Category Archives: 2016

07/23/16

Is Philanthropy Right for Your Family Business?

The meaning of the word philanthropy is “love of humanity.” Much more than just the giving of money, philanthropy embraces ever voluntary act of giving to others.

The form that philanthropy takes is as varied as the philanthropists themselves. For example, consider David Bohnett whose foundation supports a wide range of social issues; American rock star Jon Bon Jovi whose organization focuses on the issues of hunger and homelessness in the United States; Arpad Busson, founder of Absolute Return for Kids Academy.

Philanthropy can be misunderstood as being the province of very wealthy individuals or of large corporations. But many family-owned businesses are in a position to help others. The opportunity exists to make philanthropy a part of the firm’s culture.

Bruce DeBoskey, founder of The DeBoskey Group, a Denver based philanthropic strategy firm, advises that to achieve meaningful results, philanthropists should focus on a few select causes, rather than spreading their giving in smaller amounts over a wide area. Following this advice, family-owned firms can manage an impactful giving plan without placing undue stress on their resources. http://www.denverpost.com/2016/07/10/on-philanthropy-six-years-six-important-lessons-about-philanthropy/

The altruism of philanthropy affects and helps the lives of millions. But, as DeBoskey points out, giving benefits the donor as well. The work of helping others brings families together around shared values. It builds relationships with your community, supports and strengthens your brand, boosts your bottom line and promotes employee engagement.

Philanthropic businesses enjoy improved employee recruitment and productivity, greater customer loyalty and enhanced profitability. Within family businesses, community-centered activities engage upcoming generations whose different viewpoints and fresh ideas can prove invaluable to future successes.

07/15/16

Checking The Corner-Office Timeclock

On March 5,, 2014, the Wall Street Journal published findings of a study by professors at Harvard Business School, the London School of Economics and Columbia University’s business school in which they examined differences between family and non-family businesses. The Journal article focuses on the work schedules of CEOs in the two types of firms. Do CEOs of Family-Owned Businesses Work Less?

The data indicates that heads of family businesses work less hard than heads of non-family enterprises. They suggest that the incentives and risks that motivate professional CEOs to burn the midnight oil just might not be a factor for CEOs of family-owned firms.

Results showed differences between first and second-generation family-business leaders. First generation CEOs were found to work harder than their second-generation counterparts. In my own experience, this conclusion cannot be set in stone. I personally have seen instances of both a lack of motivation and a strong work-ethic and drive in second generation leaders.

The research suggested that family business CEOs may be spending their time differently. Instead of clocking long hours in the “corner office,” they may be focusing on balancing work-family responsibilities. Family CEOs might be adding value to their firms in ways not captured by the hours they are formally working, such as participating social activities that indirectly benefit the business.

According to the Journal article the jury is still out as to whether family-owned businesses with inside CEOs perform better or worse than non-family firms with outside CEOs.

07/7/16

The Advisory-Board Confusion

“Our advisory board includes my dad and me, my uncle who is retired from the business, and our non-family Chief Financial Officer. He’s on the board because he’s unbiased, and will make decisions based on what the business needs. Otherwise, my dad and I make decision on what’s best for everyone…”

The above statement made by a second-generation family-business leader shows confusion as to what advisory boards are; how they function, and how they differ from executive boards.

A family-business executive board is a governing body. It may include family members in leadership positions as well as key non-family staff who have decision-making power. All are on the company payroll. They have a vested interest in the welfare of the business, and in the case of family members, in the welfare of the family too.

Often the first foray into a board for family enterprises, an advisory board is comprised, predominately, of individuals who are outsiders with no vested interest in the business. They have no say in deciding how the business or the family will move to meet challenges. Their job is to advise on family-business best practices and provide an impartial view of the business’ interests and how to further them.

This trusted group of mentors is handpicked to provide supplemental industry knowledge, operational know-how, financial savvy and other areas of professional expertise. With the objectivity that comes from non-attachment to the family or the business, they are in position to make clear observations and suggest strategies that are free from the morass of family dynamics and nepotism.

06/17/16

Beneath the Surface of the Ground

In my last post I cited a Chinese proverb about creating long-term prosperity. Today I refer my readers to the thinking of a Native American culture–the Five Nations of the Iroquois.[1]

In American Indian Environments: Ecological Issues in Native American History, Chief Oren Lyons of the Onondaga Nation writes: “We are looking ahead, as is one of the first mandates given us as chiefs, to make sure and to make every decision that we make relate to the welfare and well-being of the seventh generation to come. …“[2]

Can there be any thinking more relevant than this to family businesses? Without upcoming generations, does the term “family business” even apply? And therefore, is thinking about the well-being of generations to come not every bit of a mandate for today’s incumbent leadership as it is for the chiefs of the Iroquois?

This is by no means an easy task. Today’s leaders are challenged by the intense pressure to produce short-term success; to please shareholders; to produce wealth now; to feed the spending frenzy of a voracious consumer society. 

Short-term thinking produces short-term results. Most contemporary family businesses do not last beyond their third generation. But there are family businesses alive and well today that have prospered for 100 years and more; whose very existence proves that paths to such longevity are open; can be found; can be learned.

Seventh-generation thinking is finding its way into our collective consciousness; changing our current worldview. Perhaps learning more about how this works will help business families to build a mindset, actions and behaviors based on their impact on the seventh generation to come: “even those whose faces are yet beneath the surface of the ground…”[3]

[1] https://en.wikipedia.org/wiki/Seven_generation_sustainability

[2] An Iroquois Perspective. Pp. 173, 174 in American Indian Environments: Ecological Issues in Native American History. Vecsey C, Venables RW (Editors). Syracuse University Press, New York.

[3] “The Constitution of the Iroquois Nations: The Great Binding Law.”

06/11/16

Grow People

Chinese proverbs are sources of immense wisdom coming down to us through the ages. Ancient they may be, yet they are solidly relevant to our contemporary world. Here is one whose message is directly applicable to long-term success in family business.

“If you want one year of prosperity, grow grain. If you want ten years of prosperity, grow trees. If you want one hundred years of prosperity, grow people.”

http://www.quotes.net/quote/9102

For multi-generational success, “100-year prosperity,” start by preparing your family’s next generation. Introduce your children to the business early. Have them take on minor roles while in school. Include them in meetings where both family and business are discussed. Discuss family and business values with them. Help them learn what the role of a leader entails. Help them craft a vision for the family and the business under their leadership.

Pay attention to the talent in your upcoming generations. See where their gifts can be applied in the family and in the business. Are there born leaders? Are there natural innovators among them; natural communicators; networkers; entrepreneurs?

It’s your job to uncover and nourish next-generation resources,to support the development of their talents and encourage their chosen trajectories.

With the next generation thus grown, the business will not suffer a vacuum; when incumbents retire, when fresh ideas are needed, when upcoming technology calls for new knowledge. And when it’s time to step into responsible roles, they will serve the family and the business well and far into the future.

06/2/16

The Three Faces of Innovation in Family Business

The presence of entrepreneurial spirit coupled with a culture of Innovation within your family firm is possibly the strongest predictor of long-term success.

It’s important to understand that innovation is not confined to the development of new products and services, although this is indispensable. The vital part that innovation plays in business processes and organizational procedures is often overlooked.

Process innovation, sensitive to new technologies, consumer practices–a plethora of changing marketplace conditions –enables your business to make responsive changes in the ways that products or services are produced and delivered. Organizational innovation involves changes in management, workflow, and operations. These are often sensitive to generational outlook and leadership styles, as well as advances in office and plant technology.

05/28/16

Innovation—Is it Really a Choice?

Last week I wrote about the critical necessity of innovation for multigenerational success in family businesses. Continuing on with this theme, here are some of the advantages enjoyed by businesses that have a culture of innovation, and some of the obstacles that block the way to this goal.

Advantages: Dexterity, flexibility and speed that comes from:

  • Deep industry and business knowledge enabling leadership to seize opportunities on the fly
  • Long-standing ties with business service professionals–bankers, accountants, attorneys–who can help with and support innovation efforts
  • Shared values, vision, and definition of success among shareholders creating swift-moving consensus.

Obstacles: Resistance to change, risk aversion, lack of focus, indecision that comes from:

  • Attachment of the family to current business structures and products
  • Tension between the older, incumbent, generation and rising-generation family members
  • Difficulties in juggling attention to the core business and attention to research, development and implementation of innovative ideas, products and services
  • The need to keep shareholders happy by continuing to provide accustomed dividends, while redirecting funds for innovation.

In his 2014 book, Innovation in the Family Business, Succeeding Through Generations, Joe Schmeider of the Family Business Consulting Group puts it succinctly: “in the most basic terms innovation is change as well as a factor associated with multigenerational family business prosperity and longevity.”

For the sake of the business, obstacles to establishing a culture of innovation must be faced and overcome.

05/20/16

‘Applied Innovation’—Defined For The Family Business

Innovation:

: a new idea, device, or method

: the act or process of introducing new ideas, devices, or methods

Source: Merriam-Webster’s Learner’s Dictionary

 Applied Innovation:

: the process of constant improvement and creative change

: a requirement for the continued success of multi-generational family enterprises

Like any other business, family businesses benefit from, if not require, a culture of innovation—a culture that supports constant improvements to its products, services, processes, governance, and planning.

While the dynamics within family businesses often present obstacles to innovation, a clear view of the competitive advantages of an innovative culture can overcome them.

Next week I’ll write about these obstacles and about some of the advantages enjoyed by family businesses that support a culture of innovation.

05/14/16

It Is About Family

In a recent blog entry I reported my experiences at the annual conference of Attorneys for Family Held Businesses (AFHE). Through its membership of multidisciplinary family-business advisors, AFHE promotes the well being and sustainability of business families, and recognizes that family businesses can only be as healthy as the families themselves.

This theme echoed resoundingly within me the following week while I was participating in a program with Defy Ventures http://defyventures.org. Defy helps individuals with criminal histories develop entrepreneurship skills and establish sustainable lives after incarceration.

I was part of a group of seventeen volunteers who went to meet thirty-five inmates in a Federal prison. All of the inmates had been part of Defy’s Entrepreneurs in Training (EIT) in-prison program. We volunteers were there to offer them exposure to successful business people and business advisors, to help them develop social and business skills, to prepare a resume and learn the processes of business formation.

The emotions I experienced during the five hours we spent with the prisoners were intense. I was overwhelmed with the gratitude of the EIT participants. We began with an exercise designed to help us experience empathy for one another and to build community. It was here that the significance of family and a new perspective on AFHE’s mandate for helping business families came to light.

Facing each other–volunteers on one side and EITs on the other side of a taped line–we responded to a series of questions: “Who has ever been arrested ?”. All of the inmates stepped to the line, as did number of volunteers. Empathy crossed the line in both directions. “Who has done something illegal but not been arrested?” More volunteers walked up. “Who graduated from high school?” “Who has a college degree?” No inmate stepped to the line in answer to this. “Who was arrested as a teenager?” “Who experienced abuse as a child?” “Who does not know his biological father?” “Who spent time in foster homes?” “Who has a parent who used illegal drugs in their presence?”

Overwhelmingly it was the presence or lack of a healthy family that most separated the volunteers from the EITs. The absence of healthy family relationships was revealed as a formidable factor in devastating the lives of the inmates. Similarly, the presence or lack of well being of the family can influence their businesses’ failure or success.