December 7, 2021 by Interchange Capital Partners
By Ahmie Baum
Family businesses face a unique challenge today - bridging the perspectives and approaches of up to five different generations working together. As someone who has guided countless family businesses through transitions, I've seen firsthand how these generational differences can either strengthen or strain a business's future.
The statistics are sobering: only 30% of family businesses successfully transition to the second generation, and a mere 12% make it to the third. But these numbers don't tell the whole story. In my 45+ years of experience, I've found that families who embrace their generational differences - rather than fight against them - create stronger, more resilient businesses.
Whether you're actively working with your children in the business or planning for a future transition, understanding how to harness the unique strengths of each generation is crucial for your company's long-term success. Let me share some strategies that have helped our clients turn generational gaps into competitive advantages.
Generational Perspectives
In order to understand how to bridge the generational gap, you must first understand each generation’s unique perspective.
Younger
The younger generation consists mostly of Millennials and Gen-Z, maybe even some Gen-X depending on when your family business was started. This generation is typically filled with energy and excitement as they are just entering the working world. The family business may be the first or only job they have ever had. The younger generation is eager to make a difference, implement ideas, and build something that is their own. They may have a historical understanding of the older generation but may not grasp the significance of that history (i.e., the hard work, time, effort, and sacrifice it took to build the family business from the ground up). This generation may take for granted the financial security that the family business has provided.
Older
The older generation typically consists of Traditionalists and Baby Boomers. Again, depending on which generation started the business, Gen-X could be part of the younger or older generation. This is the generation that built the business from the ground up. They may have come from little financial security and built a business that is very financially secure, although they don’t necessarily feel that way. They may worry that they are only one bad decision away from losing it all, and so they want to protect all that they’ve built. The older generation has a wealth of knowledge about how to create, manage, and maintain the business, but they may be a little stubborn in their ways and unwilling to try new things. They may also have a desired outcome for the business that the younger generation is not aware of, which can make communication between generations difficult.
How to Bridge the Gap
Now that you have an understanding of the general ways in which each generation thinks, let’s take a look at ways to bridge the generational gap, improve communication, and maximize your family business’s chance of success.
Work Outside the Family Business First
The first way to bridge the generational gap is to have the younger generation work outside the family business first. Depending on your specific situation, this may not be possible. For instance, if you are short-staffed or worried about needing a successor sooner rather than later, you may need the younger generation to take up the reins right away. Assuming this is not the case, however, having the younger generation work outside the family business first can provide several benefits, including:
Improved skills related to managing responsibility and building work ethic
Increased understanding of the younger generation’s strengths and weaknesses in a professional setting
Appreciation for the family business, how difficult it was to build and maintain, and how important it is to be able to effectively manage in the absence of the older generation
Outside work can provide foundational skills that can then be honed and expanded upon in the context of the family business.
Tell the Story of the Business
Another way to bridge the generational gap is to tell the story of the family business. This works to both create a common history that each family member can remember with pride, as well as build a common vision of the future that both generations can work toward. It is an anchoring point for times when there may be mistakes, misunderstandings, or disagreements about how to proceed. When everyone is on the same page about the story behind the business, its goals, and what it represents, navigating generational differences becomes much easier.
Assign Appropriate Roles Within the Business
Next, it’s important to make sure family members are placed in positions appropriate for their age, level of education, experience, and skill set. The more you can play to the younger generation’s strengths, the more successful they are likely to be. Avoid nepotism as much as possible as it only serves to create tension and resentment among non-family employees. The strong foundation you’ve built must be maintained if the business is to pass successfully to subsequent generations, and nepotism works to undermine even the strongest of foundations.
Celebrate Generational Differences
Just because the oldest generation is different (sometimes significantly so) from the youngest generation, doesn’t mean that all those differences are bad. Using assessment tools to identify the core values and strengths of each generation is a great way to bridge the generational gap and open the door to working together collaboratively.
Just as people grow from children to adults to elders, a family business must do that as well. Those who are able to thrive across several generations almost never look exactly the same in the third generation as they did in the first. It is important to embrace innovation and diversification so your company can grow and adapt in the long run.
How Our Family Business Advisory Firm Can Help
At Interchange Capital Partners, we specialize in helping families navigate generational transitions through our Clarity Foundation™. Our deep experience working with multi-generational businesses gives us unique insight into turning potential conflicts into opportunities for growth.
We help you:
Create structured communication frameworks between generations
Develop clear succession strategies that honor both traditional wisdom and innovative thinking
Build governance systems that leverage each generation's strengths
Design collaborative decision-making processes that respect all perspectives
Ready to transform generational differences into competitive advantages? Contact us at team@interchangecp.com or call 412-307-4230 to schedule a consultation.
About Ahmie
Ahmie E. Baum is the founder and executive chairman of the board of Interchange Capital Partners, a premier family business advisory firm committed to empowering family-owned businesses. With over 45 years of experience, Ahmie specializes in guiding families to safeguard and grow their wealth through our strategic Clarity Foundation™.
Passionate about helping multi-generational family businesses, Ahmie excels at navigating their unique challenges, allowing them to focus on what they do best. One of his greatest joys is getting to know the firm’s clients personally, listening to their stories, understanding their journeys, and identifying and solving for the challenges that keep them up at night.
Ahmie collaborates closely with clients to help design comprehensive plans that address their obstacles, seize opportunities, and leverage their strengths. As he manages each family's complex and unique situations, Ahmie takes on their challenges as his own, fully committed to helping them work toward achieving their goals. His mission is to guide clients through their uncertainties, enabling them to move beyond their fears and confidently pursue their dreams.
Ahmie began his career at EF Hutton in 1979, eventually rising to the position of Senior Vice President. In 1993, he transitioned to Paine Webber, later acquired by UBS, where he spent nearly 27 years. During this time, he earned an Executive Certificate in Financial Planning from Duquesne University and obtained his CFP® designation. He holds a Certificate in Family Business Advising (CFBA) from the Family Firm Institute. He has been actively involved with Strategic Coach, an internationally renowned entrepreneurial coaching program, for over 20 years. Additionally, he has earned certificates from The Growth Institute, specializing in business growth, scaling, and cash management.
When he’s not working, Ahmie enjoys spending time with his wife, Sara, their three children, and three grandchildren. He recognizes that health is wealth, so he has committed to daily yoga, meditation, and plant-based eating. His other hobbies include woodturning, golf, reading, listening to music, and biking. He is active in his community, has served as the Foundation Chair of the Jewish Federation Community Foundation of Greater Pittsburgh, and supports various philanthropic endeavors. To learn more about Ahmie, connect with him on LinkedIn.
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