Thursday, February 27, 2020
A critical issue for family enterprises transitioning from one generation to the next is preparing the rising generation of leaders, including both family and non-family leaders. As the search for talent remains a top challenge for many employers, the need for building committed and capable leaders from within is more important than ever.
Succession planning, however, should not be confused with replacement planning. Replacement planning is a form of risk management. Replacement planning answers the question of who will fill an immediate, unexpected void. Succession planning, on the other hand, is a proactive approach to ensure continuity of enterprise leadership that is committed to cultivating talent from within.
Succession planning cannot be limited to the rising generation of family members. It is essential to create a pipeline of leaders throughout the enterprise that support the family ownership, understand and endorse the family mission and values, and have the interpersonal skills to lead.
The senior generation must drive this development. Succession planning is a critical driver of strategic planning. It is not just about building the enterprise bench of people ready for new responsibilities. It is also an opportunity to nurture a culture that is committed to the values and vision of the family. The strategic development of talent creates a win-win environment for the enterprise and the workforce. It is an environment where there truly is long term opportunity for employees, and employees see a path of personal growth, development, and advancement.
Good succession planning is a process. There should be clearly defined roles regarding who is responsible and accountable for the process. What’s more, the senior generation needs to demonstrate in both word and deed support for the process and accountability for expected outcomes.
Moving an enterprise forward requires the right people, doing the right things, in the right place, at the right time. Like strategic thinking and planning, succession planning starts with where the staff’s abilities are now, considers where they need to be, and determines how the enterprise will help them get there.
Wednesday, February 5, 2020
Family governance structures alone won’t make a business successful, but a business won’t grow and be successful long term without the right governance structures. Long-term success takes the same commitment to innovation and excellence that made the enterprise successful in the first place. Good governance structures can set up the business and the family to continue that legacy of success.
Governance structures run the gamut. Some are complex and extensive. Some are simple and straightforward. Appropriate governance structures for any family business must focus on the particularities of the family and the business at issue. There is no one size fits all solution. In general, corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. For family businesses, governance should help formalize issues such as ownership, leadership structures, control, conflict resolution, and communication. For many families, the process of developing family governance can be as valuable and educational as the final product.
The review and development of good governance for a business family should be a normal part of the life and rhythms of the business. Developing these guidelines can at times pull leaders away from daily business operations and can also surface tension between family members. That is normal, and it is a healthy part of the process of developing good governance. As family businesses work to develop their own governance, they need to determine what will work best for their family. The most appropriate governance structures for an organization must be tailored to the particular organization, industry, and family.
There are pieces, however, that are strong foundational components in almost any organization:
· Family Vision, and Philosophy – 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.
· Buy-Sell Agreement – Drafting a clear buy-sell 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.
· Family Council – Family councils, sometimes called shareholder assemblies, can be an important mechanism for family members and shareholders to guide the organization.
· Family Meetings – Annual family meetings provide countless opportunities to update family members on the state of the business and plans for the future; to let family members ask questions and be heard; to keep family members who are not employed in the business engaged; and to recognize accomplishments of family members outside of the business.
Whether your business is in the first generation or the fifth, Good Governance Leads To Better Family Business Outcomes.
Tuesday, January 7, 2020
How rapidly is your world changing? As they say, the only thing constant is change. Change is inevitable. How are you managing the change?
Family and work are often places of structure for people, and when that constant is shaken, when things change, there is natural anxiety. When things do change, communication is important in maintaining trust. If change is happening, it is best to communicate as much as you can as soon as you can.
How do people react when confronted by change? Many times, people respond to change initially by denying it, then by ignoring it, and finally by resisting it or kicking it down the road. This is when leaders must be astute and help people understand why the change is critical, how the change will impact them, what value the change brings for the future, and how each individual can support the change. Individual resistance to change is one of the primary reasons that change initiatives fail at all levels.
Managing change successfully is also critical for survival and growth of any system, especially business families. Change in the business can originate internally or externally. Both types of change require a significant level of knowledge, skills, and abilities by leaders to effectively deal with the change management process. Change management is particularly important for those who feel the greatest effects of the change, as they are the ones who often resist it the most.
How are you communicating change? If you don’t provide a way for people to get information, rumor mills will fill the void.
How transparent is the change you are leading? One key to providing good communications, especially during times of change, is to provide a way for individuals to ask questions and provide feedback.
Leading through change requires casting a vision for a better future. What change is presenting your family enterprise with new opportunities?
Tuesday, December 17, 2019
from SKM Associates!
Everyone at SKM Associates wishes you the happiest of holidays! As we reflect on the "reason for the season," our prayer is you'll be encouraged and blessed as you follow the call on your life. Thank you for letting SKM Associates be a part of your journey.
It's the season for spending time with people we love, sharing hugs and smiles, and sending special wishes to all of those who mean the most to us.
May your family realize the love of this season and continue through next year.
God Bless and have a wonderful New Year.
Grace and peace,
Tuesday, October 29, 2019
Enterprising families have many competitive advantages: strength of relationships, cultural fit of family members, shared values, strong commitment of those involved, strong work ethic of family members, patient capital, and flexibility in hard times.
At times, however, family relationships and the needs of the enterprise 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, why, and who is fulfilling what role. Different stakeholders may want to accomplish different things, either from an enterprise 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, board member.
It is important to understand which role is being played, by whom, in which context. The contexts vary, ranging from developing the rising generation, to governance decisions, to business strategy, to estate planning, to leadership, to business management, to hiring family, to promoting family. The list goes on. The ability to know through which lens one is approaching an issue requires sensitivity to the perspectives of different roles being played by different individuals.
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 an enterprising family, it is critical to define who is playing what role. 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. With properly defined roles, keeping it in the family should be fun and rewarding.
Tuesday, October 1, 2019
What does trust mean to you?
Trust does not get built in a vacuum, and it takes work to build trust over time. Some say it is a feeling that cannot be defined. You know it when you feel it, but you have trouble defining the feeling. In a family business, trust should be defined as a “feeling that another person, or a group of people, or the system is performing in your best interests.” Test this definition by thinking of someone you trust completely. Do you feel that this person has your best interests as top priority?
As a leader in a business family, there are intentional steps that you can work on to help build trust in your family and your business.
Trust them. Give your family, your team members, and others the benefit of the doubt. Create a high level of trust by trusting them first.
“Trust men and they will be true to you; treat them greatly, and they will show themselves great.” Ralph Waldo Emerson
Do what you say you will do. When you promise what you can’t (or don’t) deliver, people lose trust in both you and your ability. Instead, deliver on what you say you will do in the small things each day. What’s more, when you make a mistake, admit it, own it, and correct it.
Use trust elevating communication techniques. Genuinely listen and seek to understand before being understood. Speak respectfully about all, to all. Speak about people as though they were present.
Confront reality. Tackle the tough issues head on, don’t ignore them and hope they will go away. Lead courageously even if the new is uncomfortable.
Put others first. To be trusted, you need to focus first on the needs of others. Strive for the best in others, develop their strengths, and support them in reaching their goals.
Own your part. Decide now that you will take the necessary steps to become a trusted leader in your family business. Don’t rationalize or blame others: your behavior will show how much you are to be trusted.
Demonstrate integrity. Be honest. Put others ahead of yourself. Don’t cut corners or act unethically.
“Good teams become great ones when the members trust each other enough to surrender the ‘me’ for the ‘we.’”Phil Jackson
Be the family business leader that builds trust.
Tuesday, September 3, 2019
Who you talk to is as important as what you sayTriangulation: when one family member does not communicate directly with a second family member but will communicate with a third family member in hopes that the third family member will filter the message to the second family member. It can also be a form of splitting in which a person plays one family member against another.
This type of communication, though a common human impulse, has many unintended consequences:- Family members drawn into this type of conflict end up with a negative view of each other.
- The third family member doesn’t get important feedback about how others are perceiving him or her.
- The real, underlying issue never gets resolved, the cycle repeats, and others follow the behavior pattern.
- Family members stop being able to work together because of baggage and unresolved conflict.
- Failure to address issues directly and dialogue openly negatively affect the bottom line.
How can a family enterprise avoid communication triangulation?1. Be an example with your own communication. No matter how frustrated you may be with someone, talk directly with them.
2. Refuse to get drawn into the middle when someone vents to you. Speak wisdom and send them back to the other person for direct dialogue.
3. Focus on developing positive communication and conflict resolution skill.
4. Seek help. As a leader of the family enterprise, find a coach to support you and your family in developing healthy communication habits and breaking the communication triangulation cycle.
Only by addressing communication triangulation directly will the cycle end. Families and their enterprises cannot thrive where communication habits undermine trust and credibility. Conflict is inevitable, but how you handle it is not.
Handle the right problem with the right person
Wednesday, July 10, 2019
Robert Frost’s poem,Mending Wall, posits, “Good fences make good neighbors.” In his poem, Frost, intentionally uses the mending of a tangible wall as a representation of the barriers that separate the neighbors in their friendship. Good neighbors respect one another’s boundaries.
In a business family, boundaries, though often mental structures or commitments, are as real as tangible fences. Boundaries establish one thing in relationship to another. They are a line between where one ends and the other begins. Boundaries draw lines regarding what is acceptable and what is unacceptable within the family and the enterprise. Boundaries help family members balance personal and professional obligations; maintain family bonds; and develop emotionally and psychologically throughout their lives.
To improve boundaries in your business family, it is important to keep in mindawareness, intention, action, and resolution. We all have the ability to learn and grow in defining and being responsible for our boundaries. In a business family, it is as important to have a Boundary Policy as it is a Mission Statement. A Boundary Policy should include:
The balance between individual needs and business needs
Maintaining personal and interpersonal privacy
The elimination of burdensome family baggage
Avoiding domain ‘spillover’ – family, business, ownership, management
Resolving conflicts in the appropriate domain (the family or the business)
Promoting growth, stability, and success of family business
There are several key items families need to recognize and can start working on immediately:
1. Recognize the need for clear boundaries. These boundaries exist in the family, in the business, and personally with individuals playing several roles depending on the context.
2. Talk about boundary issues. Communicate the concerns of each individual, and walk toward the conflict. Avoidance is not a healthy option.
3. Develop a written Boundary Statement for your family and business.
When you boil it all down, where do family business conflicts really start? Too often, it is with boundary issues.
Tuesday, June 4, 2019
Mom and dad worked hard to grow the family enterprise, and over the years it became quite successful. The enterprise’s growth included new business units and facilities spread across the region. A consolidated management team reported directly to the owner. As the next generation joined the business, there was an inherent expectation that one of the next generation stars would take over leadership as the next CEO. Mom and dad believed each child wanted to share in the ownership of the enterprise, and they had a plan in place. Or so they thought.
A review of the shareholder’s agreement (including the amendments to the agreement that occurred at various points over the years), the estate plan of mom and dad, and a cursory review of life insurance policies, show that the documents tell a different story.
It is not a stretch to imagine such a situation. We have seen versions of this more than once. The business is not owned in the manner the owners thought; mom and dad’s estate plan doesn’t take into account how life has changed since it was last reviewed; the rising leaders in the business aren’t protected like everyone thought; and the life insurance policies, which once seemed like excessive are suddenly inadequate for the way the business has developed.
How does this happen?
1. The founders are busy growing the business.
2. Key executives are not brought into governance issues.
3. The family does not dedicate time to discuss what each individual desires for the future of the business.
4. All business units grow up under one company, and risk is not spread across several operating companies.
5. The family entrusts the drafting of all documents, wills, trusts, and estate plans to advisors who are familiar but not qualified.
6. Documents are not reviewed on a regular basis to include changing needs, new risks, and increased complexities.
What do you do?
1. Identify one person, a trusted advisor, as the quarterback to build a team of subject matter experts that are committed to work together for benefit and best of the family.
2. Think through the changes that are occurring in the family and the business that need to be addressed.
3. Review all documents, governance issues, and estate planning on a regular basis.
4. Establish specific times, at a minimum annually, for the family to discuss ownership, governance, changes in personal goals, family values, and rising generation plans. Some families call this a family council, others use this as both planning and educational.
5. Don’t leave the planning of your family’s future to chance. Take action!
Too often, growing, privately held family enterprises get stuck and don’t take advantage of the invaluable resources a third-party advisor can be. Let’s talk today about how we can provide a professional team tailored to your business to help you lead for the future.
Tuesday, April 30, 2019
Family businesses have many competitive advantages: strength of relationships, cultural fit of family members, shared faith and values, long term commitment of those involved, strong work ethic of family members, patient capital, shared visions, and flexibility in hard times. Those strengths, however, can lead to unique challenges in transitioning the business.
There are some common themes in family business transitions that go awry: a senior generation that can’t let go (either business is going well and it is too much fun to let go or the business is struggling and the senior generation feels like they have to get it back on track); lack of confidence in the rising generation; indecision in selecting the next leader; avoiding difficult or awkward conversations; emotional identity in the business; and a rising generation that can’t work together.
For a successful transition, one of the critical pieces is giving voice to the concerns of those involved. There are many options in transitioning a business, ranging from a sale of the business to non-family, to gifting some or all of the business to family. To successfully navigate the transition, family leaders must work hard to preserve family relations, family culture, and viewing this as a journey and not a single event.
The decision process for the transition, requires consideration of several key areas:
1. Interest of the next generation: What is the true desire of the next generation? Do they want to lead the family business?
2. Skill set of the next generation: If the next generation has an interest and desire to keep the business in the family, what do they need to learn? How will they develop as leaders, and who will hold them accountable?
3. Future Vision: What systems, processes, or procedures will be put in place to maintain the long-term success of the business and family? What communication guidelines will be agreed to by all family members to ensure all understand the objectives?
4. Ownership Structure: What is the best structure for the estate planning of the senior generation? How will the next generation navigate the ownership responsibilities?
After building the business, transitioning the family business is the next most significant work. The complexities of decision making to sell, to hold, to transition could be fraught with strife. If done well, through proper planning and open honest communication, the transition has the potential to unite the family and create a collaborative relationship between the generations.