I grew up in a family business, a sprinkler manufacturing company in Peoria, Illinois. My father ran this business for nearly 40 years, and I had the privilege of working in this business myself. While not every decision my father made turned out to be right, he made many excellent decisions. One of the very best was instituting an annual event he called “Employee Appreciation Day.”
Briefly, Employee Appreciation Day consisted of all office workers spending one day in the company’s factory or warehouse, laboring alongside the regular employees of those areas. This event served a number of purposes. First and most generally, it brought employees together for a full day, thus breaking down some of the structural barriers inherent to these separate functional areas.
Second, this day of direct interaction provided more specific knowledge that was helpful to all employees. For example, working on the assembly line allowed sales people to better understand how the products worked and to better appreciate the care that went into the creation of each item. Manufacturing employees could share process improvement suggestions with managers they wouldn’t otherwise see.
Most importantly, Employee Appreciation Day (which included a pizza lunch for all employees) strengthened the company’s conscious culture of cohesiveness and collaboration — a culture that provided the company with a competitive advantage in the marketplace.
What strategies have you tried for strengthening the culture of your family business?
Years ago, I had the pleasure of visiting with a wise family business owner/operator named Tom Gulliford. He shared with me his unusual philosophy about vacation time: all employees must take a minimum of two weeks’ vacation whenever they take time off. His reasoning was that anything less than two weeks did not allow the employee to truly get away from work… which was the entire purpose of vacation in the first place!
The constant pressures of business competition often compel companies and their employees to work ever-longer hours, so there’s no easy solution to this problem. Family businesses, though, can lead the charge. I say this because changing our perspective on long work hours requires a long-term perspective. While an examination of a particular moment may lead one to continue working, a longer term perspective will make it clear that occasional breaks are required. As is often said, “It’s a marathon, not a sprint.”
And, who is better positioned to take a long-term perspective than family businesses? These companies – many of whom have lengthy histories – measure time not in hours or days. but in generations. This perspective allows family businesses to see an extended vacation not as a short term loss, but instead as an investment in the long term… an investment in the individual and an investment in the business.
Whether it’s taking the “Gulliford Approach” of minimum vacation time or some other strategy, how is it that your family business manages that long term investment of employee work/life balance?
At my son’s middle school basketball game this week, I overhead a young cheerleader say (to her coach!), “No offense to our guys, but I want the other team to win.” The coach is a friend of mine, so I caught her eye and we shared a good laugh. She certainly has her coaching work cut out for her!
Every time I picture that exchange in my head, I laugh out loud. It’s just so incongruous: a CHEERLEADER, whose whole purpose is to support a team in their pursuit of victory, pulling for the OTHER team. It just doesn’t make sense. And, as usual, the example got me thinking of family business. (Stay with me here!)
I have had the honor of interacting with several sibling groups over the last couple months and these groups fall into two camps: siblings who respect each other and siblings who do not.
The sibling groups who respect each other can lack a shared vision. They can lack structure and governance needed to effectively govern their business. They can be stressed by changes in their industry. But the foundation of respect and true appreciation for each other give them a base to come together and effectively work through these challenges. I’ve even seen situations where they come together to do the needed work and decide that one sibling is no longer aligned with the business vision. Departure of a respected sibling is difficult and strains relationships, but holidays and family togetherness are almost always preserved.
I’ve also observed sibling groups put in terribly difficult situations. Often, the siblings have been together for decades but don’t have the foundation of respect and true appreciation for each other. These situations were brought to mind by our young, confused cheerleader. Her role was clearly to cheer for one team (she had on the uniform for goodness sake), but she was rooting for their opponent.
These siblings love the family business and enjoy their roles within the business. They bring value to the organization with their competence and passion. And they deeply dislike their “partners” – co-managers or co-owners – who happen to be their siblings. How can you be professionally fulfilled when you love your work, but disrespect your coworkers? How can you be fully effective when your uniform puts you on one team, yet you feel like the opponent of the very team you’re supposed to be cheering for?
It is definitely a confusing and challenging place to be with stakes much higher than a 7th grade basketball game. I have deep empathy for adults who have devoted decades of their life to a family business and feel like their profession and passion can only be fulfilled if they stay in the business. However, staying in the business puts them in daily contact with folks they don’t respect.
If you’re contemplating becoming part of a family business in an owner or manager role, think deeply about your potential “partners” – the siblings (or cousins) you will interact with regularly. If you don’t respect or appreciate those folks, I urge you to pass on the opportunity. While our young cheerleader just needs a little coaching, I rarely see these feelings improve with time in the family business.
Busy seems to be the stock response to “How are you?” these days.
We all struggle at times to balance competing demands for our attention from family, work, community,and other commitments. Sometimes we can feel overwhelmed by the frantic pace and lose sight of how fortunate we are to actually have so much going on in our lives.
Yes, children can be self-centered, create disorder, and put huge demands on our time… and they bring humor, new experiences and growth to our lives.
Yes, work requires long hours, difficult collaborations, and travel or other personal life sacrifices… and enables us to interact with other driven people, stretches us to learn new skills, and in a family business – allows us to know our family members more deeply than most.
Yes, community engagement can be frustrating, inefficient and hard to get initiatives sustained…. and they permit us to make an impact, change lives for the better and get to work with people who share our values.
The truth is, there is little in life that is really worth doing or deeply rewarding that does not require sacrifice and effort. While we all need to make sure we carve out some quiet time and opportunities to take care of ourselves among all the responsibilities we shoulder, the truth is we are tremendously privileged to have these responsibilities. It means we are fully functioning grown ups, it means there are people who believe we make valuable contributions to important goals, it means we have love and joy in our lives….
The next time you are feeling stressed by your over-committed calendar, take a minute to smile about the richness of your life that is in fact evidenced by all you have going on.
I turned 60 this summer. I feel as energized, curious and active as ever. But, I do notice a few significant differences.
A source of great pleasure is spending time with family. Sitting on the floor and trading monosyllables (mostly ‘Ga!’ and ‘Da!’) with my 9-month old granddaughter is one of my greatest joys. If I had a choice between seeing a prize-winning movie, hearing an award-winning orchestra, eating a gourmet meal or feeding strained peas to the baby, I would take the latter without batting an eyelash. Quite different from when, as a young parent, I longed to get out of the kitchen and away from the babytalk and mashed vegetables.
Professionally, a source of great pleasure is sharing observations and insights with colleagues. Collaborating as part of a team in support of client success is much more satisfying than being a heroic (and more limited) solo practitioner, even if it takes more time and some patience. I recently co-authored a book on Human Resources in the Family Business (coming from Palgrave McMillan in November) with Wendy Sage-Hayward and David Ransburg, two of my FBCG colleagues. Learning and creating together took a bit more time, but it was fun to tussle, disagree, and thus synthesize new insights together.
And, it’s not like I’ve stopped exploring. My late-in-life interest in mindfulness has taken me to retreats in Germany, France, New York and California, and introduced me to a wonderful variety of practitioners from around the world.
I’ve been reading Atul Gawande’s wonderful book, Being Mortal. He talks about the changes that come with age — how people tend to focus more on what’s known and familiar, as vs. seeking new experiences and acquaintances. How people enjoy slowing down, doing less, going deeper rather than wider. He points to research that links this — not to aging, or decrepitude — but to a sense that the time ahead can be short, and that every moment is precious.
These pleasures, of course, are available to us regardless of age. We don’t have to wait for age 60 to appreciate our loved ones or our teammates.
We can take a moment to appreciate their presence at every age.
She will hold the position for the 2015-16 academic year while a national search is conducted to fill the permanent position.
“She brings tremendous knowledge about family business, wisdom with regards to family dynamics and communication, and passion for assisting family businesses to achieve their potential,” said Ed Hart, director of the Center for Family Business at Cal State Fullerton. “We honestly could not be more excited for what JoAnne brings to the center and to our members.”
Norton has been working with multigenerational family businesses for more than a decade in the areas of family governance, communication and leadership training. A former vice president of shareholder relations for a family-owned media company, she has taught in the business college for seven years and facilitates two peer affinity groups of the center. She holds a doctorate in organizational leadership from Pepperdine University.
The endowed position was established through a fundraising drive led by major donor Rick Muth, president of Stanton-based Orco Block. Muth is a founding member of the college’s Center for Family Business.
The center was established in 1995 as a partnership between the business community and the university. Its mission is to enhance the well-being and survivability of family businesses by providing opportunities for education, interaction and information tailored to business needs and concerns.
This week’s blog is an easy-to-grasp list of 10 qualities I’ve noticed about the underpinnings of high-functioning family businesses over the last 25 years. These are not things I made up. They are philosophies and guiding principles of families I’ve been honored to serve and speak with.
Estate planning is NOT continuity planning. Confuse them at your peril. Estate planning is necessary but usually not sufficient. Continuity planning will include these critical matters: leadership transitions of the company, the board and the family; the rules that govern the board, compensation and performance measures; company strategy; shareholder education; and your vision and purpose for being in business together.
Family meetings should help plan for future generations of ownership and encourage leadership, fun, shareholder development and meaning. If the meeting does not work out as well as hoped the first time, give in and go hire an expert to facilitate the conversations that are required. And, while we’re on this subject, another reason to use an outside facilitator is because it is hard to come across as neutral and objective when you’ve got a large stake in the outcome of the conversation. Being a member of the family, an employee of the business or a member of the board may skew your thinking and ability to seem unbiased to everyone else in the room.
The family will need expectations aligned around many areas including their expectations for growth, risk, profitability, liquidity, purpose and policies like how we select leaders and who can be on the board.
Salary, bonus and distributions/dividends are different. I’ve seen many a family co-mingle them in order to minimize or avoid tax liabilities. For families that intend to continue the business to the next generation, this is frequently the source of big problems later on.
Have an appropriate, functioning corporate governance structure.
Run the business and the board as a meritocracy.
Beware of conflicted advisors.
A leadership change will likely take five to 10 years of preparation and execution and another three to five years for the new leader to get their sea legs. All concerned must commit to hang on and work through the difficult times that sometimes arise. Remember that although we’re related, we usually view aspects of our realities differently from one another.
The transition of the company’s ownership and leadership is a dynamic strategic imperative that will benefit from having the right foundational building blocks in place. Know your values and divine a strategy that reflects those values. Be honest with yourself and each other. Have thoughtful policies about compensation, the purpose of profits (in all their forms), the responsibilities and purpose of ownership, and be open to accountability.
Be patient with one another and the process of transitioning leadership and ownership of an enterprise.
If one or more of these strike you as something you’d like to read more about, let me know. I’ll be happy to introduce you to articles and books specific to each of these 10 points. And, by the way, each of these points can be a discussion item for shareholder, family or governance meetings.
To contact Drew Mendoza, Managing Principal, please call (773) 604-5005 or email email@example.com.
There will come a time during your family business succession journey when progress requires you to give up what you love to do and what you are very good at to make room for successors to learn, grow and flourish. This is some of the hardest work of succession.
Part of the trauma in this process is watching your bright, passionate and energetic successor – someone you have great confidence in – make decisions that you’ve made for 20 or 30 years. As you would expect, they make some missteps. They collect the wrong information. They take too much time. They move slowly on small decisions and too quickly on big, complex ones. They don’t treat people right. They screw up.
As the senior team member (some prefer “seasoned” team member), it’s often hard to know when to step in. How do you ensure they make some mistakes but none that are too big? How long do you let them bark up the wrong tree?
Today, I had the honor of watching Scott, one senior generation member (who would NOT appreciate that title), hit the ball out of the park while guiding a successor.
Scott is the CEO and the oldest of a four-sibling ownership team. He is fast paced, smart and loves to engage in stimulating conversation. Scott, while effective at his job, does like folks to know how smart he is and does not suffer fools lightly. He can easily dominate a conversation. And over the 18 years he and his brothers have worked together, his brothers have taught themselves to defer to him. And why not? Scott is almost always right. His guidance has brought the business a lot of success.
However, Scott (and his brothers) have recognized that his natural style – which has been a strength of the business for a long time – will not position it for long-term success.
The successor in the business is Derek, Scott’s youngest brother by 15 years. Derek presented a feasibility study today to the Board that he and Scott developed about an acquisition target. Scott has traditionally done the majority of this kind of work and been the one to present and lead discussions.
Derek had worked very hard to be ready for the presentation. He’d done his homework, gotten Scott’s input and worked with an outside consultant on both the content of his report and his presentation style.
I have watched Scott in similar situations before. When he already understands the content of a report, Scott has a hard time staying patient. He fidgets. He sometimes adds a point but then takes the conversation off topic. Scott’s become aware of these tendencies and their effect on other’s confidence.
Today, Scott was a superstar – just like Derek was. He was relaxed. He listened well. When he thought Derek missed something, he asked a great question. The tone was truly curious. He deferred to Derek’s knowledge and really asked his opinion on the topic – it wasn’t a rhetorical question that he already knew the answer to. (Well, it didn’t sound rhetorical.)
Questions can be transformative and sometimes very hard for experts to ask effectively. Questions can make the asker vulnerable – someone might think you don’t know something when you ask a question. For the CEO who’s been charged to know everything for a very long time, vulnerability can be an extremely hard place to put yourself.
The next time you’re tempted to add your perspective, hold off until you can do it in the form of a question. A real question – not one designed to point out what you know. And get the tone right. Tone probably contributes 90% of the effectiveness of a question.
When you get it right, watch the successor bloom with confidence and initiative. What an honor to watch Scott and Derek become a case study in how the hardest work of succession can pay off.
“I had always wanted to be a nurse,” explained Rachel. “After 15 years as a stay-at-home mom, I went back to school, earned my degree and then got a great job. I worked just one town over from where we live and where my husband Tom’s family business is located. Tom was at work all the time, managing the business and I was close by with a flexible work schedule. After 20 years of patience and work, our ideal plan had come together. And then Tom died.”
When Tom died, Rachel became a 50% partner with her mother-in-law, Rita. Rachel’s father-in-law had passed away many years ago and Rita had been an active business manager and owner for years. She’d recently begun to step away from day-to-day decision making. But now that Tom was gone, she moved back into her active role.
Tom has three siblings, two of whom had worked in the family business, on and off. Rachel had never worked in the business and was concerned with Rita’s intentions. Rachel and Tom’s dream had been for their (young adult) children to have an opportunity to work in and own the business. What did Rita want? “Rita won’t say what she wants right now. I think she’s afraid that whatever she says, it will make someone unhappy. It will be hard to get her to decide.”
Rachel chose to quit her job and come to work in the family business. She saw no other way to ensure that her voice was heard. And no other way to protect the future she and Tom had discussed for their children.
Tom passed away with life insurance and strong operating agreements for his entities – ones that protected owners and the businesses from liability. However, there was no buy-sell agreement. No future plan for business ownership. Today, the business is saddled with two reluctant owners.
Rachel is an owner by default. She’s chosen to exercise her owner’s voice by trying to manage the business, with no experience and very little knowledge about financials or operations. Rita is an owner by legacy. She had hoped to back away from management but also felt the only way to exercise control and “protect” the business was to be an active manager. And that’s about all they have in common.
A team functions best when they have common ground — a shared purpose. Logically, Rachel and Rita could work on that shared purpose by jointly answering the question, “Why do we want to be in business together?” Practically, they don’t have the depth of relationship, the understanding of their roles (as both owners and managers) or the trust to answer that question today.
So they are 50/50 owners, yoked together by fate. They are both working to overcome grief of Tom’s loss that came suddenly and too early. Owners, thrown together by the death of a key business figure, rather than owners who affirmatively chose to be in partnership together.
The obstacles are huge. And preventable.
This is obviously an extreme example. However, every family member who owns or manages a business can ask themselves two key questions:
First, do you have “affirmative” and engaged owners? Affirmative owners are those who have chosen to be owners. Engaged owners are ones who are clear on the rights and responsibilities of ownership and have the knowledge and maturity to effectively make ownership decisions.
Second, are the owners aligned around why they are in business together? This trait is fundamental to effective owner teams.
Talking about what ownership might look like after you are gone is not usually fun or easy. But it’s one of the best gifts you can give your family. And one of the best investments you can make in the future of your business.
Why are banks so fond of boards with independent directors? What is the big deal?
Actually, banks are interested for the same reason as minority and non-executive owners in a successful multi-generational family business. Independent directors with real fiduciary responsibility have an obligation to work in the interests of all owners; not just those running the business, not one branch of the family, but everyone whose capital is at risk – including banks.
In business school, it is called Agency Theory: the potential that managers of a business will make decisions that are better for themselves than for owners who don’t manage the business. Things like executive compensation and perquisites are often a concern for owners who don’t share in them. How can all owners be sure they aren’t paying too much to run their business? Would dividends and other distributions be greater if management didn’t spend so much on their “pet projects?”
These are the same issues that banks worry about. The Warwick Business School study I cited previously concludes that when businesses don’t have a strong corporate governance process with independent directors, banks react by imposing their own controls through more restrictive lending terms. Family owners who are not convinced their capital is being managed properly may attempt to impose their own controls by second guessing management and raising doubts with other shareholders. Sometimes their behavior becomes a strain on the cash position of the business if dissident owners want to be bought out.
At the very least, dissenting voices can disrupt family harmony.