Hope Your Holidays are Happy

       

                                                                     
      Merry Christmas 

              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,

The Roles We Play In The Family Enterprise

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.

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Build Trust To Lead

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.

Communication Triangulation

Who you talk to is as important as what you say

Triangulation: 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

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Good Boundaries Make Good Business Families

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.

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Is Your Family Ready

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.

Transitioning the Family Business

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.

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Why Avoid The Difficult Conversation

Succession planning: the elephant in the room. A Boston Consulting Group study found a 14-percentage point difference in revenue growth and a 28-percentage point difference in market capitalization growth between family enterprises that had a succession plan and those that did not. Poorly planned and poorly executed succession plans are among the biggest value destroying events for family enterprises.

Why is it so difficult to talk about succession planning in the family enterprise when studies show an enormous amount of value is destroyed by unplanned transitions? 

In many families, the intersection of emotions, family politics, and the needs of the enterprise can feel like ground ripe for conflict. The enterprise’s needs related to leadership based on merit and economic capability may be viewed as being on opposite ends of the spectrum as family desires or abilities. While lawyers and accountants make sure the ‘i’s’ are dotted and the ‘t’s’ are crossed for an ownership agreement and tax filings, the family must be willing to have the critical discussions and participate in the hard work of dialogue for who will lead the family enterprise and how the process will occur.

Five important questions can help families as they begin the transition planning process:

1.    How will the family values be maintained moving forward?

2.    Will the family select a successor to lead the business from within the family or outside the family? 

3.    What development process needs to be implemented?

4.    Who will assist the family and keep the family focused on this journey?

5.    What will be the departing leader’s role?

These questions are not all inclusive, but they will help the family begin to have the important conversations. 

Honestly discussing the critical issues facing families and family enterprises 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 value and family business legacy. 

  

For more thoughts on how to involve your family in these conversations, give us a call. We would be happy to support you on this journey.

What values are impacting your family business?

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! 

What Is Needed In A Family Business Leader

Management guru Peter Drucker was referred to as “the man who invented management” by Business Week magazine. He has been influencing leaders with his theories on modern business as one of the greatest thinkers on management in modern times. Your family enterprise can still benefit from his ideas.

Drucker’s HBR article, What Makes an Effective Executive? explained his study of many CEOs and found they had eight practices in common. Applying these practices to family enterprise leaders and family members can help establish a solid foundation for success.

Drucker’s 8 Practices of The Effective Executive

Ask what needs to be done: Get the knowledge you need by asking what needs to be done, and take the answers seriously. Failing to ask this question will render the leader ineffective. Once you know the to-do list, set priorities and stick to them.

Ask what’s right for the enterprise: Don’t focus on what’s right for individuals (i.e. owners, family members, employees or customers.) What is right for the enterprise may not be right for individual stakeholders or family members.

Develop action plans: Set a plan that specifies results and constraints compatible with family and organizational goals. Create check-in milestones and revise your plan as necessary to reflect new opportunities or insight.

Take responsibility for actions: Ensure each decision specifies the person accountable and the appropriate deadline. Define whom it affects and whom to keep updated and informed.

Take responsibility for communicating: Make sure to clearly explain your action plan and information needs. Share the plan with your family council, family members, staff, and employees and let them know what you expect of each person.

Embrace change: Don’t treat change as a threat. Instead, exploit opportunities and explore changes inside and outside that will benefit your family enterprise. 

Run productive meetings: Clearly articulate the purpose of each meeting and end it once you have accomplished the meeting goals. Follow up with a meeting summary and include new assignments, deadlines, follow-ups, and expectations.

Say “we” not “I”:  To get the best results, always put your family enterprise needs ahead of your own. This means thinking and seeking the needs and opportunities of the family, the family enterprise, and others before one’s self.

The need for effective family enterprise leaders is too great to be left to chance. Effectiveness is a discipline. And, like every discipline, it can be learned, but it must be earned.

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