Running the Family Business: Insights from a Second-Generation Leader
Learning from the Past while Forging a Path for the Future
Family businesses are one of the fundamental building blocks of the American dream. Yet, only 30% of family businesses survive the transition from the first generation (G1) to the second (G2), and a mere 12% make it to the third generation (G3). These startling data points suggest the significant hardships of maintaining a family business and how we rarely see the legacy upheld for multiple generations. This raises a sensitive issue: Do you keep the company in the family?
As a second-generation leader and CEO of Low Country Case & Millwork (LCCM), I have navigated these difficult conversations and discovered vital insights from growing up alongside the family business to, later, becoming CEO. From conflicting opinions over the transition of power to redefining the standard for success and managing blood relationships through professional conflicts, let’s just say that G2 entrepreneurs have a heavy load to carry after the torch is passed down.
The Role of the Second-Generation Leader in 2024
Second-generation leaders like me face a unique set of challenges and opportunities. While we inherit the foundation of a long-standing reputation and goodwill, we are also expected to innovate and grow the business. This delicate balance is a challenging aspect of our role, ensuring the business's longevity while preserving its legacy.
It is a dual responsibility that requires a compromise between preserving the undertones of the established brand and driving new initiatives that enable continued growth—a task that is almost certain to cause upheaval. Today’s world demands upgraded technology and streamlined processes to keep up with increasingly competitive environments. The second-generation entrepreneur is expected to tread lightly while stepping out from under the shadow of their predecessors. We are driven by the notion of “don’t mess up,” while G1 is focused on survival in its rawest form.
Sibling Stereotypes Resemble G1, G2 & G3 Entrepreneurs
The generational pass-down of a company closely mimics the patterns of family dynamics: the oldest child is most similar to G1 business owners; they are stubborn and determined to succeed independently. While the second child, most relatable to G2, has a more explorative attitude. They are generally accepting of change and take calculated risks. The 3rd generation business owners, like the 3rd child of the family, often are shielded from the hardships of the startup phase. This enables them to feel more comfortable and assured than G1 & G2 and focus their efforts on creative initiatives. This pattern extends beyond the bearings of immediate family structures and helps us understand the perspective of each generation of leaders.
Early Exposure and Family Dynamics
Exposure at a young age to the family business plays a crucial role in shaping the mindset and skills of a second-generation leader. My journey began at the age of 12. I was the eldest brother, who spent summers in Summerville riding a bike to the office as my first job and gradually progressed through various roles in the company. This hands-on experience provided a deep understanding of business operations at LCCM, giving me the reinforced work ethic that enabled me to later take on the CEO role.
“As the oldest, I was always under the assumption that I was expected to work in the family business, while my younger brother had different interests,” I say. As a proud father and successful G2 leader of Low Country Case & Millwork, I am passionate about giving my children a chance to choose their path. I want my kids to pick their careers rather than establishing the expectation for them to overtake my position.
This is a common theme among the next-generation owners as they bear the brunt of assuming their family's livelihood and facilitating the change in how things are done in the business.
The Generational Divide
G1 leaders are often doers who are deeply involved in daily operations, while G2 leaders tend to focus on processes, team dynamics, and systems to drive the business forward. This shift from doing to managing is pivotal for the company's evolution.
“A first-generation founder and leader is going to be that person who really put their blood, sweat, and tears into creating a business from scratch. They’ve built a legacy. There’s absolutely something to be said about that! So no matter how much a following leader scales the company or professionalizes the company, that founder will always be set apart as the person who made that level of risk, put in that hard work, and who had what it took to actually stand that company up from the ground.” - Larry Brinker Jr.
Distinct Differences Between the Generations
G1 Leaders are entrepreneurial at their core, passionate, and fearless, with a primary objective of surviving. They possess a short-term, day-to-day mindset and derive a significant portion of their self-worth from the business’s well-being. This trait is integral to their growth at the initial phases of operation, but as they pass on the company's reigns, it can impede G2. The founders have difficulty stepping away - especially when passing the role onto their children.
G2 Leaders are open to new ideas focused on maintaining some status quo while pushing for achievement. The most successful adopt a long-term, big-picture mindset and see their value outside the workplace. They are capable of delegating tasks rather than commanding all aspects of the business.
I am proud of my aptitude for self-reflection and emotional intelligence, as well as how I manage my team members and internal conflicts. I can invest in LCCM's culture and well-being, whereas my father had to spend his time establishing the workplace itself.
Best Practices for Second-Generation Leaders
In the last year, Low Country Case & Millwork brought in over $11 million under the direction and leadership of my wife, Amy, and me. Our efforts have led the company to the 2024 Small Business of the Year award from the Charleston Metro Chamber of Commerce. Below are some of the most significant points of advice that have contributed to our continued success with LCCM:
Never Stop Learning: Embrace continuous learning through reading, executive coaching, and engaging with non-competing peers. The "Law of the Lid" suggests that a leader's ability determines the effectiveness of their organization. Raising your leadership lid through personal growth is essential - solve internal problems before tending to the external.
Prioritize Professionalization: Bring strong credentials and entrepreneurial skills to the table. It's crucial to professionalize the business, build out new initiatives, and engage in strategic planning. Freshen the advisory team, develop shareholder and ownership agreements and foster family-wide activities to ensure cohesion. My summers spent working at the office prepared me to assume the role of CEO. With the hard work and hours invested, I was able to push the company beyond the scope of the G1 standards.
Balancing Legacy with Innovation: While preserving the family legacy is important, innovation and growth are equally vital. This balance can be achieved by engaging in strategic planning and pivoting the family focus from a single-minded business development approach to a broader set of initiatives. Don’t be afraid to make the necessary changes, but try not to rush or overwhelm the existing culture and operations.
Be a True Leader: Build a respectable team and learn to delegate effectively. As the business grows, it becomes impossible to do everything yourself. Empower your team members and trust them to take on responsibilities, allowing you to focus on strategic growth. This is one of the most necessary steps for a second-generation entrepreneur.
Stand By Your Values: Establish and communicate clear company values. “Our values aren’t just written down,” I say. “They’re on our shirts and walls as daily reminders. We even have an accountability and reward program to ensure everyone knows our values are not just important; they are permission to play.”
“In the case of a family business, the potential to succeed is even greater because (of) shared values, common goals, mutual respect, and a winning culture (that) can transcend generations.” - Yoni Lavi
Transitioning from G1 to G2 in a family business is a complex yet rewarding journey. I am a strong example of a modern entrepreneur who has overcome the challenges of evolving his family business and finding personal satisfaction in his career. My wife and I have a life built on hard work and mutual respect fueled by serving our community, friends, and family.
