Category Archives: 2018

01/13/19

Family Business And Organizational Culture

The Questions Every Entrepreneur Must Answer, by Amar Bhide, published in the December 1996 issue of Harvard Business Review[1] is one of my perennial favorite articles to use in teaching my class on entrepreneurism at Baruch College, City University of New York.

Rereading the article recently, several thoughts came to mind as being significant when reframed in the context of family enterprises.

Speaking of entrepreneurs the author writes: “To secure the resources demanded by an ambitious strategy, they must manage the perceptions of the resource providers: potential customers, employees, and investors.”[2] Further into the article he adds that “… the entrepreneur must design the organization’s structure and system, and mold its culture and character.”[3] and that “When entrepreneurs neglect to articulate organizational norms…, their organizations develop a culture by chance rather than by design.”[4]

Successful multi-generational family businesses come about more by design than by chance. Considering the article in this context one might view the founder or current head of the family business as ‘the entrepreneur.’ And continuing the simile, family members might be viewed as resources—for the family or the business or both, and managed accordingly. The perceptions of family members have impact regardless of their roles in the business. They help to articulate and establish organizational norms. When these are appreciated and employed as a resource to be developed, a culture arises by choice from within the family.

The perceptions of stakeholders are not the only issue the head of a family business should be alert to, but it is important one when seeking to create a multi-generational legacy.

[1] Bhide, A. (1996, December) The Questions Every Entrepreneur Must Answer. Harvard Business Review.

[2] Ibid.

[3] Ibid.

[4] Ibid

12/14/18

More Thoughts About Family Businesses

Last week I published a note from a reader. She had written in to say that she was thinking about family businesses and wondering why most of them do not survive past their third generation. She supplied some possible answers to this, along with further questions.

Another reader commented on this note, pointing out that sometimes family business owners discourage their children from entering the business. They push them away.

What’s that about? There are many possibilities.

It might mean that the business’ head decision maker grew up in a dysfunctional family; the business had added another divisive instrument. Now, as the family patriarch—or matriarch, he/she does want the children to suffer the same experience. So the children are steered away from the family business.

Or perhaps it means that there’s love in the family and the parents want a better life for their children than they have had for themselves. For example, the greengrocer on the corner wants his children to become successful professionals; doctors and lawyers. The parents don’t want their children to have work the same long, hard hours as they did, and for so little money.

Or perhaps the children are girls. Their father wants to pass his business on to the next generation—and still, in this day and age, not to daughters.

Perhaps, success in a family business can be measured in terms of the growth and prosperity of the owner’s progeny; the family’s succeeding generations, and not the business itself.

 

11/28/18

Thinking About Family Business

Hi Rick,

I was parking my car over near the Vitamin Shoppe, and for some reason I started to think about family businesses.  I thought about how they usually do not last past their third generation. I’ve learned that from you, and always accepted it as fact.  I still know it to be fact, but this time it struck me very hard. Why should that be? What makes the difference between three generations and out, and a multi-generational family business? And what makes that business one that continues for 100 years or more?

Well, it occurs to me that times change. The economy changes. Opportunities for upcoming generations change. The way young people view their futures; their attitudes toward work changes. Is their family business one they can be proud of? Does the business’ values match the values of the current time? Can it’s products or services be updated again and again? What impact does the incumbent generation have upon their thinking? How often can/do they impart a vision of the business in the future?

What makes a young person wish to stay with and build their family business?  And where is the tipping point between the second or third generation, and the next hundred years?

You’ve said it begins with intention.  Where does intention begin?

Suddenly I find this a deep and meaningful mystery.

***

Some thoughts from the Vitamin Shoppe parking lot – November 27, 2018

11/10/18

Moving Into Eldership Roles

In last week’s blog article I presented a situation in which a daughter, now CEO of the family business, wanted her father to take on a different role in the business. Her father was content to be managing some of the business operations. His daughter wished him to assume the role of the firm’s ‘ambassador.’ With his industry knowledge and contacts she envisioned him spreading goodwill, identifying potential opportunities and mentoring next-generation family members.

A reader of this article took exception to the daughter’s attitude. The reader wrote that the daughter should not object to her father pursuing his own interests, within reason. That she should not be the judge of how her father can be most beneficial. That she should be honoring her father as founder of the business. That she should have respect and faith that her father knows what he is most comfortable doing and where he might bring the most value to the firm. My reader added the opinion that the daughter’s thinking was potentially based more on her own goals than on her father’s interests.

I’m grateful to my reader for the thoughtful and useful feedback. It highlights how many different viewpoints exist in situations like this and many strong emotions as well.

We, as professional family-business consultants, recognize various roles that elder family-business leaders can move into as they age and next-generation family members take over the business, or are ready to. There is the role of ‘ambassador,’ described in the first paragraph. There are ‘monarchs’ who hang onto authority and control until they die. There are ‘generals’ who leave but don’t give up their authority and may even return to ‘save’ the business.

As it happens, in the family business described above we see the father assuming yet another common role, that of ‘inventor’ He has returned to developing the firm’s core business. He is in a position, now with his expanded knowledge and experience, to add value to the firm with innovative management ideas, production methods and products.

The ‘ambassador’ and the ‘inventor’ are two of the more valuable roles a family-business elder can embrace as they pass leadership onto the next generation.

10/27/18

Relevancy Reborn

Recently I had a conversation with a woman who is heading her 2nd generation family business.  She spoke about her father who is in his mid 60s. She told me he does not interfere with her management of the business but does insist on retaining control of some day-to-day operations. She added that he had recently divorced her mother and was dating again.

She doesn’t want to get involved in his personal life, but does want him to play a different role within the business. She believes that with his 30 years of experience he would be more beneficial to the firm as its ‘ambassador.’ In this role, with his industry knowledge and contacts he had nurtured over the years he can spread goodwill, identify potential opportunities and mentor emerging next-generation family members.

This situation shines light on the question of how an older-generation business leader can maintain personal relevancy after the younger generation has assumed control. It’s not uncommon for someone approaching their elder years to be facing this passage. Instead of letting go and moving forward, they may attempt to relive times of their life when they felt most alive.

By transitioning to the new role his daughter wishes him to assume—one that neither he nor the family may have envisioned before—her father’s personal and work relevancy can be reborn.

10/6/18

What’s Important At Thanksgiving Dinner

I recently had a conversation with a potential client that would eventually involve her husband, elderly parents and two siblings. The issue, as brought to me, involved transitioning the management of the family business from her parents to her husband. I learned that among the family members there are differing thoughts regarding the value of the business. There is also some resentment about her husband’s ambitions for the business. Moreover, her two siblings believe that their sister and her husband are taking advantage of their parents.

This situation is complex, yet not unheard of. In the course of our conversation we discussed how developing a clear statement of individual and family values will lay important groundwork for its resolution. We spoke as well of the importance of educating the family members about the systems that underpin the workings of family businesses, and helping them understand best practices employed by successful multi-generational family businesses. Most important though, in our conversation, was the question of how to convince the family members to undertake this education with the help of an outside advisor.

What is fundamentally important here? I suggest it’s family harmony. Will this family be able to sit down together for Thanksgiving dinner next year and enjoy the company of everyone there? If not, the business and everything and everyone associated with it are left in peril.

 

09/22/18

Toward An Entrepreneurial Mindset—Seven Skills

Family businesses are described as having three complex, interrelated subsystems. The family comprises one subsystem; the ownership and the business itself comprise the other two. Over the past couple of decades particular attention has been given, and necessarily so, to understanding and addressing the needs of the family subsystem. But a shift of focus is now required. Marketplace and consumer expectations are changing overnight. Consequently the way we do business has changed. For family businesses to remain successful, greater attention must now be focused upon the business subsystem, and of particular value today is the cultivation of an entrepreneurial mindset.

A mindset consists of our attitudes about something. Today, the entrepreneurial mindset is considered more important than experience, knowledge and family history for the success of a business venture.

Seven critical skills contribute to an entrepreneurial mindset:

1. Plasticity: The ability and willingness to change actions and plans to overcome present and future challenges.

2. Communication and Collaboration: The ability to clearly express ideas to an intended audience, including persuading others to work towards a common goal.

3. Creativity and Innovation: The ability to think of ideas and create solutions to problems in the absence of clearly defined structures.

4.Innovation and Problem Solving: The capacity to apply higher-level, process-oriented thinking, consider an issue from a range of perspectives and use that reasoning to make decisions.

5. Future Orientation: An optimistic disposition with a concentration on obtaining the skills and knowledge required to transition into a career.

6. Opportunity Recognition: Seeing and experiencing problems as opportunities to create solutions.

7. Comfort with Risk: The capacity to act upon a decision despite uncertainty and challenges.

The mindset of a given business leader toward applying these skills reflects one of two fixed perspectives: a fear perspective defined by thinking, “when I fail I am no good,” or a growth perspective, defined by “when I fail I learn.”

09/8/18

Full Stop—The Fear Factor

 Better not to hire a coach or go to a therapist or even pick a doctor, because you might discover that you’ve been doing something wrong.[1]

Many times I have spoken with principals of family businesses about their plans for transitioning to the next generation. Many times I have seen that they do not understand how to do this successfully. They listen to what I have to say, but do not ask for help. I have seen heads nodding in agreement about the benefits of hiring a professional with family-business expertise to guide them and their family in achieving a multi-generational family business, and reaping the rewards of having an established multi-generational family. And too frequently, I see no further action taken. It’s sad. because I know the difference that an expert in family-business best-management practices can make.

In his blog article, The Overwhelming Fear of Being Wrong, Seth Godin suggests that fear engendered by uncertainty stops forward action. In the case of family-businesses leaders, fear of asking for expert help may stem from not knowing how to assess the guidance being provided. There may be fear that other family members may object; that they personally may be supplanted; that they may be seen as being wrong in hiring an “outsider.”

Most family businesses do not survive beyond their third generation. Their failure is largely due to a lack of understanding of the best practices and unique dynamics of family enterprises. Family-business consultants have the know-how to guide your family business safely through this critical transition. When it’s forward motion or stop, perhaps it’s best to overcome the fear of being wrong. and ask for help.

[1] Seth. Godin. The Overwhelming Fear of Being Wrong, https://seths.blog/2011/07/the-overwhelming-fear-of-being-wrong/

08/11/18

Elder Or Elderly—Inspirational Reading

I recently finished reading Thomas Moore’s most recent book: Ageless Soul: The Lifelong Journey Toward Meaning and Joy https://www.amazon.com/Ageless-Soul-Lifelong-Journey-Meaning/dp/B075X2S2Y8/ref=sr_1_1?ie=UTF8&qid=1533849488&sr=8-1&keywords=ageless+soul+thomas+moore.

I find the book extremely important and have described its premise—distinguishing between being elderly and being an elder—as critical for living a life with meaning and joy. I also immediately saw its importance to the survival of both the incumbent head of a family business and the business itself.

Within the mainstream of our contemporary culture ‘elder’ is perhaps an elusive term. Moore though, uses this term as he writes about elders he has known in his life, and about their qualities. Surprisingly, these qualities are not elusive, though they may be challenging. In the section of the book entitled “How to Be an Elder” (pp 178-185) he presents this list:

  1. The first requirement is to be comfortable with your age
  2. Have confidence in your education and experience to the point you may guide others
  3. The elder has to love young people
  4. The elder uses any knowledge and wisdom he or she has to benefit others, especially the young
  5. Cultivate your power to inspire others

 

07/27/18

Defining Productivity For Family Business

In a recent blog post, entitled Business/busyness https://seths.blog/2018/07/busyness/ Seth Godin states that what matters in business is the question: “did I spend my day producing enough benefit for all the time invested?”

Seth is asking an important question; I recommend that you read the entire blog post.

Further into the post he provides a suggestion for answering the question: “Once you know what you seek to produce (not an easy task), add up all the time you spent to create it.” While not exactly what he was writing about, I fixed-on the phrase “once you know what you seek to produce” and related it to family enterprises.

It is not uncommon for a family business to come about accidentally. One starts a business, gets married; has children. The children help out and eventually assume control of the business. If things go well the business grows and the second generation passes it on to their children, likely in the same way they received it. They in turn assume responsibilities and eventually control the business.

In this scenario the business is looked at in present time, and productivity is largely measured in the context of the business’ balance sheet. Family is important; but as an entity separate from the business itself. There is not yet generational thinking and recognition of a family-business legacy.

With each generation as they grow, family businesses become more complex. The simple mechanism of succession described above no longer works. For the business to continue now requires planning. It requires a longer view; an intention to produce a multi-generational family enterprise. “…once you know what you seek to produce” is key. Intention aligns family members, resources and practices in the direction of a shared goal.