All posts by Bernard Kliska, Ph.D.

Addiction in the family business

Bernie Kliska
Bernie Kliska

Addiction is an unfortunate but common issue that many families have to deal with. Families in business together are not exempt from this issue.

When a family member has an addiction, be it drugs, sex, gambling, alcohol, etc., it is necessary to address the problem in order to have long term family harmony and stability. This is especially critical if the addict is the anticipated successor.

Unaddressed, addiction can wreak havoc on a succession plan. As a consultant and family therapist, I have seen the results and consequences of addiction on families. The addict places a huge burden on the family. Their erratic and irrational behavior takes an emotional toll on everyone.

Unfortunately, for a family in business together, a lack of family harmony not only affects the family, but negatively impacts the business’ success as well.

There are two common ways families deal with an addict in the family. The first is they pretend the problem doesn’t exist, or they end up enabling the addict as a way of coping.

However, in reality the problem does not magically disappear. If your family is facing this tough situation, here are some steps family members can take to effectively deal with an addict.

  1. Encourage (not threaten or force) the addict to seek professional treatment. The best case scenario is for the addict to enter treatment willingly and take responsibility of his or her own healing.
  2. Regardless of whether or not the addict decides to seek treatment, you should attend support groups. Support groups will teach you about setting boundaries, consequences, compassion when it comes to dealing with an addict, not taking on the responsibility for the addict staying in treatment, being supportive versus enabling and what to expect from the addict.
  3. Have all family member’s employees sign a Family Member Employment Policy that includes the requirement for them to be addiction free. You can stipulate in the policy that anyone found to be suffering from an addiction must seek treatment and show proof of successfully completing a treatment program as a condition of continued employment.

The third step is important for any business owner, whether or not you currently have a member of the family suffering from addiction, in recovery, or even if everyone appears to be doing well.

Implementing policies and safeguards to protect what you have worked so hard for is just common sense. No one knows what tomorrow may bring, but planning for all possible contingencies will provide for the best chance of future success for both your business and family.

Hiring a family business consultant: Key questions and considerations

Bernie Kliska
Bernie Kliska

As a consultant to family businesses, I am frequently asked, “When will I need a family business consultant?” The simple answer is, when you need one, you will know it.

A consultant is usually brought in to help a family resolve particular issues that they do not have the time or expertise to resolve by themselves. There are basically two types of systems consultants often used:

Expert or project consultants will give you solutions to particular problems and help implement those solutions.
Process consultants help you define the problems and then assist you in reaching your own conclusions and solutions.

What should you be looking for when hiring a family business consultant? The first and most important factor is straight forward: can they help solve your particular issues that are hurting the family and business or both?

Before hiring a consultant, here are some questions you should ask yourself:

  • What type of experience do they have working with family businesses?
  • How broad and deep is their training?
  • How long have they done family business consulting?
  • Do they demonstrate expertise on the pertaining issues the family is presenting?
  • Have they helped other businesses with similar issues?

Two other basic criteria are cost and time. Is the consultant affordable for you and is there a time constraint? Do you have confidence that the consultant will complete the project on time?

While these are important factors, the real question is, does the consultant have the experience and ability to manage the specific issues that are involved? A quick and cheap solution that doesn’t solve your problems is not very useful.

Helping to cultivate harmony is an important part of the consultant’s involvement. Family businesses are incredibly complex entities. Family business members inherently need to work through a broad range of complicated challenges, with the consequences of failure being not only the loss of the business, but also potentially the loss of the love found in family relationships.

Succession, ownership, communication, family dynamics, and governance all require different types of management. However, to be successful, all of these things need to be functioning in harmony. Thus, there are many different skill sets that a consultant needs to work with a family business.

Running a business is hard, especially these days. Trying to run a profitable business with your family, while maintaining harmony within the family, can be even more difficult. Fortunately, there is help available.

Family business consulting is basically the art and science of helping a family business find the delicate balance of peace and success among the family and the business.

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.

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.

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.

Paying the Board

Bernie Kliska
Bernie Kliska

A board of directors can help your company set long range goals as well as address pressing business issues.  To get the most value from a board, they should be compensated fairly for their time and related expenses.  It is recommended that a board should meet at least four times a year and careful thought should be given to their advice.

Some sort of an honorarium is usual for board members.  It can range from $250 to $5000 (or more) per meeting.  The level and type of compensation depends on the size and type of the corporation.  One possible way to figure compensation for a director is to take the top salary of the company’s CEO and apply the following formula: divide the total compensation of the CEO by 2000 hours.  Multiply the results by about 50 hours, which represents four full day meetings, plus some preparation and telephone time.

The key issue to be considered is the extent to which the director adds substance to the family business.  If there is going to be pay for board members, they should be people who add more value than they cost.  Family members who serve by birthright rarely provide real value as directors unless they have the qualifications to be selected as board members for other businesses.

Typically, indemnifying directors from legal liability is sufficient to attract qualified candidates, although some companies buy officer and director’s liability insurance as added protection.  For emergency meetings, it is a good idea to pay extra to enhance the director’s willingness to rearrange his or her busy schedule.

Your respect for your director’s involvement should be reflected in the fairness of his or her compensation.

Family Business in the Age of Uncertainty

Bernie Kliska
Bernie Kliska

In today’s business environment, there appears to be many issues for family businesses to be concerned about.  The demands and tensions during these uncertain times highlight even more clearly the need for trust and open communication between family members.  It also emphasizes the need for economic discipline, clear policies, and well-established systems of family and business governance.

A major concern today is the uncertainty of what Congress will or will not do in the future.  Acknowledging the current bewildering political environment is important.  It helps people understand that it is natural to feel uncertain and anxious during these times.

Family businesses seem to be more resilient during uncertain times because they tend to focus on long-term goals.  They work not only for the current generation of the family, but also for future generations as well.  They naturally tend to be more entrepreneurial and adaptable.  They also usually have a deeper reservoir of loyalty to draw upon, not just from each other, but also from their employees.  They are less prone to lay people off and more willing to hold onto employees longer.  For that reason, they often have a more dedicated and motivated work force.

What differentiates lasting family businesses from non-family businesses is an acknowledgment that they have challenges and they embrace those challenges.  There is a willingness to work towards resolving them.

We may not be able to destroy the beast of uncertainty, but we can definitely put it in its cage, where all it can do is occasionally rattle the bars and put on a distracting show.

“Someday This Will Be Yours”

Bernie Kliska
Bernie Kliska

The ability to carry on a successful intergenerational transfer of ownership and leadership is one of the most important and difficult issues facing a family business. One metaphor for succession is the firefly. They flicker brightly for a period of time, then fade away. Consultants call this the rule of thirds: only about a third of family businesses make it to the second generation. A third of those survive to see a third generation and only three percent of those manage to see the fourth generation. Research indicates that failing to transfer the family business can be traced to one major factor: lack of planning. A recent survey (1,952 families) indicated that 66% had no succession plan or had a ” loose plan” that was rarely executed.

Succession planning can be especially complicated because of the relationships and intense emotions usually involved. Most people are not comfortable discussing issues such as aging, death, and their financial affairs,all of which are involved in the discussion of succession. Realistically, it takes years to plan and implement a proper succession plan. A good plan typically covers three main topics: management, ownership, and financial matters. It is important to recognize the distinction between management and ownership. They are not necessarily the same thing.

Often, the most challenging part of the succession process is getting started. First, you should thoughtfully and realistically assess the situation, and determine your objectives. Then, methodically address each issue that may stand in the way of those objectives. Seek input and help from advisers, independent directors and family members.

Succession of a family business is inevitable and the earlier you start planning, the more effective your transition will be.

Family Business: A Valuable Marketing Tool

Bernie Kliska
Bernie Kliska

Businesses that are family owned are increasingly marketing themselves as a “Family Business.”

Surveys indicate that people generally have a positive view of family businesses because of the principles associated with it. They tend to focus on resilience and legacy. The owners of a family business usually have a long-term incentive to protect the reputation of both the business and the family, particularly, though not exclusively, if the family name is “on the door.” This can translate into better service and integrity, which in due course could lead to higher trust and loyalty among customers.

Some of the businesses that identify themselves as a family business are: Walmart, Mars, Becktel, Cargill and Koch Industries. Koch Industries is named for its founder Fred C. Koch who formed the foundation of what eventually became the largest privately held company in the United States. Perdue Chicken always uses a family member for their television commercials. S.C. Johnson ends all of their marketing materials by stating “We are a Family Business.”

If you have a family owned business, it is something you should be proud of. This is who we are. Keep getting the word out and take advantage of your unique situation.

Professionalizing the Family Business

Bernie Kliska

What is the meaning of the term professionalizing?  For some families, professionalization means transparency and accountability; for others, it means more formal structures and systems, yet for others it suggests they have a non-family CEO….  But are these always an improvement on what came before?

One of the issues with the idea of “professionalization” is that it is based on assumptions.  One assumption is that the family business is not already professional.   Second is that other models of business are better than the one they have and if they duplicate it, it will improve their enterprise.  Neither of these assumptions are necessarily true. 

There is often a perception that family businesses are not professional.  However there are many family businesses that are incredibly professional. The meaning of “professionalization” should not be whether a family member or non-family member heads the enterprise.  Instead, it should be a company that exhibits high standards of performance and ethics. 

One should not fall in the trap of assuming that the way to make your business more professional is to get rid of family members who are employees. The word “professional” implies strong leadership that nurtures formal processes for setting clear goals and rules, appraising employees performance, hiring based on ability to contribute, and promoting based on merit.  If that is what you have – you have a well-managed business, and that is the key to long-term success for any enterprise.