Secrets of Success for second generation family businesses

Family businesses succeed in the second generation only if they become professional businesses.

Recently Galen Lehman took several weeks off from his job as president of Lehman’s. He spent this time visiting suppliers and other businesses he knew and admired. The companies he visited ranged from one employee to 300 employees. Most were owned by Amish or Mennonite families. At each stop, he asked, “What is the secret of your success?” This is one of a series of postings about what he learned.

Like the first generation businesses I visited, businesses now owned by the second generation had many common characteristics.

Founders of successful businesses usually create their success from thin air based on intuition and a Midas touch. But, as the business grows and moves onto the next generation, they have to learn to trust statistical analysis. Flying by the seat of your pants usually stops working. For the owners, “work” no longer means getting their hands dirty in the trenches. Now they must create

organizational charts, learn to measure budgetary performance and figure out how to measure accomplishments like “establishing the corporate vision.”

I saw that in the second generation, business decisions must be made with heads instead of hearts. Owners can no longer do what they like to do. For the sake of the company and for the sake of employees, they must do what the business needs (even if they don’t enjoy it). Owners are often forced into difficult conversations with the multi-talented generalists who helped build the company, because (like the owners) those same people must develop more depth in new areas to fully contribute.

Owners who built the business by dint of pure genius must also learn to recognize and reward the genius of others. In any large business, success means trusting others to engage new ideas, lay foundations and plan the future. The businesses I visited where owners had a high opinion of their own abilities often couldn’t let go of authority. As a result, they were struggling to find loyal and talented managers and innovators.

Without exception, every large, established business I visited was at some stage of making or resisting these kinds of changes. I saw that the ones in the early stages found their path to success blocked by family politics. The ones in the late stages often mourned that their path to success was paved with more than a few broken relationships. In a few cases, this was even true between members of the immediate family.

I would be lying if I claimed that our family journey at Lehman’s has been without struggles. But, I’m proud of how we’ve worked together to reach success. Somehow, we’re figuring out how to separate family relationships, which cannot help but influence every decision, from work, where family relationships can stand in the way of accomplishing our dreams.

Yet, even as we reach for those dreams, we try to remember that “success” means more than just making money. It means building a strong family and living out your values in a meaningful way, too.

Our goal: To build a strong family while we build a strong business.

What’s your experience been with family businesses?

Galen Lehman

About Galen Lehman

Lehman's CEO and son of founder Jay Lehman. Homesteads on five acres. Believes in a Simpler Life...rewarding relationships, fresh, local (preferably homegown) food and the gratification of hard work. Plant a tree!