Tag Archives: accountability

Accountability in Your Family Business – Achievable Reality or Elusive Dream?

Mike Fassler
Mike Fassler

I have often had the opportunity to serve family businesses where accountability is alive and well and the resulting culture of accountability provides a competitive advantage.  Likewise I have seen plenty of family businesses where the lack of accountability is a perpetual topic of discussion, there are little or inconsistent consequences when people fail to deliver, and accountability seems like an elusive dream.  Often family businesses that lack a culture of accountability also have contentious relationships which are a drain on both family and business energy and resources.

So what are some of the distinguishing factors for those family businesses where a culture of accountability is a reality?

Shared Values – Shared values are the foundational building block to accountability as they inform what attitudes and behaviors are expected and provide broad guidelines for family member interaction with one another and with the business.

Shared Vision – A shared vision provides a clear understanding of where both the family and the business are going and how one supports the other.  A shared vision provides the context within which results can be gauged and is the connection to a purpose larger than any one individual.  It is this connection that creates the incentive to contribute to the overall good.

Freedom of Choice – Accountability is built through freedom of choice to contribute on the part of the individual.  Absent a voluntary choice to contribute, there are too many ways to blame others for behavior and results that don’t measure up.  The motivation to be accountable is derived from the satisfaction of choosing to contribute.

Certainly articulating goals, roles, policy, procedures, consequences, etc. to provide additional clarity on expectations can be helpful to developing a culture of accountability.  However, no amount of structure will substitute for shared values, a shared vision, and freedom of choice when it comes to making accountability an achievable reality in your family business.

Next-Generation Leadership in the Family Enterprise Part 1

Steve Miller
Steve Miller

In a two-part blog post, Family Business Group consultant Stephen P. Miller highlights some key findings from his recently completed research on how nextgeneration family leaders develop leadership skills.

Engineering a successful generational transition is often the issue that most concerns family business entrepreneurs who hope the businesses they have created will thrive through multiple generations of family ownership.  Family firms that develop effective nextgeneration leaders often employ the following leadership development strategies:

  • Ensure next-generation leaders have job assignments with real responsibility, accountability, and risk; inside or outside the family business.  Nextgeneration leaders need opportunities to make complex decisions and experience the results of those decisions.
  • Provide accurate feedback on performance, often from trusted non-family leaders in the business.  Nextgeneration leaders benefit from knowing how others perceive their leadership practices in order to learn the emotional and social intelligence competencies that account for over 85% of top leaders’ performance.
  • Create a positive and supportive family culture.  Families that work hard to foster open communication, establish effective conflict resolution and governance processes, and create an overall positive family climate enhance the chances that nextgeneration family members will develop leadership skills.
  • Start early:  Learning leadership skills takes decades, so wise family business owners encourage nextgeneration family members to gain leadership experience in activities in which they are personally interested in school and early in their careers.

The good news is that leadership skills can be learned.  Forwardthinking family enterprise owners focus as much or more on the development of their human capital, including nextgeneration family leaders, as they do on their financial capital.

Three ingredients to multi-generational firm success

Drew Mendoza
Drew Mendoza

Over the last twenty-plus years of working with and observing multi-generational family businesses, three attributes common to the oldest, largest and best performing ones seem to present themselves repeatedly. 

First – the family shareholders are aligned around matters of vision, purpose and expectations of each other and the enterprise.  And, as often as not, they reach alignment through the use of family meetings or other such important forums for shareholder and family education, development, trust building and communication. 

Second, the output of those family meetings – their vision, purpose, sense of unity,  policies and agreements – these all serve as important contributors to strategy.  The outputs inform management of what is expected of them and the rules they’ll have to play by; what some may call the non-negotiables.

Third, their values implicitly or explicitly include transparency, accountability, stewardship, outside input and a responsibility to others.  These values usually guide them to establish appropriate and active governance – both for the family and the operating company.

At our website, www.efamilybusiness.com, you’ll find dozens of books, webinars and thousands of articles loaded with ideas about family meetings, governance and being an effective family firm shareholder.

Holding Yourself Accountable is Key to Credibility

Stephanie Brun de Pontet

Accountability is a loaded idea in our culture and even more so in a family business – where notions of professional accountability and family ‘loyalty’ sometimes clash.  We want folks to be accountable for their choices, actions and results, but we also want to show empathy for each other’s struggles and limitations, and patience with young people who are starting out and finding their way.

While I understand the parental desire to give our children the benefit of the doubt, or let them off the hook for a transgression that we can minimize in our minds – we don’t do them any favors by taking the ‘easy’ way.  This pattern often starts early.  When a child comes home with a bad grade and tells you that it is because the teacher doesn’t like them, their classmate makes noises and this is distracting, or a kid moved their book so they couldn’t find it – it is natural and tempting to sympathize with your child and agree that the deck was stacked against them, therefore we don’t need to hold them accountable.

Unfortunately, when family members have never really been held to account for their choices, actions or results, they have a hard time recognizing their role or responsibility in any situation.  These are the family members always being derailed by things that are ‘outside their control,’ and when things go awry it is always someone else’s fault.  Someone else failed to get them the numbers they needed to do their job, their kids are sick, the boss didn’t explain the task well, whatever.

Any adult who cannot take basic responsibility rapidly loses all credibility.  In life there will always be hurdles and challenges to overcome.  The contrast is stark, there are folks who are ‘doers’ who consistently find a way to get results despite the challenges, and there are those who will only complain and want sympathy for their plight.  Pay attention – if you find that you spend a lot of time explaining to others why you couldn’t get something done – understand that eventually folks will simply count you out, they will decide in advance that you cannot get things done – and instead seek the input or work from folks who can.

Accountability: “Evaluate to improve, not to prove.”

Norb Schwarz

A young next generation executive working for the family business her father founded recently told me that lack of accountability among family members in the business was hampering the successful transition of the company to the next generation.

Unfortunately her comments mirrored those of other clients who have had difficult transitions due to apparent lack of accountability. Why is accountability such an elusive issue in many family businesses?

Perhaps it is because accountability is thought to be synonymous with “consequences” and thought of as punishment for failing to accomplish a task.  Yet, if we looked at accountability with a different lens, perhaps some of the barriers to its acceptance might be torn down.

Rather than looking at it as a way to impose consequences or punishment for failure, we should be welcoming accountability as a process that offers an opportunity to learn and improve on results that are both positive and/or miss the mark. Clear communication of agreed upon goals and measureable benchmarks to achieving the goals are prerequisites for the successful integration of accountability into a positive culture for the family business. With this positive process in place it will be much easier to establish a meritocracy based on accountability as opposed to an aristocracy.

“Evaluate to improve, not to prove.”

Another Invited Accountability Example

Steve McClure
Steve McClure

In a previous post, I defined invited accountability in the context of operating and non-operating shareholders.  Another opportunity for family members to invite accountability is in the situation where a founder passes control to a lead successor with voting stock. 

 There is a middle son of a family business founder that has been named the successor to his father, and there are six other siblings.  The father feels the middle son is the best successor choice because he is an engineer and it is an engineering firm, he has the proper education, and has worked hard to be qualified.  The father, not wanting his other children to weaken business leadership also gives this son the voting stock…control is in his hands as the single most powerful shareholder.  The other siblings, being siblings, are resentful.  Getting no explanation from the father, they snipe, criticize, form coalitions and try to catch their brother making mistakes so that they can prove that he is not better than they, as their father has apparently decided. 

Now, this lead sibling can decide to say, it doesn’t matter, I have the voting stock and can do what I want, even if there is an outside board and family council.

However, this lead sibling can also decide to invite accountability, even though there is nothing to force him to do so.  He can say to his brothers and sisters, I will share my thinking with you about the direction of the business and the hard choices we must make to change and adjust the business to market forces.  And, we will have a discussion and open debate about my thinking in our family council and in our board room where I will listen and be influenced by you.  I will do my best to try to convince you of the merits of my thinking, prepare you with information and when relevant, offer my decisions and rationale up for your scrutiny.  In the end, I will not offer up my voting stock to you, but I will act as closely as possible as if we all shared the voting stock equally.

The other siblings may also choose to invite accountability.  In exchange for their brother’s promise, they may offer their own.  They may say, we will behave in ways that are respectful to you and not go behind your back to form coalitions, snipe at you, or criticize you to others or among ourselves.  We will not be resentful or angry at the father for his choice of you as the successor.  We will promise these things to each other and we will invite you and each other to challenge any one of us that violates these promises.  In other words, we will invite accountability.

Of course their reasoning for doing so is to secure a stronger family, an aligned team of shareholders, and the resultant competitive advantage.

Invited Accountability

Steve McClure
Steve McClure

Business families with “accountability issues” often describe them in two ways.  The shareholders who do not work in the business, whether actual shareholders or family members in line to inherit, will see it one way:

My relative running the company is not accountable to the rest of the family.

The interpretation from those involved in operations of the business see it another way:

My relatives are trying to impose accountability and they do not have the background or experience to do so.

While there may be cases of individuals who just don’t want to be held accountable period, generally speaking, family managers are resistant to being held accountable by “ill-equipped” family members.  Resistance is also emotional, as family shareholders who want to impose accountability are seen as ungrateful for the care, sacrifice and achieved business results of the past.  The idea of accountability is not resisted; in fact, they feel they already are being accountable.  Shareholders don’t want to take it on faith however, they want proof.  However, it is very difficult for even the most qualified family member to hold another family member accountable.

Business families who break through this impasse, or avoid it altogether, do it by utilizing objectivity; in the form of a wise, universally trusted advisor or senior manager who can interpret and build receptiveness in family-to-family communication.  One we know is quoted regularly by all as saying, “There is management’s view and there is the shareholder group’s view, and then there is the right way to do it.”  Or, objectivity comes from strong, universally trusted independent directors making use of formal board procedures and appropriate involvement of management and shareholders.  Whatever the form, business leaders are more likely to welcome accountability when individuals are involved who are unbiased and understand business.

It is difficult for a family group of shareholders to establish the objective resource they need; they are loosely organized and their motivations may be suspect no matter how open and transparent their methods.  Management is better equipped due to access to organizational and financial resources.  However, if they don’t actively involve family shareholders in an open and transparent process they will not have full trust either. 

When family managers lead in resolving the accountability issue, and do it well, they demonstrate a sincere form of invited accountability.

Patriarch’s New Year’s Resolution

Norb Schwarz

Lack of accountability is often a major cause of succession challenges within family businesses.  Why not make the establishment of effective accountability the top priority on your New Year’s resolution list?

In cases where transitions are running into trouble, lack of effective accountability is frequently the cause.  This can manifest itself in many ways.  For example, parents are often the ones who administer and deliver the performance management feedback for the next generation.  Unsurprisingly, this frequently causes conflict among and between generations.  Why?  Because family issues and emotions often end up overshadowing the performance management process.  In some cases, a process is not even present. 

A related example is compensation, which is frequently managed on a basis other than merit.  We have seen clients where they have policies based on a concept of “equality”, others on the basis of gender or years of service.  Such policies are often the causes rather than the cures of conflict. So, I encourage the senior generation to consider the following resolution for family accountability in the coming year:

  1. The owners, in collaboration with the Board of Directors, shall establish a written comprehensive participation policy for family in the business.
    1. What are the prerequisites to joining the company (education, experience, etc.)?
    2. What is expected in terms of on-going performance for family working in the business?
  2. Ownership shall develop an agreed upon Vision for the future of the business and owner expectations for the business.  These will be updated and communicated to the Board of Directors in writing annually.
  3. Wherever possible family in the business shall report to non-family managers for performance management purposes.
  4. Family members shall be formally reviewed a minimum of semi-annually with the following guidelines:
    1. Wherever possible performance shall be measured on quantifiable and agreed upon written performance management objectives.
    2. An annual blueprint for personal and professional growth and improvement shall be established for each family member in the business.
    3. At each performance management review, each family member working in the business shall be given at least three areas in need of improvement and action plans to improve within those areas.
    4. Adherence to business culture and underlying family values shall be a regular topic within the evaluation process of each family member working in the business.
  5. Family member compensation shall be in accordance with established company compensation policy for the position occupied and performance within that position.  Wherever possible such compensation shall be based upon position responsibilities and performance-based goals previously agreed to.