The Family Business Difference: Capitalizing on Family Innovation

Joe Schmieder

Joe Schmieder

Family businesses have unique strengths built on the overlap of family and business, in part because the family running the business has more at stake—including reputation, survival, and security—than the managers and employees of non-family firms do.

Innovation is one such strength at the family-business intersection. Innovation in a family business, like most other features, is different from that in non-family firms. A key dimension of difference is that innovation in family firms is driven and enhanced by several distinct factors that can ultimately yield greater business performance, and family harmony.  Family-business features that serve as innovation drivers include:

  • Personal attachments such as family bonds, customer relationships, and inter-family-business connections—all of which support innovation

  • An incremental approach built on exercising moderation with R&D spending and emphasizing small changes to offerings, rather than giant leaps

  • Longer time horizons that yield greater patience with the development time associated with innovation

  • Shared values including innovation itself, with several supporting elements such as innovation-focused objectives and cross-functional visibility

  • Low leverage, with an emphasis on reinvesting funds back into the business—and into innovation, specifically

  • Experimental tolerance, or a willingness to try new things, even when that means going against the conventional (in a calculated way)

  • Family leadership that supports innovation by generating high-value ideas and speeding the product development process

Family businesses are indeed different from non-family firms, and many of the differences cited above support their ability to innovate, which in turn supports their growth and profits and the family’s well-being.

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Family Retreats

Bernie Kliska

Bernie Kliska

A family retreat should be a time to align values and educate each other, while at the same time have some fun. It is usually held in an informal setting where family members can bond and exchange ideas and information.

To handle the flood of material, questions, complaints and accolades, it would be advisable to have a facilitator to help guide the family with their interaction.

What may seem like a good idea at the time, can fall flat or even become an occasion for family flare-ups. So what makes for a good family retreat?

  • Develop a Defined Outcome: It is valuable to have realistic and clearly defined goals and outcomes. The agenda should be distributed to everyone in advance and based on input from the entire family.
  • Be Thoroughly Prepared: There should be no surprises. The single largest cause for why family retreats do not succeed is because of not being prepared. If for example, one person is a “trouble maker,” that should be anticipated in advance. If a family has a hard time sitting for an extended period of time, that has to be factored into the design of the retreat.
  • Bring Solid Content: This is an opportunity to gain family cohesion around certain viewpoints and strategies. This is also a time for families to learn something about themselves as individuals, as well as collectively as a family.
  • Ensure Effective Process: Often family leaders focus on the end result and underestimate the importance of the process involved in the discussions. The process should be fair, open and engaging to ensure full participation from everyone. While content is critical, it is often the process that causes problems and derails communication.

If properly planned, the family retreat should be an opportunity to prevent confusion, dissension and conflict. Having sincere and candid communication will only benefit the family, as well as the business.

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Vision & Mission Statements: What’s the Difference?

Bernie Kliska

Bernie Kliska

Does it matter if you use a Vision Statement when you meant to use a Mission Statement? The answer is yes. As research has shown the importance of a family business having a strategic plan, it is equally important for the plan to include both a clear Vision and Mission Statement. Both statements serve valuable roles as the core element of the strategic plan.

A Vision Statement defines what the business hopes to be in the future. It provides guidance for a five to ten year period. It is written succinctly and in an inspirational manner that is easy for all family members, employees, and customers to understand.

A Mission Statement defines the present purpose of the family business. It usually answers three questions: What it does, who it does it for, and the company’s values and priorities.

The Vision and Mission Statements can be marketing tools as well because it announces your goals and purposes to your employees, suppliers, and customers.

It is never too late for a family business to define its Vision and Mission. In fact, some even reinvent themselves through the strategic planning process, which always should include well defined Vision and Mission proclamations.

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Strategic Planning

Bernie Kliska

Bernie Kliska

In order for a family business to survive beyond the current generation in today’s fast churning economy, a well-developed strategic plan would be greatly beneficial. Conceptually, a strategic plan is relatively long range, from three to five years on average.

The term Strategic Planning typically refers to the process of developing business goals and provides a detailed road map of how to achieve those goals. It facilitates communication among family owners, Board of Directors, management and employees.

Perhaps most importantly, strategic planning provides a framework to help guide decision making and how to make the business profitable and sustainable. It also challenges past business practices and opens the way for choosing new alternatives.

The result should be a well thought out written document that includes a business Vision and Mission Statement. It needs to include a time frame in which goals hope to be accomplished and designated individuals who will be responsible for meeting those goals.

Carlock and Ward (1) discuss the importance of having a parallel process. This means there should be a strategic plan for not only the business itself, but for the family members as well. This parallel planning will help unify the business and the family.

A strategic plan is not set in stone and should be revisited annually and revised according to current circumstances.

Strategic planning can be the key to unlocking the door to making a family business successful. Research has shown it to be one of the three most important factors of family business sustainability. The other two factors are holding regular family meetings and having a Board of Directors.

(1). Carlock and Ward (2001), Strategic Planning for the Family Business, Palgrave Macmillan.

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Capital Market Theory and the Family Business

John Ward

John Ward

The most recent HBR has the theme, “Are Investors Bad for Business?” (excerpt). Extraordinarily respected Clayton Christensen of HBS talks of how bad capital market theory is for innovation and job creation. Finance rations capital to a short term bias presuming capital is scarce. But it isn’t, Christensen asserts.

Family business capitalism sees the world differently. Families see capital as limited, but also embrace the long-term view. Families don’t decide as much by IRRs as by future scenarios. Limited capital sharpens the commitment, persistence, and agility necessary for sustainable success.

For years I’ve thought that shareholder capitalism couldn’t escape its fundamental assumptions and elegant, even if wrong, orthodoxy. With Professor Christensen leading a different thesis I’m heartened we maybe see things differently. While that’s good for society, it also lessens the competitive advantage of business families. Or, maybe, business families are so innately good at this thinking that they are protected by years of experience.

It’s ironic. Just as the share value capitalism theory is facing critique by advocates, business families are losing confidence in their inherent advantages. They are increasingly being told by family business researchers that they compromise shareholder value too much for family continuity and comfort.

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Conciliatory Gestures – Helping Make It Safe to Reach Agreement

Mike Fassler

Mike Fassler

Families that work together successfully while maintaining positive family relationships have figured out how to have difficult conversations and reach agreement on challenging matters.  Conciliatory gestures, doing something or saying something that expresses a concession or a willingness to make a concession, can play an important role in this success.  Conciliatory gestures help create a safe environment for multiple parties to make concessions as they work toward agreement.

Examples of conciliatory gestures include apologizing for what was said or for how you behaved; acknowledging your contribution to the challenging situation which demonstrates a willingness to be accountable, and positive expressions about the other’s contribution.  These gestures demonstrate vulnerability and a desire to find common ground.  This in turn can elicit a conciliatory gesture on the part of others as the expressions send a message that fairness will be represented in the ultimate decision.

In order for this to be effective, all parties must share a fundamental belief that they all have the greater good of the family and the business in mind balanced with respect and consideration for individual interests.  Absent this mindset, conciliatory gestures may be viewed as less than authentic and therefore manipulative.

Give it a try.  The next time you are engaged in a discussion that is emotionally charged and where opinions vary, try out the use of a few conciliatory gestures.  Set the example for the group engaged in the discussion as it may be contagious and could lead to a break through to agreement.

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Accountability in Your Family Business – Achievable Reality or Elusive Dream?

Mike Fassler

Mike Fassler

I have often had the opportunity to serve family businesses where accountability is alive and well and the resulting culture of accountability provides a competitive advantage.  Likewise I have seen plenty of family businesses where the lack of accountability is a perpetual topic of discussion, there are little or inconsistent consequences when people fail to deliver, and accountability seems like an elusive dream.  Often family businesses that lack a culture of accountability also have contentious relationships which are a drain on both family and business energy and resources.

So what are some of the distinguishing factors for those family businesses where a culture of accountability is a reality?

Shared Values – Shared values are the foundational building block to accountability as they inform what attitudes and behaviors are expected and provide broad guidelines for family member interaction with one another and with the business.

Shared Vision – A shared vision provides a clear understanding of where both the family and the business are going and how one supports the other.  A shared vision provides the context within which results can be gauged and is the connection to a purpose larger than any one individual.  It is this connection that creates the incentive to contribute to the overall good.

Freedom of Choice – Accountability is built through freedom of choice to contribute on the part of the individual.  Absent a voluntary choice to contribute, there are too many ways to blame others for behavior and results that don’t measure up.  The motivation to be accountable is derived from the satisfaction of choosing to contribute.

Certainly articulating goals, roles, policy, procedures, consequences, etc. to provide additional clarity on expectations can be helpful to developing a culture of accountability.  However, no amount of structure will substitute for shared values, a shared vision, and freedom of choice when it comes to making accountability an achievable reality in your family business.

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Should I Stay, Or Should I Go?

JoAnne Norton

JoAnne Norton

My nearly ninety-seven year old mother-in-law has an intriguing quote displayed prominently on her refrigerator at her home in Calgary. “One of life’s most important decisions is when to begin middle age,” it reads. My husband’s young-at-heart mother often reminds me on our evening phone calls that we’re only as young as we feel.

Today we can work as long as we want to, especially if we are blessed with good health, a clear mind, and our own business. But how long should we? That’s one of the many questions members of the senior generation sometimes ponder in the middle of the night and sometimes discuss with their spouses in the middle of the day.

Would the business be better off with or without me, they wonder. Do I continue to add value? Are my ideas still relevant? What if I raise the subject of my retirement and then change my mind about leaving?  How do I deal with the pain in my heart as I consider letting go of something so dear?

The next generation grapples with its own set of challenges. How long can they afford to carry someone who they perceive is no longer pulling their weight? How do they bring up the topic of a parent’s retirement without sounding ungrateful or uncaring? How do they ignore the gnawing in their gut as resentment grows and the silence between the generations becomes deafening?

The good news is that we’re living longer, we’re staying healthier, and we’re looking better than at any other time in history. So we must now wrestle with the question of when or even if to begin a new chapter away from work—a better chapter than our parents and grandparents have ever had the opportunity to write. This is new stuff for both generations, and we’re short on role models, experience, and theories.

Barbara Walters was still working at age 84, but could we? Should we? In a family business both generations need to have candid discussions periodically at both the family and the board levels regarding retirement. The decision about when a parent should move on drastically depends on the industry as well as the desires of both generations for the future.

Sometimes these conversations are already taking place, not with family members in the senior generation who are mulling over what they might do next, but among frustrated future owners. Whether they are thinking about grandparenting, golfing, starting a charity, or beginning to play Chopsticks it is crucial for parents to share their plans, so their adult children can make theirs. Both generations will be much more open to this discussion if it is approached with patience, appreciation, and love.

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What’s The Best Way To Say Goodbye?

JoAnne Norton

JoAnne Norton

Barbara Walters was one of my earliest childhood heroes. I remember watching her on our first black-and-white television set very early in the mornings, the only woman in a large cast of men. I cheered when she became the first female anchor on an evening news program, though ultimately that did not turn out well for her, and I was absolutely delighted when she created “The View” featuring strong, articulate, funny women.

Like millions of viewers, I’ve watched her retirement process over a number of years as she slowly cut back the number of hours she worked and the programs she did. Last week, I saw her final regular appearance on “The View,” which featured much fanfare as everyone from heads of state to international celebrities paid homage to Walters, who has changed our world in so many significant ways.

Saying goodbye and thank you to people who have had a profound affect on us is crucial for them and for us because the impact has ramifications on those who are leaving as well as those who are left. Nowhere is this as important as in a family business. When the family leader of a family business retires there most likely will not be appearances from celebrities nor buildings named in their honor, but it is vital that they have a proper send off.

When I began studying Murray Bowen’s Family Systems Theory at the Georgetown Family Center in the late 90s, psychologist Dr. Polly Caskie presented research suggesting that the future health of the retiring leader and the family itself was dependent on the celebration at the end of the career. For that reason, Polly said there should be presentations made from representatives of three specific groups: the business, the community, and the family. Leaders, like all of us, needed to know that their lives mattered, that their many sacrifices had been worth it, that they had made the world a better place, and that their family, especially the spouse and children, appreciated them. She hypothesized that the time, energy, and expense would be more than worth it to the future health and happiness of the retiree.

What reminded me of Polly’s sage advice after so many years was something Barbara Walters said on Friday, May 16th, on “Good Morning America.” She commented that she had remained dry-eyed as she had listened to all of the accolades from state heads and stars until she had received a message from her daughter, Jackie, who had written the night before:  ”I just wanted to say I was thinking of you tonight. Tomorrow is a special day. You have impacted this world as very few can. This is a transition towards a new journey. I love you and wanted you to know how proud I am of you.” That’s when Barbara said she finally cried.

At the end of the day, no matter how big our business is, how many lives we’ve touched, how much we’ve changed the world, it is the love of our family that matters most. That’s why it is so important to say goodbye and thank you at the right time at the right place in the right way.

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Why Do We Work?

David Ransburg

David Ransburg

Many people answer this question quickly by saying one word: pay. While it is true that some people work for financial compensation, not everyone does. In fact, you can probably think of many people you know for whom money is not their primary motivator. Some are mainly driven by being in control while others put a high value on being recognized for their efforts. Others still are primarily driven by the desire to help those in need.

When I say “primarily driven,” I do so because it is quite rare that someone is motivated by a single driver. Typically, employees will have 2-4 motivators that are most important to them, with one in particular being a little more important than those that follow.

A number of researchers have attempted to understand the various motivators that provide purpose for workers, and I’ve found that the list generated by Hogan Assessment Systems to be particularly useful, especially when it comes to family businesses:

  • Recognition: Responsive to attention, approval, and praise
  • Power: Desire for success, accomplishment, status, and control
  • Hedonism: Orientation for fun, pleasure, and enjoyment
  • Altruism: Help others and contribute to society
  • Affiliation: Desire for and enjoyment of social interaction
  • Tradition: Dedication, strong personal beliefs, and obligation
  • Security: Need for predictability, structure, and order
  • Commerce: Interest in money, profits, investment, and business opportunities
  • Aesthetics: Need for self-expression, concern over look, feel, and design of work products
  • Science: Quest for knowledge, research, technology, and data

The above list is important for family businesses for a couple of reasons. First, I’ve found that family businesses are typically very clear about their purpose, and they make great effort to hire employees who share that purpose. If, for example, you are a family business that is primarily driven by helping others (“Altruism”), then being clear about that characteristic will help you to find employees who share that purpose… and will likely do better work as a result.

Second, as a manager in a family business, understanding that your employees will not all be motivated in the same way means that you can tailor your management to fit the specific drivers of each employee. For example, giving an award for “Employee of the Month” may do very little to motivate a worker who doesn’t care about “Recognition,” but that same award will likely mean a lot to someone for whom “Recognition” is at the very top of their list.

What drivers are most important in your family business?

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