Working well together, sharing assets fairly, planning collaboratively for the future – these are among the most critical tasks of an enterprising family. They all have in common a fundamental basis in trust.
In my experience, families who are able to sustain a culture of mutual trust, seem to adhere to three basic elements, whether intentionally or not:
Family members are reliable. They do what they say they will do.
They demonstrate feelings of intimacy. They care about each other and they like being together.
They are honest with each other. They have open, direct communication — they are willing to speak and to listen when difficult things need to be said.
These elements might come naturally to some, and might need to be learned by others. Either way, trust is something that is built over time.
Professor Morgan Witzel of Exeter Business School wrote a fascinating critique of “scientific management” in the FT (July 18, 2011, p 11). In it he argued that “the passion for metrics” meant too little attention to difficult to measure, yet invaluable, elements of success:
It seems to me these areas are just where family businesses excel and establish long-term competitive advantages – another example of “unconventional” family business strategy.
Paul Spiegelman started a business in 1985 with his two brothers. Called Beryl, the business is a call center that caters to hospitals. The company now has 350 employees and $35 million in revenues. One brother passed away and the other went on the other entrepreneurial ventures. Unlike most players in his industry, Paul told the New York Times that his business had developed a “great internal culture” with client retention and employee retention rates unheard of in the industry. This culture allowed the company to provide greater value to clients, build profitability to six times industry averages, and thus, invest in further improving the business.
Spiegelman, now 53 and financially secure, first decided to accept an investment from a private equity firm, and then walked away from the deal. He realized that the investors expected to get a return on their investment in four to six years and that going down that road would have a negative impact on the company’s culture. He realized that he could continue to grow the business using cash flow, and for the first time, some bank debt.
Many entrepreneurs dream of starting a business, growing a business and realizing a big pay day by selling the business. Others dream of creating a unique organizational culture that provides on-going growth and value into a indefinite future. Spiegelman now has new dreams. He is looking at the possibility of a employee stock ownership plan, but also told the Times, “I never thought this was a company my children, who are 5 and 9, could run. But now sometimes I think, maybe they could.”
Family businesses often pride themselves on maintaining a strong and consistent culture built on the family legacy and values. While this adherence to a strong culture can be one of the greatest strengths of a family business, it can be particularly challenging when entering foreign markets.
Family businesses that successfully expand beyond their country borders manage the balance of loose and tight controls. They identify the key elements of their culture – the ones they can’t operate successfully without – and develop ways to transmit them across borders. Transmission mechanisms may be formal – such as training programs or job evaluations that measure adherence to culture. Or, they may be informal, such as visits from headquarters personnel to remote locations or opportunities for managers in remote locations to visit headquarters.
At the same time, successful international family businesses understand when they need to relax their culture to accommodate differences in international markets. Successful international family businesses in a recent study unanimously supported the empowerment of local management to run their international operations. Clearly defining priorities for those managers at the outset, gathering data that allowed home country management to track performance and hiring strong in-country talent were all identified as keys to success.
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.
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.