All posts by David P. Ransburg, Jr.

Employee Appreciation

David Ransburg
David Ransburg

I grew up in a family business, a sprinkler manufacturing company in Peoria, Illinois. My father ran this business for nearly 40 years, and I had the privilege of working in this business myself. While not every decision my father made turned out to be right, he made many excellent decisions. One of the very best was instituting an annual event he called “Employee Appreciation Day.”

Briefly, Employee Appreciation Day consisted of all office workers spending one day in the company’s factory or warehouse, laboring alongside the regular employees of those areas. This event served a number of purposes. First and most generally, it brought employees together for a full day, thus breaking down some of the structural barriers inherent to these separate functional areas.

Second, this day of direct interaction provided more specific knowledge that was helpful to all employees. For example, working on the assembly line allowed sales people to better understand how the products worked and to better appreciate the care that went into the creation of each item. Manufacturing employees could share process improvement suggestions with managers they wouldn’t otherwise see.

Most importantly, Employee Appreciation Day (which included a pizza lunch for all employees) strengthened the company’s conscious culture of cohesiveness and collaboration — a culture that provided the company with a competitive advantage in the marketplace.

What strategies have you tried for strengthening the culture of your family business?

Time to Get Away?

David Ransburg
David Ransburg

Years ago, I had the pleasure of visiting with a wise family business owner/operator named Tom Gulliford. He shared with me his unusual philosophy about vacation time: all employees must take a minimum of two weeks’ vacation whenever they take time off. His reasoning was that anything less than two weeks did not allow the employee to truly get away from work… which was the entire purpose of vacation in the first place!

Mr. Gulliford’s intuition has since been supported by many researchers.  (Click here for a summary of these studies.)   We now know of the many harmful consequences of work/life imbalance.

The constant pressures of business competition often compel companies and their employees to work ever-longer hours, so there’s no easy solution to this problem. Family businesses, though, can lead the charge. I say this because changing our perspective on long work hours requires a long-term perspective. While an examination of a particular moment may lead one to continue working, a longer term perspective will make it clear that occasional breaks are required. As is often said, “It’s a marathon, not a sprint.”

And, who is better positioned to take a long-term perspective than family businesses? These companies – many of whom have lengthy histories – measure time not in hours or days. but in generations. This perspective allows family businesses to see an extended vacation not as a short term loss, but instead as an investment in the long term… an investment in the individual and an investment in the business.

Whether it’s taking the “Gulliford Approach” of minimum vacation time or some other strategy, how is it that your family business manages that long term investment of employee work/life balance?

Trick or treat!

David Ransburg
David Ransburg

Americans celebrate Halloween on the last day of October, and neighborhoods are filled that evening with the children’s chorus of: “Trick or treat!” While children typically receive a treat in response to their request, there is, nonetheless, an implicit threat of harm or mischief if no treat is granted.

Do adults grant treats because of the threat? I suspect not. As one who grants these treats, I can tell you that I do so not because of “trick-o-phobia,” but because I want to do something nice for my neighborhood’s children. I’m surely not alone when I say that I’d give out just as many treats (with just as much good cheer) if the customary phrase became simply, “Treat?” Practically speaking, I believe that’s how most intend/interpret the phrase anyway.

What does any of this have to do with family business? In my experience, family businesses provide members with many opportunities for both consequences (“tricks”) and rewards (“treats”) and occasionally the tricks and the treats go hand in hand. “I’ll take on that unpleasant work assignment, but only if I get a company car.” Or: “I’ll give you a company car if you take on that unpleasant work assignment.”

Holding someone ransom or delivering an ultimatum is never productive, mainly because it establishes the two parties as adversaries rather than allies. Perhaps family business members can become more allied by borrowing from the children of Halloween: more treats than tricks.

And, just like all the children know when they examine their Halloween “loot,” focusing on the treats leads to an outcome that is very sweet.

Back to school

David Ransburg
David Ransburg

I realize that kids have been back in school for a couple of months now, but I recently ran across something inspired by one school in particular, and that something has direct value for family businesses.

The KIPP Foundation was founded in 2000 with the purpose of creating “a respected, influential, and national network of public schools that are successful in helping students from educationally underserved communities develop the knowledge, skills, character and habits needed to succeed in college and the competitive world beyond.” Much has been written about KIPP, and their many successes are remarkable.

KIPP has many chapters, and each chapter is governed by its own board. KIPP’s Colorado board was recently provided guidance to help them understand which issues the board should deal with vs. those that are better left to those who manage the schools day-to-day. While specific issues were not delineated, the KIPP Foundation provided the following list of questions to help board members make their own decisions along these lines:

Governance Issues vs. Management Issues

  • Is the issue strategic?
  • Is it about the future?
  • Is it central to the mission?
  • Is a high‐level policy decision needed to resolve a problem or disagreement?
  • Is a significant change in firm performance, either positive or negative, in evidence?
  • Is the board’s performance dashboard signaling a need for greater attention?
  • Does the CEO want and need the board’s support?
  • Has a new risk factor for the firm become evident?

What other questions would you suggest to help family businesses in particular distinguish between governance issues and management issues?

The meaning of labor

David Ransburg
David Ransburg

We celebrate Labor Day on the first Monday of September, and I’ve always thought that this holiday may be the most important one for family businesses. If that statement strikes you as strange, please bear with me.

Labor Day became a national holiday in 1894, and it is dedicated to the social and economic achievements of workers. While originally conceived of as a celebration of organized workers, most people now see it as a celebration of all laborers, organized or not.

Family enterprises, representing the vast majority of businesses in North America, certainly contribute a tremendous amount of labor to our economy. For that reason alone, it would be appropriate for family businesses everywhere to celebrate Labor Day. But, there’s more…

The word “labor” has another meaning beyond “toiling at work” in its relationship to childbirth. A quick review of “labor’s” etymology shows that the original meaning referred to “toil, exertion, task,” while the secondary meaning associated with childbirth followed a few hundred years later. Refer to “labor pains” today, though, and there is no question that most will initially think of childbirth… especially for expectant mothers!

There is, unfortunately, no nationally recognized “Family Business Day,” but that is no cause for despair. The efforts of family businesses do not go unnoticed: their holiday is Labor Day – after all, what better holiday is there for family businesses to celebrate than the one whose meaning is both work and family?

Little League rules and learnings for family business

David Ransburg
David Ransburg

As the Little League World Series recently wrapped up, there’s much we can learn from these terrific players and coaches. Important ideas like sportsmanship, respect, effort, accepting defeat with grace, and fun immediately come to mind. Also, if you believe that Little League baseball is simply about winning, treat yourself to this video of the post-game speech by the coach of a Rhode Island team that had just been eliminated from the tournament:

Little League Speech

There’s also a specific lesson from Little League that is directly applicable to family businesses: The 24-Hour Rule.

I recently attended a local Little League game and learned about an interesting policy that this particular league calls “The 24 Hour Rule.” There’s no documentation of the rule for my local Little League, but the Middletown (NJ) Little League has a similar policy that they articulate beautifully on their website:

If an issue should arise that requires communication with the coaches, please wait 24 hours. During this time we ask you think about what you want to say and how you want to say it. The cooling off period prevents matters from getting out of hand when they shouldn’t. Never approach the coaching staff on the field or at practice.

I’ve worked with many different family businesses, and occasionally the issues that they address are significant and emotionally-charged. In these instances, tempers can easily become inflamed, leading the conversation to become destructive instead of constructive. In those cases, the best remedy I’ve found is a simple “timeout” – stop talking for a few minutes and let the group disperse with no interaction at all until everyone has “cooled off.” In my experience, participants regain their bearings within 30 minutes or so – rarely does it take as long as a full 24 hours.

Everyone is different, though, and every situation is different… so, that 30 minute guideline is just a rule of thumb. But, however long it takes you and your family to cool off, once you do return to the conversation, you all will do so with clearer heads. That timeout may seem like a setback or even a “loss” in the moment, but it will actually get you closer to progress long term. Just like that Little League team from Rhode Island, what seems like a loss will actually be a win.

What other tips would you recommend for dealing with “explosions” within a family business?

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?

A Surprising Benefit of Low Pay in Family Businesses

David Ransburg
David Ransburg

I recently met with a family business owner who is quite open about the fact that he consistently pays his employees at a below-market rate. Given that he also makes great efforts to ensure that his company delivered the very highest level of quality, I questioned him about his low pay strategy.

I thought – somewhat naively, it would now appear – that higher quality demanded higher employee wages. He believed that low pay helped him to find the right employees for his company – those who would be dedicated, hard working, and have a strong belief in the company’s vision and mission. In other words, offering low pay – and having a reputation for doing so – provided his company with employees who weren’t working solely for the money. And, he believed, an employee who works for reasons other than just the money is an employee who will ultimately deliver higher quality.

While I remained somewhat skeptical, his argument did move me slightly because it reminded me of the common refrain about the low pay received by teachers. Even though all agree that teachers are so important, we, as a society, want them to be passionate about their jobs and to see their work as meaningful – not to do it for the money alone.

Now, there’s some research that further supports this line of thinking. The Institute for the Study of Labor (IZA) in Bonn found that relatively few workers are motivated by their organization’s mission, BUT those who are so motivated provide substantially higher effort AND receive lower pay. Granted, higher effort does not guarantee higher quality… but, I would suggest that it’s a good start.

Have you found a similar benefit of low pay in your family business? Or, are there other surprising benefits of low pay that you’ve seen?

Pay for Succession?

David Ransburg
David Ransburg

When most family businesses hear the phrase, “you will pay for succession,” they likely think it means that there will be pain associated with the process of transitioning from one generation to the next. I’m here to suggest another, more positive way to think about that phrase… and this new way of thinking comes from some of the world’s largest publicly traded companies.

A recent article in the Wall Street Journal identified a growing trend where publicly traded companies have begun providing outgoing CEOs with compensation that is directly tied to grooming their successors.

For example, outgoing Intel CEO Paul Otellini had the opportunity to earn up to $4 million in extra pay if he successfully met certain criteria associated with preparing his successor, Brian Krzanich. While the company’s Board of Directors determined that Mr. Otellini had met some of that criteria, his performance was not sufficient to earn the full bonus – he received half.

This new approach is, I believe, especially interesting for family businesses because succession is one of the biggest challenges – if not THE biggest challenge – facing many family firms. Succession – or as we at FBCG like to call it, “generational transition” – is an extremely complicated issue that is influenced by many factors (e.g., Is the next generation prepared to take over the family business? Is the business viable?), but one of the common roadblocks to successful transition is often the incumbent’s reluctance to let go. That reluctance alone can be a very challenging knot to loosen, but the publicly traded companies mentioned above have given us another tool with which we can tackle that reluctance “roadblock”: pay.

While extra pay alone is unlikely to be sufficient to get most incumbents to let go, it can certainly be a powerful incentive to increase the likelihood that they will do so. From now on, perhaps, the idea of “paying for succession” will take on a new, more positive meaning.

Have you ever paid an incumbent for grooming their successor? If so, how well did it work? And, can you think of other forms of “pay” that might be even more effective than money?

A Lesson for Family Businesses from “March Madness”

David Ransburg
David Ransburg

You may not think of college basketball as a family business, but in a few rare cases it can be viewed through that lens. Take the McDermotts from Iowa. The father, Greg, is the head coach of the Creighton University men’s basketball team, and his son, Doug, is not only the team’s star player, but he is also considered to be one of the greatest college basketball players of all time. The Creighton team spent this entire season as one of the top ranked teams in the country, in large part because of Greg and Doug’s ability to work together effectively.

For those who are interested in learning more about Doug’s phenomenal career, there is an enlightening article in a recent issue of Sports Illustrated magazine. One of the passages from this article that stood out to me was the sentence that identified the key to their success:

“[Greg] and Doug have determined that the father-coaching-son arrangement can work only if family time and basketball time are separate.”

As you might imagine, it can get confusing at times for Greg and Doug because they not only have a father-son relationship – they also have one that is coach-player. And just as the different roles each plays in relation to the other can lead to confusion about priorities, goals, and ultimately cause communication to be difficult, so, too, can the presence of multiple roles lead to confusion within family businesses. While you may naturally think of yourself first as “Dad” or “Mom,” you must remember that others may also see you as “Chairman,” “Boss,” and/or “Majority Shareholder.”

Like the McDermotts, members of family businesses would be wise to be explicitly clear about the multiple roles that are played, even if it means occasionally creating separate time for each. Maybe this college basketball tournament isn’t “Madness” after all.

What are your experiences with multiple roles in your family business? How have you managed to minimize the confusion that can often come with these multiple roles?