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Keeping the family business growing

Today's guest post was written for the University of Miami School of Business Administration. How do you pass the entrepreneurial mindset to the next generation? Readers, what is your experience?

By Marianna Makri

Makri_headshot_08The skills required to start a business are often very different from the ones required to lead it — and that can be an advantage when a second generation joins the top ranks of a family business. That was the consensus from the members of a panel discussion I hosted on the dynamics of family businesses, called “Keeping It in the Family,” held at the school during Global Entrepreneurship Week, an international initiative aimed at inspiring entrepreneurship.

Three father-son pairs talked about their experiences working side by side in the family business: Rick Tonkinson and his son Steven, of the financial planning and advisory firm Rick Tonkinson & Associates; Arthur Steier and his son Alex, of manufacturer SSI Chusei; and Sandy Goldstein and his son Sean, who expects to graduate this year from the School, of Capsicum Group, a digital forensics, data recovery and technology support company. All three fathers are members of the School’s Entrepreneurship Programs Advisory Board; Steier is chairman.

A key question was: “How do you pass on to your sons the entrepreneurial mind-set that made you so successful?” Rick Tonkinson responded: “As a family business, my mind-set of continuing to build on what we have already achieved over the past 20 years is embedded into the company culture. Passing on my mind-set to move forward, despite the economic conditions, is conveyed by me by Steven through our weekly meetings. We are constantly evolving to another level of efficiency and level of service. It is not having to create something new from scratch, but rather mold what you already have.”

Sandy Goldstein suggested that entrepreneurs of the next generation need to be effective managers and process innovators. He distinguished between two types of entrepreneurs: those who invent something new and change the boundaries of their existing industries, such as Apple founder Steve Jobs, and what he deemed “incremental innovators” like Papa John’s founder John Schnatter, who built his pizza business by refining the process for an existing concept.

Entrepreneurs like Schnatter could be called process improvers or industry hawks. Often, the members of the second generation in a family business must fall into the second category.

Arthur Steier noted that the first-generation entrepreneur may have been motivated by economic need. If so, then it may be difficult to instill that spirit in his children, as that necessity likely doesn’t exist for them. Steier’s conclusion was that entrepreneurs are neither taught nor born; rather, they are created by external forces that ignite an internal drive.

The panelists agreed that while you cannot teach someone to be a visionary, you can certainly help guide the development of an effective leader.

Marianna Makri is an associate professor of management at the University of Miami School of Business Administration. Her areas of expertise include strategic management and entrepreneurship, corporate governance, innovation and technology management, and business policy. She has authored more than twenty book chapters and academic journal articles in top management publications including the Academy of Management Journal, Strategic Management Journal, and Entrepreneurship Theory and Practice.