Families that work together successfully while maintaining positive family relationships have figured out how to have difficult conversations and reach agreement on challenging matters. Conciliatory gestures, doing something or saying something that expresses a concession or a willingness to make a concession, can play an important role in this success. Conciliatory gestures help create a safe environment for multiple parties to make concessions as they work toward agreement.
Examples of conciliatory gestures include apologizing for what was said or for how you behaved; acknowledging your contribution to the challenging situation which demonstrates a willingness to be accountable, and positive expressions about the other’s contribution. These gestures demonstrate vulnerability and a desire to find common ground. This in turn can elicit a conciliatory gesture on the part of others as the expressions send a message that fairness will be represented in the ultimate decision.
In order for this to be effective, all parties must share a fundamental belief that they all have the greater good of the family and the business in mind balanced with respect and consideration for individual interests. Absent this mindset, conciliatory gestures may be viewed as less than authentic and therefore manipulative.
Give it a try. The next time you are engaged in a discussion that is emotionally charged and where opinions vary, try out the use of a few conciliatory gestures. Set the example for the group engaged in the discussion as it may be contagious and could lead to a break through to agreement.
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.
In my work with sibling or cousin shareholder groups, I often encounter unprepared, or “sudden” shareholders. These individuals come into ownership of their family’s business as a result of a gift or the death of a parent with little to no preparation for the role of owner. As these shareholder groups come together to align for the future, a challenge they face is that some of the shareholders who now have decision-making powers have not been equipped with the knowledge on how to effectively manage this responsibility.
Often the “sudden” shareholder becomes dazed and confused about what being a shareholder means. Questions like: “What are my responsibilities?”; “How much time do I have to commit?”; “Do I have to do real work if I am a shareholder?” “What if I really don’t want to be an owner – what are my options?” arise in their minds. They don’t really understand what ownership of the family business means to them or the broader family.
This situation can bog down the governance process and lead to ineffective decisions as the shareholder group seeks a threshold level of knowledge to “get up to speed.” In addition to the time each individual shareholder may need to wrap their mind around their rights and responsibilities, the group of shareholders also has to learn to collaborate as a team of owners – something that doesn’t just happen by virtue of kinship! The governance process tends to slow to the pace of the family shareholder with the least knowledge.
A critical component of multi-generational family business continuity is a cohesive shareholder group. The better prepared the family is for transition of ownership from one generation to the next the smoother the transition will go. A key part is preparation of all potential next generation shareholders through a deliberate next generation shareholder development effort. By learning about being an effective shareholder well in advance of a triggering event, the family and the business will be better equipped for continuity and will not run into the unnecessary burden of power without knowledge.
During the first quarter of this year I had the great privilege of witnessing a significant accomplishment by a long time client. I started working with this family in the late 1980’s as they were contemplating exiting their business due to some feedback from their lender and general frustrations with short cash flow. They asked me to take a look at their situation and share my assessment and recommendations.
Their lender had indicated that since they were not able to “zero out” their operating loan once a year from the operating cash flow of their business, this suggested they were not making money. The lender further argued that if they were not making money they should consider exiting their business. My client was alarmed and considering an exit. I dug into the numbers and had extensive discussions with the client. My analysis indicated that in fact they were very profitable but the combination of their growth rate and the structure of their balance sheet was creating their liquidity challenges. I shared with them that they were bankable and they could likely have their choice of lenders. They shopped their financing package and were presented with financing offers from 3 different lenders. The flood of emotional relief this family experienced upon refinancing was moving.
Fast forward to the first quarter of this year, 25+ years later, to the incredible experience for me. At our annual planning meeting where we were reviewing their financial statements, this client proudly shared that as of this past December they had completely paid off all of their debt. Their personal equity position is now over “8 figures”, they have plenty of liquid assets, and their business continues to churn out positive earnings and cash flow. We spent the meeting discussing the future for them personally, for their family and for the business. The pressures they now face are around stewardship of their sizable equity position, and making choices between options – enjoyable challenges to consider. It has been my privilege to serve this family along their remarkable journey of success.
A common challenge for family members in business together is communication. How well family members are communicating impacts the family’s ability to work together effectively, a capability that is foundational to healthy families and healthy businesses.
One key to effective communication by leaders is being thoughtful and deliberate about WHO Knows WHAT and WHEN (WKWW). Information and its flow is a powerful influence within families and businesses, and WKWW sends signals as to one’s standing.
If family or business leadership conveys important information to one or more persons at the exclusion of others of supposed ‘equal standing’, this can signal that some have favored status. This will likely lead to anger, hurt feelings and an erosion of trust among those who feel they were slighted by not receiving the information. Further, those who received information may start to believe they are ‘special’ and entitled to different access – making it difficult to adjust to any requests to change the flow of information going forward without escalating resentments in the system.
A few thoughts on how to reduce the risk of these problems. First consider whether the information to be communicated is primarily a family matter, a business matter, or an ownership matter. Then communicate within the proper venue – family matters at family meetings, business matters at management meetings, and ownership matters at board or ownership council meetings. That way the right people will more likely received the right information at the right time.
The second thought is role clarity. For very good reasons some family members or management team members should know certain important information exclusively or before others in the family or on the management team. Having clearly defined roles within family and business governance will help set appropriate expectations as to the flow of information.
Finally, for important information that needs to be communicated, think through and visualize: the appropriate venue, the best person to convey the information, the sequence and the timing. Consider who will be most impacted by the information and the magnitude of any changes that will come along once the information is conveyed. Taking the time to visualize the roll out of the information will increase the odds that you will get the roll out right.
WHO Knows WHAT and WHEN? Getting this right will help your family and business go a long way to not hurting others feelings, an important part of working together effectively.