Can The Next Generation In The Family Business Say We Did It?

Many founders of businesses who want to pass the business to their children find it difficult to actually do so.  Developing a plan, crafting a process for the development of the next generation, and transitioning of the business to the next generation can feel like a foreign concept or unchartered territory.

The founder’s heart is generally in the right place in his or her desire for the next generation to take over the business.  However, it is not uncommon to hear statements like the following from the senior generation: why don’t they tell me what they want to do? what do they want? why won’t they just step up and take responsibility? what do they expect of us?”

The next generation, on the other hand, is often wondering: why doesn’t Dad / Mom just tell us what they want? which one of us will be president? when will they retire? what will they do when they retire?

Too often, the next generation is not given opportunities to learn how to make critical long-term strategic decisions and is not given a chance to participate in family leadership meetings to learn how to analyze both family and business issues.  In some situations, the next generation is never truly given the opportunity to learn how to operate the business.

It is critical for the senior generation to consciously help the next generation grow. The next generation needs to gain the expertise, experience, mentoring, tacit knowledge, passion, and internal drive to continue building the family legacy. The next generation needs to hear praise, encouragement, appropriate guidance, and the confidence of the senior generation. When the proper plans, processes, and guidance are in place by the senior leadership, the next generation can continue building the legacy.

A leader is best when people barely know he or she exists, not so good when people obey and acclaim him or her, worst when they despise them.  But of a good leader, who talks little, when their work is done, their aim fulfilled, they will say, 'We did this ourselves.'

— Lao-Tse

 

What are you doing to prepare the next generation?

 What would the next generation say?

VISION

“If you don’t know where you are going, you’ll end up someplace else.”

 –Yogi Berra

When you start out on a journey, the goal is to arrive at the destination.  On your family business’s journey, the destination is not always clear.  However, for families in business, that desired destination must be tailored to the vision of the family, the organization, and the individuals.  No two journeys are alike, and the destination is not the same for every family business. 

The vision is the shared image of the family’s definition of success and what the family wants the business to be.  Having a vision is critical for the journey to realize the goals and dreams of the family.  The vision provides a future orientation to answers questions like: How do we want to utilize our resources and care about those who are important to us? 

Understanding and following the vision of the family is critical to the ultimate success of the family, of the individuals, and of the business.  Following the vision requires commitment.  Commitment is best considered in the framework of the family, the business, and the ownership of the business.  This means results are best achieved with not just a single event or item, but by working over time to develop the capability of the family to manage governance and decision-making.  With commitment to a “visioning” process, there is built in accountability to keep everyone focused and on track.

Simple yet complex questions can help begin the visioning process:

1.     What do we desire for our family?

2.     What will be the story of our family?

3.     What do we desire for the next generation?

4.     What is our family’s responsibility to society?

5.     How will our family values influence the vision of what we want to become?

6.     What will our family business not do?

7.     What is our time horizon?

8.     How will the business be part of the family vision?

9.     Who is leading our business? How are they leading?

10.  What kind of abundance is our family and our business enjoying? What does it look like, specifically?

The goal is to create a framework to help the business operate successfully while recognizing and dealing with normal family issues.  The vision will have very little impact on family unity and company performance, however, if the family doesn’t intentionally think about what steps are necessary to get there.

The vision is the what.  It defines where you are going.  Where will your journey take you?

Sustaining The Family Business With A Coach

Average life expectancies have been going up for years now – with the Social Security Administration listing average life expectancies as 84 for men and 86 for women – and the numbers continuing to trend higher.  It is not unheard of to have three or even four generations of family members alive and working in a family business at the same time.  This creates both challenges and opportunities for enterprising families.  Successfully navigating the journey of a family business requires a combination of discipline, communication, deliberate planning, and difficult decisions.  A professional coach can provide invaluable support along the way.

There are a number of benefits to utilizing a family business coach to help the family navigate the family, generational, and long term issues.  A coach can bring clarity to issues, perspective based on experience, and unbiased relationships with family members.  In addition, a coach can provide:

       1.    Unbiased Input.  A coach can act as the unbiased mediator between family members as well as offer unbiased reviews of business issues.

2.     Strategic Insight.  A coach can ask tough questions and be a sounding board for family members to test new ideas, particularly with respect to ownership planning, management planning, and family governance.

3.     Giving Voice.  A coach can be a safe outlet for both family and non-family employees in the business to discuss concerns or perceived inequities.  Additionally, the coach can help provide both employees and family members the tools to help foster communication, particularly communication about delicate or difficult to discuss issues.

4.     Succession Planning.  Senior family members do not always want to recognize their ultimate departure from the business and do not always admit they will one day need to transition the leadership. A coach can provide support to foster the dialogue and develop a plan to pass the baton to the next generation.

5.     Asking the Difficult Questions.  A coach can also help family members identify and articulate hidden issues – usually underlying, perhaps unspoken, issues that are emotional in nature yet critical and fundamental for the family to navigate and openly discuss in order to nurture trust within the family.

A professional coach can help the family business function with discipline and forethought to ensure sustainability for future generations. The coach can help the family achieve family goals by helping to establish the framework, training, helping with talent development, and fostering reflective planning for the future.

How Does A Family Business Keep New Ideas Flowing?

In order to survive and thrive beyond the first generation entrepreneur, a family business needs an internal force of innovation and creativity among employees and family leaders. 

Innovation in a family business means finding the next competitive advantage over the current way of operating, but must also be compatible with the family’s values, culture, and vision.  Many important innovations consist of incremental improvements to products and processes.  Fostering this internal force requires a management and leadership mold that empowers all in the business to internalize an “owner’s” mindset and to take initiative.

Creativity is a conscious choice to challenge the status quo.  Creative people are value investors in the world of ideas.  Value is generated by evaluating a creative idea, calculating the risk-reward, and driving forward.

How can a family business foster innovation and creativity to keep new ideas flowing?

1.     Set the culture.  Establish a culture that promotes authenticity, commitment to people, commitment to the business, and continuous effort.

2.     Nurture a nudge.  A nudge is an action that attracts peoples attention and urges then to alter their behavior in a positive way, yet it is not done in a heavy handed way. This nudge may be as simple as urging the sharing of an idea or as complex as developing and implementing a change process.

3.     Teach the family and employees the business.  Focus not only on the technical skills each individual needs to perform, but educate people regarding how the business makes money, how the business attracts and retains clients or customers, and other big-picture issues that impact the business.

4.     Keep the momentum going.  Building the internal force of innovative and creative family leaders and employees, and the culture to keep it going, takes hard work.  To keep the momentum going, ensure that the organization focuses on competitive compensation, keeping morale up, and consistent, effective communication.

By tapping into the internal force of innovative and creative family leaders and employees, a family business can outthink and outperform the competition, increase profits, and move successfully into the future.

Finding Non-Family Leaders for the Family Business

In a 2016 PwC survey of next generation leaders in family businesses, 69% of respondents said that they wanted to bring in non-family managers to help modernize/professionalize the family business.  The benefits of incorporating non-family leadership into a family business, particularly at the board level, are well-documented, including objectivity, outside expertise, skills where there is not a qualified (or willing) family member, and more.  If next generation leaders are heeding the sage advice to incorporate non-family leadership into the family firm, implementing such advice is a particular challenge in the current labor market. 

Employers of all stripes are facing the same challenge in hiring: there is a dearth of candidates with the soft skills necessary for success, such as critical thinking, the ability to communicate clearly, taking initiative, problem-solving, and getting along with others.  In other words, employers across the board seem to be struggling to find exactly the type of candidates that family businesses who are hiring non-family leaders should be seeking.    What’s a family enterprise to do?  There are a few strategies that can help family businesses find, develop, and retain key, non-family leaders: 

·     Continuous Networking.  The best source of candidates is networking.  Leaders should always be networking and, in that networking, keeping one eye open for high-potential candidates.  Sometimes that might result in stumbling upon an ideal candidate when the organization doesn’t have an opening.  In that case, consider creating a position.  Bringing a qualified, high-potential candidate into the organization when he/she is available and then grooming him/her for leadership within the context and values of the organization can be invaluable and avoid the difficulty of needing to hire someone and not being able to find a qualified candidate at that particular time.

·      Identify and Develop Talent Within.  Developing talent from within (both key internal employees and family members) pays dividends not only now, but in the future as well.  Employees will have the training and resources to perform at a higher level, the organization will have a deeper bench of talent from which to draw future leaders, and continuous learning and opportunities for advancement will create an incentive for valued employees to stick around for the long term.  What’s more, developing leaders from within, leaders who are a known asset and presumably share the same vision and values as the organization, reduces one of the riskiest activities in which organizations engage: external hiring.

·      Effective Compensation Plans.  When an organization has strong individuals and implements effective programs to develop them, it is important to incentivize those key employees to stay.  Create compensation structures that align with your values and incentivize people in alignment with desired outcome.  For key family members, this might mean considering opportunities for increased ownership over time or capitalizing on the non-economic reasons that individuals choose to work for the family firm.  For key non-family employees, it might mean exploring options like nonqualified retirement incentives or other creative, long-term reward programs.

·      Think Outside the Box.  Qualified candidates come in all shapes and sizes.  Don’t limit the search to only candidates who fit a certain mold.  Look at the whole candidate, not just the job description.  The work ethic, critical thinking skills, and leadership necessary to accomplish one thing in life can show the grit and soft skills necessary for success in other areas, as well.

·      Trust Your Gut.  Your instincts may be your most valuable asset in identifying and developing key talent.  Do the due diligence in each searches, ask for reference checks, have candidates interview with multiple employees (and listen to the feedback your employees provide), but, ultimately, trust your gut.  Hiring is one of the most difficult things that organizations do; trust your instincts for hiring key employees.

Finding talent in today’s labor market is not easy.  In fact, hiring trusted family members who already align with the organization’s values and culture is a distinct competitive advantage of family firms.  However, as the next generation survey recognizes, there are also benefits to bringing in non-family leadership.  These strategies will help your organization set the foundation for building a strong bench of talent within your organization over the long haul.

To Everything There Is A Season

 “For everything there is a season, and
a time for every matter under heaven:
a time to be born, and a time to die;
a time to plant, and a time to pluck up
what is planted; a time to kill, and a time to heal; a time to break down, and a time to
build up; a time to weep, and a time to laugh; a time to mourn, and a time to dance;
a time to throw away stones, and a time to gather stones together; a time to embrace, and a time to
refrain from embracing; a time to seek, and a time to lose;
     a time to keep, and a time to throw away; a time to tear, and a time to sew; a time to keep silence, and a time to speak;
a time to love, and a time to hate;
a time for war, and a time for peace.”

Ecclesiastes 3:1-8

Ecclesiastes teaches us about seasons in life.  The Byrds reminded us of this truth in their song, Turn! Turn! Turn!  Just as seasons change throughout the year, seasons also change in a family business. Sometimes, the changing season means transitioning from one generation to the next. In nature, as winter moves into spring, there are specific changes that occur. Daylight lengthens.  The sun shines warmer.  Trees bud.  Flowers bloom.

Likewise, as seasons change in family businesses, families need to take actively embrace the change and make it a healthy transition, which includes deliberate dialogue, agreed upon timelines, and a plan. Making the change of season for the next generation a healthy one requires planning, training, educating, specific experiences, collaboration between the generations, and preparation for the senior generation’s next phase of life.

Just as we plan for the spring season by putting the hats and gloves and boots back in the closet and by planting flowers in the flowerbed, a family business should prepare for the change of the family’s season by digging into to the following:

1.     Committing to building the family legacy.

2.     Drafting a written plan, along with a timeline, for the transitions to the next generation.

3.     Implementing a feed-back mechanism for the next generation to understand how they are progressing.

4.     Preparing development plans for the next 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.

5.     Forming a team of professional advisors to support the family in the transition process.

Plan for the successful change of seasons in your family business.

For A Business Family, Legacy Is More Than Just What You Have Earned

A true family legacy is more than just the legal documents distributing your assets when you die.  In order to nurture the legacy, you must understand what your family legacy is.  A true family legacy encompasses the values and passions that fuel your family.  It is perpetuated through family stories, your family’s belief about wealth, and how you live out your family values on a daily basis. A legacy is formed by the sequences of actions that resemble one another and are lived out in each generation.  It is the repeated behaviors and actions that shape your family legacy.

Like it or not – everything you do and say contributes to or influences your legacy. Building a legacy is not a one-time event. Rather, it is a lifelong process that is influenced by, and also influences, family. Each family is special and unique. Each generation needs to adopt and add to the family legacy and definition of family wealth. The wealth of a family consists of more than simply the financial capital. Your family has special family intellectual wealth, family social wealth, family spiritual wealth, and a unique familyness.

So what are a few family activities that you can do to begin defining your family legacy?

1.     As a family, write a family mission statement, complete with your family values and beliefs, and discuss what it means to see those values in action.

2.     Record family stories through conversations with parents, grandparents, and other relatives either through audio, video or written word. You may decide to record the younger generation interviewing their senior family members.

3.     Define what wealth means to your family legacy.

Engaging in a legacy 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 legacy goals will influence a business family’s worldviews; competitiveness; beliefs about wealth and philanthropy; and how major decisions are made.

The legacy you leave is the life you lead.

     What legacy are you creating right now?

Seasons Greetings

Wishing you peace, joy, and all the best this wonderful holiday has to offer. May this incredible time of giving and spending time with family bring you joy that lasts throughout the year.

May the message of Christmas fill your life with joy and peace.

Best wishes to you and your family during this holiday season.

Change in the Family Business

Change in the Family Business

“There is nothing permanent except change”

                        Heraclitus, 513 BC

Based on this quote, people have been struggling with change for over 2,500 years.

I recently was talking with several business owners who commented that they felt the economic climate, the business climate, and the family dynamics were changing so fast they did not know which way to turn. Those comments stirred my thoughts to explore what do business families need to be aware of, or not lose in a changing environment?

If we stop to think why people usually fight change it is frequently because they feel they do not have or will not have control and the familiarity of the known is more comforting than the unknown. The natural response to this feeling of powerlessness, frustration, and fear is resistance. This resistance requires inclusion in the discussions, evaluations of the options, and a belief that as a family all are united.

Several ways we can begin to help our families and businesses deal with change is to recognize and admit that change is a fact of life and without it we will never grow our business or build a family legacy. With a recognition of these facts, together the business family can decide what, where, when, and how the change will be met.

By reaching out to other family members, maintaining realistic optimism and a can-do spirit the business can meet and plan for changes by finding new opportunities in changing situations.

Sometimes change feels like a roller coaster with no one sure which way to go.

If you expect the unexpected you will not be surprised that you are surprised.

How is your family and your business planning for change?

Let Me Tell You A Story

Every family in business has a story – or, more likely, many stories. Family stories give context to a family’s culture, historical perspective to current crises, and insight to influences that helped shaped the family and the organization. Stories show next generations who the family is: the family culture, values, work ethic, and faith.  Stories invite the next generation to experience a world that shaped who they are.  Stories connect the listener to the storyteller, to the key players in the story, and to the history. 

For some, getting senior generations to tell stories is easy.  For others, it takes more intentional effort.  Sometimes stories are told during informal conversations at work or at home.  Sometimes creating space for intentional dialogue can foster family storytelling.  Younger generations can provide rich opportunities for telling family stories by asking leading questions. For example:

            Tell me about the time…

            Tell me how you started in the business…

            What was the most difficult obstacle grandpa faced…

            Give me an example of when…

            What did you do when…

What are the stories you are telling your children?

Your stories are unique to your family.  Sometimes, senior generations think their stories are obvious.  Or boring.  Or not interesting to younger generations.  It’s these stories, however, that give context and character to a family.  It shows them how their families became who they are and how the business became what it is.  It’s these stories that give younger generations an identity of who they are.  It helps younger generations grasp hold of an identity bigger than themselves.

The family-ness that comes from this shared identity is also one of a family business’s strongest competitive advantages.  In other words, sharing stories not only brings understanding and identity to family, it is also one of the best ways to develop one of your strongest competitive advantages.

Communicating your family story is part of building your legacy in teaching and raising up the next generations. Your children and grandchildren will continue writing the story of your family. Help your family continue your legacy. 

Let me tell you a story.

When Dad (or Mom) No Longer Calls The Shots

Preparing the next generation to take over the family business and make decisions as a team must start before the family’s entrepreneurial leader is gone.  Business founders too often spend their entire careers making the difficult decisions by themselves, doing the difficult work, and dictating orders to the next generation.  When the strong leadership and decision-making abilities that made the founder’s business successful at first go unchecked as the next generation comes along, the next generation may not learn how to work through conflict, make decisions as a group, or do the difficult work of leading the organization.

Recently, we heard from a second-generation family business. The family had five siblings, their spouses, and several third generation family members working in the business.  As we talked with each family member, everyone expressed the same sentiment: “Before Dad passed away, we never had conflict.  Dad told us how it was and how it was going to be.”  When we spoke to them, about two years after the father’s death, the second generation was at a true stalemate. They were unable to make a decision as a group.  They could not decide who should lead the business.  Every conversation ended in unresolved conflict.  Sad to say, over the years following their father’s passing, mistrust, conflict, and a decline of respect for each other forced the siblings to the only decision upon which they could all agree: liquidate the business and go their separate ways.

So how can an entrepreneur and his/her family prepare for the future when Dad or Mom no longer calls the shots?

1.       As a family, engage in open communication to define why you want to be a business family.

2.       Be humble and respect your family members for who they are and the knowledge, skills, and abilities they posses.

3.     Commit to truly listen to each other.

4.     Establish communication guidelines that all family members can agree to follow when conflict creeps in or decisions need to be made.

5.     Be a safe family member, including by demonstrating openness to feedback, asking questions, and avoiding reactive behavior.

6.     Create a participatory culture, such as getting all family members in the game and seeking their opinion.

7.     Handle conflicts as they occur by walking toward conflict, handling the “right” problem, and working to move toward mutual agreement.

8.     Remember the counter intuitive requirements. If you want to be heard, first be willing to listen. If you want to be trusted, you must first be willing to show trust.

9.     Be willing to give grace and forgiveness.

10.  Commit to your family.

Following the guidelines above will help set the framework for the next generation to take over the family enterprise and continue the family’s legacy.  If your family is stuck, it might be helpful to have an independent third party come along side your family on this journey.         

This can be the journey of a lifetime.   

The Family Council

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.