By Danielle Walsh

When a business’s ownership changes hands, this transition can, understandably, be a challenge for those involved. This notion is particularly true for long-standing team members or employees who have worked with the previous owner(s) for many years. Resulting challenges are often magnified when ownership is transferred to a next-generation family member.
Often, the transition isn’t well communicated, which can cause employees to worry about their job security. Indeed, amidst a generational transition of ownership, relationships between owners, managers, and team members can become strained, which can lead to decreased productivity, low morale, and even employee turnover. To ensure a continued harmonious and healthy working environment, these very real fears need to be addressed by outgoing and incoming owners.
Unfortunately, there are many inter-generational differences which tend to complicate the ownership succession process—for those on the managerial team, as well as team members working in other departments.
Three generational differences of note
Work ethic
In most cases, the founding- and second-generation owners of a family-run business worked very long hours, with both groups likely having spent more time working in the business than at home. By comparison, third-generation employees tend to value work-life balance and are keen to automate or seek efficiencies to ensure they can find sufficient time for family. This choice is a stark difference from first-generation workers, as it was much more common in years past for households to have a stay-at-home parent. Nowadays, most households have two working parents, which means both necessitate some flexibility with regard to work.
A differing approach to work ethic can sometimes lead to conflict between the generations, stemming from a lack of understanding, coupled by a significant deviation from previous standards (which may be difficult for older generations to tolerate). This can also have an impact on long-term employees who are used to operating in the same way as the retiring generation. It is not uncommon to see a certain level of resentment if employees feel they are putting in more hours in the store than next-generation owner/managers. This is often misinterpreted for a lack of caring or commitment from newly appointed owners.
Methods of communication
To generalize, many founding- and second-generation family business owners are poor communicators. In my years as a family business advisor, I cannot tell you how many successful entrepreneurs have said to me, when discussing important business practices, “I haven’t told anyone else about this—they should just know.”
Third-generation managers tend to be more transparent and willing to take the time to communicate with the family members they work with. Keep in mind, however, the way these individuals prefer to communicate often frustrates their predecessors (i.e. emails/text messaging vs. phone calls/face-to-face interactions). For many, this change has a significant impact on how families communicate overall. For those in the older generation (including owners, employees, and managers), it can be difficult to adapt. This can lead to a palpable slow-down or stoppage in communication between the generations, which can cause serious issues for the business. Indeed, if a long-standing employee is not comfortable with email or text messaging, but new owners insist on using this method of sharing information, this can lead to conflict and result in a less productive work environment.
Priorities
As mentioned, unlike many of their predecessors, third-generation owners and managers tend to prioritize work-life balance and time spent with family. This shift in focus can be very difficult for some, which can lead to conflict.
In my experience, second-generation owners and managers are often left frustrated by what they perceive as a lack of commitment to the business by those in the incoming generation; likewise, the third generation is often frustrated by what they see as an unreasonable demand of their time. Clear expectations must be outlined so all family members, irrespective of generation, know what is expected of them and what they, in turn, can expect from the business.
Business priorities also tend to differ between generations, with newcomers prioritizing innovation, change, and the use of technology, which can be difficult for second-generation team members. These changing priorities can also be difficult for the business’s veteran employees who are used to established policies and processes and are not necessarily onboard with new changes.
Change, while always a challenge, can be particularly overwhelming when it impacts a management team, ownership group, and/or overall policies and procedures. It may plant seeds of insecurity in the minds of employees, leading them to believe the new owners don’t appreciate them, or think they were doing a poor job under previous management. This can lead to a loss of employees—especially those who have been around for a long time. Employee retention is already a struggle for most businesses; during a transition, it can be even harder.
What can be done?
With the right approach, it is possible to navigate potential concerns from long-standing team members. This can help maintain strong, positive relationships with these loyal employees, while also minimizing conflict and increasing overall retention and morale.
Keep communication open
It is important for the new owner to share their vision and goals for the company with the team, as well as address any questions or concerns employees may have. Maintaining open and transparent communication is the first step in navigating changes during a generational transition of ownership. Holding team meetings and having one-on-one conversations with team members can help build trust and create a positive work environment.
Seeking out (and listening to) employee feedback is also extremely important. Encourage team members to share their thoughts and feelings about the transition. Be responsive to their concerns. This will help build trust and foster a sense of collaboration between the new owner and the employees. I often encourage retiring owners and newly installed leaders to hold a strategic planning session with their staff to reinforce the notion of everyone working together. This helps align the decision-making with the long-term strategy.
It is also important for incoming owners to recognize the established methods of communication, as this can certainly help bridge potential “communication gaps.” Third-generation owners, for example, must recognize that, just because they sent an email about something, this does not necessarily mean the message has been clearly communicated to all team members. Don’t be a stranger—make face-to-fact contact whenever possible to avoid any hiccups.
Emphasize stability
Job security and employment stability are among the biggest employee concerns during a transition of ownership. As such, new owner(s) should take steps to reassure employees that their jobs are secure and the change in ownership will not affect their benefits. This can be accomplished by sharing plans for the future of the company and emphasizing stability and continuity.
It is also important to make sure any changes to company policies or procedures are communicated clearly and in a timely manner. This will help to minimize confusion and uncertainty among team members and reinforce the stability of the company during the transition.
I often recommend next-generation owners wait a few months before making significant changes. It is important to let employees feel comfortable with the transition and then, slowly, make changes. This will also allow the new owners to include team members in discussions on how to proceed with certain procedures, making changes empowering rather than stressful.
Maintain company culture
Company culture is the foundation of a successful business, and it is important to keep it consistent during a generational transition of ownership. This can help to preserve the sense of continuity and stability employees are looking for and, again, make the transition process smoother and less stressful for all involved.
New owner(s) should strive to understand and embrace the company’s existing culture and values, and work to maintain these moving forward. This may include continuing to support employee events and initiatives, or preserving existing traditions and celebrations which have become a part of the company’s culture. In a family business, maintaining culture is often easier, as it seems to naturally permeate through the generations and to the employees.
Invest in training and development
During a transition, new systems and processes may be introduced, requiring employees to learn additional skills or adapt to new roles. Investing in training and development can help team members adjust to these changes and increase their confidence. This is particularly important for long-standing team members, who may feel they are being left behind as the company evolves.
Investing in training and development can also demonstrate the new owner’s commitment to the growth and development of their employees, which can increase employee satisfaction and engagement.
Create a positive work environment
The work environment has a significant impact on employee morale, productivity, and satisfaction. Incoming owners should strive to create a positive workplace where employees feel valued, supported, and motivated.
This can be achieved by encouraging collaboration and teamwork, as well as recognizing and rewarding employees for their contributions. Creating opportunities for employees to network and socialize outside of work can also help build strong relationships and foster a positive work environment.
Be patient
Patience is a virtue—but, for entrepreneurial leaders, it is often difficult to apply!
Change takes time, and it may take a while for employees to adjust to new ownership. More than anything, incoming owners should be patient and understanding as employees navigate this transition.
Being patient is also important with respect to implementing revised rules and business practices. Changes to processes, policies, and structure can add an extra layer of stress. While incoming owners are likely excited to put their own stamp on a business, these changes need to be planned and introduced over time—not all at once. Having realistic expectations of when and how to make change will help new owners be more successful and get the employees and managers onboard.
Danielle Walsh is a chartered professional accountant (CPA), chartered accountant (CA), and holds certificates in family business advising and family wealth advising from the Family Firm Institute (FFI). Walsh developed her philosophy and desire to help family businesses from her father, Grant Walsh, who has worked as a family business practitioner for more than 25 years. She and her father published a book titled, A Practical Guide to Family Business Succession Planning: The Advice You Won’t Get from Accountants and Lawyers. Walsh also currently teaches the first family business course offered at the undergraduate level at Carleton University in Ottawa and recently joined MNP as a partner, focusing on succession. She can be reached at danielle.walsh@mnp.ca.