wherever you choose to work.
They will gain useful skills and knowledge that will accelerate their growth when they join the family business.
They will be able to pursue a different career path, which will help them clarify their desire to work in the family business or not.
But where does that leave Michael, who plans to enter the business right away? Is he foregoing obvious benefits and will he be at a major disadvantage in his development and eventual leadership hopes in the business? Not necessarily, and this is where mandating outside work experience can be challenged.
Some family businesses will simply not be able to afford having next generation members detour to other firms for two, five, or even ten years. And there are some practical benefits to going right into the business.
What are the advantages to entering the business without delaying to gain outside experience?
The next generation member will immediately start to develop expertise in the family business’s market and industry.
They will begin to develop long-term relationships with key vendor, customers and employees.
Starting at the family business earlier may provide more opportunity to cycle through a wider variety of positions in the company.
If there is a need to expedite succession planning, then starting at the company earlier allows for more time spent with the current leadership preparing to take over the business.
Entering the business right after school should not be viewed as an inferior choice. It’s simply another option in how the family develops the next generation of leadership and, as with any decision, it needs to be thoughtfully managed.
Preliminary research points to a third consideration for success of the next generation
Though their routes into the business will differ, Michael and Nora will share a similar experience that will deeply affect their long-term success: their entrance and onboarding into the family business. How this process is managed will likely have a larger impact than whether or not they have outside work experience.
New preliminary research is showing that the “inside experience” of the family business is just as important, or more so, than outside experience (Williams and Wittmeyer, forthcoming).
Inside experience can be described as how a next generation family member is exposed to the family business throughout their life and the way the family plans to integrate that member when they enter the business. Inside experience is common to all next generation family members, whether or not they seek outside work experience.
What are key considerations when planning to integrate a new family member?
Several factors play into the inside experience and integration process. Here are some key questions that both the business and next generation member should consider:
How has the next generation member been involved in the business as a young person? Are they passionate about the business and their career prospects? Family business scholars have described a variety of reasons why a next generation member might choose to pursue a career in the family business. The difference between whether they want to join, or feel obligated to join, can affect their level of commitment and success at the family firm (Sharma and Irving, 2005).
Have the current owners given the next generation member an open and clear understanding of the current state of the business, including financial health?
Are there transparent, fair rules for hiring family members into the business, and will the next generation family member be contributing to the core needs of the business (as opposed to being given an invented position just so they have a place to start)?
Is there a professional development plan for the next generation after they start?
The question of gaining outside work experience before joining the family business is complicated. Each family business needs to view their particular situation and goals, and the goals of the next generation family members. Whatever the conclusion on whether the next generation seeks outside experience or not, it’s imperative that their eventual entrance into the business is done thoughtfully and with an integration plan.
Next generation family members should be given the time, space and information to make an informed decision that fits their values, aptitudes and career interests. The process of creating some distance and objectivity will ultimately benefit the business that should accept and support the next generation’s role. There is no single recommendation except to allow the time for them to make their decision.
Danco, Leon, Beyond Survival: A Business Owner’s Guide for Success (1975), The Center for Family Business, The University Press, Cleveland
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Williams, Michele and Wittmeyer, Carol Students and Curriculum (2018), Presented to the Cornell Family Business Scholars Round Table on June 20, 2018