Tag Archives: culture

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.

The Case for Versatility

David Ransburg
David Ransburg

If you read my post earlier this week, you will see that I began to explore the keys to effective leadership in a family business, and that one of those identified keys is a deep understanding of the family business’ culture.

Effective leadership does not, of course, rely solely upon cultural understanding, and one of the most prominent features I see in effective leaders of family businesses is versatility. By “versatility,” I mean that a leader can modify his or her behavior depending on the circumstances at hand. If the situation calls for focusing on strategy, a versatile leader will be able to do so effectively… and then switch to being more operational when circumstances demand such a shift.

This support for versatility is certainly not mine alone – there’s some powerful research that supports this claim. An article from the Summer 2003 issue of the MIT Sloan Management Review reports on a research study where senior leaders were assessed in terms of their versatility as well as their organizations’ effectiveness. The correlation between versatility and effectiveness indicates that approximately 50% of what separates effective leaders from those who are not effective is versatility. In other words, while versatility is not the only factor that contributes to effective leadership, there is nothing more important. If there is only one other factor – and reason suggests that there are multiple other factors such as industry experience, functional knowledge, and cultural understanding – then at best that one other factor can only be as important as versatility. If there are multiple other factors, then this research suggests that each of them would be less important than versatility.

In your personal experience with family businesses, what do you see as other key characteristics of leadership?

Slothful, Indeed

David Ransburg
David Ransburg

The December 18, 2013 blog post on Freakonomics discusses recent research on family firms and draws the conclusion that non-family CEOs drive better performance for their companies for the simple reason that they work more hours than do family CEOs. Strikingly, the term they use to describe these family CEOs is “sloth.” While you’ll find no bigger fan of Freakonomics than me, their use of this term misses the mark by a wide margin.

My quarrel is not with the underlying research – it does come from Harvard, after all – but instead with the simplistic conclusion drawn from this academic paper. While the number of hours worked by a CEO may be one useful indicator of a CEO’s effectiveness, there is much more to consider when evaluating their performance. For starters, the old adage about “working smarter rather than harder” comes to mind. It is too often the case that activity is mistaken for productivity… and that seems to be part of the problem here.

I would also like to point out an often-overlooked element when considering the performance of any CEO, whether a family member or not: Do they understand the culture of the business. Culture is key. Perhaps the greatest authority on management practices, Peter Drucker, once said, “Culture eats strategy for breakfast.”

And, when it comes to a family business’s culture, who will understand it better, a family member who has grown up from childhood within that very culture, living it every single day… or a non-family CEO who has joined the family business from the outside?

Clearly, even a family member who “gets” the culture must also possess strong management skills… but, to look at two candidates for the CEO position – one who is a member of the family, and one who is not – and to assume that the non-family candidate is superior just because they might log more hours at the office would be not only simplistic and short-sighted, but it would also be potentially damaging to the family business long term. This is what the authors of the Freakonomics blog would seemingly have us believe, and there’s a term for that kind of thinking: sloth.

Help new executives avoid landmines…

Anne Hargrave
Anne Hargrave

When you start the process to hire an executive from the corporate world to work in your family business, be proactive in setting the stage for the person to be successful.  Explore cultural and job fit deeply, and reveal sacred cows early on.

Before starting the recruitment process, create a job description that clearly defines reality and highlights decision-making scope and areas of authority.  And, do the hard work of getting buy-in from all key family and non-family stakeholders.

Cultural fit is much more than a buzzword; it often exceeds the importance of skill level.  In order to use cultural fit as a screening mechanism, step back and have multiple people participate in a process to define the current culture, or the culture you desire, and then create a robust methodology for assessing cultural fit in candidates.

When you have found the right person, encourage them to stay within the scope of their area of responsibility and authority so they don’t loose focus and credibility.  Often people fail in their roles because they loose perspective on the nature of the relationship between the family and the business; setting the stage for accountability early on supports their ability to succeed. 

Any executive worth their salt is going to challenge the status quo – that’s what you want.  The sacred cows often found within a family businesses come as a surprise to a person from the corporate world.  By laying out the realities of projects or initiatives that are important to the family or the business, and are not up for discussion, there will be less chance of creating unnecessary waves.  Evaluating fit effectively and being transparent helps new executives avoid landmines.

Good communication is more important to asset sharing families than to others.

David Lansky
David Lansky

While of course good communication is important for all families , the stakes are higher for asset sharing families. Communication breakdown, conflict, and family dissension may affect not only family relationships, but business integrity and  the  livelihood of family members, employees, community members  and many other stakeholders. So asset sharing families would be well advised to make good communication an integral part of family culture, something to strive for, to nurture and to preserve.

How do you Identify Important Director Attributes for Your Board?

Kelly LeCouvie
Kelly LeCouvie

When you sit down with your existing board and/or management to discuss what you are looking for in a new director, it’s likely that you create a list of skills and experiences that you feel a director should possess in order to add value to your board. That makes sense. Specific industry knowledge, skills such as corporate finance, marketing, operations, perhaps experience in negotiations or government relations might be of value to the board.

We encourage boards to also spend time identifying personal attributes that an effective director should possess. What type of person might best integrate with the culture in the business and perhaps the family? Are there specific personality characteristics that you know might trigger conflict or unease with the board? Do you have a culture of inclusion that allows for input from every individual at the table, regardless of their background or level of understanding? Do you make decisions as a board that might subordinate profit to other considerations that are important to the family (such as community philanthropy, or care for family members in need? These questions prompt you to think about what kind of director might be most compatible with your board. You might find a director candidate with the right skill set and relevant experience, but they are driven exclusively by bottom line results. They might have little or no tolerance for tailoring executive positions to the needs and talents of family members. Or perhaps their ego requires more ‘air time’ in the boardroom than is appropriate.

If you are looking at director candidates, look beyond the skills and experience base they bring  – ask yourself about the cultural and chemistry ‘fit’ with the group before you make a commitment that is tricky to undo!

Case Study: Heineken as a Family Business

by John L. Ward

I had occasion to hear a talk by the Chairman/CEO of Heineken, Jean-Francois van Boxmeer.  So much of what he said reaffirmed our observations and experiences. First, some context, then our shared views.

  • Heineken is about 150 years old and controlled by the fifth generation of the Heineken family. They are the third largest beer company in the world.
  • The family has often relied upon non-family management, but always participated actively as owners. Mr. van Boxmeer started with Heineken immediately out of school. He held positions in Africa, Poland and Italy and proudly announced he had never looked for a job elsewhere. He’s been CEO/Chair since 2005 – 8 years already.
  • The Heineken family has voting control but only 25% of the economic interest via a holding company owned 51% by the family that controls 51% of an operating company. The rest of the shares are publicly listed.
  • The company’s core brand represents 17% of revenues. Otherwise they have more than 250 local brands around the world, 28 of which are long-term partnerships that represent 25% of all sales.

Observations

  • Mr. van Boxmeer was asked of the advantages and disadvantages of being a family business. The disadvantage he quickly noted was the “constraints of the balance sheet – especially in an industry where you must grow or die.” On the other hand, numerous advantages:

―   Patience and the long-term view.
―   The “nerve” to courageously hang in during tough times.
―   A special spirit of passion for the business.
―   The people like working for a family.
―   The long nurtured capability to work with partners and to integrate   acquisitions into the Heineken culture.
―   Long-term value is more important than share price.
―   Market share is more important than earnings.

  • What does it take to successfully integrate acquisitions?

―   Clear direction
―   Mix people up
―   Get rid of the 10% who don’t buy in
―   Use people’s strengths

  • What about the culture?

Culture is what you do, not what you say in a brochure. The key Heineken values are

―   Passion for quality*
―   Enjoyment*
―   Respect*
―   Integrity*
―   Entrepreneurship
―   Demanding of results

The first four (*) we note are commonly distinct for family firms. It’s interesting to note the seeming contradiction of “enjoyment” and “demanding of results.” Maybe not a contradiction?

  • What he looks for for cultural fit in new hires?

―   Integrity – doing what’s best for company (what we often describe as “doing the right thing”).
―   Competence, of course.
―   Empathy.
―   Low ego – the credit belongs to customers and employees.

  • A classic cultural contradiction he noted was to balance local culture and company culture. This, he feels, is another special capability of Heineken.

In sum, the long-term view, strong DNA-based culture and special dynamic capabilities define Heineken, even as a listed company and even though the family only holds governing roles.

Merry “Charisma Wrist”???

David Ransburg

During the winter holidays, I heard a young child mispronounce “Christmas” as “Charisma Wrist,” so I now have charisma on my mind. As one who’s been fortunate to work with many effective leaders of family businesses, I’ve been thinking more specifically about charisma and whether or not it’s important for leaders.

At least in Western culture, there is an archetype of leadership where charisma is one of the first qualities that come to mind. Think George Patton, John F. Kennedy, or Martin Luther King, Jr. In business terms, leaders like Lee Iacocca, Jack Welch, or Steve Jobs fit the bill. These leaders were all forceful, dynamic, charming, and magnetic. In a word: charismatic.

Recent business thinking has turned that thinking on its head… or, at least it’s begun to. Most widely known is Jim Collins’ concept of a “Level 5 Leader” from his book, Good to Great. Briefly, Mr. Collins’ extensive research into those few companies that demonstrated years of above-average performance after years of below-average results showed that these companies’ “Level 5 Leaders” were described with words such as humble, timid, modest, and shy. In other words, un-charismatic.

Even more compelling evidence in support of the “un-charismatic” leader, in my mind, is research conducted in 2004 by Tosi, et. al. They studied Fortune 500 companies and found that CEO charisma did not predict company performance. The one thing that was influenced by CEO charisma? CEO pay.

Merry “Charisma Wrist,” indeed (at least if you’re a charismatic CEO!).

What are the key traits that you see in the leaders of family businesses?

HEB Founder Culture 107 Years On

Kent Rhodes

On November 26, 1905, Mrs. Florence Butt took out a $60 bank loan to open the first H-E-B store in Kerrville, Texas. The store was run on the ground floor of the Butt’s house and was named C.C. Butt in honor of Florence’s husband, Charles.

Now being run by a third generation H-E-B has grown from a single local grocery store into a chain of nearly 400 stores generating annual sales in excess of $18 billion, currently operating in two countries. This company is another prime example of how a founder’s values, translates into a culture that informs every aspect of the successful family enterprise.

In the early 1900’s, groceries were traditionally delivered to a customer’s home and for Florence’s three sons, this meant delivering groceries to those customers using the boys’ outgrown baby carriage until the family was able to save up enough money to purchase a little red wagon to serve the purpose. Florence created an environment that supported, and in fact relied on, family participation, which has translated into a culture that views participation as a family privilege that is extended to employees today.

As the first store became a hit in the community, the family hired their first non-family employee, G. Leland Richeson, to assist with the growing demand and in 1919, 22 year old Howard Butts returned from serving in World War I and took over running the day to day operations of his mother’s store.

From the beginning, Howard was keen on upholding his mother’s notions of customer service, treating employees as extended family members and giving back to the community, even as the company continued to grow. He was invested in the success of the family’s business and was highly motivated to grow it. By the early 1920s, stores were added in the towns of Junction and Del Rio, Texas. Howard also expanded the selection of products offered, tailoring the inventory to consumer preferences.

One of the strongest cultural artifacts of this famous Texas family enterprise is a commitment to charitable giving, both corporately and through employee involvement. The H-E-B Excellence in Education Awards celebrates public school professionals whose leadership and dedication inspire a love of learning in students of all backgrounds and abilities. In addition, H-E-B donates 5% of its pretax profits to charity.

While Florence could not have imagined the eventual impact her approach to running her business would have, it is her direct influence that still drives the company and its fierce employee and customer loyalty today.