Advising / Consulting / Issues in the Family Enterprise

Riding the Shirtsleeves: Deconstructing a foundational family business myth

The Practitioner

As I prepared a presentation, the chair of the financial services firm cautioned me, “Please, don’t start with the shirtsleeves to shirtsleeves story; we’re sick of it.” But, I thought, everybody starts their talks that way, and with the factoid that very few family businesses survive to the next generation. We want to raise anxiety and concern to get their attention and soften them up for our positive message. Why was she tired of hearing it? When I reflected further on the impact of this myth on my audience, I began to see the wisdom of her request.

“Shirtsleeves” refers to a very real danger. But by starting with scare tactics, what sort of responses do we trigger in family leaders? The myth proposes that family fortunes dissipate over generations, further suggesting that the failure lies with the heirs. It implies that second and third generations of a family are lazy and unmotivated and use up the fruits of their elders. On its face, it is really demeaning to the younger generations. By implication, it suggests that wealth creators have the higher virtue and they need to use their wisdom to set up structures like conditional trusts to “take care” of these obviously less noble and deficient heirs. What’s the problem? Isn’t this prudent foresight?

This may not be the best way to invite, inspire and engage the younger generation. When I present the “shirtsleeves” myth, elder generations respond with head shaking agreement and concern for the future of what they think of as “their” wealth. They want to avoid “spoiling” (what an interesting word choice!) their kids by exercising control and conditions and oversight of their now adult children. The myth justifies a lack of trust. How does this affect their beneficiaries? This paternalism communicates a message that they can never measure up to the family legacy and are barely expected to. Tapping into their own uncertainty and even guilt about being inheritors and their own anxiety about finding a place where they can shine, this approach can fuel a self-fulfilling prophesy. Heirs are expected to be passive and not contribute; and to no one’s surprise, that is how they act. With a small but significant income from a restrictive trust that asks nothing of them, they respond by acting like eternal children!

By focusing attention on what can go wrong—which is certainly possible—the shirtsleeves myth diverts attention from another, more promising dynamic: seeing the treasure and value in the human capital of the “rising” generation. The reality of many inheritors is that they very much want to contribute to the family’s legacy by creating wealth and using it wisely. They have a deep sense of service and responsibility but in directions that may differ significantly from those of their elders. How do they express that difference and perhaps challenge the implicit distrust of their elders?

A positive way to respond to the challenge of equipping the next generation is for the older generation to create a climate in which the next generation can exert influence over the family enterprises and support activities that develop their capability and credibility. For instance, I have conducted workshops for the Family Business Network (FBN) in Asia and other places, helping next generation family members discover their callings in life, given the advantages their family can provide, so that they can find ways to be a positive resource to their families. I see many families where leadership for entrepreneurship and family development comes not from the top–the founding generation or second-generation elders—but arises from the energy and values of the new generation. Far from being lazy or unmotivated, faced with the reality of their family’s abundance, inheritors want to expand the family’s mission to include socially responsible business, investment and community service. Too often they perceive that it is hard to offer their contribution, since it sometimes is not offered in a traditional package.

The alternative is to focus on the positive elements–such as values-orientation, desire to make a difference, and teamwork–of the millennial generation. Their actual behavior does not support the stereotype of the entitled brat (though certainly some of them exist). FBN has created Polaris, a pledge for their members, which guides them to create a sustainability plan for family and business stewardship. Who leads the family to do this? Largely, the initiative of younger family members who see that the wealth of the family can be put to new purposes. One of my graduate students, , himself a next generation family leader, is doing his doctoral research on the emergence of such “family champions” who, without being given formal leadership, step up and help the family or family enterprise move in a new direction.

The shirtsleeves myth can do harm if it leads older generations to overlook the positive engagement and values of their children. I have begun to reverse the meaning of this myth, by focusing families on how they can become aware of and harness the values-based dedication of the next generation. In some families, lack of validation and support for new ideas causes the family members with the most talent to go elsewhere while those with a more limited purview remain in the family business. The shirtsleeves situation arises from the behavior of the older generations, and their unclear invitation to the next generation, not necessarily from the motivation of an entitled next generation.

Instead of worrying so much about their children, founders might better look to themselves to consider how they invite their children to be their partners, and how they begin to change their role from controlling owners to generative mentors. If they do not begin with trust and offer responsible opportunities, they will be answered by passive or irresponsible behavior. My current study of 100 year family enterprises (see the working paper Good Fortune: Building a 100 Year Family Enterprise, Good Fortune, 2013) offers evidence that successful third and later generation enterprising families have a positive attitude toward the next generation, seeing them as resources, sources of “human capital” that are as important to the family as their financial capital. One entrepreneurial member of the third generation can offer family leadership that creates financial returns and also harnesses family resources for social service and community responsibility. In successful families, the third generation often has the opportunity to help the family adapt to new realities, innovate in the business, develop human capital in the succeeding generation and offer leadership and funding to improve the community.

The entrepreneurship “gene” often resurfaces in G3. The challenge for a family enterprise is to decide if it wants to harness this generativity to a shared enterprise or split into different individual families. The family wealth may not survive because the talent goes off on its own path.

How can the elders create a positive climate to invite the next generation to prepare itself for its special opportunities? They can begin with a mindset that they should trust their children when they become adults. What is appropriate behavior to take care of a child is not appropriate for young adults. Elders have to become aware of their tendency to create negative stereotypes of their children to justify over-control. Often, when the younger generation goes away to college and to work, the elders maintain a view of them as childish and irresponsible that is out of touch with emerging reality. The elders have to create ways to reach out, listen and learn from their children who may have different values and a different approach to the family wealth. The children may frustrate them by asking difficult questions about the business or proposing new paths for the family. Can the family seriously consider these views, and if promising, invest and experiment with new ways? One way to reverse the tendency for wealth to dissipate over generations is for the family to become entrepreneurial—which means trying new ventures and considering major changes in ways that are traditional. As wise people have observed: change or die.

This is not about handing the keys to the kingdom to the next generation but rather setting up a process where the young adults, seeing the resources of the family, can be mentored and supported in their growth. When they develop their skills ,they will then be capable of, as well as committed to, offering positive change in the family enterprise.

The shirtsleeves to shirtsleeves myth is a cautionary tale, but should be balanced with a view of young people whose human capital can make it possible for the family to continue to find new ways to succeed into later generations.

About the contributor:

Dennis JaffeDennis Jaffe is a professor of organizational systems and psychology at Saybrook University in San Francisco and a family business consultant. He is the recipient of the prestigious FFI Richard Beckhard Practice Award and is an FFI Fellow. He is also an FFI GEN (Global Education Network) faculty member for the family governance course. Dennis can be reached at djaffe@dennisjaffe.com.