How Important Are Values, Really?

Any of these issues can be a problem for a family business. More than one can be debilitating. Each one of these can be headed off by application of the right set of shared values.

Seen any of these?

4

 Sibling Rivalry
4 Cousin Rivalry
4 Spouses that instigate or interfere
4 Owners/Parents that don't let go
4 Owners/Parents that don't trust offspring to make decisions
4 Owners/Parents that make it mandatory for offspring to work in the business
4 Children that think they "have it made" and act that way around other employees
4 Family members that set a bad example for non family employees
4 Family member disagreements or resentments outside the business that affect business relationships, decisions or operations
4 Lack of full commitment to the business from certain family members
4 Employees that think "Profit" is a dirty word
4 Family employees which would benefit the business by staying home
4 Lack of qualified successors to run the business
4 Failure to plan the family estate soon enough, jeopardizing succession
4 Nobody can really articulate the strategy of the business: why it succeeds (or doesn't)

If you have any of these issues, chances are there's a lack of certain values. If your company let these persist over time, it will be more difficult to correct them and may require replacing individuals.

If you don't have these problems or they are mild, you can start out on a good foot by gathering the family to develop a good list of values by which you will live and operate.

Call us for solutions. A good strategic plan starts with a good statement of family values and vision for the family: what the family will need from the business and what the family will be willing to put into the business.

Then it moves on to a strategic growth plan for the business in order to provide what the family needs from it.

It is difficult for a family business leader to pull this off on his or her own. After all, you are "family". They most often benefit from facilitators that carry no baggage in the family culture.

Call us for a free initial consultation to see how your family business can realize it's goals with our strategic planning process for the family business.

 

  

Leadership


 Leaders Develop Future Leaders


Many institutions and consulting firms concentrate on helping you to choose among candidates for succession. That's a great idea, but only for those lucky enough to have qualified candidates in the first place.

The sad truth is, most family businesses will be lucky to have any qualified candidates after the first generation. (Note: only about 30% of companies make it out of the first generation to the second.)

There are many factors that can take potential candidates out of consideration over time. Your job is to increase the odds that you will have qualified candidates. First, understand why there might not be.

Bodies But No Candidates

When you start thinking about succession down the road, you may discover that you have available "bodies", but left too much to their own devices, most won't be ready to lead when you turn around and find that you either don't want to keep leading, can't keep leading, or don't even get to make the decision because you're suddenly not around any more. Aside from that, they might even decide to do something else with their lives.

So how do you create good family business leadership successors? Well, there is no surefire recipe, only a formula to make the odds better. It starts, as the values section of this site starts, with "Sincerity of Purpose". You have to keep your family members' best interests in mind. If their talents and skills and hearts take them in another direction, you should support them in that direction. You'd be better off with an outsider in their positions that is committed than a half committed family member or worse yet, a bitter, thwarted one. There are not that many "George Baileys" in the world that end up with a "Wonderful Life" by taking over a company that they hated and kept them from "lassoing the moon" as an engineer, musician, or whatever.

Even Naturals Need Development

As long as we're using movie analogies, remember the case of Roy Hobbs, the fictional older ballplayer for the New York Knights played by Robert Redford in The Natural. Before his father died at an early age, he told the young Roy, "You have a gift, Roy, but it's not enough.... you have to develop it." So his Dad worked with the kid every day on pitching and hitting before he died. You won't find that quote in those referenced in the prior link. But it's in the movie. I never forgot it. It's worth a viewing if you never watched it.

Roy Hobbs almost blew it because he let a near fatal flaw almost blow him out of baseball for good just as he was about to start a pro career.... resulting in sixteen years away from the game. The next time he was confronted with the same temptation, he almost fell to temptation again but recovered to save the day. You will probably not be that lucky. You're not in the movies.

You have a gift, Mr. or Mrs. Business Owner. It's your son or daughter. But it's not enough. You have to develop it.

Luck Favors Those With a Plan
(so it's up to you to develop the kid)

Wind the clock ahead. Suppose you developed a kid pretty far along the way. You taught them the right values, gave them good work assignments, sent them to business school. Suppose you also developed a great customer-oriented business that delivered top value, treated employees well, made good money and practiced all the right values expressed in your strategic plan. You took your best shot. You created a company where the right values were in place and you could offer your son or daughter an opportunity to use a really broad range of skills, knowledge and attributes. Then they went off and did something else they wanted to do more, or thought they did.

You have to let them go. They might even come back, ready to make a real commitment when they do. Why? They might see that the rest of the world doesn't exactly share the same values or have the same concern for customers, suppliers and employees, or offer them a chance to use their full range of business skills.

So how do you take this "best shot"? First, build a great business by learning how to run it the best way possible yourself, and keep improving it by making that one of your values. Teaching the business to others will sharpen your ability to discover new ways to run the business and to run it better yourself. Plus, one man teaches ten, ten teach one hundred, and you create.... growth capacity.

Leadership Succession Planning, well done, starts long before you have candidates that might be ready to take the reins. You need to start when candidates are young, preferably around ten years old. Here's how.
 

  1. Give young family members an enjoyable taste of the business when they are young, preferably starting around ten years old. Take them to work and plan a sequence of visits over time that uses interesting ways to show them how your business works starting with what you do for customers and why customers need it. Then show them the different stages in your service or production process. Ask them what they think at each stage, and point out why the process stage and the way you do it is important in producing the quality of final outcome for the customer.

  2. Create small work opportunities for them to develop good personal work habits and learn about different business functions in their teens.

  3. Educate them about your family/business values and live by them yourself.

  4. If they are interested in a business career, educate them in general business management knowledge and skills outside of the business.

  5. Create opportunities for them to develop management skills with meaningful assignments in charge of substantial business initiatives.

  6. Mentor them about the business strategy, business process and the key levers in the business that make money.

  7. Let them follow their own hearts and develop their own talents in order to create a fully committed successor, not an obligated one.

  8. Choose capable successors based on a number of logical criteria, not just the "oldest son birthright" rule and make the criteria known long before selection.

  9. Prepare yourself to give up the reins as well, by figuring out how you will keep active when you actually retire.

  10. Manage expectations by setting a date for succession and keeping to it.

What if You're Just Starting Out?

Many small business owners don't even think of themselves as family business owners. They think of the business as "their baby", all theirs. for some, it's nearly their whole identity, and that's natural, given the level of sweat, blood and tears they put into it.

Then they have children, and it dawns on them at some point that they might want their children to work in the business, maybe even take it over and benefit from ownership.

They might also employ a spouse, a child, a brother, sister, or other relative in the business. Then the problems can begin if you haven't set the running rules (values) down right. How do you fire a relative if they don't work out? Handle this wrong and your family harmony starts to turn rather dissonant. People might not even talk to each other any more. The word gets out in the community that you're a heartless rat when you just let somebody go that wasn't working out. You wonder if some people will want to do business with you any more.

That is a common problem, but there are are bigger ones that deal with the future of the company. If you're just starting out or in the first few years of business, you're probably not thinking about succession. Then your kids get to be ten, fifteen, eighteen, and don't know anything about the business. They may not have had a job yet, and you try to plug them in to the business. At that point, all they might want to do is play sports, video games and hang out with their buds. You should have started at step one.

It gets worse. You send them to college and they barely make it through and then "expect" to get a job in the business. They might even expect to run the business eventually. It's amazing what you know when you're 25, right? It gets worse.

Advance the clock to when the kid is 45 and you've got a marginal employee that thinks he or she can run the business but "Dad won't let go." They can't seem to run their own car well no less a business and you know it. Fear grips you by the throat when you think of them running the business and your nest egg down the drain with it. So, you have to sell the business because they would have ruined your nest egg. You gave them some shares and they got some money out of the deal but they still hate your guts. I am deadly certain that you don't want that to happen. So how do you avert this situation? 

To be continued.... come back to this page periodically more...

We'll provide additional suggestions on what to do in different situations.... including how to avert the aforementioned disaster.... by starting out on the right path when the kids are young, and your business has the ability to establish great values and practices early in the game... which is ALWAYS easier to get growing.

  • What if you have multiple candidates? What are logical criteria for selection?

  • What are the characteristics and skills of a good leader?

  • What if you have no capable candidates?

  • What if you have disagreement in an extended family system?
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