Tuesday, September 6, 2016
For a Business Family there is usually a Board of Directors to help guide and oversee the growth of the Business. As the Family continues to grow through Next Gen Births and by marriage and as the Family works to ‘pass-the-baton’, what mechanisms are in place to help guide and oversee the growth of the Family that own the Business?
One Solution: a Family Council. A Family Council is a group selected by the family-owners to, among other things, identify and pursue the family’s goals; represent the family to management and the Board of Directors; and oversee the family-owners’ goals and objectives over the year.
How does a Family Council work? There is no “one-size-fits-all” template. In fact, an effective Family Council is one that is designed for the specific needs and desires of the family that it serves. Certain steps can help guide the process of organizing a Family Council. First, the family should develop a Family Charter. The Family Charter defines the vision and purpose for the Family Council, and it serves as the foundational document to guide the Family Council. The Family Charter also defines the core values to be communicated to the next generation. The size of the Family Council should be determined by the size, needs, and focus of the family.
Following the decision of the basic structure, governance and goals of the Family Council, the Family Council should also agree on the Meeting Ground Rules and Family Code of Conduct.
A properly structured and implemented Family Council will help minimize ‘misaligned expectations’ and provide another avenue to enhance Family Communication. Discussions within the Family Council can help clarify the Boundaries between the Family and the Business, a safe environment to discuss Family Employment policies, In-Law participation, Business Leadership expectations, Conflict of Interest policies, Shareholders Agreements, just to name a few. While this may first appear to be rigid and formal, as in any Family gathering-having fun is a prerequisite.
Your family’s legacy is too important to expect it to ‘just happen’. It is important to understand what questions to ask, appreciate the sensitivity of the issues and conversations, develop the ability to communicate with those impacted, and support more satisfied lives. To lose family harmony due to a lack of understanding does not help build a family legacy. A legacy of love, harmony, security, and business success is the ultimate goal. As your business family focuses on the development of the family and the business, you need not travel this journey alone.
Tuesday, August 2, 2016
By. Dr. Denise Federer
The statistics regarding the longevity of family businesses are sobering to say the least; very few of them make it past the second generation and even less are still around for the third generation. Speculation as to why this occurs is all over the map, but as a family business advisor, it centers on leadership development, something that’s often overlooked in family businesses.
Leadership Skills Vs Technical Skills
In the corporate world, training programs abound that prepare future leaders to assume the mantle of responsibility. That’s usually not the case in a family business, where “training” may consist solely of gaining technical expertise, i.e., how to make widgets, failing to address the critical skill set required to engage and lead others in making widgets.
It’s not uncommon for owners to begin introducing their children to the family business at a young age, providing them with technical nuts and bolts and assuming they’ll be ready to lead at some point in the future. As a family business advisor, I always recommend that next-generation leaders of a family business begin their careers elsewhere, to gain education about leadership that will be invaluable down the line, but that doesn’t always happen.
A Leadership Development Plan
A great way for family businesses to support the leadership development needs of their future leaders is to hire a business executive coach. This external resource — someone who has significant experience working with family businesses — can be invaluable in ensuring that the members of the next generation have the strong voices that are necessary to get people to follow them.
Unlike coaches in the sports world, who help athletes be their best by teaching them on- and off-field skills, business executive coaches focus solely on ensuring that future leaders have the non-technical skills they need to be successful. These are often called “soft skills,” but there’s nothing warm and fuzzy about them. Since many people aren’t born leaders, and putting someone without leadership skills in charge can jeopardize a family business, the knowledge imparted by an expert coach is worth its weight in gold.
Identify Your Leadership Style
One of the most important things any leader must do is identify the type of leadership style that best suits them, but many people don’t have the ability to do that alone. Working with a business executive coach, future family business leaders can determine whether they want to be a leader who is:
· Autocratic or authoritative
· Delegative or laissez-faire
· Participative or democratic leader
Once the decision about leadership style is made, it becomes clearer how to create a vision, determine values, and successfully influence others. It’s all about being intentional about leadership style, rather than following someone else’s lead or floundering to find the right voice.
Find the Right Business Executive Coach
How do you find the right business executive coach? It’s important that the person’s experience matches the needs of the family business and he/she is able to quickly develop rapport with family members. The best bet is to ask owners of other family businesses if they’ve had someone help them who they would recommend.
With the right coach on board, amazing progress in the area of leadership development is possible — and family businesses stand a better chance of surviving for the long term.
About Dr. Denise Federer:
Clinical psychologist and executive coach Dr. Denise P. Federer is the founder and principal of Federer Performance Management Group, LLC. As a family business advisor, Dr. Federer has extensive experience providing guidance to leading U.S. firms and their executives and in private practice as a psychotherapist to couples, families and individuals—an intense focus that has led to her interest and expertise in peak performance coaching and in the unique dynamics of closely held and family-owned businesses.
Tuesday, July 5, 2016
The national election cycle is in full swing, and the world is watching the coming transition of leadership in the White House. What about your organization? Are you prepared for the critical leadership transitions that your business family will face in the not-so-distant future?
Successful transition planning for the next generation of leadership is more than just replacement planning. Too often, the plan is simply to name a backup person to fill in when a need arises or take over the position when the predecessor can’t do it anymore. This may work for covering an illness or vacation, but it will not prepare the business, the family, or the individual for future needs, responsibilities, or opportunities in a changing business climate.
There are a number of factors to consider in preparing the next generation of leadership:
1. Roles and Responsibilities. Accurately determine what roles and responsibilities are essential for the organization, difficult to replace, and will need to be transitioned in 5 – 10 years.
2. Knowledge, Skills, and Abilities. Define the knowledge, skills, and abilities needed in those positions both now and in the future.
3. Current Talent Pool. Examine the current talent pool of individuals in the family and the business to understand potential options for future leadership. Be sure to turn over every rock: there may be unrealized talent that has not been previously considered or has not had an opportunity to develop.
4. Development. Proactively prepare and develop the talent pool for future needs, responsibilities, and the changing business climate. A well-defined development plan can be an important tool in developing the next generation of leaders. To be effective, development plans require thoughtful planning, diligence, and follow-through.
5. Preparation. Prepare the family and the business for the next generation to assume leadership. Help the future leaders earn the respect of the family, the business, and outside stakeholders.
Honestly discussing the critical issues facing families and family businesses in transition helps foster the objectivity and focus needed for long term success. Successfully navigating the transition of leadership for both family members and key non-family members often means the difference between prematurely liquidating the business and creating a multi-generational family business legacy.
Monday, June 6, 2016
Every family has values. They may be spoken or unspoken. Some families live out their values more closely than others, but each family has a set of values. Though the world is ever-changing, a family’s core values should be constant. It is these core values that influence attitudes, drive behavior and action. It is who you are as a business family.
A “value” is a principle, standard, or quality considered intrinsically worthwhile or desirable. The root of value is valoir, which means ‘to be of worth’. Values are also a source of strength because they give business families the power to take action. Values are deep and emotional, difficult to change and often unconscious.
Sometimes, people mistakenly think of values as a list of “shoulds” and “shouldn’ts” guiding what they can or cannot do. To the contrary, values are energizing, motivating, and inspiring. When people care passionately about something—in other words, value it—they can spur themselves to great achievements. The core values really are conscious motivators!
That doesn’t mean it is easy to just sit down and articulate the family values. Documenting the family’s non-negotiable values takes collaboration and discussion. There are many ways to codify a business family’s values; however, simply identifying the values is more important than how you document them. As the saying goes, ‘just do it.’ Engaging in a values dialogue should not create opposition in the family. Rather, it should be an opportunity to experience the free flow of thoughts between family members to build a congruence of thoughts that will unite the family and strengthen the business.
Articulating these core values will influence a business family’s worldviews; competitiveness; beliefs about wealth and philanthropy; and how major decisions are made.
As Roy Disney said: “When your values are clear to you, making decisions becomes easier.”
Tuesday, May 10, 2016
A family member working in his family business was asked the question,
“Why does your family business exist?”
The response was a long period of silence, followed by,
“I never really thought about it. It was always just here!”
If you were to stand at the door of your business and ask each family member and non-family employee that goes in and out of the business that question, how would they respond?
Why is this question so important?
As a business family – Why does your family business exist?
The definition of success in a business family may be in the eye of the beholder. The measure of success must be determined and agreed upon by all in the family and the business. When family members are able to share their thoughts, hopes, and dreams in a safe environment, the opportunity to increase family commitment, business growth, and build a family legacy will increase.
Why is your family in business together? Is it just a way to pay bills? Is it to provide employment for all family members that need a job? Is it to harvest the business and cash out? Is it to build a family legacy with an entrepreneurial mindset? Is it to build a family legacy? Is it to pass the business to future generations?
Your family’s dialogue about these questions may be more important than the answers and can provide the basis for putting the pieces in place to building a lasting family legacy. Whether in the Entrepreneurial stage, the Sibling Partnership stage, or the Cousin Consortium stage, every business family must explore these questions and determine the needs for the next stage and for the family’s legacy.
As a business family, take the time and do the hard work dialoguing with your family to build your roadmap for the success of your family, the ownership group, and the business management.
Monday, April 11, 2016
On a farm, silos are a valuable structure for storing materials and protecting them from external threats. Silos can also exist in business families. However, in a business family, silos are psychological and, at times, physical barriers used to store power and isolate something from the rest of the organization. Silos often are simply focusing on one’s self to the detriment of the family, the business, and a collaborative environment. It could be in the context of multiple business divisions, or separate locations, or distinctly defined tasks that results in isolation. These silos in a business family can have a number of detrimental consequences, including driving wedges between individuals, minimizing communication, and preventing collaboration.
There are no clear paths for the construction of these silos, nor are they built overnight. Silos don’t necessarily develop intentionally or from malicious intent. Operating in silos often happens gradually over time and can lead to individuals operating their own pieces of the business without input or collaboration with the rest of the business. Sometimes, silos are a mechanism to avoid difficult conversations or address difficult relationship issues. They take shape over time and can result in mistrust and isolation.
Recognizing silos in the business family requires an understanding of what is happening in the short term and the long term. Redundancy is one sign that you may have a silo problem. The redundancy of work, of decisions, of tasks, of discussions and of meetings might be a sign of silos. Another sign is difficulty in reaching a family member with needed information or knowledge – or just not understanding or knowing what someone else does. Another sign is simply realizing that individuals are operating on their own without collaboration or input from the rest of the organization.
How do you break down silos? How do you keep silos from becoming fortresses?
First, recognize and admit that silos exist. You can’t begin addressing how to eliminate them until you admit they are there. Then, begin exploring why the silos developed in the first place. Revisit the business family’s core values and realize that these core values are what will keep the family together and help eliminate the silos. In addition, commit to communicating with each other, and commit to open and honest evaluation as a family.
Keep silos from becoming fortresses. Appreciate the contributions of others. Do the hard work of communicating, and provide grace, love, and forgiveness to each other on the journey of being a business family.
advising and supporting Families in Business as they build their legacy
Contact SKM Associates
Tuesday, March 8, 2016
Many family business owners hope that their children will one day take over the business. They dream of working side by side with the next generation. They often assume that the transition in leadership will happen naturally over time. However, hoping and dreaming about a future for the business, and assuming that day will come, won’t make it so. As baby boomers rapidly approach retirement, succession planning can no longer be kicked down the road to tackle another day. It is an all too common refrain to find business families that are not making concerted plans to transfer the family firm to the next generation. Beyond just an estate plan to transfer legal title to the business, building a business family legacy requires successfully transitioning from one generation to the next, and that transition takes hard work.
Business families frequently struggle – or even fail – when they do not address and actually talk about the longevity, the vision, and perpetuation of the business and commit those plans to writing. Talking with the next generations about the future, talking about a longer time horizon than Wall Street allows for publicly traded companies, and discussing adequate preparation and development of the next generation of leadership opportunities to both strengthen family relationships and strengthen the future leadership of the business.
Business families succeed when they are able to discuss the difficult issues, plan for the future, and work together as a cohesive unit in a unified structure. When the ownership is beyond the founder/entrepreneur and consists of a sibling group or a cousin consortium, there is even greater opportunity for misaligned expectations, misunderstanding, and conflict. The dialogue required for this planning is not always comfortable or easy. The discussions need to address, among other things, business goals, business management, ownership, and shareholder expectations.
Even with the best transition plan in place, however, the plan must be executed. A defined transition plan should be flexible enough to deal with both current issues and future issues, and yet detailed enough to provide meaningful guidance for both generations. Both generations need to execute the plan with a focus on the present and striving toward a vision of the future.
Creating a collaborative environment between generations can strengthen relationships and allow the family to capitalize on their financial, human, social, and intellectual capital. Having a plan in place and the ability to discuss and implement the plan with the family will help you in setting the foundation for building a multi-generational family legacy.
advising and supporting Families in Business as they build their legacy
Contact SKM Associates
Tuesday, February 9, 2016
“It’s not personal, it’s just business.” It’s usually not true in life generally, and it’s true even less in family businesses.
Family businesses have many competitive advantages: strength of relationships, cultural fit of family members, shared faith and values, strong commitment of those involved, strong work ethic of family members, patient capital, and flexibility in hard times.
However, at times, family relationships and the needs of the business can come into conflict. The personal relationships of families in business bring an added level of complexity. It is during those times that the business leadership and the family leadership must understand what is to be accomplished and why. Each stakeholder may want to accomplish something different, either from a business perspective or from a family perspective. In navigating these situations, individuals play different roles at different times: parent, child, cousin, founder, owner, president, shareholder, employee.
It is important to understand which role is being played in which context. The contexts vary, such as how will the next generation of leadership be developed? Will the leadership of the business stay in the family? If so, which branch of the family? Should a certain family member be hired (or promoted)? Individuals in different roles may have different understandings of the goals and objectives. The ability to know through which lens one is approaching an issue requires sensitivity to the perspectives of different roles.
Many business families try to navigate these complexities on their own. Many times that works, but there are also times when support from a neutral third party with expertise in organizational and interpersonal dynamics can be invaluable. Someone to provide unbiased feedback and to approach the issues objectively. Someone to help lay a framework for stakeholders to have positive and healthy communication.
In a business family, it’s almost always personal, too. To maintain business prosperity and family harmony, assistance from an impartial third party can be invaluable. Tough times don’t need to be divisive for the family or the business. Keeping it a family affair should be fun and rewarding.
advising and supporting Families in Business as they build their legacy
Contact SKM Associates
Tuesday, January 19, 2016
“Shirt sleeves to shirt sleeves in three generations.”
- American saying
“The father buys, the son builds, the grandchild sells, and his son begs.”
- Scottish proverb
“Clogs to clogs.”
- A Lancashire proverb from the 1600s
“Rice patty to rice patty.”
- Asian proverb
“Father, founder of the company, son rich, and grandson poor.”
- Mexican saying (translated)
Across generations and across cultures, the sentiment is the same: family businesses and family wealth don’t make it into the third and fourth generations. Statistics on family business only reinforce the adages: only 12% of family businesses will continue operating into the third generation and only 3% of family businesses will continue into the fourth generation. It doesn’t need to be that way.
Every business faces challenges to successful, long term operations. For the countless strengths and opportunities giving family businesses a competitive advantage, business families face unique challenges in setting up the business and the family to be successful for generations to come. There is no magic checklist or fill-in-the blank formula, but there are things business families can do:
· All family members participate in defining the core values for the family and the business
· Create an environment of open, clear, and direct communication
· Develop clear policies and business norms for family members
· Clearly define the roles and responsibilities in the business
· Have a plan, in writing, for the transition of the business to the next generation
· Establish a fair and equitable exit strategy for those not interested in the business
· Help each family member internalize the vision for the family and the business
Involving all family members in addressing these issues can help improve the odds of success for future generations and nurturing the family legacy.
It’s not too late to get started.
advising and supporting Families in Business as they build their legacy
235 Yoder Road • Harleysville, PA 19438 • 215-256-5997
Tuesday, January 5, 2016
By 2017, it is estimated that 40.3 percent of family business owners expect to retire, creating a significant transition of ownership in the US. Less than half of those expecting to retire in five years have selected a successor http://www.massmutual.com/mmfg/pdf/afbs.pdf
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.
Tuesday, December 15, 2015
Christmas and New Year, the season of love and happiness is here and we would like to take an opportunity to wish you and your family a very Merry Christmas and a very Happy New Year. For us, Christmas is filled with more happiness because of friends like you.
We are thankful for the opportunity to work with great folks like you. We are able to do what we do because of referrals from people like you. We don't take those referrals lightly, and we appreciate you thinking of us when we could be helpful to you or someone you know.
Merry Christmas to you and your family.
We wish you the best in the New Year.
Friday, November 20, 2015
Who can answer the question?
What is the cause or source of conflict in a family business?
Though there is not one answer to that question for every situation or family business, we do believe based on experience, the source of much conflict is ‘misaligned expectations’.
So what do we mean by ‘misaligned expectations’?
Each family member brings his or her own thoughts, ideas, experiences, definitions, interpretations, and perceptions to discussions, decisions, planning, and communication. These may not always be in alignment or the same as other family members. In many situations there is an assumption (we all know what it means when we assume) that others just know what we mean and we move forward acting on our own definitions or interpretations. Many family members are remarkably out of touch with each other. They fail to realize that they are not operating in isolation. These families take the greatest hits when change is necessary or a critical decision must be made. A failure to accept or hear questions posed for understanding often lead to a defensive posture. When that occurs the ability to move forward is definitely hindered and finger pointing or hostilities develop.
In these type situations it is important that family members seek first to hear and truly listen for understanding rather than thinking about what you want to say. Ask for clarification. Focus on the meaning of what is being said. Together commit to what and how you will move forward. For a family that may require revisiting and reviewing the vision the family has developed for the future and the values that will guide them in the journey.
Countless families have great intentions and inspiring visions for themselves, but they don’t take the critical step of translating their intentions into concrete systems. Even worse, they often implement characteristics, strategies and tactics that are misaligned with their positive intentions, which in turn creates confusion and cynicism and conflict.
Don’t let ‘misaligned expectations’ derail building your family legacy.
Friday, October 30, 2015
With Jim Steiker
SES Advisors, Inc.
Employee Stock Ownership Plans (ESOPs) are unique among retirement plans. An ESOP merges the tax benefits of a qualified retirement plan with corporate nuance, and aligns employees’ retirement benefits with corporate goals. This combination of tax-favored employee and corporate benefits is complex. With planning and an expert team of advisors, it can be a win-win scenario for both employees and employers.
Is an ESOP Right for You?
An ESOP can be appealing if you want to reward employees who have helped you build your business, and it can also be used to supplement your firm's 401(k) or other retirement plan.
Why Should A Family Business Consider An ESOP
ESOPs are a tax-favored liquidity strategy that delivers fair value for shareholders.
ESOPs allow for a “low and slow” ownership transition
ESOPs benefit the people who have helped create value in the Company.
ESOPs create tax-favored independent and sustainable companies.
ESOPs create and preserve legacy
James G. Steiker: James G. Steiker is Chairman and CEO of SES Advisors, Inc. and FoundingChairman of its sister law firm, Steiker, Greenapple & Croscut P.C.
Jim is a corporate, pension and tax attorney and financial advisor with more than 30 years of experience in Employee Stock Ownership Plans (ESOPs) and other employee ownership matters, focusing primarily on ESOP design, transactions and compliance in entrepreneurial companies.
Jim is the past Chair of the ESOP Association’s Advisory Committee on Finance and currently serves on the ESOP Association Board of Governors. He is also a past trustee of the Employee Ownership Foundation and a past member of the Board of Directors of the National Center for Employee Ownership. He is a frequent speaker and author on ESOP matters and serves as a director of nine ESOP companies.
Jim is a graduate of New York University School of Law, where he was a Root-Tilden-Snow Scholar, and of Wesleyan University.
555 City Ave.,
Bala Cynwyd, PA 19004
Bala Cynwyd, PA 19004
Join The Network of Family Businesses for this fascinating Webinar on Thursday, November 19, 2015 at 11:00 AM Eastern Time, with Jim.