Tuesday, October 24, 2017
The New York Times chronicled the story of Larry and Helene Donley under the banner, When Mom and Pop Can’t Sell the Farm (Or in This Case, the Theme Park). According to the NYT, 43 years ago, Larry and Helene Donley began running what has now become a wild west theme park outside of Chicago. Now in their eighties, Larry and Helene might be ready to retire. But, neither of their two sons, who are both in their sixties and have helped manage the business over the years, are interested in taking over, and their grandchildren are off doing other things with no interest in the family theme park. Meanwhile, markets are changing: kids are more attracted to virtual reality and video games than old-time theme parks; vacation habits of American families are changing; kids and families are busier with organized sports and activities. The list of challenges for a small theme park goes on.
The real estate where the theme park sits, however, may hold significant value to a developer. The business also comes with a restaurant and a liquor license that could be extremely valuable for other commercial uses. But, there is a hitch: Larry and Helene want whoever takes over the business to continue operating the theme park exactly as they have, down to some of the smallest details. It’s more than just a business to Larry and Helene. It is who they have been for many years. The kids say it taps into Larry’s inner child. They refuse to cash out to the highest bidder, knowing that bidder will likely knock down the park for new commercial use.
What is a family to do? How does a family business owner avoid being eighty-plus years old and working as hard as they did for the past 43 years with no plan for transition or letting the business innovate as the world changes? It starts with the three basic questions: where are we now, where are we going, and how do we get there. As owners of a business, families need to chart out their plan for success and be willing to adapt as they go.
First, the family needs a vision. What will success look like for the business? What does success look like for the family? Are family members willing to let go and let new people innovate to keep maximizing the use of the family’s resources? Part of this includes talking about who you are. Your identity and core values are bigger than the business and bigger than its success or failure.
Second, the family needs to work through how each family member wants to be involved (or not) in accomplishing that vision. Is anyone in the family interested in the business? Are the interested family members qualified for the roles they want? What other strengths do family members bring to the table to help maximize and manage the family’s resources?
Finally, as you go out and pursue that vision, remember to be flexible. Part of what makes a business successful is executing a plan but staying flexible to adapt as you go.
Define what success looks like and begin charting a path to get there.
Tuesday, October 3, 2017
Looking around at the fractured state of families in the world today, it is tempting to think of previous generations as the ideal time of peace and harmony. In setting up a family business for multi-generational success, traditions of yesteryear only go so far. For a family business to succeed both now and with future generations, appropriate governance is critical.
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.
Governance discussions should begin with agreement on how a family will communicate, debate, resolve conflict, and hold each other accountable. These conversations take not only a high level of trust within the family, they also require grace and love. Then, the family can move to creating a family charter describing how the family will relate to each other and to the business. Along with the family charter, the family needs a strong shareholders agreement that includes, among other things, clearly defined governance structures. At that point, the family can begin to process additional issues such as management of the business, compensation, training and development of family, and qualifications for leadership roles. For families who want to build a sustainable legacy, this is just beginning to scratch the surface. Good governance also requires the discipline to execute and hold each other accountable to that which was agreed upon.
The review and development of good governance for a business family should be a normal part of the life and rhythms of the business. It is important to recognize that 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. Best practices can provide insight and guidance, but what worked for another family may not work for yours.
Remember, the best practice is the one that works for you and your family as you strive to build your legacy.