One of the main ways that a single entrepreneur takes the first step toward a “Family Enterprise” is by involving the next generation: children. Often, this process is informal; summers and weekends turn into a full-time job after college or right after high school if college is not in the cards. There is, however, such a thing as being too informal about this transition, and it can and does lead to trouble down the road. Here are some suggestions for handling this transition based on my experience with many families both before problems arise and after things have become a bit (or quite) messy:

 Researchers have found that entrepreneurialism is not tied to specific genes. Many founders have the mistaken belief that since they were able to become successful entrepreneurs, their children must be hard-wired similarly; this assumption often leads to trouble. Take the time to assess your children’s interests and abilities over time in a formalized manner to make sure that bringing next-generation members on board is in everyone’s best interest and is good for the business.

Create a development plan that includes specific learning goals and objectives and a time frame for assessing progress. This assessment should not happen once at the end of the initial time frame but throughout and with the goal of building on strengths and identifying weaknesses to support growth and learning in those areas.

Find a good mentor for the child entering the business. I’ve seen many families engage an experienced and trusted non-family employee for this role. Other families have sent the child to spend significant time working in a similar business in another part of the country (so not in direct competition – often these cooperative connections are made through professional associations). This allows the child to deepen his or her knowledge of the industry while also learning how things might be done differently in another firm – valuable data to bring back to the family company. Other families have requested that the next-generation member try working in a very different field they find interesting with the goal of supporting the child to make sure that they find a career they have passion for and are not simply “defaulting” to the family business.

Be flexible about appropriate roles. As time passes it may become clear that the next- generation family member does not have what it takes to lead the company but may have strong skills in sales or financial analysis or production. Don’t force a square peg into a round hole but find the best position for the next-generation family member to be successful and demonstrate competence. Forcing a poor fit will not only hurt your business but will quickly lose the respect and damage morale of non-family employees.

Owners do not have to work in the business. Early on in a business the owner does it all.  But as a business grows and moves from generation to generation, and family members increase exponentially as siblings give rise to cousins, it is common to have more owners than qualified leaders, managers and general employees. One misstep I see too frequently is failing to make the distinction between ownership and management and clarifying the rights and responsibilities of each.

What is the lesson?

 Enterprising Families: Take the time to formalize a process of onboarding the next generation. This will help to manage the expectations of everyone involved, protect the harmony of the family and support the success of the enterprise.

 Advisors to Enterprising Families: As a trusted advisor you are in a powerful position to engage founders and their family in tough conversations. By using a matter-of-fact, educational approach you can help your family clients avoid common pitfalls. Formalizing the process of bringing in the next generation will pay dividends for your clients for generations to come and will help them to see you in more than a technical role.