Monthly Archives: May 2019

05/23/19

Family Business Pros And Cons

I was recently asked, “what are the pros and cons of working in a family business.” Pausing for a second, I responded, “that it’s a family business.” I added that I did not mean to be ‘flip’ in responding, but meant instead that family businesses are too complex for that question to be answered in a few sentences.

Understanding the context in which such a question is being asked is important. In addressing it I find myself quoting the opening line of Tolstoy’s Anne Karenina, “All happy families are alike; each unhappy family is unhappy in its own way.”

I want to know the experience of the person asking it.

A family business operates on interactions between two systems. The family constitutes one system. The business constitutes the other. Each has its own values. Each demands recognition of its values. Taking goals for example, those of a family are thought about in terms of the development and support of its members. Business goals are thought of in terms of profits, revenues, efficiency and growth. In the family system, evaluation or reward of family members is based on who they are. Effort counts, but there is unconditional love and support. Evaluation within the business is based on performance and results. On these criteria, individuals are likely to be promoted or terminated.

Returning to the question of pros and cons, I have come to believe these depend to a large degree on the happiness of the family. I have seen this reflected in widely differing attitudes—a family-business member telling me that she could not imagine working anywhere else but in the family business; a second-generation family business owner saying that he did not want his children working in the business because “he loved them too much.”

05/17/19

Working On Succession Planning

The term “working on your business” may not be new to you. The idea of working on your business pertains to doing the work of creating a business that is sustainable and functions independently of you. One in which the day-to-day operations are managed by the systems and processes you established, and the people you developed to implement them. A business that runs on systems and processes, rather than on your daily efforts, allows you to focus your time and energy on challenges and opportunities that arise for innovation and growth.

We all have the same 24 hours a day and 7 days a week to accomplish our tasks. Without systems, and people trained to manage those systems, we business owners have basically created a tireless job for ourselves. Without a conscious effort to change this situation, the business will likely remain as it is, without significant growth.

Succession planning can be thought of as analogous to working on one’s business. Family businesses consist of systems within systems; the family, the shareholders, and the business itself. Rather than on processes, these systems thrive on policies.

Similar to how systems and processes help your business grow, policies that effectively govern family members, shareholders and the business itself make it more likely that your family and business will continue to grow into the far future. Unless you work on developing these policies, your chances for a successful succession and multi-generational survival are threatened.

Like the conscious effort required to establish a sustainable firm, for a family-business leader committed to creating multi-generational stability a conscious effort is required.

05/4/19

Family Businesses—Changing the World

Inc. Magazine dedicated its May 2019 issue to businesses tackling big, complex challenges that affect everyone—companies that are pushing fresh approaches and creating the industries of the future. Inc.’s editor noted the mindset of one the companies they profiled—now successful and hardly standing still. One major theme running through this issue is about ‘Helping Entrepreneurs Change The World.’

This got me thinking about family businesses that are making significant impacts on the world.

Family-operated businesses have some advantages over non-family-operated businesses when it comes to initiating innovation in response to market changes. They can make decisions and implement them faster. But innovation and staying relevant in the marketplace are not the same as ‘world-changing.’

There are credible reasons that can interfere with a family business implementing world-changing initiatives. Decision making must coordinate with the interests of family, the business and the ownership. And the heads of family businesses tend to stay in control longer than leaders of non-family businesses. This tendency carries both pros and cons. A long tenure sustains stability and family values. However, long-serving family heads may have blind spots and not recognize the need for change when it’s readily apparent.

Despite these impediments, examples exist of family enterprises that are about changing the world. In his book, Family Champions and Champion Families: Developing Family Leaders to Sustain the Family Enterprise, family-business consultant Joshua Nacht describes how innovation rises from the energy and skills of younger family members who take initiative and introduce new ideas. He calls these youngsters ‘family champions,’ and tells how they are balancing tradition and innovation, values and profits, with both short-term and long-term views.

Reviewing Nacht’s book In his Forbes Magazine article “How Champions Of Change From The Rising Generation Transform Their Family Businesses,” long-time family-business consultant Dennis Jaffe comments that, importantly, these young champions have the ear of the family leadership in a way that does not exist in non-family companies. But, unfortunately, many families do not facilitate exchange of ideas between generations; a necessity for developing champions. https://www.forbes.com/sites/dennisjaffe/2018/10/03/how-champions-of-change-from-the-rising-generation-transform-their-family-businesses/#b4b45b05a55f