Tag Archives: ransburg

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?

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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?

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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?

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The Benefits of Women Leaders in Family Firms

David Ransburg
David Ransburg

Recently, the “Management Science” journal published a research paper about the impact of female leadership on the performance of family firms. Specifically, this article — “Gender Interactions Within the Family Firm” by Amore, Garofalo, and Minichilli – examined (1) the impact of replacing a male CEO with a female CEO and (2) the impact of increasing the percentage of female directors on a company’s Board.

According to the authors, replacing a male CEO with a female CEO slightly improves a family firm’s performance, and this slight improvement is magnified when the proportion of females on a company’s Board increases as well. They caution, though, that this magnification is less pronounced when (1) the firm is larger in size and (2) when the firm is located in geographic areas characterized by gender prejudices.

The authors suggest that the significant positive impact comes from the interaction between multiple females in prominent leadership positions of the same firm.

So, for those family businesses that are smaller in size and located in geographic areas that are free of gender prejudices, keep this in mind the next time you are making a change of CEO: a female candidate might lead your company to better performance than would a male…. especially if that female CEO is supported with some female Board members.

What do you think about this research? Is it consistent with your own personal experiences?

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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?

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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.

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The Ties That Bind

David Ransburg

Have you already given up on your New Year’s resolution? If so, you’re certainly not alone. According to a recent study by the University of Scranton’s Journal of Clinical Psychology (http://www.statisticbrain.com/new-years-resolution-statistics/), only 8% of those who make a New Year’s resolution are actually successful in achieving their resolution.

So, why am I discussing this on a website about family businesses? The answer lies in one of the proven tactics for experiencing greater success when you find yourself struggling to take action: turn to a group for some support… and, the most fundamental group, or social network, is the family.

The mechanism behind the power of social networks is not completely clear, but what IS clear is that you will have better success in changing your behavior if you attempt that change as part of a social network.

What is really interesting is that it is not just people you interact with directly who impact your behavior. Extensive study by Harvard’s Nicholas Christakis (http://christakis.med.harvard.edu/av/video/TED_superorganism.mp4) shows that people who are as far away as three degrees of separation from you (i.e., your friend’s friend’s friend) can have a significant impact on your behavior… even if you never interact directly!

If your friend’s friend’s friend that you’ve never met can impact your emotions and your behaviors, then imagine how powerful the impact is of family members you work with frequently – even if that family member is a distant cousin based at a far-flung satellite office! The point is, even if the connection isn’t readily apparent, it is there… and, it is meaningful.

If it’s not just what each of you does individually that matters, but also the connection between you, then maintaining those connections is incredibly important. Like many things in life, connections will weaken and eventually disappear if neglected or mistreated. So, invest in those family connections… even the distant ones. That would be a New Year’s resolution worth keeping!

What are some of your New Year’s resolutions related to your family business?

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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?

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What Family Businesses Can Learn From the Olympics

David Ransburg

It’s Olympic season, and there’s much that can be learned from these special athletes… and not all of it comes from the playing field. One Olympic moment that stood out for me occurred during women’s gymnastics, when American Aly Raisman was competing. As exciting as Ms. Raisman’s performance was, it was equally compelling to witness her parents’ reactions as they watched her perform (for those who didn’t see this on television, you can watch a brief clip here: http://www.youtube.com/watch?v=V5Mz8UCxL5o).

What’s especially interesting to me about this clip is that it’s become a kind of Rorschach test for the relationship between parents and their children. Some people watch the Raismans’ behavior and see love & support (mixed with a little anxiety – gymnastics injuries can be serious…). Others watch the same scene and see over-involved enmeshment, parents whose purpose and identity has been consumed entirely by their child’s pursuits.  Of course the truth is likely some of both.  When a family member is performing on the world stage it is natural to be proud and nervous.  In addition, in the context of elite sports, it is almost impossible to achieve world-class status without what might be otherwise described as ‘excessive’ involvement of the family – it simply takes that much sacrifice to make it happen.

Most families do not have a world-class athlete at home, yet families that own and operate a business together do have to navigate complex boundaries of love and closeness that may be different from other families.  There are no guarantees, of course, but the family businesses that can manage the often-present extremes mentioned above have a chance for success along the lines of Ms. Raisman’s.

(She won a gold medal.)

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Good Luck!

David Ransburg

I enjoy finding nuggets of family business wisdom in unusual places. Recently, I found one such gem while watching a video of Michael Lewis (the author of popular books such as “The Big Short” and “Moneyball”) giving the commencement address at Princeton University this past June.  In particular, one comment he offered to the graduates stood out to me: “Above all, recognize that if you’ve had success, you’ve also had luck. And, with luck comes obligation.”

In my experience, successful family businesses embody Mr. Lewis’s words. They are very aware that their current success is built upon the foundation laid by their ancestors’ hard work and good fortune. Rather than believing their accident of birth entitles them to continued success, the best family business leaders see the obligation that comes with this legacy.  For example, strong and lasting family businesses are typically very involved in their communities, as Mr. Lewis encouraged this year’s Princeton graduates to be.

My only quibble with Mr. Lewis is that giving back – especially when viewed from the perspective of most family businesses – is not an obligation. It’s an honor.

Highlights of Mr. Lewis’s speech can be found here: http://www.youtube.com/watch?v=qwNmGd_D5cA

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