Tuesday, June 8, 2021
Tuesday, April 20, 2021
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. Families that diligently work to build a shared understanding of WHY they own – based on an appreciation of different perspectives, generally have a better understanding about HOW and WHAT they own. 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.
Tuesday, March 23, 2021
Each and every day we deal with family businesses ranging from our local car dealership, to the corner store, the dry cleaners, Wal-Mart, and the local pharmacy. It is estimated that family businesses employ more than 60% of the US workforce. Family businesses are the backbone of our economy and 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.
It is no secret that each generation of a family-owned business faces unique challenges. 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. 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.
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, strong job knowledge, fair pay, a winning culture, and opportunity for growth.
2) Wise financial management with patient capital. 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.
4) Effective structures. There is commitment to systems, processes, and practices that provide the right structure for their family, business, and customers.
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 and maintain these themes business families seek to revisit the themes with an unbiased eye. Families in it for the long haul utilize unbiased, third party resources who can help the family achieve family goals by helping to establish the framework, boundaries, training, talent development, and reflective planning for the future.
Tuesday, January 12, 2021
Our children, family, employees, customers, vendors, neighbors, (and the list could on and on) are not necessarily awestruck by what we say, BUT they are struck by what we do and how we act.
How aligned are our actions with our rhetoric?
Some time ago, I was talking with a Family Business owner whose business was struggling to survive. She stated she was also struggling to find, hire, and retain “good help”. In the course of our conversation, she stated employees who had a strong work ethic, were honest, and willing to put in a “full day” just did not exist anymore. She continued to talk of her struggles and related a story of a customer.
This particular customer told this businesswoman they did not receive certain product they had paid for. This Family Business leader stated she knew the product was delivered as she personally delivered the product. So rather than discuss the issue with the customer she advised her delivery staff to “pad” the bill each time they delivered product to that particular customer.
I then proceeded to ask her what she would do if she caught one of her employees, or children, “padding” their Timecard because they felt they were not being paid appropriately?
As leaders in our families and in our businesses are, we modeling the behaviors that match our stated values?
Are we showing / modeling respect?
Are we showing / modeling honesty?
Are we showing / modeling credibility?
Are we showing / modeling commitment?
Are we showing / modeling our stated core values?
Are your actions speaking so loud people cannot hear a word our saying?
What examples can you provide?
“When your values are clear to you, making decisions becomes easier.”
Roy E. Disney
Tuesday, December 1, 2020
Rarely do we find an enterprising family that openly denies loving each other. As their logic goes, ‘we all love each other, therefore we don’t really need to worry about putting things in writing’.
Many family businesses that succeed from generation to generation have one thing in common. They have the difficult discussions to put governance and transition plans in place, while they all still love each other.
The most appropriate governance structures for a family business must be tailored to the particular organization, the industry, and the family. There are several structures, however, that are strong foundational structures in almost any organization:
Family Vision and Philosophy – Countless entrepreneurs and first generation
family business owners built strong businesses on a core set of clear but often
unspoken values. An invaluable starting place for many organizations and
families is to take the time to write down the values, vision, and philosophy
of the family and the organization. People change. Businesses change. Families change. Guiding values should not.
Buy/Sell Agreement – Drafting a clear buy/sell agreement (or related type of
agreement) that lays out how the business will transfer among family
members and among generations is vital as families grow and new generations
come into the business.
Succession Plan – Developing a strong bench of candidates for future leadership
is important for any organization’s continued success. It’s an important step
for leaders, but it’s also important for rising generations to know that an
investment is being made in them and opportunity is being given for them to
earn more responsibility in the business.
Whether your business is in the first generation or the fifth, it is not too late. Some
organizations create a formal family charter in working through these issues. Some
families start by scratching out their ideas on the back of a napkin. Whatever the format, these basic structures can help set up your family business to thrive for generations to come. Governance agreements require hard work. Where will you start?
“There is no better time than when relationships are
strong and positive to develop an agreement that
protects all in the family against unforeseen changes
down the road.” – Unknown
Tuesday, November 10, 2020
Family businesses have many competitive advantages: strength of relationships, cultural fit of family members, shared values, long term commitment, patient capital, shared vision, flexibility in hard times. In some family businesses, however, these advantages can unintentionally foster an environment in which the rising generation becomes overly focused internally.
Internal issues do matter. Operational excellence, for example, is important. Its part of what built the business to begin with, and the rising generation needs to master it. However, the rising generation also needs to learn how to recognize and lead through the greater range of issues. This means keeping a focus on the internal issues like operations as well as, for example, seeking new innovations to pivot to meet changing demands in the marketplace. In short, this requires thinking like an owner.
Learning to think like an owner takes time. It doesn’t happen all at once. Nurturing the rising generation to think like an owner means helping them think through the questions that keep owners up at night.
- How and where should we be investing our resources; human capital, financial capital, and intellectual capital?
- What systems, processes, or procedures will be put in place to maintain the long-term success of the business and the family?
- What communications guidelines will be agreed to by all family members?
- How will the family’s values, mission, and culture be applied to continue to build the enterprise?
- What risks are reasonable? What is too much risk?
- What is not adding value that needs to stop?
- What is the best governance structure for the rising genteration?
- How will the next generation navigate the ownership responsibilities?
After building the business, transitioning the family business is the next most significant work. Empowering the rising generation to think like owners is part of preparing your family and your business for continued success.
Friday, October 9, 2020
You’ve worked hard to create a strong, sustainable business. You’ve been successful in building a profitable business. But, beyond building a successful company, you want to build a legacy for your family. Perhaps that means preparing for the next generation to take over the company. Perhaps that means liquidating the company and using the wealth for other family legacy purposes. Or, perhaps you have other goals in mind. Whatever the case, it takes careful planning to make it happen.
Avoidance, or doing nothing, can seem like the easiest option, but is only going to make things more difficult in the future (and probably frustrate the rising generation in the process). Preparing for any change in season takes planning, preparing for succession is no different. Planning that requires an understanding of where we are now; where we are going; and how will we get there.
Journeys that are critical to the ultimate success of individuals, the family, and the organization require commitment. The commitment is best when considered in the frame of a holistic approach. This means results are best achieved with more than just a single event or item. The preference to work over time to develop the capability of the family to manage their own governance and decision making contributes to fully functioning at the crossroads of the Determined Strategy and Emerging Issues.
To make “success” the outcome of succession, it’s not too late to get started. Doing nothing is not really an option.
- As a family, commit to building the family legacy and the business legacy.
- Commit to having the difficult conversations. A professional family business advisor will be invaluable to help your family through these discussions.
- Draft a written plan, along with a timeline, for the transitions to the rising generation.
- Prepare development plans for the rising generation that provide opportunities to learn about the values and vision of the family and that provide opportunities to learn about the rights and responsibilities of being an owner of the business.
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 can often be the key piece in solidifying the opportunity to create a multi-generational family business legacy.
Nurturing and developing the rising generation can be a very rewarding journey. Moreover, it supports and builds the family legacy. However, it takes time, intentional commitment, and effort to work together.
Tuesday, September 22, 2020
Everywhere you look, you’re likely to see people facing an unprecedented amount of stress. Mental health experts know stress during times like this can impact people in many different ways and may be exhibited by:
- Fear and worry about ones’ own health and the health of your loved ones, the financial situation or job, or loss of support services relied on.
- Changes in sleep or eating patterns.
- Difficulty sleeping or concentrating.
- Worsening of chronic health problems.
- Worsening of mental health conditions.
- Increased use of tobacco, and/or alcohol and other substances.
Everyone reacts differently to stressful situations. How you respond to stress during these unprecedented times can depend on your background, social support from family or friends, your financial situation, your health and emotional background, the community you live in, and many other factors.
As a leader in the family business, how do you help your family and employees navigate the current situations?
Part of the answer needs to lie within each individual. Each individual needs to have a level of self-awareness so as not to react inappropriately. Respond, don’t react. As Families in Business it is important to help all family members and employees to understand themselves. They, after all, represent the family and the business. Inappropriate reactions are not healthy.
Another part of the answer lies within the structure of the organization. Are the processes, procedures, workflow, reporting dynamics, or structures creating a toxic environment or contributing to the stress levels?
Leadership needs to look in the mirror and honestly explore their contribution to the crisis.
- How much added stress are we creating in our family, or in our business, or for our employees?
- How are we helping our family and team members gain higher levels of self-awareness?
- What are we doing to provide proper and acceptable ways of dealing with stress?
Grit and resilience are critical to personal care. Taking care of your family and employees can be a stress reliever, but it should be balanced with care for yourself.
Leading a successful family business through unprecedented times requires a clear understanding of positive family relationships and a clear understanding of business relationships (known as employees, management, vendors, and customers).
Tuesday, September 15, 2020
Good succession planning is a process. 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.
A reluctance to plan is understandable. Reasons families do nothing run the gamut: the senior generation fears letting go; the business is going well and it is too much fun to let go; the business is struggling and the senior generation feels like they have to get it back on track; the senior generation’s belief that the rising generation is not ready or not interested; the senior generation’s indecision in choosing the next leader; the family wants to avoid difficult or awkward conversations; psychological and emotional connections to an identity connected to leading the family 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.
For a smooth succession planning process:
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.
Identify the Talent Pool: Examine the current talent pool of individuals in the family and the business to understand potential options for future leadership.
Plan for the ‘what ifs’: This means consider what scenarios may occur and how the family and the business will respond.
Communicate Communicate Communicate: For succession plans to be smooth and effective, it must be made known to those it impacts. These discussions may be difficult, however in the absence of communication individuals will create their own narrative.
Formalize the Plan: Draft a written plan, along with a timeline, for the transitions to the rising generation. Review the existing Shareholder Agreements, Buy-Sell Agreement, compensation arrangements, Key-Man Life Insurance policies, as well as additional legal documents.
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.
Effective succession planning is a process that can make or break the future of an organization. Even with the best transition plan in place, however, the plan must be executed. Contact an advisor to help guide the process. Both generations need to execute the plan with a focus on the present and striving toward a vision of the future
Wednesday, August 19, 2020
Integrity in leadership is frequently referenced but often undefined. It is often used to represent general platitudes such as consistency of words and actions, overall moral or ethical behavior, and consistency in adversity. At its core, though, leadership integrity in a family business involves the leader’s identity grounded in a commitment to a specific set of values. A value is a principle, standard, or quality considered intrinsically worthwhile or desirable. Values are a source of strength because they give business families the power to act. Values are deep and emotional, difficult to change, and often unconscious, and integrity is a personal commitment to living out those values.
Sometimes people think of values as a list of things they should or should not do. To the contrary, values should be energizing, motivating, and inspiring. When people care passionately about something—in other words, value it—they can spur themselves to great achievements.
Integrity requires humble introspection, not self-righteous declaration. Being a leader of integrity does not mean perfection. Part of leading with integrity means the strength of character to learn from mistakes and seek continual self-improvement. Regardless of position or title, every leader and every family member must be responsible for modeling integrity.
How do you know if you are a leader of integrity? What are you doing to lead with integrity and to strengthen the integrity of those around you?
Tell your own story. Share how your character has developed and strengthened over time.
Invite feedback. Build a small group of people who know you well, see you clearly, want the best for you, and are willing to be totally honest with you.
Listen. Learn to listen without filtering what you hear through your pre-existing notions. You will find that everyone around you is continually giving you clues.
Our actions must mirror our words in every area of our life.
“Good leadership is built on love and truth, for kindness and integrity are what keep leaders in their position of trust.”
Proverbs 20:28 The Passion Translation