THE ROLE OF FAMILY VALUES IN UNITING FAMILY AND BUSINESS

Posted on February 21, 2012 by berniekliska

Bernie Kliska

According to John Ward, Professor of Family Enterprises at Northwestern University”The best tool in the family business kit is, without a doubt, its values, which shape the culture of the family and their business”. What distinguishes one family business from another are size, location, success in it’s niche, service and products. But there is a secret ingredient that acts as the glue to keep a company’s survival and the ability to pass the business proudly from generation to generation. The values and beliefs  of the family are clearly articulated to employees, suppliers and customers.

The family and business values can be a powerful marketing tool. SCJohnson Company, a five billion dollar family company always ends it’s media message with, “We are a Family Company”. Fisk Johnson, SCJohnson president stated:

“We call our values family values. They are not radically different from the values you  hear from major Fortune 500 companies, but I think we are better able to practice those values as family-owned company. People care about making quality products, really care about the family, each other and the success of the company, I believe our family caring values translate into the success of the company”.

Values play a special role in uniting family and business. When the goals of the family and the business diverge, as they invariably do at some point, shared values can LEND a sense of mission and purpose that transcends those conflicts. When values in the business and family reinforce each other, powerful synergies can arise that strengthen peoples’ performance in both realms. An excellent resource for this subject is a book by Craig Aronoff and John Ward, Values: How to Assure a Legacy of Continuity and Success.  

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3 Different Audiences for Family Business Education

Posted on February 16, 2012 by stephaniebrundepontet

Stephanie Brun de Pontet

In a previous article on family business education, Amy Schuman and I suggested one critical task in planning education is to ‘Clarify your Purpose’ – and an important related construct may be ‘Think about your Audience’.  While there are many possible ‘audiences’ – the following three have very different ‘learning goals’ – yet all are very important, and investing in these individuals’ education will serve the long-term health of the family and the business well:

1) Those who aspire to leadership roles in the business – Education programming to support this purpose should be done in close collaboration with your HR department, and should also seek input from other key leaders in the business who will provide important insight on the skills and experiences that aspiring managers and leaders of the company require.  This learning program may include encouraging family members to pursue certain kinds of academic credentials or hands-on experience elsewhere, it may include summer or other short-term projects or internship opportunities at the business, and it may include comprehensive career planning within the company.

2) The next generation of owners – We often find families benefit from setting up a ‘next generation’ group that engages in regular learning about the roles and responsibilities of ownership.  Before young adults even come into ownership it is helpful for them to gain basic knowledge of the business they will own, learn skills like reading financial statements, learn about topics like ‘taxes’ and ‘wills’ – two realities that will be far more complex for them than for their peers, and begin to understand the importance of stewardship, or the responsibilities that come with the good fortune of ownership.  Not only does this group have similar learning needs, they also need to learn to make decisions together, so the process of working and regularly meeting together to learn – can provide an important benefit of bonding this group in addition to getting them used to collaborating.

3) Those who marry into the family – Marrying into a business-owning family can be daunting and is sometimes fraught with emotional landmines.  Families in business together are often close-knit, have many traditions of togetherness, and have all been brought up with this company in their midst, so they may not see the business-focused things they do as atypical.  A new entrant to this family must gain acceptance – but will be at a serious disadvantage of not knowing the company as well, and may fear that if they ask questions some family members will accuse them of putting their nose where it doesn’t belong.  Therefore an education program is an important way of providing some basic knowledge of the company to these new family members, while also giving them insight into family traditions and shared values to help them feel accepted and well integrated.

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Developing the New Leaders of your Family Enterprise

Posted on February 14, 2012 by carolryan

Recently the Family Business Consulting Group produced a new webinar program titled “Developing the New Leaders of your Family Enterprise”.  Below are responses to a few of the questions asked by the participants during the program.  The complete webinar is available for replay at this link. 

Developing the New Leaders of your Family Enterprise

 

Q.  What happens when the diversity of experience looks more like you can’t figure out what you are looking for? How do you avoid this?

A.  The key to avoiding this is to be explicit about your plan in advance. If key stakeholders (e.g., shareholders and senior managers) know that the plan is to have a diversity of experiences — and it would also be good to let them know why that diversity is being sought — then it is less likely that these experiences will appear to be aimless or uncertain.

Q. Doesn’t speed to trust also play a role in versatility? How does trust play a role in versatility?

A. Trust does, indeed, play a role in versatility… as do a number of other factors such as business acumen, time management, and communication skills. We’ve found, though, that focusing on the “What” (Strategic vs. Operational) and “How” (Forceful vs. Enabling) of leadership will give you the most “bang for your buck.”

Q. Interested in John Ward’s students “ learnings”

  • Sales are Vanity
  • Profits are Sanity
  • Cash is reality
  • Values are eternity

Q. How do you handle a situation where founder (patriarch) has stepped away and in later years seeks to become actively involved or promote projects initiatives that are aimed at leaving his “mark”? in the process he is altering the Next Generation working dynamic.

 A.   To the frustration of many successors, founders commonly “come back.” They claim there is unfinished     teaching and contribution. In fact, they are unhappy, perhaps very depressed, since letting go.

The best we can advise is to (1) see if you can channel his/her energy in a constructive way; (2) over, over communicated; (3) hopefully benefit from the support of an outside board (or, perhaps, from long-time professional advisors).

Q. How important is it to publish and share the mission, vision and values of the family?

A.   Family mission, family values, and the family’s ownership vision are the most important foundation and the backbone of the family constitution. We believe this is so as the family’s family commitment to each other is essential for long-term ownership continuity.

Q. Is Level 5 leadership a book or an article?

A.  “Level 5 Leadership” is an article from the Harvard Business Review by Jim Collins. It is an examination of one piece of his book called “Good to Great.”

Q. How do you deal with a founder who does not delegate and does not give away real power?  It makes it impossible to grow as a leader?

A.  A founder who does not delegate makes the situation difficult. There are many factors to consider, but the two that I would start with are (1) trying to figure out what is constraining the founder from delegating (sometimes, simply asking the founder, “What keeps you from delegating?” may be enough to loosen those constraints), and (2) painting a picture for the founder of the likely long term consequences of not delegating — often, the thing that constrains founders in situations like this is that they are so focused on today that they haven’t given much thought to tomorrow.

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The Outstanding Global Executive

Posted on February 9, 2012 by johnward

By John L. Ward & David Ransburg

Shortly after our webinar on preparing new leaders for the family business we found some comforting affirmation of our presentation. We proposed that the following qualities were most important – in fact, we proposed that business family heirs have special innate strengths in these areas:

  • Versatility and balance;
  • Humility (rather than charisma);
  • Practical wisdom – an intuitive sense for “doing the right thing” in new and complex contexts; and
  • Leading change by creating new meanings for old stories.

The comforting confirmation: A new Spencer Stuart (search consultants) publication agreed that the most important qualities of outstanding global leaders are

  • Humility;
  • Agility;
  • Sensitivity;
  • Intellectual curiosity.

They went on to emphasize that the #1 leadership selection trap is “mistaking charisma for skill.”

To listen to the Developing the New Leaders of your Family Enterprise program register here.

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Encouragement for Board Chair’s and CEO’s

Posted on February 7, 2012 by craigaronoff

Craig Aronoff

The Chairmen’s Forum, a group of experienced chairman from major corporations, has stepped up its effort to encourage the separation of the roles of board chair and CEO.  The group endorses the appointment of  independent chairmen .  Companies in the S&P 500 which divide the roles have almost doubled in the past five years.  While the practices of public companies do not necessarily provide models to family businesses, in this instance we agree with William E. McCracken, head of the Chairman’s Forum, that “boards function much more effectively” with responsibilities split between the chair, who manages the board, and the CEO, who manages the company.

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The Year of You

Posted on February 2, 2012 by norbschwarz

Norb Schwarz

By now most of us have made our New Year’s resolutions and have put them on a back shelf.

For 2012, I am working on a new challenge. I am concentrating on self-improvement as opposed to focusing on the business. The process will be much the same as my business planning process. First take an inventory. Who am I? What are the elements that make up “me”? I came up with eight potential elements for myself; the spiritual me, the emotional me, the relational me, the financial me, the professional me, the experiential me, the intellectual me, and the physical me. Given those elements of “me”, the next step is to look at how I have fared in each area in the past, where I am now, and where I want to be in the future. The final step is to outline what I have to do to meet each of my future goals and begin the process for each.

I like to keep the following favorite verse in mind as I go though my “year of me” process:

Isn’t it strange that princes and kings
And clowns that caper in sawdust rings
And common people like you and me
Are builders of eternity?

To each is given a bag of tools
A shapeless mass and a bag of rules
And each must make, ere his life is flown,
A stumbling block or a stepping stone.
R. L. SHARPE

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Effective Leadership Preparation

Posted on February 1, 2012 by craigaronoff

South Carolina Governor Nikki Haley describing her preparation for effective leadership:  “I grew up in a family business where I started doing the books for them when I was 13.  I had my first corporate audit at 15.”

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Silos are great for corn but destructive to your business.

Posted on January 31, 2012 by norbschwarz

Norb Schwarz

John had been working for the company for 25 years and is close to the patriarch. In fact, Dad hired him and has consulted with him in making key decisions over the years. Today the company is facing some real challenges.  The market appears to be growing, and its products are still well received, but profitability is lacking due to internal inefficiencies.

An outside consultant was called in to assist in getting the company on track again.  What he found was a common problem in many previously successful family businesses. Over the years, the company had developed management “silos”, the most destructive of which was led by Dad’s valued confidant, John. Because of his position as a top manager in the company and his close relationship with dad, John was thought to be immune to challenge by the other managers, even when they knew that his departmental decisions were harming the rest of the company. In order to cope with the situation, the other senior managers began to develop their own silos to protect their departments from John’s power plays. Interdepartmental teamwork and communication almost ceased to exist, as did overall profitability.

It took the outside consultant’s report on the situation to open Dad’s eyes to the cause of the problem. John was given an ultimatum to destroy his silo and become a collaborative team member or retire. John chose to retire. On his retirement, other silos began to collapse and an effective management team began to evolve. Internal efficiencies began to improve and profits began to rise again.

Silos are not restricted to farms or companies. Some of our worst defeats during WWII were caused by admirals or generals who were not team players. The resulting lack of communication often led to lapses in intelligence and failure to coordinate battlefield or naval campaigns, causing unnecessary loss of lives.

Unfortunately we see many family businesses using silos as a way to ‘work around’ family tension – where one brother is put in charge of one area, and another in charge of a different division and they make a ‘pact’ to stay out of each other’s sand boxes as their personal dysfunction prevents them from working effectively together.

Don’t be blindsided by loyalty and longevity, and don’t use silos as a way to ‘divide the enterprise’ between feuding factions of the family. Silos in the company lead to unhealthy internal competition, breakdowns in communication and opportunity for your competition.  Beware the silos as they can really set you up for failure.

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LETTING GO IS HARD BUT NECESSARY

Posted on January 26, 2012 by berniekliska

Bernie Kliska

For most family business senior CEOs, the prospect of relinquishing control is a troubling one. It presents many fears—the fear of mortality, the fear of not having sufficient funds and the fear that one’s adult children won’t get along. These business leaders have put their hearts and souls into the business for all their adult lives; yet, as most seniors recognize, they must let go if the business is to make a successful transition to the next generation. In fact, they need to be thinking about giving up both the CEO role and voting control.

The process of letting go should begin long before the CEO’s retirement takes place, even before actual succession plans are drawn up. Ideally it should be the function of the board of directors to determine the appropriate time for the CEO to retire.  While clearly the CEO needs to have a voice in this process, if they are the sole decision-maker on when they should let go, they may well be tempted to stay on longer than they should —past the time when they still are an effective leader.

In order to prepare for the challenging transition away from the leadership role, CEOs need to develop security and confidence in a number of realms.  First, they need to ensure the company is sound enough to sustain itself without the senior CEO at the helm.  In addition, they need to take steps to achieve personal financial security – so they are not financially reliant on the business going forward.  Third, ensure the children really grow up by giving them the opportunity to succeed or fail without their parents’ protection.  And finally, often overlooked is the importance of developing meaningful other interests that you believe will keep you engaged and excited to face every new day.  The CEOs who are able to let go are those who know that even without the business, they still have value as human beings.

Entrepreneurs who truly retire and turn over authority can find joy in knowing that they have built a business that not only will outlast themselves but that also have been preserved for the next generation of their families. If you are interested in learning more about this subject matter I would like to suggest you read ” Letting Go; Preparing Yourself to Relinquish Control of the Family Business” by Dr. Craig E. Aronoff.

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SHOULD YOU HAVE A SHAREHOLDER (BUY-SELL) AGREEMENT ?

Posted on January 24, 2012 by berniekliska

Bernie Kliska

Going into business with a parent, child, sibling, in-law, or cousin both demands and assumes a certain level of trust. But, you need more than good faith and a firm handshake. Future disagreements and unexpected events can occur and tear apart businesses, and relationships as well.  A shareholder’s agreement is almost a must in any business when more than one person is an owner.  Just because your fellow shareholders are family is not a reason to assume this ‘good practice’ does not apply to you.

How do you avoid splitting up a company and deciding who gets what in the heat of battle?  You may not be able to think in a level-headed manner when screaming is at the highest decibel and doors are being slammed. What is better is to plan for the worst cases, hoping they never happen.  The wording and terms of shareholder agreements can vary greatly, but they most commonly address the following issues:

1) Who may or may not own shares and what happens if shares intentionally or unintentionally fall into the “wrong” hands due to divorce, death, credit problems, lifetime transfer or otherwise.

2) Events permitting or requiring a sale, such as leaving the company to pursue another profession, retiring, being disabled, funding estate taxes or getting divorced from a family member.

3) The price for which shares can be bought or sold and how that price is determined (fair market value given minority shareholder discounts, etc.) and how that price could be modified over time.

4) The payment terms, including down payment, length of note and interest rate.

Many shareholder agreements give the company or existing shareholders the right of first refusal to purchase the shares. A shareholder agreement legally determines how to handle a host of what-ifs.

While it may be uncomfortable to go through drafting legal documents between family members – remember the adage, better safe than sorry!

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