Allen Esrock is the founder of NxtGen Nexus, a community for the next generation of family business owners and inheritors of wealth. Esrock, who created NxtGen Nexus based on his own experiences growing up in his family’s retail apparel business, discusses that along with the future of the community.
What is your personal backstory coming up in a family business?
My grandfather founded Barney’s Army Store in St. Louis around 1915. Barney’s sold everything, including baseball bats, army insignias and dud hand grenades. My parents were married after World War II, and my father went to work for his in-laws. Barney’s carried a line of big-and-tall men’s uniforms. In the early 1950s, my father and one of his brothers-in-law started Big Men Shops, which specialized in clothing for big and tall men.
Big Men Shops dominated my childhood. We lived across the street from my uncle, who started the family business with my dad. I was 5 years old when I was drafted to be the security guard during Christmas shopping season. Every Christmas Eve, we'd go to the same Italian restaurant because Santa Claus was one of our customers.
After college, I entered a buyer's training program at Macy's to prepare for the family business. However, I wanted to move to become a television comedy writer. I moved to Los Angeles, got my first television writing job, and hated it. Since I was in Los Angeles, and my siblings weren’t interested in the business, my father wanted to sell the business. The store was acquired as part of a roll-up of big-and-tall men's stores and is now DXL.
Fast-forward many years later, and I was asked to speak at a family business event. As I started researching my presentation, I realized that the issues I struggled with as a family business next gen hadn’t changed in the past 40 or even 4,000 years.
What criteria should a family business follow when deciding if a family office is right for them?
There are three main types of family office: 1) embedded, 2) multi-family office (MFO) and 3) a single-family office (SFO). There’s a fourth type called a virtual family office, but that’s an offshoot of an MFO or SFO. The basic function of the family office includes the management of taxes, document management, investments, fiduciary and lifestyle.
An embedded family office uses the same staff as the family business to manage the family office. An MFO is an outsourced company that provides the same service offerings to multiple families. A single-family office has a separate staff to handle all of the functions.
Here are considerations in deciding what type of family office structure works for you:
Embedded family office: An embedded family office is a natural outgrowth of a successful family business. Over time, professionals working for the family business are also asked to handle transactions for the family members. While this isn’t illegal, there are numerous issues that can arise in areas including legal exposure, audit exposure, banking exposure, business exposure and operational exposure.
MFO vs. SFO: If a company has significant and complex assets, an MFO is the best option for a majority of families based on the following:
- Costs: The cost of being part of a family office is tens of thousands of dollars vs. millions of dollars for running an SFO.
- Complications: One issue with an SFO is that the family is responsible for staffing and running the office. If the chief investment officer decides to leave after 10 years, the family will have to get involved with hiring the new CIO, which can take six months to one year.
- Next gens: A large number of next gens feel isolated because they’ve grown up with substantial wealth. While most MFOs don’t think about serving the emotional needs of the next gen, there is an opportunity to bring the inheritors of wealth together to create community. If an MFO wants to engage next-gen clients, it must create an authentic offering that matches the next gens’ concerns and interests.
What are common reasons behind family members deciding to leave their family business?
There are a number of reasons that next gens don’t enter the family business. They include pursuing their passions, problems with working with different family business members, worried that working in the family business will create negative issues that will impact their relationships with other family members, inability to implement technology and business model solutions when there is a stubborn leading gen at the helm, perceived by peers to be taking the path of least resistance by joining the business, failing to live up to prior-generation successes, destroying the family legacy if they fail and, finally, they are bored by the business because they’ve been around it for their entire lives.
Many next gens are concerned about creating a powerful impact in the world. Those individuals should understand that the family business is an irreplaceable tool to support their local community. Family businesses are local market celebrities, so next gens can use their business philanthropy to encourage other family businesses to be more philanthropic. Next gens can help guide their families to develop sustainable business practices. Next gens can achieve remarkable success and satisfaction by utilizing the family business as a platform to do good.
How does NxtGen Nexus benefit its members who are rising to join the family business or dealing with complications related to family business?
The most important thing for next-gen members is recognizing that you are not alone! The overlap of family, business and wealth creates complex issues that can dominate the life of a family business next gen. If you have a cousin with an addiction problem, that’s a problem. However, if that cousin is the head of production for the manufacturing plant, it could cause the demise of the business.
What makes the issue worse is finding somebody to discuss the issue. There is no swipe-right if you’re a next gen. NxtGen Nexus provides a safe environment to discuss all issues around the family business, including addiction, succession, growing the business, selling the business, etc., with peers who are going through or have gone through the same issues.
We’ve found that when a next gen comes to their first NxtGen Nexus meeting, their life changes. For the first time in their life, they’re with peers who understand their goals and issues. They don’t have to make excuses for who they are and the outsized role the family business has in and on their lives. It’s extraordinary to watch them identify NxtGen Nexus as a safe zone to witness and share experiences.
Failure-to-launch syndrome: Why some families are susceptible
By JOHN M. SAMUELS
One mental health challenge that often emerges in the children of high-net-worth families is "failure to launch." Though not an official mental health diagnosis, this term describes young adults who remain dependent on their parents rather than establish independent, self-sufficient lives. Often intertwined with issues like anxiety, depression and addiction, failure to launch can be a significant hurdle for families who are otherwise accustomed to success.
Understanding failure to launch
Failure to launch occurs when a young adult becomes developmentally stalled, unable to transition from adolescence into adulthood. These individuals may struggle to complete their education, hold down a job, maintain meaningful relationships or find purpose in life. They may also grapple with addictions to substances like cannabis or behaviors like excessive gambling. In many cases, these young adults are living at home or independently with access to abundant resources, yet they lack the motivation or skills to take control of their own lives.
Dr. Rachele Vogel, Psy.D., an expert in behavioral health, said failure to launch is most common in individuals who lack a sense of identity or passion, struggle with anxiety or depression, and have grown up in environments where parents have shielded them from discomfort. "Kids need to make mistakes and learn to care for themselves," Vogel said. "A child who has been sheltered from the natural stresses and anxieties of life is going to struggle in the real world. Helicopter parenting often contributes to failure to launch."
Treatment approaches
Treating failure to launch requires a comprehensive approach that involves the entire family. Vogel emphasizes the importance of assessing and adjusting accommodating behaviors within the family that may stunt the individual's growth. This process involves making gradual changes to build the young adult’s independent living skills and fostering a willingness to face discomfort.
A health care adviser can be instrumental in this process by supporting the family in adhering to the treatment plan and helping them reduce enabling behaviors. "These changes will impact the entire family system," Vogel said, "so everyone needs to be prepared to step out of their comfort zone."
Recognizing the signs
Failure to launch isn’t always easy to recognize, especially in families where the child’s safety and security are paramount. It’s important for parents to assess their child’s resilience, problem-solving abilities and exposure to life’s challenges. "Consider what might be hindering your child's growth," Vogel said. "Are they managing their emotions and life stressors independently? Or are they overly reliant on you?"
Recovery and moving forward
Recovery from failure to launch requires patience and a gradual approach. Encouraging independence involves providing the right amount of support for the young adult to develop new skills while gradually allowing them to take on more responsibility. Both parents and the young adult need to be willing to embrace the discomfort that comes with change and growth — and sometimes, that means saying “no.”