The natural fit of emotional intelligence in family business (Part 2 of 2)

Kent Rhodes

Kent Rhodes

In my last blog post, I shared how Emotional Intelligence (EI) has become a core piece of the discussion about effective business leadership in recent years. I describe it as “the ability to monitor and understand the impact of emotions – from one’s self and others – on one’s own behavior and others’ behavior, all in a way that guides wise decision making.”

As a part of building this discussion, I am highlighting some recent research conducted by one of my graduate students at Pepperdine University, Emily Spivey, and how important it is for family businesses to be able to build in these insights as a part of good continuity planning for subsequent generations.

Emily was curious about the role emotional intelligence plays in how successful entrepreneurs build an organization from the ground up. The results of her work revealed Seven EI Qualities Important in for Entrepreneurial Success:

  1. Reading the room. Described by one study participant as the ability to understand “interpersonal dynamics that are taking place in a group or social context,” or by another as “understanding what people are experiencing at any given moment,” the importance of “reading a room” was identified as a characteristic of an emotionally intelligent leader necessary to effectively build an organization.
  2. Decision making. EI plays a role in the entrepreneur’s ability to make decisions, often quickly, creatively, and decisively, usually in the midst of uncertainty or under pressure. It even included their ability to accurately anticipate the responses and reactions of people around them and to adjust decisions as necessary.
  3. Hard leadership. EI plays a role in being able to lead in a crisis, including leading through brokenness, conflict or stress. In relationship to the uncertain and often chaotic nature of starting up an organization, study respondents talked about not only having the capacity to lead through hardship going on with other people, but the necessity of leading through their own personal challenges or conflicts as they came up. Managing and tolerating stress was also mentioned multiple times as key to effective leadership in the context of “hard leadership.”
  4. Risk taking. Another theme identified was the ability to express entrepreneurial leadership and take risks themselves, while simultaneously inspiring others to take risks as well. This role seems to be particularly important in terms of gaining financial stability by securing investors, loans, and financial security.
  5. Leadership in self and others. EI plays a role in being able to build leadership skills in others while simultaneously sustaining one’s own effective leadership over the long term. According to the entrepreneurs in the study, effective leadership includes both empowering and cultivating leadership in those around you and also having the self-perception to know your own leadership limitations or signs of burnout, and to course correct when mistakes were identified.
  6. Interaction. EI plays a role in being able to interact with others in a way that builds the confidence of people in their various roles and develops other leaders. The study respondents emphasized the importance of strong interpersonal relationships in starting the new venture.
  7. Trust. EI plays a role in trusting and building trust. This role of EI was discussed as an expression of emotionally intelligent leadership and also as an outcome. Emotionally effective leaders both trust themselves, and also inspire and build trust in others.
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The natural fit of emotional intelligence in family business (Part 1 of 2)

Kent Rhodes

Kent Rhodes

I’ve always been fascinated with the internal workings of leadership in family businesses and how founders of a successful family enterprise seem to have so much in common around their understanding of people. One of the roles I play in my life is that of a research advisor to graduate students at Pepperdine University. This means I see first hand how smart students explore and test interesting questions and how their discoveries can be applied to all kinds of organizations, especially to family businesses.

One of those recent studies by graduate student Emily Spivey explored the role that Emotional Intelligence (EI) plays in how effective entrepreneurs grow an organization from the ground up. I got excited about the results and implications for how EI and “entrepreneurialism” might be built and passed along as a part of effective continuity planning in the family firm. This is the first of two blog posts in which I’ll share the study along with the seven ways emotional intelligence can be perpetuated in family firms for future generations.

In recent years, emotional intelligence has become a core piece of the discussion about effective leadership in business. Essentially, it the ability to monitor and understand the impact of emotions – from one’s self and others – on one’s own behavior and others’ behavior, all in a way that guides wise decision making.

It will come as no surprise to anyone affiliated with a successful family business that this study verified previous research results (Barczak, Iassk, and Mulki, 2010; Cross and Travaglione, 2003, etc.) that there are clear links to the health, survivability, and overall effectiveness of entrepreneurial ventures to the personal qualities and leadership capabilities of the founder. It also bore out the notion that effective entrepreneurs naturally create an environment or culture of trust which fosters everyone collaborating more naturally, developing creative solutions, and achieving better overall results (more about that in the next post).

Interestingly enough, when asked about their understanding of emotional intelligence during the study, respondents were vague about their ideas. They tended to associate EI with “soft skills” and yet as they described their day-to-day work, the importance of using those skills became clearer. As a result, the group identified seven qualities that are important in their own leadership effectiveness when building an organization from the ground up.

They include:

  • Reading the Room
  • Decision Making
  • Hard Leadership
  • Risk Taking
  • Leadership of Self and Others
  • Interaction with Others
  • Trust Building

In my next post, I’ll share how these seven qualities apply to family businesses and the continuity of building “entrepreneurialism” in subsequent generations.

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What it means to be values driven

Jennifer Pendergast

Jennifer Pendergast

Many people associate my home city of Atlanta with our airport (home of frequently missed layovers!), traffic (if you’ve had the misfortune to drive our highways), or the Georgia Aquarium, the world’s largest. Recently I had the opportunity to visit one of our newest landmarks, and one that I hope will grow to be one of our most popular: The National Center for Human and Civil Rights.

While the role of Martin Luther King and others in the civil rights movement is well known in Atlanta and around the world, the information on human rights is less well documented. As a consumer, I was particularly struck by the information on human rights violations in the production of chocolate, flowers, soccer balls, and mobile phones.

So, how does this relate to family business? Unlike the disconnected minority owners of public companies, who invest solely to make money, owners of family owned businesses can choose to purse objectives that balance ethics and values with profits. They can choose industries, customers, suppliers and business practices that may not be the most profitable, but are choices that they can be proud of.

I recently worked with an ownership group that articulated their driving shareholder objectives as: “How we make money is as important as how much money we make.” Owners of family businesses have a unique opportunity to shape how they make money, and in doing so, shape the lives of their owners, employees, communities and other stakeholders.

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Creating meaningful leadership transitions

Jennifer Pendergast

Jennifer Pendergast

A few weeks ago, I attended the installation of the new senior minister at my church, the church’s version of the CEO. It gave me cause to reflect on leadership transition. This transition was very significant for our church. It is a large church in a large city which has played a pivotal role in support for the inner city homeless and abused, as well as globally through mission work. Our prior leader, a truly charismatic CEO, had a significant impact on our city and our church over 30 years of service. Our new minister, unknown to the congregation before his selection, was coming with a mandate to build upon our strengths and expand the church population.

What struck me was the significance of the installation ceremony. It was a joyful and very personal celebration, where several peers of the new minister flew in from around the country to participate alongside his family and senior leaders of our church. Our leaders charged him with answering a set of questions about what he would commit to us, in front of the entire congregation. And, then the congregation and his leadership team responded to questions where we voiced our support and commitment to him.

The sense the ceremony conveyed was that we are all in this together – we have a responsibility to support him and he has a responsibility to us to move our church forward. We are working as a team to create success. It really felt like we were ushering in a new era.

I then compared that to the first day of a new CEO. Perhaps, he or she addresses the employees, shares a vision and requests their support. But, rarely is there a sense of partnership, shared expectations and aspirations. Rarely is there an explicit commitment from employees and owners to support the new leader and from the leader to steward the organization’s legacy and carry it forward.

I left thinking there were lessons to be learned about the transition to a new family business CEO.

Unlike CEOs in the public company realm, who often have a short tenure and limited capacity to impact the organization’s culture, family business CEOs are more committed for the long-haul. Wouldn’t it be nice to honor and memorialize the transition, to set mutual expectations and to foster a true sense of commitment to a shared future?

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Why executives seek service on family business boards

Kristi Daeda

Kristi Daeda

As leader of FBCG’s Governance Practice, I often interview executives pursuing board service. Their stories are always interesting – full of career twists and turns, successes and lessons learned.

One thing I always ask is what their goals are for future board service. What kind of company excites them? What’s the contribution that they hope to make? The answers to these questions are telling – both in their perceptions of board service in general and their ideas of what it means to be a director for a family business board.

These successful men and women come from a mix of backgrounds. Most have worked in family firms within their careers, either as a family member or a trusted non-family leader. Many have served on other boards in the past, including public company boards. Regardless of their experience, many of the themes that move them to serve on a family business board are the same:

“I’m excited by a business that has a strong focus on values and vision.”

“I want to serve on a board where I can share my expertise and make an impact.”

“I like a board that can take a long-term strategic view.”

“I want to keep learning.”

“I want to work as a team with others for a common cause.”

They often see a family business board as a better route to these aims than public boards. They expect – and find – that family business boards will allow them to build rewarding working relationships with family ownership, have a long-term effect on the business, and derive more satisfaction from seeing the business impacts of their work than other board settings.

This is good news for all involved. Family business directors get an environment where they’re accepted as strategic contributors and they see the fruits of their labors on the bottom line. The businesses they serve get access to expertise from engaged, passionate contributors dedicated to the larger vision. In a well-functioning governance system, the outcome can be a meaningful and valuable partnership.

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Why family businesses build stronger boards

Kristi Daeda

Kristi Daeda

Boards in family enterprise can be as diverse as the families they serve. And just as the family changes, the board must change to respond to and stay ahead of new circumstances – both predicted and unforeseen.

In the early stages of the business, a board is often comprised of a founder, one or more other family members, and maybe a key non-family executive or two. Their conversations are often unstructured and decisions may or may not be communicated to other stakeholders, such as other owners or future owners or key management. This “board” may evolve to include paid advisors, like an outside attorney or accountant. Sometimes, close friends, business partners, or other trusted supporters are invited to participate.

As time moves on, a family business may reach an inflection point – a place where the board structure as it exists may not be suited to address the challenges or questions the business is facing. This is where we begin to engage with families in board development, the process of defining appropriate business governance structures for their unique situation.

What brings family businesses to build stronger boards?

  • Professionalization of the business. As the family strives to improve their business approach across the enterprise, it’s natural to look also at improving the board function. Shareholders, employees and the community may perceive the business more favorably that has developed criteria for board service and recruited well-respected leaders to serve.
  • Generational transition. Many founders seek to formalize a board to provide impartial guidance on succession planning, support the successor and provide a structure with which the next generation can effectively interact.
  • Issues with business growth or performance. If a business has plateaued or is struggling, leaders often look to independent directors for a fresh look at strategy.
  • Market opportunities. As with those that are struggling, businesses experiencing rapid growth or seeking to capture market opportunities can seek perspective from independent directors that have done similar things in their own careers.
  • Family conflict or disagreement. Tensions in the family may make board discussions unproductive or impossible. The board development process can be the conduit for better understanding of the role of governance and trust in the board. Plus, the board itself can be an impartial and safe venue for discussing challenging issues.
  • Changes in management. A capable board can provide oversight and accountability through the management transition.

A well-constituted board is an advantage at any stage. When the normal and predictable challenges like those above appear on the horizon, the advantages of a strong board become even more compelling. If you don’t yet have a board, or are unsure of whether your board is functioning as well as it should be, it may be time to begin questioning what that board would look like, and how it can support your family enterprise.

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The power of essentialism

Kelly LeCouvie

Kelly LeCouvie

I recently read the book Essentialism by Greg McKeown. It is an insightful read for those who feel chronically time-starved, stressed, hurried, and dissatisfied with how much remains undone. McKeown suggests that we adopt a “disciplined pursuit of less” in an effort to ultimately be more productive, and to contribute to our personal and professional world in the most meaningful way.

This does not mean doing less as much as making more discerning choices from options that matter most to us. He describes a process of learning to identify between the “vital few and the trivial many.” Working in a family means diverse source of stress, and this book provides some very helpful considerations that may help you make optimal choices in your management of life!

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The Board Chair role: More than navigating through the agenda

Kelly LeCouvie

Kelly LeCouvie

When people think of the Chair’s role during a board meeting, they often think of responsibilities such as introducing each topic on the agenda, asking managers to make pre-arranged presentations, soliciting comments from the directors, and managing the time used for each topic. Those responsibilities indeed typically belong the Chair of the board. However, if that is all the Chair is managing, he/she is potentially missing opportunities to create optimal value from directors’ participation. In addition to those responsibilities the Chair should consider the following questions when conducting his/her own self-evaluation.

  • Am I really listening, in an active, engaged way to what is being said?
  • Am I able to distinguish input that is truly strategic and critical from the many comments that are much less impactful to the business?
  • Can I synthesize the information and comments being shared at the board meeting and distill them into appropriate, resonant themes?
  • Do I effectively share back with the board (and management when appropriate) the meaning or impact various discussions and suggestions may have on the business moving forward?
  • Can I communicate this in a way that is actionable to the appropriate people?

If your answer to these questions is “yes”, then congratulations, you are likely a very effective board Chair! If your answer to some or all of the questions is “no”, then you have some opportunities to strengthen your own performance, and ultimately enhance the value of your board.

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Communication and family: What “should” we be doing?

Deb Houden

Deb Houden

In my last post, I talked about the importance of each generation defining what it needs in order to be an effective group for the family and the business. The operative forum was a family meeting. Family meetings can be tricky. I was facilitating a particularly tense family meeting recently when the patriarch asked me why these meeting were so hard when at the office, they just meet and go forward? He said, “We don’t seem to have as many problems with work relationships as with our family ones.” I asked him how often he talked with his employees. He said, “Every day. We have our meetings, or our visits, solve our problems as move on.”

As family members, we have a certain expectation that since we are family, we should be able to have these meetings, we should be able to talk to each other, we should be able to come to the table and work things out. A wise person once said the family should adopt the policy, “Quit shoulding on me.” The point is that the patriarch failed to accurately compare the amount and type of communication he had with his employees to how much and what type he was having with his family.

We assume as family members that communication should be easy, and when it isn’t, we can’t communicate with “them”. Families need to build capacity in their communication efforts as much as they do with their employees. Many times employers/employees have a filter on their communication before they proceed. How often do we do that with family members? How often do we filter what we say in a way that is constructive? How often do we listen to family members in quite the same way as we listen to employers/employees? How often do we search for a clear understanding of what the other family member said and what they meant?

Case in point, a large family was compiling some ground rules for future meetings. The very first rule the youngest brother said was “Don’t make it personal.” I immediately thought he meant let’s keep business issues business and family issues family. I didn’t think much more until a sister said, “Well, it’s all personal!” I thought, that’s not what he meant, but let it sit. We continued to go around the table, and finally got back to the youngest brother. I asked him to explain what he meant by “Don’t make it personal.” He said as family members, we all know the soft spot that each member has that we can poke at and it hurts. Don’t make your statements so they poke at the underbelly of each other just to hurt. Turns out I was completely wrong about what he meant. We all were but didn’t really understand until we came back around and asked.

Families would be well served to work on their communication with each other. They need to build their capacity! Keep it frequent, keep it constructive, keep on trying to understand, keep it gentle when needed and keep it from poking at the underbelly of the other. And then keep on — it’s never done! Keep building and getting better.

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Defining what’s right for your generation

Deb Houden

Deb Houden

“We’re doing it that way because that is what Dad wanted. And for as long as he is alive, that’s how we’re going to do it. It was Dad’s dream, he built it, he gave it to us, and that’s what’s important. We have to honor Dad.”

The statement silenced the rest of the siblings who were trying to have a discussion around the development of a shareholders agreement. The agreement was a “last man standing” contract where upon the death of the shareholder, their shares were retired and the remaining owners had a larger stake in the company. The sibling group of eight were in their 50s and 60s, and contemplating their own future. Some of the siblings worked in the company but most did not. One of the siblings had been diagnosed with a chronic illness that had the potential to shorten her life, and she wanted to understand the consequences of her ownership for her children. She understood the children were to receive the financial gain for the sale of the stock back to the company, but one of her children also worked for the company and hoped to become part owner one day.

While there were many facets to the discussion, I stopped the conversation and asked all of the siblings to step back a bit. Why would their dad want the agreement to read like that? What would be the purpose of formulating such an agreement? The fourth child answered, “Because he wanted the decision making to be consolidated so no one who was running the company would have to ask anyone else for permission to do something.”

I asked the remaining siblings if that was true. They all nodded in agreement. I proceeded to ask why their dad would have felt so strongly about consolidating decision making. Then another sibling told me the story of their dad, his father and his uncles. It was a story of destructive work habits and entitlement that strapped the company and angered the siblings’ father. He eventually bought everyone out and turned the company around. Their father had a very compelling reason to have the shareholders agreement written in the way that it was. However, it was now time for the siblings to come together to decide what was right for them as a group and their families going forward.

Each generation must navigate their own waters. Each generation must decide what is right for them, and what to pass forward. Each generation must face the tension of what is right for their nuclear family, and what is best for the whole and come together to negotiate a decision. And the successful negotiation can only happen through communication.

Often as consultants we are asked to speak or write on best practices. We are asked to give advice on what works best. The problem with those answers is that in order to be a best practice we must answer, “It depends.” The best answer is that each group must come together to review, to communicate, and to decide together a path that moves the family and the business forward in a constructive way. What is best for one family enterprise may not be the best for another.

I was reminded of this the past week when I listened to a webinar on the next generation and how they need to individuate and differentiate from the family. They need to become their own person and understand their own identity, their own strengths and weaknesses. When they can stand on their own, make their own decisions in a healthy way, these children become an adult who can bring a lot of positives to the family and the business, regardless if they work there or not. It is the same with each generation of a family business. They must understand where they came from, appreciate the hard work of the older generation, but decide what their own strengths and weaknesses are, what they need to do for each other as a whole in order to put their own stamp on the family and the business.

The next time you are in a family meeting, work in individual generations to decide:

  • What are our strengths as a group?
  • What is a potential area that could make us unravel?
  • What do we want our generation to be known for?
  • What happens if we do nothing?

Honor your past and hope for the future, but don’t forget to make (as a group) your own impact on the family business.

Posted in Communication & Conflict, Family Business Values, Family Meetings, Mission, Vision, Values & Culture, Next Generation Development, Sibling Teams, Succession & Continuity | Leave a comment