Tuesday, October 9, 2018
Most family businesses are just one step away from extinction. Sound harsh? According to PWC, only 23% of family businesses have a robust, documented succession plan.
If family business leaders don’t intentionally infuse the family values, vision, and culture into successors, will the family business be sustainable? The importance of leadership for succession is required! If a key leadership role in your business was unexpectedly vacated by death, disability, or disqualification, who is ready to step up? Understanding the value of succession planning requires everyone to be more engaged.
Five factors play a significant role in working towards smooth succession:
1. Build your bench:You can’t run a relay by yourself. Running a relay, like succession planning, requires the development of runners. Succession planning requires a family business to always have an eye on high potential leaders so they can develop them for future needs. Like training for a race, systematically developing successors also means systematically providing the right experiences to build the correct skill sets for the future.
2. Make the transition seamless: When a succession plan is well-executed, and a smooth leadership transition occurs, the family and the business do not miss a step moving forward. The baton is passed with ease. Making the transition seamless requires planning, preparation, and effective communication. Part of building a bench of talent is instilling in future leaders the cultural DNA of the organization, which will help provide continuity from exiting leader to successor during transitions.
3. Cast the vision: The vision is the shared image of the family’s definition of success and what the family wants the business to be. The vision provides a future orientation It points the direction for where you are going.
4. Nurture the values: Every family has values. They may be spoken or unspoken. Some families live out their values more closely than others, but each family and business has a set of values. Though the world is ever changing, a family’s core values should be constant. It is who you are as a business family. Values are energizing, motivating, and inspiring. When people care passionately about something, they spur themselves to great achievements. The core values really are conscious motivators!
5. Provide mentoring: A mentor to rising leaders will help the family business function with discipline and forethought to ensure sustainability for future generations. A mentor can help the family establish frameworks for succession, provide training, help with skill development, and foster reflective planning for the future.
As a family business, avoid extinction by focusing on these five factors for successful succession.
Wednesday, September 12, 2018
We are told that conflict is inevitable. It will occur. It is part of life to have conflict – and certainly part of family life. Yet, very seldom are family members skilled at handling conflict. Most would prefer to avoid it at all costs. Conflict in families arises in situations in which there are incompatible goals, emotional walls, or misaligned expectations. Avoiding it does not make it go away. The emotional baggage follows whether the conflict is addressed or not. Managing conflict is a difficult skill that does not come naturally, but it is a necessary skill that can be learned.
The effect of conflict can be either positive or negative. The outcome depends on how the conflict is managed. Negative conflict is dysfunctional and hinders the ability of the individual, the family, and the business to attain unity, to make forward progress, and to meet objectives. Positive conflict resolution leads to better decisions, to increased creativity, to enhanced interpersonal relationships, to value clarification, and to personal growth and change.
Knowing what causes conflict is only half the battle. Knowing what to do when conflict arises is the bigger challenge. While there are many styles and strategies for navigating conflict, there are several basic principles to keep in play.
1. Normalize it. Remember conflict is inevitable and can be healthy. Normalize healthy conflict and positive ways to manage it.
2. Walk towards the conflict. Avoidance can be detrimental if the issues are not dealt with.
3. Begin with humility. Be reflective, not projective: “What part of the problem, is mine?”
4. Check your aggression, reaction, personalization or any other antagonizing behavior at the door.
5. Listen! Passionately seek understanding. Validate the feelings of the other by listening more and speaking less.
6. Process out loud. Acknowledge the pain of the other.
7. Search for common ground. Explore agreement and similar ideas.
8. Outline areas of core disagreement. Help both parties clarify what is actually in dispute and consider ways to work through it together.
9. Seek help. If stuck, bring in more participants with differing perspectives and objective views.
10. Attitude, attitude, attitude is the key!
Conflict is inevitable. Each family member is unique and may have different interests, goals, perspectives, values, and needs. Not all conflict needs to be dysfunctional. As a family and as individuals, practice positive conflict management techniques to diffuse conflict before it is destructive. Learn the skills necessary to walk through the journey together.
Tuesday, July 10, 2018
Advisory Boards are frequently controversial. While an Advisory Board may not be the answer to end all questions, they can be a powerful tool to support a business family in building their legacy, growing the ROI, building innovation, forming new business networks, and developing key strategic initiatives. To accomplish these objectives requires a properly structured, properly staffed, and properly executed Advisory Board.
For many family business owners or entrepreneurs, there is resistance to implementing an Advisory Board for many reasons. Sometimes, they don’t know how to get started. Sometimes, they see that too many boards are simply ineffective or, worse, dysfunctional. Sometimes, they are wary for other reasons: Fear of losing control; Difficulty identifying and recruiting board members; Unengaged board members; Uncommitted board members; Boards can be expensive and time-consuming.
An Advisory Board should always provide value to the family, the business, and to the leader of the family business. While all serve at the pleasure of the CEO, the Advisory Board members are selected for their experience, insight, wisdom, ability to ask the right questions, commitment to the success of the family business, and ability to be a focused sounding board for the CEO.
Creating an Advisory Board is an important step in the life of the family business. The timing around assembling an Advisory Board is dependant on the company’s needs and objectives. To have the greatest impact, the Advisory Board is to have an impact on the vision of the company. As business owners are frequently working ‘in’ the business, the Advisory Board forces the owners to work on the business – the big picture vision – which should lead to sustainability and new revenue growth.
The professional Advisory Board ensures a healthy, functioning, and effective board that addresses the concerns of the business owners. The CEO maintains control. The business has a team of qualified, committed advisors providing invaluable advice for less than the annual compensation of a senior executive meaning it is a very cost-effective way to gain insight. The benefits of a professional Advisory Board is with strategic experts who are committed to your organization without the headaches of building (and maintaining) a full board and without the looming threat of board dysfunction.
Too often, growing, privately held companies get stuck and don’t take advantage of the invaluable resource an Advisory Board can be.
Let’s talk today about how we can provide a professional Advisory Board tailored to your business to help you lead for the future.
Tuesday, June 19, 2018
Getting married. Having a child. Purchasing a home. Starting a new venture. You don’t go into these significant changes in life without some forethought and planning. Significant transitions require preparation.
Preparation for significant transitions in a family business is no different, whether it is a transfer of assets, transition of ownership, develoment of the next generation for leadership, or fostering sustainable business leadership.
How frequently do family business leaders secretly wonder: “Are we ready? What are we missing? What have we not adequately addressed?” For families in business, there are two unavoidable issues that arise: (1) maintaining a strong, viable enterprise; and (2) keeping the family committed to and capable of leading.
To be successful as the family and entrprise grows requires preparation in critical categories:
1. Family:Preparing the family enterprises to survive long term means living family values, discussions of who the family is, how they act as a family and nurtuing relationships in the family.
2. Enterprise Ownership:The family avoids conflicts of interest or self-serving decisions by clearly defining boundaries, policies, and shareholder agreements.
3. Enterprise Governance:Sustainable family enterprises have strong governance that closely monitors performance and compliments the family’s knowledge, skills, and abilities with strategic perspectives of qualified outsiders.
4. Wealth Managemet:By diversifying risks and providing liquidity opportunities, successful wealth management helps preserve harmony and goes beyond the core holdings or legacy enterprise.
5. Philanthropy:Charity is an important element that can unite the family and the enterprise. Sharing wealth, as an act of social resonsibility, can unite the family and demonstrate core family values to the next generation.
Many companies begin as family businesses, but only those that do the hard work of continuous planning and preparation for the future will endure and prosper as a family business in the future.
SKM Associates is able to walk with your family and help guide the important work of planning, preparing, and implementing.
Tuesday, May 22, 2018
“You got to be careful if you don't know where you're going, because you might not get there.” Yogi Berra
If you don’t put together a plan to accomplish something, there is a good chance you won’t attain what you want and need to. That could not be more true in the area of exiting a family business. Research shows that many business owners just don’t ever plan on leaving their businesses or believe that there will always be a tomorrow. What are the excuses for not planning the exit?
A. “It is too early”? -- You should start planning 3 -5 years before you
leave your business.
B. “Too complex?” – Yes it is! That’s why you need help. Exit planners
work to coordinate the work of your advisory team.
C. “Too time consuming? -- Yes, if you do it alone. Again, exit planners
will do the planning and coordinating of the work to be done.
1. I have a specific, written plan as to when I would like to exit my business and move to the next phase of my life.
2. I am becoming bored or tired or feel physically stressed with the daily operations of my business and do not feel the same sense of positive energy or enthusiasm I once had.
3. I have a specific, written plan as to how I will productively spend my time when I am no longer running the business.
4. I am excited about the changes and opportunities that await me outside of running the business on a day-to-day basis.
5. I am ready to move on to my next adventure that does not include the business.
6. Considering my current feelings about the business, running this business for another 3- 5 years seems like an eternity.
7. I have coasted the last few years to avoid the aggravation and work needed for business growth.
8. I am confident in my ability to transition my current responsibilities in the company to the people I have prepared for future ownership and leadership.
9. My vacation time and time away for the business has been increasing each year and when away, it is easier for me to not ‘check-in’.
10. I have a good understanding of the legal and tax implications for a business transition and I am ready for these aspects.
1. I have a specific, written plan for how I would invest the cash I would receive upon my exit of the business.
2. There are qualified professional advisors in my life that help in developing my future financial plan.
3. The value of my business is a large / critical part of my future financial security.
4. I know my anticipated life style and have adequate liquid assets to offset any loss of personal benefits I have received while in the business.
5. My business value is less than one-half of my total net worth.
6. There is a specific written plan to turn my business holdings into cash for my retirement.
7. Excluding Social Security, I have sources of income to fund at least one-half of the needs for the lifestyle I desire to live when I leave the business.
8. For the last 5 – 10 years I have saved at least 15% of my annual income.
9. I have completed the legal documents and purchased insurance products to provide for my family in the event of an unexpected or catastrophic event in my life.
10. I have begun to execute my plan to eliminate any personal debt in the next 3 – 5 years.
An Exit Strategy includes the written goals for the succession of business ownership and control, derived from a well-thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and a time period that works best for the business, its shareholders, potential buyers, and Family.
Tuesday, April 17, 2018
During the past several years, family businesses are finding the depth and bench of their leadership talent may not be what it had been. What can families in business do to intentionally develop the next generation and nurture better owners? As the Baby Boomers plan the transition of the business to the next generation, families must intentionally help the next generation grow and develop. The potential talent pool already knows and understands the family culture. The investment is truly building the legacy and looking to the long-term as the next generation is nurtured.
So what are a few intentional ways to develop the next generation?
1. Continue to develop yourself: As a leader in your family, you set the example. Seek to learn and grow at whatever stage of life you may be. The more competent you are, the more likely people are to trust you. Developing oneself influences relations with others, motivates others, and inspires others.
2. Carefully select learning projects: Everyone has areas of growth opportunity. Take time to analyze what the business will face in the future and intentionally have the next generation take responsibility for beginning the investigation or data gathering of what and how the business can address the issue. The opportunity to learn the business, craft analysis and presentations will help the next generation face future business needs.
3. Utilize 360 Degree Feedback: This feedback can prove invaluable to gain deeper insight into how others view them. Many times we don’t know what we don’t know, and that is what can create bigger problems for the next generation later on. This can be a very valuable learning opportunity, BUT IT MUST BE DONE VERY CAREFULLY.
4. Build exposure to other leaders: Broaden the opportunity of the next generation to network with seasoned leaders of other Family Owned Businesses. This often may be the opportunity through involvement in trade associations, Family Business Forums, or the local Chamber of Commerce. Either way, it must be intentional.
5. Exposure to the Strategic Agenda: Invite the next generation to sit in on the planning discussions for the next business cycle. Do it now, before they will be expected to make the decisions. Show them your thought process. I know one business family that has rotating seats on their Board of Directors for the next generation.
6. External Coaching: Sometimes our children hear things differently, more clearly, and more receptively from an ‘outsider’. The Coach must understand the issues and concerns of a Business Family, be committed to the success of the next generation and the legacy of the business, and have the ability to both push and pull the next generation along in their learning process.
What has or is your Family intentionally doing to develop the next generation of Family Leaders?
Let us know, we would be delighted to include it in the future.
Wednesday, March 14, 2018
The Challenge. Leadership is lonely. Navigating the organization from where you are to where you want to be is hard. Knowing where exactly you should be going can be even harder. Large, publicly traded companies have the benefits of expensive, fiduciary boards providing oversight, expertise, and feedback. Well-funded start-ups and VC- and PE-backed operating companies have private boards with experts helping leadership guide the organization. Many leaders at family businesses and closely held organizations, however, are starving for input from others with outside experience and expertise, with fresh ideas for their organizations. Even the best leaders, leaders who have great vision and skill, are sharpened by the feedback of other experienced leaders.
As businesses grow, leadership and governance need to evolve. As Marshall Goldsmith says, “What got you here won’t get you there.” What growing organizations and leaders need is an efficient team of strategic experts who are committed to the organization and its leaders. They need a team of highly qualified leaders providing honest feedback, offering outside perspective, and helping leaders navigate the way forward.
The Resistance. Many business owners and leaders, though acknowledging how valuable it could be, too often resist creating boards for a number of legitimate reasons. Sometimes, they don’t know how to get started. Sometimes, they see too many boards that are ineffective or, worse, dysfunctional. Sometimes, they are wary for other reasons: fear of losing control; difficulty identifying and recruiting board members; unengaged or uncommitted board members; uncertainty regarding the cost in both time and financial investment.
Invaluable Advice. SKM Associates offers a full service professional advisory board solution. We do the work of advisory board creation and implementation, and you focus on using the strengths of a healthy board to drive your organization forward. We work with you to compile a multi-disciplinary team of experienced professionals as an advisory board that is tailored to work for you. You get access to the same expertise as larger companies, at an accessible cost, tailored to your organization, and committed to your success.
Your advisory board comes to you with, among other benefits, quarterly meetings, monthly reviews, support in monitoring key performance indicators, connections to additional resources and new networks, and more.
What is holding you back from the invaluable advice that will help you drive your organization to continued success?
Tuesday, February 13, 2018
It is no secret that each generation of a family owned business faces unique challenges. It is also no secret that the majority of businesses are family owned businesses. Yet, for many, the term family business can conjure up stereotypes of family squabbles, mom and pop shops, nepotism, and lack of sophistication. While there are businesses that fit some (or all) of those stereotypes, it is our experience that these stereotypes are not an accurate description of many family owned businesses. Indeed, we continue to see many family businesses that are thriving, growing, and using their family ownership as a long term competitive advantage.
Keeping the family in the family business is not easy and does not happen by chance. It requires hard work, commitment, and accountability. In our work, we have noticed several themes that are common in successful family businesses. What are some of those themes that help family businesses sustain themselves for the long haul?
1) Retention of both family and non-family talent. Retention is nurtured through a level of trust, commitment to the vision, and strong job knowledge. When a crisis occurs, regardless of prior squabbles, the team pulls together.
2) Wise financial management with patient capital. The family maintains a long-term time horizon utilizing patient capital and minimized debt. This is accomplished with a judicious approach to capital expenditures. Maintaining the concept of frugality allows the family, the business, and the ownership to be ready for the next opportunity and to weather the next downturn.
3) Openness and transparency. The family has a willingness to discuss sensitive issues with transparency and openness. Family members are willing to serve the family and business by frequently placing the needs of the family system, the business system, and the ownership system before their own personal desires.
4) Effective structures. There is commitment to systems, processes, and practices that provide the right structure for their family and business. There is a commitment to educate all family members and shareholders so there are minimal misunderstandings and minimal misaligned expectations.
5) Intentional development. Families in business that are committed to the long haul, consistently and intentionally set aside time to discuss and revisit the first four themes so they can keep up with changes in the family, the business, and the ownership. To implement these themes and subsequently revisit the themes with an unbiased eye, families in it for the long haul utilize unbiased, third party resources.
Well-run family businesses, in it for the long haul, stay focused on the things that will help them navigate the ever-changing challenges that they face.
For more information contact SKM Associates Family Business Consultants