Increase Efficiency by Slowing Down

Amy Schuman
Amy Schuman

Here’s an appealing headline, from the Harvard Business Review “Daily Stat” on May 7, 2015:

Taking Time to Reflect Makes People More Productive
“Trainees at a business-process-outsourcing company in India increased their performance by an average of 22.8% over the course of a month by spending the last 15 minutes of each day reflecting on and writing about lessons they had learned, Francesca Gino of Harvard Business School and Bradley Staats of the University of North Carolina write on HBR.org. Reflection prompts people to be more aware of their progress and gives them confidence to accomplish tasks and goals, the researchers say.”

My colleague, Deb Houden, recently shared this nugget with our group, knowing that we often engage our clients in thoughtful reflection as part of our consulting process.

For example, as a facilitator I regularly end meetings by asking participants to reflect on the time we spent together. Typical reflection questions might include the following:

“As you leave our meeting, what will you take with you and how will you apply it?”

“When you think about our meeting, what stands out?”

“Take a minute to reflect on the time we just spent together: Write down one word or phrase that captures a valuable nugget or insight. We’ll go around the table and briefly share before closing.”

Reflection doesn’t happen only at the end of meetings. If energy droops in the middle of the morning or late in the afternoon, you can take a short diversion from the planned agenda. Go around the table with a reflection question to focus and energize the proceedings, for example:

“What’s one of your unique skills or talents? How can you bring more of that to this meeting?”

“Think about leaving this room at the end of our meeting. What is the most important thing for us to accomplish? What action can you take — immediately — to help make it happen?”

It can be uncomfortable to ask a group to stop for reflection. I often have to weather some rolled eyeballs or other resistance. However, the discomfort is worth it! Meetings are invariably more productive, focused and enjoyable after even a very brief reflection break.

Have courage. Take the risk. Take steps to balance out the bias towards energetic forward motion. Use reflection as a tool to slow things down in order to  ultimately be even more effective.

If you are already trying this approach, let us know how it’s going!

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Rules of Communication in Family Meetings

Dana Telford
Dana Telford

I’m mechanically disinclined.  My dad recognized this early in my life.  But he wanted me to at least understand the basics of a few mechanical functions.  This inspired him to create a simple, memorable, four-word description of how a combustible engine works: pump, squeeze, pop and blow.  Let me elaborate to (literally) the full extent of my abilities.  Fuel is pumped into a cylinder.  A piston squeezes the fuel, increasing pressure.  A spark plug pops and ignites the compressed fuel.  The explosion blows the piston up and blows the exhaust out.  The energy created by the explosion is converted into power.

Family businesses are like combustible engines.  Family members and non-family employees provide the talent and skills that make up the fuel.  Goals, objectives and compensation models create pressure to succeed.  Personalities and individual work styles create the sparks that can easily turn into explosions.  Governance (a la family meetings, policies and processes) is the exhaust system that regulates the pressure inside the engine and generates the power.

Consider this: Without an exhaust system, a combustible engine is a bomb.  And with too little pressure and too much exhaust, a combustible engine is nothing more than a lit flame — it doesn’t generate power.  I would argue that without effective governance mechanisms, family meetings will suffer one of the same two fates — either an explosion of emotion and frustration or not enough energy to accomplish goals and make progress.

In my experience, good governance begins and ends with effective communication. Family meetings rely on it to manage tensions that exist between family members.  One way to make progress toward excellent communication is to create rules together.

A couple in the southeastern USA had a family construction business and 10 children.  The business and family grew and grew until the couple decided it was time to pass the business to the next generation.  To facilitate the process, they hired me.  As I interviewed family members and started to understand their strengths and weaknesses, they told me about their most recent family meeting.  At a crucial point, when the family was asked to make an important decision, the eldest son became angry, yelling profanities and cursing his parents and siblings.  He stormed out of the conference room door, slamming it behind him and leaving the family stunned and shaken.  “We were so shocked by his behavior that none of us wanted to have another family meeting any time soon,” one sister said.

In spite of this episode, we invited the brother to attend our family business workshop.  At the beginning of the meeting we turned our attention to creating rules of communication.  “How can we make sure we are listening and being heard? How can we make sure these meetings are productive?” I asked.  The responses were thoughtful and honest and included suggestions such as:

  • No interruptions
  • Be honest but respectful
  • Seek first to understand
  • Everyone has a responsibility
  • Set an agenda and stick to it
  • Set time limits set for topics and debate
  • Anyone can call a time out
  • All are equal
  • Everyone is included
  • The rules rule
  • Notes will be kept by the secretary

But the subject of the emotional outburst of the eldest brother had been fearfully ignored.  Finally, a brave brother-in-law raised his hand and suggested: “Nobody leaves without approval.”  We each held our breath but the eldest brother nodded in agreement.  The rules were approved unanimously.

Two months later, we met to review the first draft of a family constitution that would serve as the foundation of the family’s governance system.  The entire family was in attendance.  At the beginning of the meeting, we reviewed the rules of communication and each raised a hand to signal that they agreed to follow the rules during family meetings.  The meeting went very well until early in the afternoon. The topic was family compensation. Unexpectedly, a sister stood up and announced that she was tired of the meeting and hearing about her siblings “living in la la land” while she had to “struggle through every day.” She headed for the door (which, luckily, was on the other side of a large room) while the family watched her in frustrated silence.

Who came to the rescue?  None other than the brave brother-in-law, brandishing the Rules of Communication as his sword of Level Headed Truth.  “Jane,” he said quietly but firmly, “we all agreed to the Rules of Communication and we agreed that the rules rule.  Please, for the sake of your family and for this process, stay here and work with us.  We need and want your help.”  Jane stopped and scowled at him before sitting down in a vacant chair near the door, purse and car keys in hand.  She stayed put for the rest of the meeting, only to bolt out the door the instant it ended.  Two of her sisters were able to catch up to see what was bothering her.  It turned out that she and her husband were in the middle of a significant financial challenge that was causing her great stress.

Rules of communication, when created through an inclusive process and agreed to by all decision makers, can save a family meeting from falling apart and becoming a wasted, frustrating use of time and energy.  They create an expectation of professionalism in an otherwise emotion-filled gathering.  Without them, the frustrated, brave brother- in-law had probably said “Jane, sit down! You’ve always been a drama queen!” or something insensitive and hurtful.  Do your family a favor: If you already have rules of communication, dust them off and review them prior to your next family meeting.  If you don’t have them, set aside a half hour in your next meeting and create them.  As a result, your meetings will be more productive and respectful and the time spent together will be more rewarding.

First Struggle Then Strength

Dana Telford
Dana Telford

Is it possible to build personal strength without first going through personal struggle?

Sometimes as parents we are tempted to cushion our children from the pain of disappointment and failure as they mature. Too often as family business leaders we believe that we are helping family members by giving them a position that they have not earned when in reality the opposite is true. By helping too much we hinder growth. By enabling we create entitlement.

My teenage son Will loves video games. In his free time, he sits in front of our TV, thumbs a blur on the controller, eyes fixed to the screen, chattering away into his headset as he and his friends strategize how to counter the latest wave of alien invaders. My favorite game growing up was one played not on a screen but in a field: baseball. Despite my hope that this interest would somehow be passed down to Will, his interest in Little League was short-lived and unfulfilling. He tried some other sports and activities and has become a good tennis player.  He has found a passion for nutrition and weight-training. But video games are his first love, and his mom and I have given him the space to pursue this interest.

As Will’s gaming skills and interests have grown, so has the price of his hobby. Earlier this year, he set his sights on a high-powered gaming computer that was “on sale” and asked if we would order it online for him. “You know how it works,” I told him. Once each of our kids is old enough to understand, I explain to them our approach to large purchases: If we agree that the purchase makes sense, the child is expected to work to earn half the money.

It’s the same principle I learned from my mother. Whenever I wanted a new baseball bat or bike or expensive toy, my mother made me earn half the money to pay for it. That not only made me think about how much I really wanted the item — not surprisingly, a lot of things dropped off my “must-have” list when it was clear I had to help pay — but also created space for me to earn the item through hard work, rather than having it handed to me.

“But this is a lot more expensive than anything else I’ve wanted,” Will said when I reminded him of the policy. “I’ll have to earn $800 and I don’t have a job!” I told him I understood that earning the money would be difficult, but reminded him of a few pending expenses in the household that were higher priority – Anna needed braces and Sarah needs her wisdom teeth pulled.  “And,” I reminded him, “your half is going to be more than $800.  Don’t forget tax and shipping charges.”  He let out a sigh of frustration but accepted the reality and agreed to the deal.  Over the next few weeks, I observed him working and saving diligently, putting aside the money he gained from extra chores, babysitting and selling other gaming equipment he didn’t need.

One day Will came to me excitedly and said, “Dad, the computer sale is ending this week.  I need $1600 now!” I reminded him of our deal – that we would order the computer once he put $842 (don’t forget tax and shipping charges!) in my hand or my bank account. He looked disappointed. “I only have $500 saved,” he said. “But my Xbox is for sale and I’m sure someone will buy it.  Could you just order it and I can owe you the rest?”

I admit that it was tempting to give in to his request.  The clash of family socialism and breadwinner capitalism clashed inside me in a major way.  He had worked hard to save more money than ever before. But my wife and I realized that giving in would fail to uphold the principle we wanted him to learn, and would limit the space he needed to grow fully.  Obviously Will was disappointed, but he kept working toward his goal.

Within two weeks, Will sold his Xbox and reached his goal.  We were thrilled to see that the price of the computer was still $1,600 and ordered it straight away.  When it arrived it was everything he’d hoped for and he beamed with joy as he opened the box.

My wife and I told Will how proud of him we were for earning that computer.  He had become very resourceful as he pursued his goal of buying the computer: He had worked and saved and sacrificed his time and other valuables. He had become much more confident in his ability to figure out a way to make things happen. And he gained a greater appreciation of the value of money.

Through the struggle comes the growth.  As leaders we need to keep this principle in mind as we offer jobs and financial benefits to family and non-family employees.  We need to provide them adequate time and space to struggle.  Time to filter through the emotions of disappointment and space to figure out what they really want and how to earn it.  Without it how can they ever hope to develop their own strength?

Family Governance: Who Needs It? (Part 2)

JoAnne Norton

Will, a young member of the third generation of owners of a highly profitable family business, told me his family business had recently been sold.  His family members had been so wrapped up in dealing with the financial elements of the transaction there had been no discussion and very little thought given to the future of the family.

Will invited me to meet with his family, and I began by asking thought-provoking questions. “Are your family members going to split up the proceeds from the sale and all go your separate ways, or do you all want to leave a lasting legacy? Do you still have common goals? Are there wishes you share for the future? Dreams you want to dare together? And what about the logistics? Will each family branch want their own wealth advisor, or could there be an advantage of keeping your money together? Will you want to use a family office? Establish a family philanthropy? Provide wealth education for the next generation together? Will you want to meet with your immediate family — as well as aunts, uncles, and cousins — regularly to have fun and to come together for the common good? How will you make decisions together in the future?”

Will and his family had not thought about most of these issues before. At our meeting, there was a lot of discussion, some tears, and thankfully a great deal of laughter as they discussed the answers to these important questions. Plans were made and committees were created to explore the family’s new vision.

After the meeting, Will shook my hand and looked into my eyes. “I had no idea our family would still need a family business advisor after we sold the business. This isn’t the end of our family business, it’s Act II for our family.” More importantly, he said he was fired up about finally working with his family to create a vision, mission and values and having the opportunity to truly make the world a better place.

Good governance makes worthy goals easier and more enjoyable for families who want to work together successfully whether they are in or out of the family business.

Family Governance: Who Needs It? (Part 1)

JoAnne Norton

After giving a presentation on laying the foundation for family-business governance, an energetic young man came bounding towards me from the back of the room as I was stepping off the stage. Taking my hand in both of his, he smiled as he said: “Where were you when we needed you?” I laughed, and responded: “I don’t know; where were you when you needed me?”

The young man’s name was Will, and he said his family had always meant to do all the things I had just spoken about: have regular family meetings, create a vision, decide on a mission, explore their values, but they had just never gotten around to it. Their family business had been all consuming. Then one day about a year ago, a large competitor had made his father, his uncle and all of his siblings and cousins an offer they couldn’t refuse. So now there was no need to have those crucial conversations that can be so energizing, enlightening, and exciting when family business owners discuss vision, mission, and values. Since there would be no more decisions to make or conflicts to resolve, there would be no need for family governance. “That ship has sailed,” he sighed.

Actually, that ship hasn’t even left the dock yet.

Many families who have earned or inherited significant wealth together often want to continue their affiliation. In some cases it’s because, even after the primary business has been sold, they continue to hold real estate or other investments together. In other situations, family members have developed great trust and admiration for each other, and they believe it is advantageous to keep their family and their wealth together. Sometimes they accomplish this by establishing a family office, and at other times a strong matriarch or patriarch might take the lead. For whatever reason, many families choose to work together to leave a lasting legacy and to ensure their wealth lasts for many more generations.

Families who want to successfully work together need the same things family businesses do: a clear vision, an inspirational mission, and shared values. They need policies and procedures and well-defined expectations. At The Family Business Consulting Group, we are experts in family governance regardless of whether there is still a family business or not. Will and I discussed this concept, and we set up a time to discuss the direction his family was going because families who sell their businesses still need good governance.

Next-Generation Leader Development: Entrepreneurship Across Generations

Steve Miller
Steve Miller

In my earlier blog post, I wrote about the importance of next-generation family leaders gaining challenging work experience with real responsibility inside or outside the family firm. How might a next-generation leader accomplish this within the family firm?  It turns out that preparing for leadership and ownership succession in a family firm presents a great opportunity for next-generation leaders to stretch themselves and help the family business at the same time.

Transition in ownership in a family business often creates the need to grow the business to support the financial needs of more than one generation of family owners. It also often comes at a time when the market is suggesting a time for strategic renewal. The term “transgenerational entrepreneurship” refers to the ability of a family enterprise to meet these challenges by creating new streams of value across many generations (Cruz, Nordqvist, Habbershon, Salvato, & Zellweger, 2006).  Next generation leaders may have entrepreneurial ideas for addressing new opportunities in the market that the senior generation does not see or understand. Taking responsibility for developing those ideas into new products, services, processes, or business lines can provide a way to stretch their wings and establish credibility in the family firm.

One of my former MBA students did exactly that. His father established and operated a highly successful catalog business in a niche market. My student researched opportunities for distribution of other products that were underrepresented in direct-to-consumer marketing and identified a highly fragmented market that seemed ideal for direct marketing. He developed a business plan that utilized existing distribution and sales infrastructure for his new line of products and raised the necessary capital himself.

Not only has his “company within a company” been successful in its own right, but he also convinced his father that investing in developing a robust online sales platform in addition to the traditional catalog was necessary to keep both businesses competitive. He has gained valuable experience, established himself as a respected leader, and created a new source of growth for the family business. His father now sees him as a capable successor for leadership of the entire enterprise.

References
Cruz, C., Nordqvist, M., Habbershon, T., Salvato, C., & Zellweger, T. 2006. “A conceptual model of transgenerational entrepreneurship in family influenced firms,” International Family Enterprise Research Academy.

Next-Generation Leader Development: Inside or Outside Experience?

Steve Miller
Steve Miller

Laura is the second-generation CEO of a successful beverage company started by her father 25 years ago. She exudes a contagious enthusiasm for the business and articulates a clear vision for growing the family firm. When her father began thinking about leadership succession, the employees asked him to recruit Laura as their next CEO, and they love working for her.

Joe is a third-generation senior leader in a large manufacturing firm founded by his grandfather nearly 75 years ago. Joe is burned out and seems weighed down by the burden of overseeing the family enterprise. Employees don’t want to work for Joe, and one division of the family enterprise recently failed under his leadership.

Both Laura and Joe were educated at top universities, got work experience outside the family business, and are highly intelligent – three characteristics most often mentioned in the family business literature as important to next-generation leader success.  So what’s the difference between Laura and Joe?

A recent article in Harvard Business Review suggests that how next-generation leaders are developed has an important impact on their success in the family firm (Fernández-Aráoz, Iqbal, & Ritter, 2015). The interviews on which that article was based revealed that the best family firms execute a thoughtful development plan for future leaders that includes real job responsibilities at varying levels of responsibility. Where that experience is gained – inside or outside the family business – did not seem to be a key factor.

One CEO indicated that his family firm no longer requires next-generation leaders to go outside the family business to establish a track record, but rather encourages them to work for the family business from the start. This finding is consistent with my own recent research of 100 next-generation family leaders which showed no statistically significant relationship between experience outside the family business and next-generation leadership effectiveness. My study showed that the more important factor was having experiences at work that challenged and stretched the developing next-generation leader.

A closer look at Laura and Joe supports this conclusion. Laura’s outside experience was gained in a job that required her to grow a business line for which she was responsible. She had to learn a wide variety of leadership skills including planning, influencing others, and adapting to changing market conditions. Joe, on the other hand, received superb training in a technical skill important to his family business, but in a position without real leadership responsibilities.

Here at The Family Business Consulting Group, we think gaining outside experience is often the right course for many next-generation leaders. It can increase the likelihood that they will receive objective feedback on their performance and provides an opportunity for them to prove themselves in a setting where their family name is not an issue. But in the right circumstances, they can also develop successfully working inside the family firm.  It is not so much where the experience is gained, but rather the nature of the experience that makes the real difference.

References
Fernández-Aráoz, C., Iqbal, S., & Ritter, J. 2015. “Leadership lessons from great family businesses.” Harvard Business Review (April 2015).

The Sixth Generation at National Geographic

Craig E. Aronoff
Craig Aronoff

The National Geographic Society with its famed National Geographic Magazine is a not-for-profit entity dating to 1888. Among its founders and first president was Gardiner Greene Hubbard, an attorney and financier.  He helped to fund Alexander Graham Bell’s research that led Bell to being awarded the patent on the telephone in 1876. The next year, Bell married Hubbard’s daughter and after his father-in-law’s death, succeeded him as National Geographic Society president.

Gilbert Hovey Grosvenor became the Society’s first employee in 1899, and the next year, married the boss’s daughter.  He was editor of the magazine for 51 years and served the Society as president and then chairman of the board.  His son, Melville Bell Grosvenor, joined the family business in 1924, also served as president and editor, and in 1967 succeeded his father as board chair.  His son, Gilbert Melville Grosvenor, joined the magazine in 1954, became editor in 1970, president in 1980 and was named chairman emeritus in 2010. He retired from the board in 2014 after 60 years of service.

His daughter, Alexandra Grosvenor Eller, MD, joined the National Geographic Board in 2009 and continues family stewardship of this important institution into its sixth generation.

An organization need not be a business to benefit from a family’s multigenerational nurturing commitment. And profit from the good done by the organization need not be in the form of dollars to the family who founded and developed the institution.

Should Junior Generation Family Members Get Extra Vacation Time?

Kelly LeCouvie

Many of our clients develop a family employment policy as part of continuity planning. Some of the components of this policy articulate the circumstances under which family members will be hired, compensated, appraised, promoted, and terminated. And often we are told that the family business must remain a meritocracy, where family members earn their positions, and should be treated the same as non-family employees.

This philosophy seems appropriate when often there is much at stake and all employees need to be competent and held accountable. Also, non-family employees want to see that there is opportunity for them, even when their last name is not on the door. Family businesses should be run professionally in order to perpetuate the business through future generations.

That said there are times when exceptions to employment protocol might, and even should be made. Vacation time is one topic that often comes up when next generation family members join the business. They are often just starting their careers and take a position that offers two weeks vacation. However in some cases family members are given one or two additional paid weeks vacation. Senior management permits this for a number of reasons that are in fact, defendable:

  • The family may have meetings about the business while they are on vacation.
  • Junior generation family members are often expected to take courses or attend conferences that are family-business related. These courses often take place on weekends.
  • Family members are often invited to weddings and other events hosted by co-workers or family business associates, that require travel on weekends. Often junior generation members are strongly encouraged by their parents and/or senior management to attend these events.
  • There are often ceremonies and celebrations that are business related, and family members are expected to attend as ambassadors of the business. These events often take them away from their families if travel is required.
  • Community events sometimes require representatives from the business to attend. These are typically in the evenings and again, are responsibilities that family members take on in addition to their day to day work responsibilities.

While all employees sometimes make commitments on behalf of the business that are outside of regular work hours, often for family members it adds up to several days or even weeks in a year. Therefore, consideration is given to additional vacation time in an effort to make up for the significant investment made to work related commitments.

Globalization and the business family

David Lansky
David Lansky

Business families are increasingly composed of global citizens. It is not unusual for cousins who share ownership in a business or who share other financial assets to have grown up in different countries, to have been educated in different school systems, and even to have different religions.

How then to promote alignment around policies, plans and strategies when such globalization may introduce significant geographic dispersion and cultural diversity?

Some thoughts:

  • Develop an intentional plan to ensure that different family members spend enough time together to understand and strive toward a common family culture.
  • Increase the frequency of family meetings.
  • Encourage cross cultural and cross demographic sharing of personal and business experiences.