All posts by Kent B. Rhodes, Ed.D.

The natural fit of emotional intelligence in family business (Part 2 of 2)

Kent Rhodes
Kent Rhodes

In my last blog post, I shared how Emotional Intelligence (EI) has become a core piece of the discussion about effective business leadership in recent years. I describe it as “the ability to monitor and understand the impact of emotions – from one’s self and others – on one’s own behavior and others’ behavior, all in a way that guides wise decision making.”

As a part of building this discussion, I am highlighting some recent research conducted by one of my graduate students at Pepperdine University, Emily Spivey, and how important it is for family businesses to be able to build in these insights as a part of good continuity planning for subsequent generations.

Emily was curious about the role emotional intelligence plays in how successful entrepreneurs build an organization from the ground up. The results of her work revealed Seven EI Qualities Important in for Entrepreneurial Success:

  1. Reading the room. Described by one study participant as the ability to understand “interpersonal dynamics that are taking place in a group or social context,” or by another as “understanding what people are experiencing at any given moment,” the importance of “reading a room” was identified as a characteristic of an emotionally intelligent leader necessary to effectively build an organization.
  2. Decision making. EI plays a role in the entrepreneur’s ability to make decisions, often quickly, creatively, and decisively, usually in the midst of uncertainty or under pressure. It even included their ability to accurately anticipate the responses and reactions of people around them and to adjust decisions as necessary.
  3. Hard leadership. EI plays a role in being able to lead in a crisis, including leading through brokenness, conflict or stress. In relationship to the uncertain and often chaotic nature of starting up an organization, study respondents talked about not only having the capacity to lead through hardship going on with other people, but the necessity of leading through their own personal challenges or conflicts as they came up. Managing and tolerating stress was also mentioned multiple times as key to effective leadership in the context of “hard leadership.”
  4. Risk taking. Another theme identified was the ability to express entrepreneurial leadership and take risks themselves, while simultaneously inspiring others to take risks as well. This role seems to be particularly important in terms of gaining financial stability by securing investors, loans, and financial security.
  5. Leadership in self and others. EI plays a role in being able to build leadership skills in others while simultaneously sustaining one’s own effective leadership over the long term. According to the entrepreneurs in the study, effective leadership includes both empowering and cultivating leadership in those around you and also having the self-perception to know your own leadership limitations or signs of burnout, and to course correct when mistakes were identified.
  6. Interaction. EI plays a role in being able to interact with others in a way that builds the confidence of people in their various roles and develops other leaders. The study respondents emphasized the importance of strong interpersonal relationships in starting the new venture.
  7. Trust. EI plays a role in trusting and building trust. This role of EI was discussed as an expression of emotionally intelligent leadership and also as an outcome. Emotionally effective leaders both trust themselves, and also inspire and build trust in others.

The natural fit of emotional intelligence in family business (Part 1 of 2)

Kent Rhodes
Kent Rhodes

I’ve always been fascinated with the internal workings of leadership in family businesses and how founders of a successful family enterprise seem to have so much in common around their understanding of people. One of the roles I play in my life is that of a research advisor to graduate students at Pepperdine University. This means I see first hand how smart students explore and test interesting questions and how their discoveries can be applied to all kinds of organizations, especially to family businesses.

One of those recent studies by graduate student Emily Spivey explored the role that Emotional Intelligence (EI) plays in how effective entrepreneurs grow an organization from the ground up. I got excited about the results and implications for how EI and “entrepreneurialism” might be built and passed along as a part of effective continuity planning in the family firm. This is the first of two blog posts in which I’ll share the study along with the seven ways emotional intelligence can be perpetuated in family firms for future generations.

In recent years, emotional intelligence has become a core piece of the discussion about effective leadership in business. Essentially, it the ability to monitor and understand the impact of emotions – from one’s self and others – on one’s own behavior and others’ behavior, all in a way that guides wise decision making.

It will come as no surprise to anyone affiliated with a successful family business that this study verified previous research results (Barczak, Iassk, and Mulki, 2010; Cross and Travaglione, 2003, etc.) that there are clear links to the health, survivability, and overall effectiveness of entrepreneurial ventures to the personal qualities and leadership capabilities of the founder. It also bore out the notion that effective entrepreneurs naturally create an environment or culture of trust which fosters everyone collaborating more naturally, developing creative solutions, and achieving better overall results (more about that in the next post).

Interestingly enough, when asked about their understanding of emotional intelligence during the study, respondents were vague about their ideas. They tended to associate EI with “soft skills” and yet as they described their day-to-day work, the importance of using those skills became clearer. As a result, the group identified seven qualities that are important in their own leadership effectiveness when building an organization from the ground up.

They include:

  • Reading the Room
  • Decision Making
  • Hard Leadership
  • Risk Taking
  • Leadership of Self and Others
  • Interaction with Others
  • Trust Building

In my next post, I’ll share how these seven qualities apply to family businesses and the continuity of building “entrepreneurialism” in subsequent generations.

Managing Change Successfully Means Changing Behavior Permanently Part 4 of 4

Kent Rhodes
Kent Rhodes

At the heart of a discussion about recognizing complexity and managing change in organizations is how to help people shift their behavior in positive ways – hopefully improving their own productivity and increasing the level of their own commitment as opposed to simply being compliant. This applies to everyone from line workers to CEO’s.

But achieving high levels of commitment from people is not always the simplest thing to accomplish. In fact, many otherwise successful business leaders wind up simply focusing much of their time and energy on a laundry list of activities around creating strategies and re-arranging structures because those activities tend to seem more tangible and easier to measure. While those tasks are certainly important within themselves, ignoring the human behavioral aspects of successful change management is a serious miscalculation for any business, whether family owned or not.

The good news is that family businesses are ahead of the game in many ways simply because of the old adage, “blood is thicker than water”: The commitment that comes naturally within families (with a few exceptions) makes for a business made up of committed individuals – of both family and non-family members. But that doesn’t mean that all family businesses are naturals at managing change effectively, particularly when that commitment translates into resistance to talk about difficult topics, like succession and death.

So, it comes back around to change in behavior as the primary key to successful organization change and leaders of even the most successful enterprises are not exempt. Business researchers and authors, Jim Kouzes and Barry Posner reinforce this concept as the first of their five identified practices of exemplary leaders in their book, The Leadership Challenge to “model the way”.

John Kotter puts this critical behavioral aspect of change management into perspective around his 8-step change model, (http://www.kotterinternational.com/our-principles/changesteps) “For change to be good, it’s got to be in a positive direction. Initial stages of transformation are usually positive, but the change effort gets perverted as it becomes successful and as executives become more arrogant. Change isn’t the issue; arrogance is. As some leaders start running into problems, in their arrogance they say, ‘No problem. We can handle all this. We can cut corners and make our own rules.’” (Kotter in Leadership Excellence at HR.com) It’s at this moment that commitment of most everyone else in the organization begins to fall apart, jeopardizing the success of the change.

Bottom line is that successful change isn’t primarily about structures and strategies, it’s about a permanent change in behavior from everyone in the organization.

 

Managing Change Toolkit: Appreciative Inquiry Part 3 of 4

Kent Rhodes
Kent Rhodes

In keeping with the theme of change and complexity, it is well known that families who own and operate successful enterprises manage both of those at the same time and, it may seem, all the time. It isn’t enough to create both long and short-term strategic plans for the business: Family leaders must also balance family dynamics, family interests, family future engagement, and sometimes, family conflict. Of course, that doesn’t mean that managing the change that comes from those complexities are always quickly accomplished or immediately appreciated.

That’s where Dr. David Cooperrider’s development of an OD (Organizational Development) or change management tool called Appreciate Inquiry comes into the picture. This tool, or process, has gained a great deal of attention in recent years because it is based on the homespun notion that what we learn and know about, what truly works and “gives life”, is actually more effective and sustainable than what we learn from breakdowns, problems or pathologies. Most businesses are trained to focus on fixing the latter while taking for granted the wisdom that comes from the former.

Cooperrider’s basic philosophy in developing Appreciative Inquiry was that “organizations are heliotropic” – that is they are like a plant that leans toward the sun. He identified key assumptions about A.I. that can have significant influence on how change is experienced and managed: That every organization has at least some things that work well and that what we focus on becomes our reality.

This positive focus does not mean that problems do not exist or are to be denied or ignored but that they are purposefully just not the primary frame of reference in managing the results of large scale change. John McKnight in, Building Communities from the Inside Out, relays the story of a carpenter who lost a leg in an accident. According to McKnight, the carpenter can choose to focus on his capacity for woodworking, or on his deficiency due to his missing limb. The positive principle underlying Appreciative Inquiry says that by focusing on his capacity, the carpenter is more likely to sow the seeds for creating his desired and most productive future reality, even though it is through significant change.

Finally, according to Sue Annis Hammond, one of the key aspects of Appreciative Inquiry revolves around the idea that “if we carry parts of the past into the future, they should be what is best about the past”.  That seems to make good sense to me and is consistent with what I know about the best of the family enterprise.

For family businesses, this perspective is baked-in to the process of effective continuity planning, for example, for the next generation’s involvement in the enterprise. That process is underpinned with strong desires followed by clear plans to pass along the strengths of the organization’s most life-giving narrative and behaviors rather than it’s difficulties and potential dysfunctions.  Given these realities, family businesses are naturals to engage in Appreciative Inquiry as one of their primary change management tools.

References:

  • David L. Cooperrider (2000), “Positive Image, Positive Action,” in Appreciative Management and Leadership.
  • Sue Annis Hammond (1998), The Thin Book of Appreciative Inquiry, 2nd ed.
  • John McKnight (1993), Building Communities from the Inside Out.

The Management of Change: Part 2 of 4

Kent Rhodes
Kent Rhodes

There seems to be so much written and discussed about change these days. From an increasing cultural acceptance of marriage equality to keeping up with the latest technology advances (that smart phone you bought last month is already outdated), change not only is a fact of life, it also challenges our thinking and sometimes our comfort level.

Even business schools are obsessed with trying to teach current and future managers about change – sometimes even with some success.  Interesting thing is, it’s not really the change itself that creates the need to talk about managing it, but the complexity that surrounds the change.

What is striking about all the hyped talk about change, is how most family businesses seem to most naturally thrive in it simply because of the complexities a multi-generational enterprise naturally bring to the table: Strategy certainly includes market considerations but in a family business will likely include a plan for how G3 will engaged in it’s implementation; Increasing shareholder value is still central, but the relationships across family branches of owners means a deeper set of goals and assumptions are likely in place.

This particular view of change and complexity is referred to, quite blandly, as organizational development.  OD, as it’s called, is a process to help organizations be more effective in everything from making profits to improving the quality of work life. “…the focus is on building the organization’s ability to assess its current functioning and to achieve its goals…in the context of the larger environment that affects them.”  – Cummings and Worley, (2001)

So, whether they realize it or not, many family businesses are naturals at OD thinking that might actually give them a “leg up” in effectively managing change and complexity.  That doesn’t mean that process will always easy, but it does mean that some of the best examples of successful OD in practice, happens to be the family enterprise.

The Management of Change: Part 1 of 4

Kent Rhodes
Kent Rhodes

One of the fastest growing fields of study these days is the way Complexity Theory increasingly plays out in businesses and society. Originally, Complexity Theory was mostly used to describe mathematical problems according to their level of difficulty, which simply means that for some of us, Algebra II represented complexity theory in action back in high school!

But the conversation around Complexity Theory today is more about the pace, volume, and weight of change that leaders in business have to manage. Place those complexities in the middle of a multi-generational family business and complexity seems to multiply (and we’re back to the original mathematical use of the term!), requiring constant adjustment and change of its leaders.

And this is what successful family business leaders know: Balancing the key aspects of a successful enterprise may be made more complex by the need to manage all the inter-related relationships – both inside and outside of the family, and the need to leverage the multi-layers of legacy and continuity, are simply core requirements of family businesses. This means that family businesses may be the ultimate definition and example of change well managed.

With the reality of complexity theory at work in family businesses, I’ll be blogging about three change management tools and how they can best be applied in the complex world of family business.

GROUPTHINK: Leads to poor decision-making.

Kent Rhodes
Kent Rhodes

I’ve been talking about how people make sense of the world and sometimes, as a result, align themselves with other people holding similar views. While this is simply a natural aspect of human relationships, in family businesses, this dynamic can either serve the family and its enterprise in some lasting and meaningful ways or can create rifts between family groups when views are driven by groupthink. This is important in family businesses because groupthink can occur within families as each family member defers to what they think another family member wants.

Bob was the founder of his family’s successful nursery and gardening business. His two sons had grown up in the business and now managed all operations involved in the enterprise. Bob didn’t talk much about retiring and loved coming to work everyday, but he had been increasingly thinking about retiring and the plan he had made with Sally, his wife, included that he would have stepped away from the day to day business to travel, spend more time with the grandchildren and friends. But that plan was five years past due.

Based on a couple of off-handed remarks the boys had made about around the lines of “we couldn’t do this without you, Dad”, Bob had developed the idea that his sons would not be happy if he wasn’t in the office. The boys, on the other hand, were concerned about helping their dad feel valued and needed. Even though they had the entire organization well under their control and they actually wanted him to enjoy a well deserved retirement.

Hence, no one actually examined the assumptions each were making about the other or bothered to be honest about their thinking because they were deferring to what they each thought to be the other’s wishes. Bob and his sons have been participants in groupthink.

Groupthink occurs when individuals make decisions by going along with what they think others want to do without sharing differences of opinion, vetting other options, or exploring alternative outcomes. It creates a group mindset that is based on a limited view of important issues combined with a low commitment to bring in as much available information as possible. This leads to poor decision-making and can breed an environment ripe for misunderstanding and conflict.

In a family business, the fact that differences are not talked about opens the door to misunderstanding of individual goals and wishes and can escalate conflict between people by leaving individual assumptions about those differences in those individual goals and wishes unchallenged and left to become “well-known-facts”.

Same Family, Different World Views

Kent Rhodes
Kent Rhodes

One of the most basic dynamics we see in working with family owned enterprises is how people engage in similar process of making meaning of the world in similar ways. We each take in information, organizing into our own unique observations informed by our beliefs and experiences in a way that helps us make sense of the world. However, even though the process is the same for each of us, we are likely to wind up with varying differences of opinions on our individual “takes” to the same set of circumstances. Even though this is a normal process, it can result in conflict between family members.

But it doesn’t always stop there. People are prone to organize their individually constructed perspectives around others’ similarly held beliefs or actions: We tend to associate with the people around us that we perceive to be interpreting the world like we do. Being from West Texas, one of my favorite (and perhaps most extreme) examples of this dynamic was the creation of a community in West Texas designed expressly for supporters of the politician, Ron Paul. The goal of Paulville is “to establish gated communities containing 100% Ron Paul supporters and/or people that live by the ideals of freedom and liberty.” In 2008, the New York Times reported, “For now, the town is little more than an idea and a title deed…” and that is how it remains today.

In larger families – sometimes branches of the family or even just a couple of siblings – can come together with similar perspectives. This innocent, harmless and natural way of organizing can become detrimental when the notions around which these sub-groups of the family have formed are counter to the overall mission or vision of the enterprise or the family. These kinds of intragroup conflicts tend to be more complex and present a unique challenge to manage so they don’t become detrimental to the enterprise or, more importantly, to the family.

In the next blog, we’ll look at some examples…

Factors that Form Culture in the Family Enterprise: Part II Family Habits

Kent Rhodes
Kent Rhodes

There’s been a lot written and said about the link between the culture of an organization and the extent to which it performs well or is effective.  This link is even more impactful in a family owned business since part of that culture involves the relationship of owning family members with the business, employees, board members and with each other.

As I have said in earlier blogs, a family business’s culture is certainly unique to the family that owns and operates it. But it also can make the difference between the ordinary and extraordinary as it relates to excellence, employee engagement, trust within the community and reputation for “doing good”. I talked about how values make up the foundation of a culture, but another factor that influences culture is way a family relates to each other.

For example, sibling and/or cousin teams working together in a family enterprise can influence the culture of the place just based on their life long habits of interacting with each other. Whether they are combative around decision-making or wind up laughing as much as getting any work done, they influence the overall culture of the enterprise in ways that seem quite natural to them, their employees and even customers.

But like most factors that create or influence culture, the impact of relationship and communication habits among family members on the culture of their business may not be readily obvious.

Take the family that is generally combative in decision-making. Over time, employees and managers may develop attitudes and plans of “workarounds” in order to more efficiently complete work. While this may carry an element of creativity, the price may also include a reduced sense of respect and trust of some owning family members with workarounds seen as a necessary way to avoid the family confrontations to complete basic work. The end result may not impact the “success” of the business per se, but it could be impacting the extent of the business success – both in the short and long term – if all that is getting done is the bare minimum. That could have a cascading effect that impacts the company’s ability to retain the very best talent and even the reputation of the family in the community.

Factors that Form Culture in the Family Enterprise: Part I Family Values

By Kent Rhodes

Kent Rhodes
Kent Rhodes

According to Edgar Schein – a leading thinker about culture in organizations – culture is the invisible, consistent environment that influences how people think, feel and act. But he also admits that culture in a business is an abstract concept and likens it to what personality or character is to an individual: We can see the behavior that results, but it’s harder to see the forces underneath that cause those behaviors.

So, while family enterprise culture is certainly unique to the families that own and operate them, it also can be the difference between the ordinary and extraordinary as it relates to excellence, employee engagement, trust within the community and reputation for “doing good”.  One way to make a culture’s foundation or source more visible is to identify the values that are widely held and deeply shared by owning family members – including the founders – and long-term non-family managers and employees. These aren’t just the values that show up on a poster in the lobby, but the ones that people working in the place, are actually committed to and live by.

So, the 100 year-old family owned lumber yard and home improvement store values “customer service”, but what they really mean is that they know that personal relationships with contractors of all sizes keeps them close to the work happening in the community and everyone is committed to building and deepening those kinds of relationships: They can quickly anticipate what contractors need and supply them with high quality goods “just in time” and they do much of that work over a cup of coffee with their customers. This deeply held value of doing things via close relationship with customers may show up as “just the way we are around here”, but it is a culture that means the big box stores in the same city can’t even begin to compete with them.