When Grandkids Ask for Money

by Casey Dowd

The Boomer

Published May 09, 2012

The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to thefoxboomer@gmail.com.

I remember it well: It was 1974, my wife and I had only been married six months and we decided to move to Florida. I had been recently laid off from my job as an assistant marketing director at a newly-built retirement community due to the economy, and I had some contacts in Florida with job opportunities.

We had no savings to speak of, so I went to my “retired” Pop Pop who was living on a fixed income, but had some money saved (that was hidden under a mattress in the house) and asked him for a loan. He immediately asked me how much and loaned me $2,000 in cash. I told him I would pay him back with interest but he looked at me and said, “You don’t need to pay interest, but if you can pay me back that would be just fine.” Well, with that money we were able to buy a house and start our new life in Florida. No, I never did get to pay Pop back, but his generosity gave us a fresh start and we wouldn’t have been able to do it without his help.

Studies show that more young adults are turning to their grandparent for help buying their first home—skipping a generation because their parents are too worried about retirement savings.

Daniel Van Der Vliet, director of the Family Business Initiative at the University of Vermont, shares the following tips for baby boomers being asked for loans by their grandchildren.

Boomer: What is the best way to make sure you get your money back and keep family ties together?

Van Der Vliet: Here’s a general rule of thumb: If you loan money to a family member, you should be prepared to write it off as a gift. Mixing business with family is always dicey – how will you truly enforce failure to repay or negligence of expenditures? Are you able to objectively consider the real costs of not getting your money back as it relates to family ties and legacy?

Boomer: What rules and stipulations should be set for the loan?

Van Der Vliet: Consider rules and stipulations that mirror any credible financial institution. While offering a lower rate may seem like the ‘family’ thing to do, having rates similar to a bank or lending institutions emphasizes the business legitimacy of the loan. Better yet, consider higher rates to encourage going through a bank instead. Allow the family member to seriously consider all options.

Boomer: Should you charge interest rates with the payback plan?

Van Der Vliet: If you find yourself in a position where a loan to family is necessary, it should include all of the normal stipulations you would have in any business loan: purpose, interest rate, repayment terms, security/collateral, co-signor, etc.

Boomer: If I was to lend money to my grandson, should I have an attorney represent me?

Van Der Vliet: Again, a litmus test here is to consider how would you handle this if it were not a family member. In this case, yes, an attorney will assist with the proper language, terms and paperwork. There may even be gift-tax ramifications to this “loan” to be aware of (IRS Publication 550 addresses these issues.) It is also feasible to consider setting up an independent Board to allocate money to family members which would have more oversight to repayment and how the money would be used, similar to a Family Foundation. In all cases, always consult with a professional if you truly expect any portion of the money to be repaid.

Boomer: If I have substantial savings and I was going to leave money to my grandchildren in my will and they come to me for a loan, should I just give them the money I would have left them and delete them from my will?

Van Der Vliet: For grandparents with significant wealth, perhaps an annual gifting program is more appropriate and allows for an annual review of how the money is distributed and allocated. You might also consider a savings plan (529) which has specific purposes attached to it, education, for instance. If it is not stipulated in writing and executed legally, there will be no way to insure your wishes are carried out.

Read more: http://www.foxbusiness.com/personal-finance/2012/05/09/when-grandkids-ask-for-money/#ixzz1v2tiP53s

Ten Most Common Family Business Mistakes

I stumbled upon this during my reading and found it simple yet helpful. Do you recognize any of these mistakes? 

 

1. Confuse family with business

2. Hide the organization chart

3. Keep it under your hat

4. Ignore your in-laws

5. Do it yourself

6. Save money on advice

7. Compensate everything but performance

8. Plan on retiring

9. Leave estate planning to the judge

10. Confuse success with talent

 

  Don Jonovic, The Ultimate Legacy

UVM to Recognize Outstanding Family Businesses

The University of Vermont is calling for nominations for the first annual Family Business Awards.  The awards, which are being organized by the Family Business Initiative at UVM, will recognize UVM alumni and Vermont based businesses that have demonstrated a commitment to creating sustainable business through leadership and innovation.

“Research suggests that 80% of new ventures in the U.S. are launched as family enterprises,” said Dr. Pramodita Sharma, of the School of Business Administration.  “UVM’s alumni are doing their fair share in launching and growing such ventures.”

Any privately held business that is owned and/or operated by a graduate of the University of Vermont can be nominated for one of four categories: 1^st Gen, Multi-Gen- US Based, Multi-Gen Global, and the Vermont Legacy Achievement Award.  The Vermont Legacy Award is also open to all Vermont based businesses that have endured beyond the third generation or longer.

“Family businesses face many unique challenges where ownership, management and family over-lap,” said Dann Van Der Vliet, director of the Family Business Initiative at UVM.  “While there are many family business awards programs already in existence in the U.S., we would like to draw attention to the many family businesses that have been founded by UVM alumni here in Vermont, in the United States, and across the globe.”

“We are humbled and proud to have a truly distinctive panel of judges who have different perspectives on family enterprise,” said Dr. Sharma.  “We are confident that our winners will inspire us all.”

The distinguished panel of judges are: Greg Bourgea, Managing Partner at Gallagher, Flynn & Co., Scott Carpenter, President of Key Bank Vermont, Steven Grossman, Former CEO at Southern Containers, John Hall, COO of Rachael Ray, Robin Tauck, President of Robin Tauck & Partners, and Dr. Pramodita Sharma, Sanders Professor for Family Business at the University of Vermont School of Business Administration, who will serve as the non-voting chair.

Judges will take into consideration success on four dimensions when making their selections: financial success of the company, governance structure in the family and the business, contributions to the community and innovative business practices.

Nominations must be received by May 31, 2012.  The awards will be handed out during Homecoming Weekend, October 5-7, 2012.

For more about the UVM Family Business Awards, or to nominate a business, please go to: http://www.uvm.edu/familybusiness/?Page=UVMFamilyBusinessAwards.html

Low-Cost Ways To Show Employees They’re Highly Valued

Roberta Matuson was our forum presenter in Janaury when we explored “Managing Up, Managing Down, Succeeding All Around” She shared this article with FBI@UVM members by way of Fast Company. 

Small businesses can compete for talent without breaking the bank. Yes, you still need to pay competitive wages to get people in the door, but it’s the perks that will help you retain them. Here are 30 low-cost ideas for small businesses who want to show employees that they are highly valued.

1. Flex time.  Some organizations require employees to be at work during core hours, and employee can set their schedule around this. Others allow employees to put in hours at their own discretion. Most require employees to have a set schedule so managers can plan for coverage. The schedule may be adjusted to accommodate personal matters like doctor’s appointments.

2. Innovation days.  Set aside several days a year to allow employees to step away from their usual responsibilities to tackle projects related to the way they work and the spaces they work in. Results are shared in a company meeting the following morning.

3. Monthly commuter benefits.  Offer a monthly stipend ($100 or so) for those who commute by public transportation. In many cities where mass transit is used, companies offer tax-free transit fare programs; you can learn more about the options available from programs likeTransitChek or Commuter Check. These programs also save companies money in payroll taxes.

4. Fully stocked kitchen.  Provide free coffee, soft drinks, and snacks for employees during work hours. Want to bump this up a notch? Keep organic milk in stock and add fresh fruit and healthy options to the shopping list.

5. Wellness benefits.  Employees can receive reimbursement for purchases related to fitness (up to $300/year). Typical items reimbursed include gym memberships, running shoes, yoga mats, bicycles, and so on.

6. Free lunch.  Order in for all your employees once a week to foster community and give employees a break from packing their lunches.

7. Canine colleagues.  Got an office full of dog lovers? Then invite house-trained visitors to join the team.

8. Parental leave.   As this infographic shows, the U.S. has some of the weakest paid family-leave benefits anywhere–while some states guarantee paid leave, it’s not a federal mandate. You can immediately differentiate your company by making sure all employees are eligible for paid time off after the birth or adoption of a child.

9. No dress code.  Relax–ties are optional in this work environment.

10. Summer hours.  Employees kick back early on Fridays during the summer months, allowing them to beat the heat as well as the traffic if they’re heading out to the beach for a weekend.

11. Free chair massages.  Fifteen minutes in the chair once a week, and employees will return to their desks refreshed and ready to tackle their to-do lists.

12. Optional telecommuting.  In an increasingly mobile and digitally connected world, many employees can easily and successfully work from home part- or full-time. Here are some tips on working from home that will make the transition smooth.

13. Tech neutrality.  Offer the choice of PCs or Macs so employees can work on the machine with which they’re more comfortable.

14. Flexibility in paid time off.  Employees can choose how to use their paid time off bank (vacation, sick, and personal time) to best meet the needs of their individual situations.

15. A culture of work/life balance. Create an atmosphere where it really is okay to leave the office before 8 p.m.

16. Perks for part-time employees.  Many organizations treat part-time workers like they were temps. Provide part-time workers with perks and they’ll be acting like full-time workers in no time.

17. Cultural extras.  Keep the workplace exciting by mixing in rewards like concert tickets, movie outings, or passes to sporting events. Don’t forget to throw some cash your employee’s way to cover the babysitter.

18. Sabbaticals.  Offer month-long sabbaticals after five years of service, or two months after 10 years of service.

19. Laundry service.  Employ a service to pick up employees’ clothes and drop them back at work, clean and folded.

20. Car care.  Who has time to take their car in for an oil change? Companies have arranged for a service to come to the office and take care of this messy task while employees are working.

21. Gift matching.  The company matches employee’s charitable donations, with the match based on what the company can afford.

22. Adoption assistance.  This financial assistance can be used for legal expenses, adoption agencies, or other professional fees.

23. Take-out meals.  To help make things easier, new moms and dads are able to expense up to $300 for take-out meals during the first three months that they are home with their new baby.

24. Employee referral programs.  Good people know other good people, and the best employees are usually hired through referrals. Those who refer candidates who are hired receive a cash bonus award.

25. Green initiatives.  Preferred parking and/or subsidies for those who purchase and drive hybrid vehicles.

26. Paid time off to volunteer.  Employees are given a specific amount of time to volunteer in their communities.

27. Cleaning services.  Sweep employees off their feet–hire professional cleaners to tidy up employees’ homes every two weeks.

28. Tuition forgiveness.  Offer to pay a percentage of tuition owed, per year of employment, for hard-to-fill positions that are appropriate for recent grads.

29. Easier dinnertimes.  Take care of the people who matter by enlisting a vendor to deliver ready-to-eat healthy dinners that employees can elect to purchase and take home to their families.

30. Acknowledgment of significant others.  When employees do have to work late hours, the people who really pick up the slack are their spouses who are forced to work double duty. Acknowledge their contributions by sending flowers or gift cards, along with a personal note to acknowledge their contribution.

Incorporating perks like these into your organization will help you attract top talent, increase employee satisfaction, and reduce costly employee turnover, which in the end is far more profitable than scaling back on your benefit expenses to save a few bucks.

Have you incorporated any of these benefits into your business, or found any other unique ideas that work?

Author Roberta Chinsky Matuson is the President of Human Resource Solutions (yourhrexperts.com) and author of Suddenly in Charge: Managing Up, Managing Down, Succeeding All Around, a Washington Post Top-5 Leadership pick. Sign up to receive a complimentary subscription to Roberta’s monthly newsletter, HR Matters. Register today for Roberta’s free Profitability Accelerator Teleconference Series.

Family Man

Helping to ensure the transfer of entrepreneurial spirit across the generations

by Will Lindner

Dann Van Der Vliet is director of The Family Business Initiative at UVM, established by the University of Vermont School of Business Administration. The program works with family businesses to identify what makes them work and to help the owners surmount obstacles, including planning for succession, that could extinguish them.

 

The Zildjian Cymbal Co. of Norwood, Mass., is 388 years old.

How can that be? The company was founded in 1623, pretty much at the same time the Pilgrims were sailing to the New World (1620), inventing Thanksgiving (1621), and chartering the Massachusetts Bay Colony (1629).

Then, and for centuries thereafter, the Zildjian Cymbal Company was operating out of Constantinople, working through successive generations of the founding family, until 1929, when the proprietors moved the company to the United States.

They survived the Depression and kept passing the business to new heirs to this day, when it is in the hands of the 15th generation of the founding family.

Think they know a thing or two about sustainability?

Dann Van Der Vliet thinks so. But aside from Zildjian’s astounding longevity, Van Der Vliet, director of the Vermont Family Business Initiative (VFBI) at the University of Vermont School of Business Administration, does not think the company is unique.

He sees the qualities and characteristics that have kept Zildjian afloat mirrored in scores of Vermont family-owned businesses, and literally millions of them nationwide.

According to the VFBI, family-owned businesses contribute 57 percent of the U.S. gross domestic product ($8.3 trillion), employ 63 percent of the U.S. workforce, and are responsible for 78 percent of all job creation. About 40 percent of U.S. family-owned businesses continue into a second generation, 13 percent are passed to a third generation, and 3 percent go to a fourth generation or beyond.

Obviously, there’s something about the model that works. Yet it comes at a price.

More than 30 percent of family-business owners (median age 51) have no plans to retire, essentially figuring to die with their boots on, and when family-owned businesses collapse, nearly half the time, the collapse follows the owner’s death.

So while the FOB (family-owned business) model works — “Family enterprises are the predominant form of global economy,” says Pramodita Sharma, a professor at UVM’s School of Business Administration and an internationally acclaimed expert on entrepreneurialism and family enterprise — it is not without its challenges.

That’s what makes the work of the Vermont program so important: These businesses are, arguably, the backbone of the state’s and nation’s economy — the greatest engine of employment — so it’s critical to identify what makes them work, and help these owners surmount the obstacles that could extinguish them.

Van Der Vliet makes this essential point: “Family businesses have values that we’re starting to realize are important. Some have made it through five or six recessions in Vermont and have lasted for a hundred years. Think what we can learn from them!”

The VFBI had its start in 1998, when Greg Borgea, an executive at Gallagher Flynn in Burlington, approached the university to discuss a public-private partnership model.

The accounting firm would bring family-owned businesses together, to help and learn from each other regarding decisions of succession and a range of other issues that FOBs have in common. The university would provide an educational component, tapping into academic resources in business research, long-term planning, and more.

The idea wasn’t unique; Van Der Vliet says there were about 50 such organizations around the country.

Initially, the VFBI established regional centers, providing outreach to local businesses. Van Der Vliet, a New Jersey native, had earned a bachelor’s degree at UVM in recreation management and returned for a self-designed master’s degree that combined business, public administration, and education. He was hired by the university to work in the regional center in 2000 as a program developer.

He met, listened to, learned from, and assisted companies in central Vermont. In 2003 the university closed the regional centers and brought Van Der Vliet to the Burlington campus. He, his wife, Susan, and their children, Kate, 12, and Rob, 7, live in Huntington.

Once in Burlington, Van Der Vliet teamed with then-director Michele Ferrullo Asch. “It was a sweet spot for me,” he says. “I had program experience and business contacts. I had cultivated an ability to sit down and listen to the owners and hear what’s important to them and what they’d like to accomplish. Family businesses dominate the economy, numbers-wise, but it was a relatively new and emerging area for study.”

Van Der Vliet succeeded Asch as director, and developed the program. Succession is, obviously, a pivotal issue for FOBs: Which child of the owner is best suited to take over? Which child wants to, and are these the same person? Is the weight of history — a century-old, multi-generational business — on the heir’s shoulders, or “just” the enterprise of the parent? How is the transaction structured?

Then there are the FOBs that extend beyond the nuclear family (uncles, cousins), and any number of complications, such as part-owners with no management role, and hands-on managers who aren’t family members

Succession may be a focal point, but VFBI’s business members come to realize that it’s part and parcel of the kind of long-term planning they should be doing anyway. The imperative of sorting out succession can lead to a strategic re-imagining.

“There’s a big difference between running a business and owning a business,” Van Der Vliet explains.

“Running a business implies you’re working there day to day. But the higher calling of ownership is to, hopefully, get to the point where the business can run without you; so instead of being a day-to-day thinker you become a year-to-year thinker, or a generations thinker. You become more strategic than operational.”

To engage in the full sweep of these challenges, the VFBI offers two group structures: the CEO group and the next-generation group. Right now there are three CEO groups and two at the next-generation level.

“We keep the groups small, typically only six to eight in a group,” says Van Der Vliet. “It helps foster discussion and keeps confidentiality and accountability high.”

The next-generation groups study and prepare for the complications of succession. CEO groups can go where the faint of heart would hardly dream.

Norman Akley and Lauren LaMorte are the married co-owners of Trow & Holden, a Barre manufacturer of hand tools for the stone-working trade employing 15 people. Akley succeeded his father, Gordon, in a line of relatives dating back more than a century.

LaMorte and Akley have availed themselves of the Family Business Initiative for 10 years or more, but about two years ago joined one of the CEO groups. For Akley, it was a bit of a shock.

There are about six companies in the group, and they take turns hosting monthly meetings. “When we had our first meeting, all our books were open,” says Akley. “I’ve never done that with anybody. The exposure was pretty stressful for me.”

“It was voluntary,” LaMorte interjects. “You reveal what you want to.”

Other owners had done the same, says Akley, and he felt they should follow suit. Now they look forward to the meetings.

“For us, it’s like having an advisory board,” says LaMorte. “We have a very high-level CPA facilitating and a bunch of smart people in the group, and we have things to learn from them.”

LaMorte notes consistent characteristics. “Family businesses tend to be very self-reliant; they’re pretty private and they’re very busy; people wear a lot of hats. When we go to seminars of the VFBI, and also in the CEO group, it gives us an opportunity to step back from our daily tasks and think longer-term, and clarify our thoughts in specific areas.”

“We’ve heard amazing stuff about the way things get done, or don’t get done,” adds Akley. “We’ve learned things from companies about how they solve problems. Dann is really good at what he does. He keeps us apprised of seminars and programs that are germane.

“Those that aren’t taking advantage of this resource are selling themselves short. You’ve got to put every tool in your toolbox that you can these days. You need all the resources.”

Van Der Vliet, 43, knows the feeling. He is a bit of an entrepreneur himself. The VFBI gets no state or university funding, so Van Der Vliet must craft a stimulating curriculum and program that attracts paying members.

Current enrollment stands at about 32 companies, but others participate in some activities and membership is dynamic. Four contributing partners — Gallaher Flynn, KeyBank, hmc2, and the Coaching Center of Vermont — help supplement dues and registration fees for non members attending forums.

Although the VFBI is 13 years old and highly regarded, Van Der Vliet believes it is poised to take flight anew. This has much to do with Sharma’s recent arrival, buttressing an academic staff that includes Professor Rocki-Lee DeWitt, senior lecturer Amy Tomas, and lecturer Bret Golann.

Sharma has an extensive research and publication history (she is co-author of a book titled Entrepreneurial Family Firms, which is used in academic courses around the world). In her view, studies of the family business model, and supportive interaction with working businesses, couldn’t be more timely.

“As the population is getting older and a large majority of founders are getting closer to retirement,” she says, “two related challenges are faced by family enterprises: the transferring of ownership to next generations, and transferring the entrepreneurial spirit across generations of leadership.”

Van Der Vliet is encouraged, however, by the tenacity, imagination, and resourcefulness of the businesses he works with. It follows a rich history of Vermont entrepreneurship (which he defines as “coming up with an idea, and taking the risk of executing it”).

“We have a very creative state,” he asserts. •

Originally printed in Business People Vermont – December 2011.

Global Family Enterprise Case Competition Is First Of Its Kind.

Burlington, VT, USA – The University of Vermont (UVM) School of Business Administration announces the inaugural 2013 Global Family Enterprise Case Competition (FECC). This first of its kind case competition will match undergraduate & graduate students enrolled in universities and colleges with the world’s finest family business programs.  The competition for the UVM Family Enterprise Cup will be held in Burlington, VT, USA from January 9 – 13, 2013.

Pramodita “Dita” Sharma, Sanders Professor at the UVM School of Business Administration states, “UVMs Family Enterprise Case Competition is the first of its kind in the world. While family enterprises dominate the economic landscape and are the biggest contributors to job creation and communities, there is currently NO case competition in the world that exclusively focuses on family enterprise cases. We are very excited to launch this competition and expect teams from leading schools in the world with graduate and undergraduate family business programs to participate.”

Undergraduate and graduate students who will be enrolled in a university or college at the time of the competition (Jan. 2013) are eligible to participate in this competition.  Each team will consist of 4 student members (including one alternate) and at least one coach. Complete competition details will be forwarded to each team upon successful registration.

The competition format will be based upon the eventual number of entrants. All teams will be assigned by random draw into divisions and then compete against those teams in a round robin format accumulating points to determine the division winner. Division winners will advance to the finals round, which will consist of an additional 1-2 cases. All cases will be judged by a panel of judges representing experts from industry, business and academia. Judges will be entrepreneurial leaders who are well versed with the unique dynamics of family enterprises. Presentations must be in English. The winning team receives the first ever UVM Family Enterprise Cup as well as $2500. The division winners will receive $1000 per team.

“The Family Enterprise Case Competition will be an annual event that will showcase both the best of current family business case writing as well as case analysis. This competition will attract next generation thinkers and successful business leaders from across the globe to Vermont,” shares Daniel Van Der Vliet, Director of the Family Business Initiative at UVM.

The total team registration cost is $1000 USD, with pre-registration of $250 due by 30 May 2012. Each participating team will pay for their travel and lodging, while the University of Vermont will provide most meals and entertainment during the completion. Hotel rooms have been secured at the Hilton Burlington at $115 USD (for single or double occupancy).

TO PARTICIPATE, please send an immediate expression of interest via email to FECC@uvm.edu or call 802-656-5897.  Teams must also pre-register to secure their spot by 30 May 2012 at:  http://events.constantcontact.com/register/event?llr=py7cifcab&oeidk=a07e5l6sm1t63e624d1.  

Form 1099 reporting

This comes from our trusted partners at Gallagher, Flynn & Co.

There has been a lot of press around Form 1099 reporting over the last couple years, including legislative changes. Many of the biggest proposed changes have been repealed, but 1099s continue to be reporting that has the interest of the IRS. On most 2011 business tax filings, there is a new question regarding the filing of Forms 1099: are you required to file any and did you properly file them? We will be asking about this new question this year as we prepare your 2011 tax filings.

In the meantime, attached is a summary of Form 1099 filing requirements and issues for your review.  If you have any questions, please contact your GFC representative for more information.

Tax Alert #32 Form 1099 Filing Requirements

Lillian Frank - Administrative Assistant

Gallagher, Flynn & Company, LLP

55 Community Drive, Suite# 401

So. Burlington, VT  05403

Main Line: (802) 863-1331

Direct Line: (802) 651-7201

Fax: (802) 651-7305

Email: lfrank@gfc.com

www.gfc.com

Success Beyond Tomorrow

You may be noticing a bit of a new look for The Family Business Initiative @ UVM. First, the name. Though not a radical departure, after discussing with members and stakeholders, we have changed the name to identify ourselves more closely with the University of Vermont, but kept our Family Business Initiative intact.

Our new logo, seen at the top of this email, signifies the inter-connectedness of our family business networks, both at the peer group level, but also the broader connections that exist between members, our partners and the University.  However, maybe you see something different. Let us know.

Our tagline – “Success Beyond Tomorrow” echoes what each of you are currently engaged in, building a lasting success for your family and business.

Finally, if you are connected to us via Twitter or our blog, we have a new name there as well.

Twitter - @fambizsuccess

WordPress - fambizsuccess.wordpress.com

All of this happened with the input of our members, the support of our Board of Advisors, and the diligent work of Veronica Williams and hmc2 advertising.  Thank you Veronica.

Creative Corner: Family enterprises need to plan for succeeding generations

In addition to the Green Mountains and Lake Champlain, Vermont’s landscape is adorned by many innovative family enterprises — Bond Auto Parts, Pomerleau Real Estate, Maple Landmark, Simon Pearce, the RehabGYM and Vermont Country Store, to name a few. And the dominance of family enterprises in the business community is not unique to Vermont. There is growing awareness among public policy makers, scholars, and practitioners around the world of the integral role these enterprises play in creating jobs, incubating new businesses, and promoting economic development.

At the University of Vermont’s School of Business we’re working on several projects to try to figure out what helps family enterprises to succeed over generations. Our Vermont Family Business Initiative, led by Dann Van Der Vliet, offers programs throughout the year on issues important to family enterprises. Our researchers are engaged in the Successful Transgenerational Entrepreneurship Practices (STEP) project housed at Babson College in Massachusetts.

In this project, over 170 scholars from 41 leading institutions of the world work together to develop usable knowledge on transgenerational entrepreneurship. How might the entrepreneurial spirit of one generation be passed on to the next? Is the curiosity, conscientiousness and openness to experience that is inherent in the founders, transferable to the next generation family members? Or, does the entrepreneurial drive of the founding generation dim the lights on the entrepreneurial aspirations of the next? Findings from this research suggest that there is no one answer. While some families successfully transmit the entrepreneurial spirit across generations, others struggle to do so, often leading to the end of their firms after the founder’s career is over.

Research indicates that successful dynastic families plan for the entrepreneurial career of each member of the family by providing age appropriate experiences to build their entrepreneurial skills. For example, in 1976, two Mok brothers — Peter and John — and John’s wife, Meg, founded Automatic Manufacturing Limited in Hong Kong. The trio manufactured low-tech engineering plastics such as those used in remote control toys and electrical appliances.

The technology was simple, margins low, volumes high and competition intense. Over time, through keeping a constant eye on innovation and a focus on high quality, the company has moved into high-tech products used in office electronics, industrial control systems, medical and surgical products. In these segments, the margins are higher and the competition less intense. Today, Automated Manufacturing employs more than 3,000 people and occupies a 330,000-square-foot facility in China.

To continue on the innovative path, the Mok family has developed a spin-off scheme for building the entrepreneurial spirit and expertise of the next generation. By age 30, family members are expected to complete a master’s degree in technology and gain experience in a non-family firm. Between the age of 30-35, they must complete a marketing-based degree while taking on an executive position in their family firm. Between 35-40, family members are to co-found a new venture with a non-family employee of the parent company. The next five years are spent in leading this venture. At 45 years of age, the spin-off is merged into the parent company and the next generation member moves to the headquarters to oversee a segment of the parent company. Similar planning characterizes successful family enterprises in Mexico and Germany.

Of course, one size does not fit all families or family enterprises. Each family needs to develop its own set of guidelines for imbuing the entrepreneurial spirit in the next generation and ensuring that the spirit of the senior generations stays alive as they move from one life stage to the next.

The University of Vermont’s School of Business takes pride in preparing our students to become successful entrepreneurs in changing times. For your family enterprise related questions, please contact us at the Vermont Family Business Initiative and we will do our best to help you.

Dita Sharma is the Sanders Professor at the University of Vermont. Prior to this appointment, she was the CIBC Distinguished Professor of Family Business at Concordia University, Montreal. She is the editor-in-chief of Family Business Review. In October 2011, she received the prestigious Barbara Hollander award in Boston at the 25th anniversary celebration of the Family Firm Institute.

Professor Sharma Delivers Keynote at Asia Pacific STEP Family Summit

Dr. Pramodita Sharma recently returned from Kaohsiung, Taiwan where she was the keynote speaker at the 2011 Asia Pacific Successful Transgenerational Entrepreneurship Practices (STEP) Family Summit.

STEP is a global applied research initiative that explores the entrepreneurial process within business families and generates solutions that have immediate application for family leaders.

Dr. Sharma spoke about “Governing a Family, a Firm, and a Family Enterprise: How a Family Enterprise can Achieve Sustainability.”

“I was amazed at how the issues faced by family enterprises around the world are so similar,” said Dr. Pramodita Sharma, of the University of Vermont School of Business Administration.  “My talk provoked similar thoughts and inquiries that I have experienced in the US, Canada, Mexico and Europe.”

Participants in the Summit participants came from all over the world including Australia, Canada, Thailand, India, Malaysia, Japan, China, UK and the US.  And despite the diversity, Dr. Sharma noted the unification around issues that concern leaders of family enterprises, particularly succession, trans-generational entrepreneurship, governing a growing firm and family, managing sibling relations, and motivating next generation family and non-family members.

“These are all issues that we address through our Family Business Initiative and bring to the attention of our students in our Family Business course,” said Dr. Sharma.  “It was an honor for me to be invited to deliver this keynote speech at this important Summit and spread the word about our initiatives at UVM into this region of the world.”