How will technology contribute to the continued success or failure rate of family-owned businesses? Will the rapid development of useful technology be adopted and implemented by family-owned businesses?  How is technology viewed across the generations that comprise a family-owned business? These questions are important to not only the millions of family owned businesses but relevant to their vendors, customers, and policy makers in the U.S.

Illustration from Univeristy of Connecticut Magazine

Family Businesses Play a Significant Role in the US Economy

Family-owned businesses contribute significantly to the economy of the United States.  According to a BusinessWeek article,

“Family businesses account for 50% of U.S. gross domestic product. They generate 60% of the country's employment and 78% of all new job creation. Indeed, some of the world's largest corporations, from Wal-Mart Stores, Inc. (“WMT”) to News Corporation (“NWS”) to Ford Motor Company (“F”) are family businesses. And regardless of size, all family businesses face significant challenges of continuity, longevity, and ultimately success.”

Yet several studies indicate that approximately one-third of family-owned businesses make it to a second generation and the succession rate to a third generation drops to the teens. Whether due to failure or a lack of interest to pass a business to the next generation, the sustainability of a family-owned business is challenged by the divide between generations. That divide often includes how generations use technology.

 Source: John Ward, Loyola University, Chicago

Generational and Relational Divides

Family dynamics and conflict between generations certainly play a role in the failure or success rate of family businesses that make it to the second and to the third generation. An added element of a family business is how and parents and children, brothers and sisters, uncles and aunts, nephews and nieces often work together.

Technology has an impact on the "Generation Gaps” that already exist in most family-owned businesses. Currently, there are approximately four generations – Seniors, Boomers, Generation X, and the Net Generation. With rapid changes in technology, it would be foolhardy to imagine that these generations understand, utilize and value technology similarly. While there may be some adoption across all four generations, each generation has applied technology to their life quite differently.

As reported in an academic research report on family-business strategy, older generation founders are generally authoritarian, unwilling to share power, and strategically conservative. On the other hand, younger generation family members are generally impatient for strategic change, personal independence, and an opportunity to prove their worth. This conflict of objectives may also flow into decisions about investment and value of technology where older generation family members that are less likely to use technology or be comfortable with it, may therefore devalue the potential for technology in the business. Younger generation family members that are more comfortable with technology and use it daily are more likely to value it and push for its adoption.

So what happens when one, two, three or even four generations come together in business and make decisions about technology? As noted yesterday on Know More Media, a recent study revealed that

“Six in 10 business owners with multiple generations working in the business say there have been disagreements between older and younger generations about how to invest in technology.”

The study was provided by Microsoft Corp. and conducted by KRC Research. The implications of the study may be significant for family-owned businesses where the business, by definition, is managed and employs cross-generational family members. Most businesses have multiple generations working in the business.

Small business owners (not necessarily family-owned businesses) get advice on technology from a variety of sources, but more owners get advice from friends and family than other sources such as professional colleagues, technology consultants, retailers or manufacturers. However, business owners who get information from friends and family are the least likely to be satisfied with their investments in technology. So the potential for conflict over technology spending is significant.

Using Technology Helps Small Business

While there is significant discord across generations on how to invest in technology, the study also concluded that that technology helped small family businesses. Approximately, three quarters of those surveyed agreed that technology:

• Increased the efficiency of their operations (79% agreed)
• Grew their business (74% agreed)
• Provided better customer service (74% agreed)
• Improved the quality of their image or product (70% agreed)
• Helped them stay competitive with bigger businesses (68% agreed)
• Enabled them to gain an advantage over their competition (68% agreed)

As a small, family-owned business, you may want to consider how technology can help your business. If you have Gen-X or Net Gen employees or clients they may prefer to communicate technologically. Your clients may find you through a search engine or want to see your company’s web site before they consider doing business with you. Is your business prepared technologically to attract younger employees and customers?

Consider how you can use technology for:

Communication – within the company and with clients and vendors – email, instant messaging, etc.

Marketing – marketing - website & search engines (paid and organic), branding, customer service, market research

Management – customer relations, database management, employee relations, recruiting and staffing, pay and benefits, and leadership and training

Leaders of a family-owned business must recognize the potential breadth of emotions and make objective decisions that are often difficult to come by in such situations. Listening and valuing input from all generations of employees will make a better company, more satisfied employees and a happier family. There will always be cross-generational issues to contend with.  Where possible, use these differences to make better decisions and to create balance in your family-owned business.