Preparing Next Generation of Business Owners

How to Ensure Your Kids Have the Needed Skills

By Chuck Sujansky

 According to Forbes Magazine 90% of American businesses are family owned or controlled. In terms of dollars and cents family owned businesses represent 50% of the US Gross Domestic Product. (1) Are you ready for the next generation of business owners

But family owned businesses also face some pretty stiff challenges. Less than a third survive the transition from the first generation to the next. Apart from the financial challenge, family-owned businesses fail because the first generation holds onto the reins too long or is reluctant to step aside. Sometimes the older generation simply fails to prepare the next generation for future leadership.

The Challenges of a Family-Owned Business

Many businesses are common in the automotive industry. New and used car dealerships, auto parts stores, collision centers and mechanical repair shops all are passed down to heirs. But how many of these offspring are prepared for executive leadership? What skills and abilities will the succeeding generation need to run the businesses successfully? To illustrate the challenges involved, consider the following case study. (2)

Bobby Hansen, the owner of a large suburban new car dealership has a dilemma. A second-generation owner himself, Bobby expected his three children to join the family business following college. But the new car business is much more complex since the days when Bobby joined the dealership following high school. As each of Hansen’s children graduated from college they assumed positions in different departments of the dealership.

The oldest son, Rob, joined the sales department and gradually became one of the top-producing members of the sales team. When the top management position in the sales team opened up he was a natural choice to assume the position.

Bobby Hansen’s middle child, his daughter Katy, spent summers during college in the dealership office processing paper work and managing records. Following graduation she came into the dealership full time to manage the office staff. Due to her knack for details and understanding of procedures she was well-respected by her employees.

Hansen’s youngest son, Billy, was the “gear head” of the family. He was passionate about cars and trucks and was very knowledgeable about repairing and customizing them. When he wasn’t managing the parts department he could be found tinkering under Next Generation of Business Ownersthe hood of a car.

Together the Hansen family was a formidable team when it came to running the dealership successfully. But when Bobby began to think about retiring from the business he realized he had a dilemma. Each of his three children possessed differing strengths and abilities and any of them could potentially be the best choice to lead Hansen Motors into the future.

The oldest son, Rob, was the obvious choice for future president of the dealership. But while he was good with people he disliked details and didn’t always see the big picture. His daughter was very detail oriented and well respected by her employees, but she didn’t necessarily understand the technical side of vehicles or possess the persuasive  skills to work with sales staff. Billy, the youngest son, possessed technical skills and a true passion for cars and trucks. But he showed little enthusiasm for managing others and showed no ambition for stepping up to greater responsibility.

Future on the Line

When it comes to preparing the next generation of leadership within any family business functional knowledge and skills are not always enough. Family members with specific skills in sales, service or office procedures may not be effective at supervising dozens of employees or directing a multimillion-dollar operation.

And selecting a successor without considering his or her skill sets only serves to postpone problems into the future and possibly sow the seeds of future challenges. For top leaders the question is not just “who is ready to step into the top spot and lead the organization now?” The problem becomes “what skills and capabilities will be needed by top leaders tomorrow to assure the dealership’s continued growth and success?”      

Specifically, owner Bobby Hansen needs to ask himself two questions:

  • Which of my children is the best candidate to succeed me now?
  • How can they each acquire the skills necessary to guide the dealership into the future?

The answers to those questions will help Bobby prepare for transition to the next generation of family leadership. In our experience the best strategy is to start with a validated assessment tool to determine each offspring’s strengths, weaknesses and potential.

After all, an auto technician wouldn’t begin repairing an engine just because the “check engine” light on the dashboard is glowing     g. He or she would first use an Onboard Diagnostic Scanner to evaluate the engine’s performance and pinpoint the components in need of repair.

The same is true of all of the people charged with managing the dealership. Before making promotion or development decisions the owner should take steps to evaluate each candidate’s skills, potential and developmental needs. We believe the most effective tool for that job is the Profile XT® by Profiles International.

Assessing the Future

Choosing a successor for the top leadership position of a family business, or any business, is tough. It’s possible to gain an objective assessment of a candidate’s qualifications and capabilities using validated instruments like the Profile XT®. Unlike traditional “tests” this assessment doesn’t evaluate accumulated knowledge or measure right and wrong answers. Instead it examines what an individual may need to succeed within a given position.

But it also pinpoints areas that person should develop to be effective within the job. It’s a reliable way to understand what an individual brings to the position as well as what the individual needs to learn to build on his or her success.

In the case of Hansen Motors, the oldest son might benefit from developing stronger financial management skills, learning performance management techniques, and understanding strategic planning concepts. Hansen’s younger son could benefit from improving his “people skills” as well as from receiving in-depth exposure to the dealership’s other departments. Bobby Hansen’s daughter could benefit from developing strategic management skills, receiving cross-department exposure, and gaining sales experience.

The final decision about which of his three children should succeed him doesn’t have to be made right way, so long as Bobby Hansen is committed to implementing a succession plan based upon the individual strengths, developmental needs and accumulated skills of each heir.

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  1. Aileron. “The Facts of Family Business.” Forbes. Forbes Magazine, 31 July 2013. Web. 11 Apr. 2016.
  2. This case study is based upon the experience of several family-owned businesses to whom we’ve provided consulting. Those businesses are ‘exemplified’ here to illustrate the challenges faced by family owned businesses within the automotive industry.