Cultivating intrepreneurship key to longevity
Every entrepreneur and family business owner has heard the humbling statistics. Only 30 percent of entrepreneurial family businesses make it to the second generation. Beyond that, the numbers surrounding successful succession to a next generation get even more dismal. New studies are finding entrepreneurial and family businesses fare far better than these numbers would indicate. In fact, a 2013 study found fifty-seven percent of the U.S. GDP is contributed by family-owned businesses while globally, it is between 70 and 90 percent. Obviously family businesses are not just surviving, they are thriving.
Judy Hogel, executive director of the Chicago Family Business Council at DePaul University says "Our member companies are doing so much more as they prepare to hand over the reins to the second generation. "Most importantly, the ones who are successful plan, educate and foster an environment of open communication and accountability," she added.
Family firms that survive succession need to prepare a next generation of change agents, according to Hogel. They have to consider that they are passing on more than just a business, it can be a legacy for the family. For a family business to live on, the founders must shift from thinking about just maintaining the business entity to building an enterprising family. That same passion and spirit that drove the founder to create his or her business must somehow be passed to sons and daughters while simultaneously keeping them content to be the guardians of the family business.
"Intrapreneurship allows family members to start something new in the existing family business and innovate from within," Hogel said. "We see it as one of the most important indicators for longevity. Our members who embrace a culture of entrepreneurship within their own walls have a much better chance of a successful transition to the second, third and future generations." They're creating cultures that empower the next generation of leaders within their company.
CFBC member company Chicago Glue & Machine is an example of a company with such a mindset. Co-founders Irwin Katz and Chuck Siegal both had experience in their own family businesses prior to their purchase of Chicago Box in 1984. Both worked with their fathers before becoming partners by purchasing the existing box making company together.
True intrapreneurs, Katz and Siegal expanded their product offerings. Since they were selling adhesive machines, why not sell the glue too? In the late 1980s, Siegal's son, Brad Siegal, joined the company bringing his skill for product integration and production to the family business. Ever since Brad was 16 and watched his grandfather sell his business, he was inspired to have his own company someday.
Just a few years later Katz's daughter, Nirel Inman, joined the company as well with her passion for finance and operations. Allowing Brad and Nirel to be intrapreneurs in the business their fathers co-founded swayed both of them to join the family business instead of setting out on their own. As second generation owners, they both have a deep appreciation for what their fathers built over the last 30 years and have a true sense of pride in carrying on their legacy and growing the business. The culture of intrapreneurship continues, most recently by opening a location in Missouri.
One of the biggest benefits to CFBC member companies is learning from each other and sharing knowledge, added Hogel. They cultivate the entrepreneurial spirit in the next generation. They pass on values and a sense of responsibility. Often they use family resources as a vehicle for spawning new organizations. These traits are what successful long-term family businesses have in common as they redefine those widely-held statistics.
• For more information, contact Judy Hogel at (312) 362-7518 or judy@chicagofbc.com