Tag Archives: family businesses

05/5/18

A Family-Business Crisis Of Perception

Family businesses are subject to a range of crisis that are unique to them; not encountered by non-family businesses. Here’s a common and potentially excruciating one:

The incumbent leadership of a family business may or may not be confident that the upcoming generation has the competence to lead the family business going forward. Members of the upcoming generation, on their own part, feel entirely confident that they have what it takes to successfully lead the business into the future. It’s a crisis of perception.

To bypass this perceptual disconnect, long-lasting multigenerational family businesses have structures in place that foster family and generational coherence:

  • Avenues for good communication: Perhaps the most important trait of successful family businesses. It seems easy but we all know it isn’t. Opportunities for family members to share stories about goals, plans, hopes, aspirations, dreams, challenges and even failures can foster a cohesiveness that avoids conflicting perceptions of confidence and competence.
  • Established values: Descriptors of ‘what’s important to us.’ Families who know and respect one another’s values are better able to sustain a vision for the family and the business that crosses generations.
  • Respect for the past: With an eye on the future. Successful multigenerational family enterprises know that each generation needs to determine a vision for the business under their leadership, while remembering and genuinely valuing what preceding generations accomplished. A place to begin engendering this respect may be writing the story of the family’s founder and telling it to all generations that follow.

These structures help to create a shared perception of what is real with regard to the readiness and competence of the family’s next generation to lead; and they also help build this competence long before the doubts and disconnects have a chance to arise.

 

04/20/18

Employment Policies In Family Business

In all social structures, policies provide a process for aligning an organization’s values with its actions. In family enterprises, where there is an overlap of family, business management, and ownership, a family-employment policy is one of more important policies a family can develop.

It can be difficult for family business owners to be objective about hiring—and firing—family members. The family-employment policy helps by providing an established process and procedure for hiring family members. It outlines the factors necessary for employment, and when applied consistently, helps family members understand their relationship to the business.

“The policy is intended to avoid conflict, and should focus on what is best for the company and should stay consistent for family and non-family members[1].” It sends a message that employment with the company is not a birthright–it must be earned.

For instance, the policy may specify that a family member must have gained experience and earned a promotion in an outside firm; achieved a certain educational level; be a good fit within the company, and have skills commensurate with the current market salary for a legitimate job opening.

The policy may also include a statement of philosophy such as: “We are a family committed to our members and descendants being responsible, productive, well-educated citizens who practice the work ethic and make constructive contributions in the local community and the world at large”[2], thereby reinforcing family values.

While all families are different, it’s clear that development of a family employment policy is dependent upon good communication among family members and between generations.

[1] Family Business Wiki. http://www.familybusinesswiki.org/Family+business+Policies

[2] Bork, David. 1991. https://www.aspenfamilybusiness.com/PDF/Sample_docs/Employment_Policy_Form.pdf

04/7/18

Developing Future Leaders

For family businesses to thrive through succeeding generations, the development of future leaders must not be left to chance. It’s the responsibility of the current head of the family business to recognize and nurture leadership qualities in members of the rising generations. Here are seven strategies for accomplishing this critical task: 

  1. Be a model of leadership yourself.
  2. Demonstrate honor and respect for family members who are leaders.
  3. Recognize that there are as many different leadership styles as there are leaders. Consider the differing yet effective leadership styles of Martin Luther King, Mahatma Gandhi, Eleanor Roosevelt, Malala Yousafzai, Oprah Winfrey, Stephen Hawking, Winston Churchill, General Patton, and Steve Jobs. Encourage the development of individual and innate leadership styles within your own family.
  4. Provide younger family members with opportunities to lead.
  5. Help them learn to identify leadership opportunities within and outside the family business.
  6. Encourage their involvement in leadership activities in a variety of life areas such as in school, in professional associations, in your community as well as in your family business.
  7. Encourage them to think in terms of what they want to accomplish for the family and the business.

Of course, it’s important for the head of the family and current leadership to monitor the path of potential next-generation leaders; to see where they succeed; where they struggle; to guide, correct and mentor them. The future of the family and the business will be in their hands.

03/11/18

Best Practices Common To Successful Family Businesses

“All happy families are alike; each unhappy family is unhappy in its own way”

—Leo Tolstoy, Anna Karenina

 I recently read, again, this first sentence from Anna Karenina. Thinking about the truth of this statement as it pertains to family businesses, I have found much inspiration in: Perpetuating the Family Business, 50 Lessons Learned from Long-Lasting, Successful Families in Business by John L. Ward—quoted liberally here—to present six best practices common among successful multi-generational family enterprises:

  1. Establish a shared Intention to become a multi-generational concern.

By establishing an intention we declare an objective and foster a determination to succeed. This creates a focal point around which family members can coalesce, facilitating the birth of a long-term vision for the family and the business. Critically, this established intent places the responsibility on each new generation of leadership to pass the business on to the next in better condition than that in which they received it.

  1. “…Develop policies for family participation in the business -before the need.”[1]

“Long before the second generation is ready to come into the business, for example, the first generation develops and writes down on paper an employment policy that sets forth the requirements for family members who want to join and move up in the business. And long before the second generation enters the business, the first generation puts on paper a policy that guides decision making on compensation and performance appraisal issues.”[2]

  1. “…Enduring family businesses work very hard at defining a Sense of Purpose.”[3]

“They ask and discuss such questions as: Why are we doing this? Why are we working so hard? Why are we spending the time to develop policies? Why are we exerting so much energy to prepare for the future?”[4]

  1. Build Processes

“The capacity of a family to deal”[5] continually and “effectively”[6] with issues as they come up “will be a function of its skills as a group to communicate, solve problems, reach consensus, develop win–win solutions, and collaborate.”[7] It is “all the thinking and meeting and discussing that family members do together to resolve issues.”[8]

  1. Next-generation responsibility and leadership starts with good parenting.

“…One of the things that we can never underestimate is how much good parenting affects the future of a family business. After all, what is a family business about if it is not about the next generation?”[9]

  1. “Communication is Indispensable.”[10]

“Successful families recognize how profound, complicated, and perilous–and rewarding –communication can be. Business families with a long history of success are families that work very hard at communication.”[11]  They do this by maintaining open dialogue between family members—sharing family stories, writing family newsletters and other creative strategies that work for them. “Some once-successful family companies that lost their ability to continue as family firms lay that to a lack of sufficient communication.”[12]

Each of these practices is a scaffold upon which to build an enduring multi-generational family business. They are easy to write about and difficult to achieve. But having examples of workable strategies set by successful long-established businesses takes the guesswork out of what is necessary and provides guidelines to the possible.

[1] John L. Ward, 2004. Perpetuating the Family Business, 50 Lessons Learned from Long-Lasting, Successful Families in Business, Palgrave MacMillan, p. 23

[2] Ibid, p. 23

[3] Ibid, p. 24

[4] Ibid

[5] Ibid, p. 26

[6] Ibid

[7] Ibid

[8] Ibid

[9] Ibid, p. 27

[10] Ibid, p.15

[11] Ibid

[12] Ibid

02/23/18

A Warrior Heart

In preparing this blog piece, I turned for inspiration to one of the most important books I read last year, Money and The Soul’s Desires: A Meditation on Wholeness by Stephen Jenkinson. I had gotten no further than the author’s ‘acknowledgements’ page when I came across a statement about his son that stirred images and a longing in me, both as a father and as a son: “My son, Gabriel shows me the grace of his brawny warrior heart. I remember him taking his canoe out through the mist alone, and I honor him and kiss his brilliant feet for finding their own brilliant way.”[i]

To be successful as a multi-generational family enterprise, we must be able to honor our children for finding their own brilliant way—for themselves, the family and the business under their leadership. While this places responsibility on the child for setting out to brave the mists of next-generation leadership, it places equal responsibility on parents for helping our children develop their own warrior hearts.

[i] Stephen Jenkinson, 2002. Money and the Soul’s Desires, A Meditation on Wholeness. Iron Gold of Mercy Publishers, Ltd., Ontario, Canada. Page xi.

 

 

 

01/27/18

Time Together–Indispensable To Family-Business Success

What keeps venerable old families together?
They are, after all, only as strong as the roots that bind them.[1]

The above quote comes from a Dec 30, 2017 article in the NY Times that I had saved because in it I see an important message for all family businesses—a message that cannot be repeated enough.

The article, Keeping the Family Tree Alive https://www.nytimes.com/2017/12/29/your-money/family-business-wealth.html features descendants from three famous families: Sylvia Brown, whose family name adorns Brown University, Alessia Antinori who is a 26th generation member of the Italian wine making company bearing that name and Mitzi Perdue, heiress to the Sheraton Hotel chain, and widow of chicken magnate Frank Perdue.

For me, the overriding message is: members of successful family enterprises spend time together. Eating dinner together and vacationing together are examples. Time together helps family members embrace a common sense of purpose, create and sustain a culture of cohesiveness across generations.

It’s interesting to note that the representatives of the three families written about in this article are women. Women are typically perceived as the archetypical force for family cohesiveness. Considering that more family businesses fail because of family related challenges than business ones, the extent to which women participate in their family enterprises might justifiably be seen as a significant factor for failure or long-term success.

 

[1] Sullivan, P. (2017, December 29) Keeping the Family Tree Alive: Retrieved from https://www.nytimes.com/2017/12/29/your-money/family-business-wealth.html

 

01/15/18

Family Business—A Three-Way Balancing Act

Open up a family business and you will find within a three-way structure of dynamic subsystems; the family, the ownership and the business. These three must continually adjust to one another to maintain balance among themselves for their own health and that of the entire business. What’s tricky about that? Each of the subsystems has its own set of priorities.

Priorities for the Family subsystem are:

  • Harmony
  • Unity
  • Acceptance
  • Loyalty

Priorities for Ownership are:

  • Dividend Distribution
  • Stock Appreciation
  • Control

For the Business subsystem priorities are:

  • Growth
  • Profitability
  • Market Share
  • Innovation

Set out like this, it becomes easy to see where points of contention may exist as the systems’ moving parts meet and inevitably impact one another; where family harmony intersects dividend distribution; where innovation meets control; where market share runs aground of stock appreciation…

These are a just a few of the many ways these three subsystems can become unbalanced, creating inter-family conflict, operations slowdowns, loss of profitability and overall damage to the sustainability of the business and the family.

12/16/17

Strategies For Presenting Change Initiatives In Family Business

When a member of the rising generation in a family business proposes changing some aspects of how the business is run, members of the incumbent generation may, incorrectly or not, perceive their initiative as telling them that they, personally, are outdated. That they are no longer needed and should surrender their leadership role. The incumbents’ reactions to this perceived threat can have a caustic effect on the business with reverberations felt by all stakeholders.

This situation is particularly challenging if the family has not developed a culture of conversation about the interface of the family and the business, whether about introducing innovation and change initiatives, or about the transition of leadership between generations. Conversations like these may be difficult, but if avoided the outcomes born of silence can be even more challenging.

If you and your family have established protocols for conducting conversations like these, you have taken an important step towards ensuring your long-term success.

Lacking an established protocol for conversation, a perceived threat can be diffused if a proposal for change is offered with care and tact, in a way that—by reflecting human nature—facilitates the incumbent leadership receiving it openly. Key elements of this strategy are:

  • Showing respect for the past while presenting a vision for the future.
  • Recognizing and acknowledging the vision, labor and accomplishments of the incumbent generation and those that came before them.
  • Declaring an understanding of the importance of the family legacy and the desire to carry that forward.

Since this tactic supports and validates the efforts of the incumbent generation, it may circumvent the perception of the proposed change being seen as a threat.

However, that the incumbent generation will eventually be supplanted by the rising generation is not a threat, but a fact. So for them a different strategy may be appropriate. It may be valuable for them to recognize that transitioning out of the leadership role does not signify a departure from the business or the family. They may assume new and equally important roles; as spokesperson, senior advisor, nurturing next-generation leaders, and passing on the family values and history.

Change, for better or worse, is of course inevitable. For the family that is prepared to embrace it, new adventures beckon for both the generation that transitions out of their leadership roles and for the new generations that succeed them.

12/2/17

Challenges To Creating Change Initiatives In Family Businesses—Two Kinds Of Practice

Recently I’ve been writing about the challenges of creating change initiatives in a family business where the older generation is in charge. One of Seth Godin’s recent blogs, Two Kinds of Practice, http://sethgodin.typepad.com/seths_blog/2017/11/two-kinds-of-practice.html touched on what I see as a critical aspect of this inter-generational dynamic.

According to Godin, in the first kind of practice, we learn to play the notes as written, coming as close to a specified standard of perfection as we can. Applying this to family business, we learn to conduct business as the generation in charge does it. Practicing this way, Godin adds, we can become very proficient.

Learning to play the notes as written is sound advice. It respects the past while helping to develop an understanding of the family’s values and why we do business the way we do. The business environment though, is in constant flux—today more so than ever. The successful business will keep an eye on the future and have a mindset that embraces innovation.

The second kind of practice Godin describes as being “more valuable but far more rare.” This he says is the practice of failure. “Of trying on one point of view after another until you find one that works. Of creating original work that doesn’t succeed until it does.”

Founders of family businesses sometimes forget that their know-how was gained from their own painstaking efforts that resulted in errors early in their careers; or perhaps are reluctant to return to those times of uncertainty and anguished miss steps. But when founders seek to maintain their own comfort by denying this process of learning by trial and error to members of the next generation, their actions may lead to a painful decline of both the younger generation family members and the business; a decline fed by an inability to adapt.

Some families build their businesses on the practice of failure as a value. For them innovation is seen as a key to growth. But they are rare. In the majority of business families, the natural conservatism of the generation in charge is at odds with the natural forward-thinking innovative attitude of youth.

These two sides for different reasons are often blind to each other. And being blind, a clear vision for the future of the business is compromised. At this point it becomes wise to seek the help of an impartial outside observer. An expert family-business consultant can help take the blinders off, reawaken the incumbent generations’ memories of struggle and failure, remind them about how they succeeded, and set the new generation free to do the same.