Editor’s note: A frequent question we hear from business families regarding family governance is: “Where do we start?” The following is a selection of articles and other resources that can be helpful in thinking about the role family governance might play in your family.
As family business advisors, we have been recommending to our clients that they form family councils for decades. In fact, councils are often considered the sine qua non for all families who own businesses together, particularly if the business has been around for more than a generation. But who really needs a family council, and what exactly is one?Read more…
Last month’s Family Business Advisor (FBA) article touched on the process of ‘on-boarding’ new employees in the company. We asked readers and our advisors to comment on a few questions based on their experience, and we are summarizing what we heard. Please note, we cannot draw any scientific conclusions from this exercise – rather, it is food for thought & perhaps further discussion…
1) When asked if family businesses were better, worse or no different than other companies when it comes to ‘on-boarding’ employees, more of our respondents suggested family businesses are likely ‘worse’ or no different. A couple of interesting caveats: first, the vast majority of our colleagues (all professional advisors to many family businesses) responded ‘no difference’ to this question. Second, if we look at some of the comments from readers, we get a sense that some family members may have struggled with their own on-boarding because of the high degree of scrutiny that can come from being ‘the boss’ kid…’ – which also aligns with the answers we got to question 2 below
“Worse when onboarding a new employee who is a family member, not necessarily worse when onboarding non-family employees”
2) When asked who had a better ‘on-boarding’ experience, family or non-family employees, both readers and FBCG advisors tended to weigh in on the side that non-family employees had an easier time of this. One reader’s quote adds some depth to the opinion:
“We have hired many more non-family family employees so the process is more standardized and doesn’t involve the extra complexities that can exist when bringing in a family member.”
However, an interesting ‘counter-view’ (that it may be easier for a family member to onboard) is captured in this quote, which speaks to the family benefit of familiarity:
“When I joined the business I already knew many co-workers and senior management, from working there over summers and company functions/picnics where the family has been involved.”
3) Finally, when asked to rank the importance of certain ‘best practices’ around on-boarding next generation family employees to the business, both the readers and the FBCG consultants came up with the same relative hierarchy. A few comments underscored that all of these are important or valuable, but when forced to rank, the following order emerged, starting with the most valuable:
1) The new family employee works outside the family business first
2)The new family employee starts working at the right job
3) The family employee reports to a non-family member
4) The family employee participates in the same performance feedback process as other comparable employees
5) The company board is actively involved in the onboarding of the new family employee
We deeply appreciate everyone’s participation in these ‘mini-surveys’ and hope readers gain some additional insights alongside us as we seek to hear from readers about their lived experienced with these complex topics. We hope to continue to send out questions to our readers and are always looking for innovative ways to engage folks in the dialog. As always, if you are interested in learning more about how the Family Business Consulting Group, Inc. may be a resource to you and your family, please do not hesitate to reach out.
Paul Hawkins of the University of Portland, recently said the following:
“When asked if I am pessimistic or optimistic about the future, my answer is always the same: If you look at the science about what is happening on earth and aren’t pessimistic, you don’t understand data. But if you meet the people who are working to restore the earth and the lives of the poor, and you aren’t optimistic, you haven’t got a pulse”.
In providing support for the communities in which they provide employment, manage supply chains and enjoy a customer base, family firms have demonstrated an extraordinary willingness to give back. Much of this is connected to their values which include the need to support the wider “societies” in which they operate.
However, increasingly, giving monies is insufficient for family firms. They want to get involved in the causes they support in a hands-on way. Some are beginning to treat their philanthropic support and donations as they would any other investment. Family firms are beginning to measure their ROI in emotional, spiritual, political, commercial and social terms.
A group in the UK called “Achieving Impact”, run by James Plunket, works with families to align their values to the political, social and environmental needs of those to whom they give. Families treat their investment in land/machinery/people in the same way they treat their investment into charities. They work to build KPIs that help them to measure the impact they are having. Performance measurement becomes a key element in the philanthropic endeavours of family firms. Some families ask:
are we collaborating with other providers (social and political) for the greater good?
to what extent are we proactive in our giving vs. reactive?
do we combine with institutional investors who are ethical?
I’m often approached by family members who need a coach. They may have a mentor who is sometimes, a family member. So why is that not enough? This lies in the fundamental difference between the mentor and the coach. A mentor can pass on knowledge, provide advice and in some cases, “tell you what to do”. They are directive. A coach, however, is meant to unlock the answers that we all have inside, if only we knew it. Their role is to ask the right questions, reframe what you may perceive as a lack of choice and help you to see that we all have within us the capacity to choose. For example, we can:
change the system (often difficult)
change the person or part of the system that is causing us distress
change our reaction to that system
The latter is always within our capability so to do.
Often times, a coach will help you to become “unstuck” and to envisage a future that is different. They might ask, if things were different:
what would you feel?
what would you hear?
what would you see?
A mentor may also be part of the family business, such as a non-family executive. Sometimes they may be too close to be perceived as objective. Perhaps the mentor themselves feels compromised on confidential issues. Perhaps they have their own agendas which must also be respected. But coaches are neutral and you can be assured of their confidentiality in discussions. They help to build your self-esteem by having YOU find the answers. But rest assured that coaches are not therapists. They may use counseling techniques but some issues do belong in therapy. A good coach should understand these boundaries, be able to articulate them and make recommendations for additional help should you need it. Most importantly, a good coach should be willing to work alongside any other mentor/therapist you might work with. All for the good of YOU.
For more insight into how coaches can assist in the family firm, please look out for our webinar on July 27, 2011. For additional information click here.
During a recent conference with family businesses in Asia, I had the honour of giving a presentation on the subject of governance. It was all about the structures, processes and the behaviours required for promoting the continuity of a family firm. During the Q&A and during the lunch roundtable chats, I was amazed to hear the same question asked again and again: “This is all well and good, but can you teach me how to talk to my parents?” and conversely “Can you teach me how to talk to my children?” It seems governance structures alone will never be sufficient but must be supported by healthy and mutually respectful dialogue across the generations. Many next generation members did not have the heart to tell their parents that they wanted their “own” career. Older generations resisted dialogue for fear of putting too much pressure on their children. Some wanted to save their children from the rigours they had experienced.
So what can we do? One family decided to hold a “dialogue” workshop. We helped each generation to articulate their primary needs, their fears and their ultimate desires plus any questions they had for the other generation. I was as an external facilitator to help create a “safe space” for such dialogue, complete with rules of engagement and we worked with each generation to prepare for the session.
The results were surprising and heartwarming. Most notably, a feeling of mutual regard developed across both generations, emotions were aired and accepted and the power of dialogue was witnessed by all first hand. Now they don’t need a facilitator. The family has a common dialogue to use when they need to raise an issue and we were able to provide permission for each generation to talk to the next without preconceived outputs.
If the holidays weren’t enough to stir up trouble for family businesses here in the US, for the past couple weeks we have been in the midst of college football rivalries to add some fun conflict to the family business. Yes, I did say fun conflict, and yes, there is such a thing, and sports can deliver the goods. All over the country stretching from Southern California with the cross-town rivalries of USC and UCLA, to the South with Alabama and Auburn, to the Northeast with Harvard and Yale and culminating this weekend with Army vs. Navy in Philadelphia, it is rivalry season where brother roots against brother and family alliances and differences are celebrated!
Last Saturday here in Oregon the 114th Civil War game pitting the University of Oregon Ducks vs. The Oregon State University Beavers was played in Corvallis. The “number 1” Oregon Ducks went on to defeat the Beavers by a score of 37 − 20. Now the Ducks will play in the BCS championship game against Auburn on January 10th 2011 for the often-disputed title of college football champions. While the BCS debate is a whole other discussion for blogs and sports radio elsewhere, for family businesses, sports rivalries can be a nice distraction and an enjoyable way to deal with some healthy conflict. Here in Oregon, it was fun to watch families divided in their loyalties as a husband wore green and yellow (colors of the Ducks) and his wife wore black and orange (Beavers) and their sons and daughters divided in Oregon and Oregon State colors. Throughout the stadium the pattern repeated itself as families were divided in their allegiances, and some even went so far as to display the ultimate hybrid — the platypus — melding the Duck and Beaver fan who has ties to both schools.
Many family businesses in the weeks leading up to the Civil War used the event with their employees as a way to bring hilarity to the work place as various bets and challenges were issued based on their respective allegiances to either the Ducks or the Beavers. I can tell you on Monday morning there were plenty of Beaver family business owners driving to work wearing Duck gear, or having their car adorned with Duck colors or even worse dressed as the Duck mascot. For many around the state of Oregon yesterday was a very long day of humiliation and insults, but there is always next year – and it was all in good fun.
Regardless of the sport it is interesting to see how in some families the long tradition of supporting one team continues while in others the next generation breaks the tradition and roots for the biggest rival – just to shake things up a bit. Certainly many families use game day outings as a way to bond and socialize together for fun. With a few of my clients we have used their strong connections with a certain sports team as a motivator to not violate the ‘Code of Conduct’ or they will be required to make a contribution to their rivals’ athletic fund. We have had a great deal of fun with it, and I can tell you the shame of writing that check is a powerful motivator! A good question to ponder is: ‘How does your family use sports and rivalries as way to build bonds and connections with family and employees?’
Warren Buffett and his company Berkshire Hathaway gave the family business world an inside look of how an entrepreneurial first generation business goes about the selection of a new leader. Earlier this week Berkshire Hathaway introduced little known Todd Combs as the new heir apparent of Warren Buffet’s empire. An excellent article in the October 27th edition of the Wall Street Journal titled Todd Combs Is a 100% Fit With Berkshire Culture provides a glimpse of the process used by Buffet and Berkshire Hathaway. In this article we see many of the “best practices” as well as some insightful lessons for the next generation that we urge our family business clients to follow in succession planning. Here are nine of these observations:
Succession is a Long Process – Warren Buffet is 80 years old but it is clear that succession planning has been underway for some time with his immediate successor Vice Chairman Charles Munger driving the process. We also learn in this article that Mr. Combs responded to a mysterious “help wanted” request in early 2007 marking over three years to find the right person.
Leadership Comes in All Styles – We learn that Mr. Combs is a “low -key” guy and that he doesn’t come from a “typical path of privilege and pedigree.” Knowing that Mr. Buffet keeps it simple, it appears Mr. Combs shares Mr. Buffett’s core values of modesty, respect, and work ethic.
Forty is About the Right Age – The age of 40 (plus or minus a few years) is typically the time when a next generation leader should be in position for a transition to a leadership role. Is there magic to 40? Certainly not, but by around 40 the experience, accomplishments, maturity, and understanding of a person’s strengths and weakness are usually evident, and there is still some time for final leadership grooming. In this case Mr. Combs is 39 which is right on track.
Work Ethic & Winning Attitude — One of the most common issues that comes up in the succession process is the demonstration of a strong work ethic by the prospective successor. Younger generations are often criticized for their lack of drive and work ethic – but clearly Mr. Combs is noted for his ability to work hard and be focused to get the job done. As his former professor noted, “I don’t remember saying to myself, “this guy is the next Warren Buffett” says Richard Hanley, but he probably had the greatest desire to win.”
Experience + Education Lead to Credibility — Mr. Combs has an undergraduate degree from Florida State and an MBA from the Columbia Business School. What is interesting is that he is remembered as a notable student for his drive and focus. As one of his professors remembered “when you teach, you see some people that just go through the motions, and some people who genuinely want to make money … that is where Todd’s head was.”
Beyond his education is his impressive resume, working in both the public sector as a government regulator as well as the private sector with various stops at an insurance company, a hedge fund, as well as leading his own investment firm. His steady path, and diverse experiences links together a “deep understanding of finance, business, and regulation.”
Street Smarts Too — Formal education is certainly important but street smarts and the ability to learn, be flexible, and develop the softer skills are things that you just can’t teach in the classroom. It is noted, “he is smart and he can adapt… when he got in this business, he didn’t know anybody.” The ability to develop his people skills and to think on his feet, along with his formal experience and education is a powerful combination that any next generation leader should strive to develop.
Thinking Different is Leadership — Success in not measured by following the crowd. Mr. Combs has often thought differently and many times he has won but occasionally he has lost. “As markets collapsed in September 2008, and his fund lost 9% during that month, clients say Mr. Combs was disappointed but quite calm, unwilling to sell shares he believed in … others who became fans of Mr. Combs say that, unlike many hedge-fund managers, he spent little time sharing investment ideas with others in the business, preferring to develop his own ideas.” Leaders are willing to continue to lead even when the chips are down and remain calm.
Passion and Thoughtful Matters — In order to be successful as a leader you need your own passion that gets you up each morning. Throughout the article people from various aspects of Mr. Combs’ life provide examples of his commitment. One example came from an investor in his firm who stated: “It’s tough to find someone that passionate and thoughtful.”
Cultural Fit is Everything — Impressive resumes and the finest schools are great but a next generation leader must fit the culture. Mr. Buffett says, “he is a 100% fit for our culture. I can’t define the culture while I am here, but we want a culture that is so embedded that it doesn’t get tested when the founder of it isn’t around. Todd is a perfect in that respect.” “Mr. Buffet says he and Mr. Munger were sold on Mr. Combs not only because of his ability and intelligence but also because they were convinced he would fit in to Berkshire’s no-fuss culture.”
Time will tell how successful Todd Combs will be in filling the biggest shoes in business but once again with their process of succession planning, Mr. Buffett gives the business world yet another lesson on how we might think about how we manage our own companies for long-term, sustainable success.
It can be a lonely place to lead a family business but CBS Television’s Sunday show ‘Undercover Boss’ http://www.cbs.com/primetime/undercover_boss/ has become a useful tool for many family business leaders to get a glimpse of how others interact and relate to their companies. This past week’s episode featuring family owned NASCAR was the latest installment of the top rated show. ‘Undercover Boss’ has featured many family companies including White Castle, Herschend Family Entertainment, Hooters, and Great Wolf Lodge, as well as non-family owned companies including Waste Management. In this week’s episode, The “Undercover Boss” had to be non-family executive Steve Phelps, Senior Vice President and Chief Marketing Officer, because Brian France, CEO and Chairman is simply too well known in the NASCAR organization to be able to go “Undercover”.
The typical ‘Undercover Boss’ features a CEO working incognito from the entry levels up the organization in multiple roles and gaining a new perspective on their company’s process and people. In spite of some slick Hollywood editing, a dash of cheesy music and a predictable formula of a story, it still results in a good hour of reality television which is not an easy feat in 2010. But perhaps the most useful aspect of ‘Undercover Boss’ to many of my clients has been the opportunity to see other leaders interact with their staffs. From running a meeting with their own executive teams to having difficult conversations with a manager that has not been doing his or her job.
‘Undercover Boss’ serves as both good and bad examples in leadership and tactical day-to-day management that many family business leaders simply don’t get an opportunity to see as an outside observer. Other clients have mentioned that the show has been a conversation starter with family members about what they observed in ‘Undercover Boss’ and a source of perspectives on matters of their own family business. Family members as young as eight have talked about what they have seen on the show, from the emotional aspects of employee’s lives to questioning the basics of customer service. ‘Undercover Boss’ has even brought some families together around the television on Sunday evenings like way back in the 1990s pre-TIVO.
Finally ‘Undercover Boss’ has emphasized the connections to the human element regardless of your level in the hierarchy of the organization. Each episode has reiterated the importance of a strong corporate culture based on treating the customer right, as well as living the basic simple values of the golden rule “treat others as you would like to be treated,” the central theme of ‘Undercover Boss’ that just happens to be part of the competitive advantage of a family business. This is one case of a television show being a useful reminder of never forgetting that the most important aspect of being in a family business is getting out of the corner office and managing by walking around once in a while.