Category Archives: Uncategorized

The value of experience

Norb Schwarz

I recently came across the following statement in a family participation policy regarding the requirement of outside employment for family members wanting to join the business. Please let me know of any other items you might include from your experience.

Outside work experience is required for the following reasons:

A. It’s good for the company:

  • We have a wider and more varied experience base (ideas and contacts).
  • It promotes a culture of meritocracy over entitlement.

B.  It’s good for the family member:

  • Opportunity to make mistakes elsewhere (that aren’t remembered forever).
  • Opportunity to prove oneself and gain self-confidence where a person’s last name doesn’t count.
  • Helps avoid self-doubt later down the road (could I have made it on the outside?).
  • Opportunity to find a mentor from outside the family or business.
  • Opportunity to gain different perspectives and experience and be able to start contributing earlier in one’s career.
  • Acceptance by non-family members will be easier (credibility issue).
  • Opportunity to develop honest expectations for oneself.
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Ancient Wisdom for Today

JoAnne Norton
Jo Anne Norton

“What’s the most important thing I need to know to be successful in my family’s business?” asked the young MBA student with his soft Southern accent. This question after I had just been interviewed by his professor for over an hour in a family business class! We had covered everything from family councils to family constitutions, from family unity to family politics, from having strong family values to having inspirational family vision statements, and now he wanted to know the most important thing.

Sharing the ancient secret of the Oracle at Delphi, I whispered to him: “Know thyself.” While it is crucial to have the best governance possible in a family business, I explained to this serious student, there are many ways of learning why you are the way you are, why you do the things you do, and how your communication style differs from the communication styles of others. The more you know about yourself, the better you will be able communicate.

If you are in a family business you need to ask yourself, how does your birth order affect your personality? What can you learn about yourself from taking the Myers-Briggs Type Indicator? What is your Enneagram type, and what does it say about you? Then once you’ve learned about yourself, learn as much as you can about the personalities and communication preferences of your family members, especially those who are in the family business with you.

Good communication is critical to the success of your family’s business, and understanding each other’s personality types makes communication easier. When you’ve invested time and energy to know yourself and your family, those little misunderstandings that have the potential to grow into big problems never materialize. Then there is no cause for resentment, retaliation, or retribution. So go on a journey of self-discovery—and take your family with you!

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Lessons from Egypt

Norb Schwarz

The recent events in Egypt brought to mind something that I first read in 1999, so I revisited it again the other day. If you have never seen it or forgotten about it, I would suggest you take a look at the web site “cluetrain.com”. What the authors of the manifesto envisioned for the future of business has also impacted the world order.

“A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies.”

Cluetrain.com

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I Am Getting Tired Of This!

Chris Eckrich
Chris Eckrich

Working in or owning a family business together is full of benefits (meaningful work, a chance to make a difference, financial security, and others), but it is not uncommon to have periods of tension that, if left unattended, may become chronic and exhausting.  For example, brother wants to expand, but sister wants to minimize risk.  Or, cousin A is leading the organization and wants more control (and reward), and is frustrated with cousin B who is not performing, or nitpicking.  As tensions build, it may start to feel like the other party is not just doing something annoying or contrarian, but is responsible for the frustration felt.  When this happens, we start to see the other party as the enemy, obsess about their wrongdoings, simmer, and either escalation occurs, or we just avoid contact and ignore discussions that might be helpful for the organization, but are too painful to hold.  It is not uncommon for one or both parties to either think or say, “I am getting tired of this!”

So often, the roots of conflict and tension lie in lack of alignment between expectations on direction, roles and responsibilities.  Families have learned in recent years to recognize tensions as systemic challenges that can be addressed, rather than personal failings or weaknesses that must simply be endured or avoided.  For example, high quality time spent discussing the roles that each person is playing and the expectations that accompany those roles will generally be much more productive in addressing performance issues among a sibling team than venting to a spouse or sending emails pointing out inadequacies.  Families have learned that working ON the issue (in this example, making sure that all understand what each person should be doing), is far less time consuming and energy draining than being stuck IN the issue (raised voices and defensiveness). 

We can’t eliminate all disagreement or conflict in family business, but ongoing or increasing tension is our early warning system that it is time to create the space to work on the issue.

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Questions Answered From Mastering Family Business Paradox Webinar

The following questions were asked during the recent Family Business Consulting Group webinar, Mastering Family Business Paradox.  Amy Schuman and John Ward were the presenters of this program.  CD’s and On-Demand Playback of this program are available at this link.  Mastering Family Business Paradox

 

Q. The polarity map is a nice academic model to frame the paradox. Are there practical tools that can allow family members to display the courage to be vulnerable about their fears and needs?

A. The Polarity Map™ (originated by Dr. Barry Johnson of Polarity Management Associates) is actually very simple, practical and safe – give it a try! In our book we give a step-by-step guide to completing the Polarity Map™ – hopefully, once you read it you’ll see it’s quite straightforward.

But you’re absolutely correct that, much of the time, the issues that need to be mapped can be quite emotional. It takes some courage to approach the ‘map making’. However – and I’ve been working with these maps for over a decade, so I am drawing on years of experience here – the maps provide a neutral and objective framework that maximize the success of the conversations. They really work!

One quick example – take the paradox of ‘harvest and invest’. Folks often have strong opinions here. Many times, those in the business want to preserve capital for the business, those out of the business are eager for a tangible, timely, return. How to talk about this calmly, and not open up a wide gap between the two groups?

Get the entire group in the room, and fill out the map together. Take the minority position first. Let them describe 4 upsides of their pole. Then, ask them to describe 4 downsides when their pole is ‘overemphasized to the exclusion of the other side.’ Then, switch, and let the majority group fill in upsides and downsides. This could be the very first time that each side has been fully heard by the other. That alone can be a major accomplishment.

Some keys to doing this successfully when emotions run high:

1. Let the minority group – the less powerful group – the group with fewer numbers and less opportunities to express themselves – be heard first. They often have years of being ignored or dismissed, and this will need to be overcome in order for both sides of the paradox to come to the fore.
2. Ensure that all views are fully heard, without interruption or judgment.
3. Start with the recognition that both poles are essential and both will be sought.
4. Recognize historical preferences for one pole – and be prepared to balance those out without over-correcting.

These are just first thoughts – more ideas can be found in our book or at Dr. Barry Johnson’s website, polaritymanagementassociates.com. Or, we can continue discussing the Polarity Map™, here, in this blog!

Q. What does the “agency problem” mean?

A. An agency problem exists when management and stockholders have conflicting ideas on how the company should be run.

Publicly owned companies can have an ‘agency problem’ because the shareholders and management are different parties.  Management is drawn to being an ‘agent’ for themselves – if a conflict arises between them and shareholders, management might be tempted to act on their own behalf rather than on behalf of shareholders.

In family enterprise, this problem disappears to a large extent, because management and shareholders are (largely) one and the same group. As the two groups draw apart, the agency problem can resurface.

Q. In my personal experience from family businesses (2nd and 3rd generation) there is a strong history of placing family first.  Currently some siblings work in the business and others not, so it seems it is now family first and family members working in the family business first and others second what is your experience?

A. Yes, in our book we hypothesize that a second generation will tend to place family first, so we understand!

It’s not uncommon that the world looks very different to family members working in the business, and those not working in the business.  In our book, we take a stab at listing the areas where these two groups will tend to see things differently. For example, in terms of the paradox of privacy/transparency, it is common that those working in the business tend to favor privacy  and those not working in the business seek more transparency.   Or, in the paradox of invest/harvest, we tend to see those working in the business favoring investing and those not working in the business favoring harvesting.

Introducing the concept of paradox could give you a great excuse to start an open conversation about what’s going on in your family. Start with the basic paradox of ‘family first/business first’. Take out a blank Polarity Map™ and fill it out together as a family.  The dialogue that you have will be a great first step towards building more mutual understanding – and possibly making some helpful changes in how you are approaching these issues right now.

Let us know if this is helpful!

Q. How do differences in personalities of the leadership affect the paradox dilemma? And of course do gender differences between family members have any impact on family paradox’s?

A. Interesting question. A leader’s personality can certainly lead him or her to overemphasize one half of a paradox. For example, a highly facilitative leader may be blind to the need for directive leadership. Or, a very transparent leader, who highly values open communication, may miss the necessity of privacy and discrete communication.

In our book, we do talk about cultures that are more conducive to paradox management. We believe that curious cultures are more conducive to managing paradox than are judgmental cultures. In the same way, we might say that leaders who are more curious – that is, open to new perspectives and eager to explore them – will be better at managing paradoxes than leaders who are more judgmental – that is, closed to new perspectives and more black and white in their thinking.

Finally, on the gender question, it is hard to make a blanket statement. A gross generalization might say that women tend to be more family first, and men more business first, in their approaches. You might think, based on research in different communication styles between men and women, that women would tend to prefer openness while men would prefer discretion,  or that women would tend to be more inclusive and men more exclusive. Although it is dangerous to make blanket statements in this regard, I do believe that within families, there can easily arise consistent gender differences generations that persist over time. Females and males can harden into ‘camps’ that ardently defend their position year after year, each representing one side of a paradox. In these cases, using the paradox framework (and the Polarity Map™) to surface and openly discuss these dynamics, would be a very powerful approach.

Q. I wonder if the inclusive/selective would also apply to spouses vs. blood lineal descendants?

A. Thanks for this good question, – which we did discuss on the webinar. The issue of spouse inclusion is a big one for families in business together. People tend to have very strong opinions on this matter — expressed in the extreme:

“It’s unthinkable for us to allow in-laws to work and/or to become owners in the business”
…or…
“How could we even imagine excluding in-laws from employment or ownership in our business?”  

Like so many things, neither of these approaches is the one ‘right’ answer – families can make either approach work well – and unfortunately, either approach has the potential for disaster.

Interestingly, there are several specific decisions here that are NOT paradoxes, they are problems to be solved. Two simple examples: – will our policies include in-laws as shareholders? Yes or no? Will our policies include in-laws as employees? Yes or no? These are problems to be solved – not paradoxes to manage.

However – along with the need to make clear decisions come some important paradoxes to manage. No matter what policy is selected, the paradox of inclusive/selective needs to be managed.

So – if the decision is made to exclude spouses from employment in the business, extra efforts and opportunities should be sought to include them in other meaningful ways, for example in the family’s philanthropy or in the preparation of the next generation.

If the decision is made to include spouses in employment, extra emphasis upon exclusivity might be necessary. For example, if this policy results in quite a few family members working in the business, extra attention to family performance appraisals and clear processes for promotion will be especially important.

This dynamic provides a great opportunity to explore the difference between a ‘problem’ and a ‘paradox’, and how they both need attention and care! Thank you.

Q. Do you find that individual families who have recognized and worked through these polarities end up somewhere in the middle or continuously cycling through the infinity path?

A. Thanks  – it’s a great question about how paradoxes and polarities work. It may be logical to conclude that the ‘best’ place to be on a Polarity Map™ is smack dab in the middle, between the two poles. However, this notion of staying put in one place on the Map is much too static for the lively dynamic of a polarity. Families that are highly experienced in managing paradox find themselves comfortably and continuously cycling through the infinity path, moving steadily and deliberately from one side of the paradox to the other. By tapping the power of both poles, over and over again, and giving full respect and honor to both sides, these families keep themselves well positioned in the upsides of both poles, spending minimum time in the downsides.

Trying to pick a middle ground and stick there is actually impossible, as the movement through a polarity is organic and unstoppable. Trying to stop this natural movement will tend to find you over-emphasizing one pole to the detriment of its complementary opposite.

This is not to say that ‘synthesis’ is impossible. There are actions – experiences – where you are experiencing the full power of both poles of a paradox. For example, in family education, when you honor the need for education of both the individual and the group, it can be impossible to separate them. Skill building for the entire group, by definition, will strengthen the skills and knowledge of the individuals in the group. Conversely, it’s impossible to separate an individual’s skill building from the skill level of the whole family. This is a great example of synthesis – emphasizing both group and individual at once.

Q. How have you seen families effectively debate the common family business paradoxes?

A. Actually, one of the appealing things about working with a paradox is that it tends to move a family away from ‘debate’, and towards more open sharing with the goal of mutual understanding.

For example, let’s say that a lively ‘debate’ in your family commonly has to do with the strategic direction of your business. One group tends to focus on the historical strengths of the enterprise. This group is firmly rooted in preserving the successes of the past, appreciating the family’s proven strengths, and staying true to the way things have always been done – their motto might be, ‘If it ain’t broken, why fix it?’

The other group tends to be centered in the need for change and innovation. This group speaks of the untapped opportunities for success in new ventures and the exciting potential for invention and experimentation into areas not yet imagined – their motto might be, ‘Change or die.’

Many families will engage in a debate between these two camps. Each camp flings their well-reasoned arguments against the other. Who wins? The wisest position, or the one with the loudest, most persistent and stubborn adherents? Whoever ‘wins’ the current debate, these arguments tend to be a losing approach over time.

If you shifted your perspective, and viewed this dynamic as a paradox – with two desirable poles that appear to be in conflict with each other, but are in fact, complementary – you would accept both the need for Tradition and  the need for Change. Instead of trying to choose one over the other, picking one instead of the other, the family would seek ways to pursue both. The debate would shift to a dialogue, where the upsides of each pole were fully explored. The group might analyze how well they are doing at valuing and pursuing both. Instead of trying to convince each other of the wisdom of each separate position, the two groups would work together to ensure that both tradition and change were being respected and pursued throughout the organization, and that both were being executed with skill.

Q. Your thoughts to us advisors in dealing with our own dilemmas?

A. Yes, we had a bit of time to talk about this on the webinar. There are plenty of paradoxes in our work as advisors to family enterprises. To what extent do advisors challenge as vs. support  their clients?  How much do we, as advisors, facilitate our clients’ decision-making, and how much do we direct them? And how much do we focus on process as vs. outcomes, or people as vs. tasks? All of these dilemmas are paradoxes – in each case we may have a strong preference for one side of the pair, and miss the need for both.

Pushing ourselves, as advisors, to recognize paradoxes when they are present, and to appreciate and value both options, will be crucial. This is where working as part of an advisor team is advantageous. Not only do we have the advantage of multiple perspectives and areas of expertise, in a team we can make sure that all sides of an issue are being recognized and respected. The best cross-functional teams see paradoxes as a source of energy for excellence, rather than a frustrating source of complexity and challenge.

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Chick-fil-A Controversy Gives Insight to Family-Owned Business’s Powerful Culture

Craig Aronoff

 

A visit to Chick-fil-A reveals much about the organization.  The facilities, usually crowded, are pristine.  The employees, a rainbow of young (but during this recession not always so young) faces, inevitably are welcoming, smiling, helpful, polite and quick.  The food is hot, tasty, reasonably priced, and healthy options are available.  The menu is displayed attractively but there is no “value menu” with cut-price items (the patrons seem to find value in the restaurant’s regular offerings). 

While locations are not on every corner, they are convenient and easy to locate in the areas where the company operates.  A tasteful poster on the wall (there are several) talks about opportunities with the company and reveals that outlets are operated with carefully selected partner/managers, a very different model than that commonly seen at other fast-food franchises.  The poster also talks about college scholarships provided to employees, one of the factors that allows the company to be highly selective in who it employs and gives it perhaps the lowest employee turnover rate in a high turnover industry. 

Another tasteful poster shows the company’s philanthropic thrust (without calling it that) – aimed at providing life sustaining and building programs for challenged youth and families.  One program is aimed at building stronger marriages. 

If you visit Chick-fil-A on a Sunday, however, you won’t see any of these things.  You won’t be able to get in.  The place will be closed.  The entire operation is closed on the Christian Sabbath at a cost that Forbes Magazine estimates to be in the neighborhood of $500 million in annual sales. 

Cathy Family

 

The Cathy family, owners of Chick-fil-A, is strongly Christian, but no religious icons decorate restaurant walls.  No Christian tracts are handed out with the waffle fries.  While an employee walks among the diners at their tables offering to refill drinks, no one encourages saying grace before their meals.  

The recent protest over a local Chick-fil-A providing lunch to a group that promotes the traditional view of marriage focused a national media spotlight on the company.  Dan Cathy, second-generation owner/executive, said that Chick-fil-A values everyone and isn’t “anti” anyone.  He said that the company’s goal is to create “raving fans.” 

I’ve run into some of those fans.  Like my client in Cleveland, Ohio – third generation in a very large family business who could afford any restaurant but had his 30th birthday bash at Chick-fil-A.  Or the porter at the Honolulu airport who saw my Georgia driver’s license (Chick-fil-A is headquartered in Atlanta) and told me to tell those Chick-fil-A people to open some locations in Hawaii (being acquainted with Dan Cathy, I passed on the message). 

As a family business consultant for nearly thirty years, I have been fascinated with Chick-fil-A as a family business.  I think the recent attention to the company obscures important lessons that it exemplifies.  It has perhaps the strongest culture of any company that I am familiar with.  It is a culture built on very clear values, reinforced by the company’s every action and decision.  The culture is observable in the products, prices, promotion, and especially the people of the organization.  The culture and values are visible, but other than the Sunday closing, not their Christian source. 

That Chick-fil-A is a wholly-owned family business allows them the freedom to operate as they see fit within law and regulation.  That Chick-fil-A’s and the Cathy family’s values are based in their religion gives them the means to more readily and easily formulate and communicate their values.  Of course, actually practicing and living one’s values is always the hard part.  Implementing their culture and values in a way that supports the on-going success of a business that has grown as large as Chick-fil-A ($3.5 billion in sales in more than 1500 locations) and that welcomes a large and diverse base of loyal customers is no small feat.  Focus on politics or religion, in my view, can lead to loss of the opportunity to learn from Chic-fil-A’s success in building and sustaining its organizational culture as a way of building and sustaining its business – or the opportunity to enjoy a really good chicken sandwich and the best freshly-squeezed diet lemonade you’ve ever tasted. 

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Steelers to win.

John Ward
John Ward

I once did a study that compared what it’s like to play for/work for NFL teams–comparing those teams that are owned by families to those “corporate owned” to those new entrepreneur owned.  The best performers?   The teams owned by families.  So it was no surprise that the Bears, Steelers and Jets made the final four.  As the Packers are owned by community shareholders, it should be a very close game, with the 3rd Generation Rooney family winning the Super Bowl.

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CO-CEOs

John Ward
John Ward

Did you know that about 30% of all family businesses say they are considering co-CEOs in the future? 

While not recommended by management textbooks, the idea has worked well sometimes. For example, the German Miele white goods producer has had co-CEOs for generations!

The split up of Motorola this week into two companies ends a co-CEO situation that has existed over the past several years. In separation they were asked how the co-CEO model had worked. They said several things:

  • It was tough for both of them.
  • They knew being sole CEO will be much more focused and fast.
  • It can work well for a limited, purposeful period of time.
  • To work requires lots of communication, communication, communication.

Food for thought.

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Newsweek Gets the News (At last)

Craig Aronoff

Newsweek (12/20/10) cites a recent Harvard study of 4000 firms that finds “companies in which families hold control ‘outperformed their counterparts by 6 percent in market returns and 10 percent in profits.”  Says Newsweek:  “The study refutes the long-held notion that family firms are plagued by infighting, failure to innovate and a tendency to mix personal and professional bank accounts.”  This certainly isn’t news to readers of The Family Business Advisor, but its nice to see that Newsweek (until recently owned by the Graham-family-controlled Washington Post Company) has finally gotten the news.

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How to Have The Happiest Holidays In Your Family Business!

JoAnne Norton
Jo Anne Norton

Having Happy Holidays!

This year I’ve been asked for tips on getting through holiday gatherings with family members when some of them are actively working in the business, some are owners who might not be particularly happy with profits this year, and some are family members who are neither in the business nor owners. Should discussion of the family business be considered off limits?

There are a couple of problems with talking about the family business at holiday family gatherings. First of all, many businesses have lots of jargon and expressions that other family members might not understand. One member of a highly successful multi-generational family told me that when she was with her family and they started talking business, it was like being in a foreign country with a language she didn’t speak or understand. So if you bring up a business concern you need to be aware that you might be starting a conversation that others can’t relate to.

Also, you have to think about the impact of the family business conversation on the children, especially since this has been such a tough year economically for most businesses. What you say this holiday season might make the next generation reluctant to consider joining the family business even decades later.

On the other hand, we have to recognize that it’s tough to completely leave the family business out of the conversation. In October my cousin Barb had our annual family reunion on a gorgeous fall day in Quincy, Illinois, and I had the opportunity to talk to my Uncle Merle who was a second-generation owner, along with my father and my Uncle Louis, of our family’s business. He was reminding me that when the three of them were in the family business they were only off one day a year together and that was Christmas. My uncle told me about one Christmas when they were standing around drinking eggnog and talking shop when my mother asked if there could be just one day a year when they wouldn’t talk about business.

Uncle Merle said that my dad patiently explained to Mom that the company was always top of mind, and that he and his brothers really loved talking about it so much he hoped she would understand. That’s why having empathy-the ability to understand and share the feelings of another-is one of the greatest gifts we can give to each other this year. If you are the one who wants to talk about business, think about the feelings of your other family members. If you are the one who would prefer to have a day without mentioning the business, consider the feelings of those who are always thinking about the business and enjoy talking about it.

Beginning with the end in mind, you want your time with your family to strengthen family relationships. The latest Price Waterhouse Coopers research released at the beginning of November confirms what I’ve found in my own work with family businesses, and that is: if the relationships in the family are healthy, the business is more likely to be healthy. Here’s to happy, healthy relationships throughout the holidays!

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