Category Archives: 2019

12/8/19

Commitment In Family Business

One of the secrets of successful multigenerational family businesses is their attention to three critical qualities within the family as a whole, and as possessed by the person who will be their next leader. These are: commitment, capabilities, talent for leadership. I intend to discuss each of these over the course of my next few blogs and newsletter postings, starting today with ‘commitment.’

Family business advisors often look at ‘commitment’ from the point of view of what motivates next-generation members to join the business. This is often assessed in terms of four factors. One: the young person knows and loves the business and the opportunities it provides. Two: the person knows they are expected to join the business. These expectations can escalate to bona fide pressure to do so. Three: Joining the family business is seen as their best alternative. Four: They have a sense of being dependent on the family and the business.

It’s always useful to define our terms. So what does the word ‘commitment’ mean? A visit to Merriam Webster online brings up this first set of definitions:

a: an agreement or pledge to do something in the future

b: something pledged

c: the state or an instance of being obligated or emotionally impelled

Some commitments are major, like marriage. Here there is a public statement of intention to fulfill the obligations inherent in the relationship, and to give priority to these obligations over lesser concerns. This commitment invokes a pledge by each partner to learn the tools necessary to support the relationship.

A commitment to a family business is also major. Members of family firms often have high levels of emotional attachment and are pledged to the firm’s success. They too are committed to learning the tools needed, in this case, to sustain the business.

For successful multigenerational businesses this commitment includes dedicating time and effort to consciously and systematically developing their next generation of family members and leaders. These strategies engender emotional attachment to the family business. This helps ensure that upcoming generations of family members make a commitment to join the family business from knowledge, love and appreciation, thus shaping its future.

11/23/19

Understanding Values, Vision and Mission In Family Business

Many businesses write their vision and mission statement so they read similarly, just with different words. This shows a lack of understanding of these two important guiding business principles. They may also be missing a clear statement of their values; the bedrock upon which a sustainable business is built. Once clearly articulated a vision and mission statement can be crafted

It’s important to make distinction between a vision and a mission. I hold that values are what’s fundamentally important — to an individual, a family, and as an extension, to their business. A vision is what the family aspires to build. Mission is a statement of how the family and the business will impact and share with the larger community. Together they clarify intention and facilitate trust within the family, leading to profitability and success across generations.

Remember Joan of Arc’s famous battle cry: “free France” (libérer la France). She states her mission as an action. The action is the fulfillment of her vision, “a free France.” Her driving value: freedom. Built on these, her strategy was to enroll the farmers. Her tactic, to cut the British supply lines. She succeeded because her mission was larger than herself.

One way to understand the larger purpose of your business’ mission is to ask yourself whether you would share it with your stakeholders (i.e. employees, client, customers, the public, etc.)

As an illustration: A bodega owner selling foods from his home country within his New York community stated his mission was to open two more stores. Asked if he would put that on the wall behind the check-out register, he demurred. He realized that more stores in and of themselves would not add value to his customers’ lives.

After considering the distinction he recognized that his mission, larger-than-himself, was to provide his New York community with the foods they remembered and enjoyed in their home country. In making the distinction he was enrolling his customers in his mission.

11/2/19

Generosity And Connection

Sitting down to write today’s blog piece I was thinking about several concepts related to family business. Among these, the difficulty of choosing the right successor, the significance of shared family values, the importance of stewardship (the passing on of family assets—wealth, reputation, emotional well-being, spirituality—in better condition than when you received them.)

As I do at times, I turned to others for ideas. In this case I found what I was looking for in a blog by Seth Godin.

Godin’s article Bread and Book, is not intended to be a comment on family businesses. But it’s one of the best—and more tragic—stories I’ve seen of succession, family values and stewardship https://seths.blog/2019/10/bread-and-books/. It’s a story of world-famous baker Lionel Poilâne and how Godin and Poilâne met and became friends.

Describing what he learned from his time with Poilâne, Godin wrote: “Ideas, bread and books are all the same–they’re better when they’re shared. The posture of generosity and connection replaces a mindset of scarcity, and Lionel modeled this philosophy every day.” From his friendship with Poilâne Godin learned about the magical intersection between generosity and idiosyncrasy.

Tragically, Lionel Poilâne and his wife were killed in a helicopter crash, leaving behind two teenage daughters. It’s here that the story enters the realm of family business.

The elder daughter, Apollonia, immediately stepped up and took over the running of the bakery. She’s made a success of it, with no diminution of quality. And she’s recently published a book.

In Poilâne: The Secrets of the World-Famous Bread Bakery, Apollonia relates her family’s story. It begins with her grandfather and now flows to the fourth generation. She writes: “The seeds of this book were planted by my father and mother in my sister and me. They are seeds of passion, determination, and love for our craft. My sister, Athena, helped me germinate those seeds, and with the birth of her son, we now have another generation with whom to share our family story.”

Family values, succession, stewardship. It’s all there for the learning,

10/6/19

Family Businesses Have More Women Leaders

According to the Pew Research Center, the percentage of female Fortune 500 CEOs reached an all-time high of 6.4 in 2017 (32 out of 500) and fell to 4.8 percent in 2018 after several women left those roles. With women comprising at least 40% of the world’s workforce and half of the population, it’s remarkable the number of women CEOs is so low.

In family businesses, it’s a different story. Ernst & Young (EY) surveyed the largest family businesses from top global markets. They found that the world’s largest, longest-lasting family enterprises are advancing women further and faster that their non-family counterparts. Specifically, the survey revealed the percentage of women in top management to be 22% and board membership, 16%.[1]

The difference begs the question why.

One reason is found in the long-term perspective of family businesses. They are more conscious of preserving a family legacy than an individual’s legacy. This coincides with the fact that in a family business a CEO’s tenure is longer than in a public company—an average of 20 years compared to 6. EY suggests that longer CEO tenures may serve to break down conscious and unconscious biases against women by giving company leaders more time and opportunity to witness women’s contributions and accomplishments.

Family-owned businesses are also characterized by their focus on people and relationships, in addition to profits. Their more social and broader purposes help family members and employees engage with each other, the company and their community. These priorities are largely accepted as inherent in females leaders.

An article published by Women in Family Business (WiFB)[2], adds to this perspective, stating:

“Family businesses are often more socially conscious than their non-family business counterparts. They are more likely to hire people and less likely to lay them off, more likely to support their communities, and far more likely to be concerned with the long-term health of their communities. And they are not as concerned with quarterly cash flow and profits, likely because they operate with far less debt. This is truly a family-motivated attitude — what kind of leaders put their families at risk?”

Further, family businesses, by definition, blur the lines between work and family. And men today, more so than in past generations, are sharing the responsibility of balancing work and family obligations–issues that historically have been seen as women’s concerns. The result, more women in leadership roles, further balancing societal benefits.

[1] https://www.ey.com/en_us/growth/how-family-businesses-are-embracing-women-in-leadership

[2] https://www.womeninfamilybusiness.org/women_and_family_business_good_for_one_another/

09/21/19

SWOT Analysis And Family Business

A SWOT Analysis is a valuable strategic-management tool for helping businesses of all types identify strengths and uncover weaknesses. It pinpoints places where improvements are needed and spotlights pitfalls to be avoided. It’s also useful for identifying opportunities and threats. Entrepreneurs and their advisors use it to discover circumstances that stand in the way of goals. These can be marketing issues, management deficiencies, threats from competition and many other serious business challenges.

Family businesses differ from non-family businesses in that they function through the interplay of three subsystems. These are: the family, the business and the ownership, a/k/a equity shareholders. SWOT analysis of each of these subsystems provides insight into this interplay.

We at The Family Business Leader recently performed a SWOT analysis with a third-generation family business. In the ensuing conversation we discovered several strengths within the family. One is that the members enjoy strong and supportive relationships. Another is finding that a rising-generation family member had useful industry experience gained working outside of the family business.

The analysis also uncovered some weaknesses in the areas of management, leadership and entrepreneurship. Threats were identified, coming from changes in the industry. Opportunities were found for expanding sales.

Now in possession of a larger picture of their business and the environment in which it operates, family members—both those active and not active in the business—became encouraged to come together and act as an advisory group. Together they discussed the SWOT findings, acknowledged their strengths and developed plans for addressing their weaknesses. Their strong family relationships supported all members in the discussions.

As a direct result of their talks, the family member with outside experience was offered a position in the family business. This addition made it possible to take advantage of the opportunities to expand.

The SWOT analysis was also useful in shining a light on ownership issues reverberating within the family. The Ownership subsystem is the source of some of the thorniest issues in family businesses. Enabled by the experience of having productive conversations, the shareholders are now ready to plan open conversations about transferring ownership to the next generation.

These benefits and many more can be gained through SWOT analysis. Consider applying this invaluable technique to your own family business.

09/6/19

Paul Klee and Late-Life Productivity

In prior postings I’ve told stories about parents having difficulty letting go the reins of their family business, and handing them off to the next generation; stories of their inability to let go, even though the next generation is more than competent to run the business.

A major reason for this situation may be found in the realm of psychology. The business is what the parent has always done, and perhaps constitutes a large part of their identity. After relinquishing control of their business, the parent has nothing ahead to go on to. They may also find themselves face to face with a crisis of meaning. As sometimes happens, and perhaps even more than once in the course of our lives, what we have done before; what has gotten us to the present moment, no longer inspires us as it previously had. This crisis misunderstood, unexplored and unresolved, can become a point of contention within the family and can negatively impact the business as well.

An article I came across written by historian Christopher P. Jones about the painter Paul Klee: Paul Klee & Late-Life Productivity https://medium.com/@chrisjones_32882/paul-klee-late-life-productivity-a2ed7a4cab6f, seemed to have meaning in connection to this family-business crisis, and some thoughts that might point a way forward.

Klee was not the head of a family business, so the analogies to be drawn from his life are not direct. His late-life story is about innovation and growth in response to adversity; the Nazi takeover of his German homeland; his deteriorating health from an ultimately fatal autoimmune disease. He did not have a choice as to these circumstances, but he did have a choice in his response to them.

He never did stop what he had done since his youth. But through adversity he found new meaning in it; developed new methods. Adversity forced innovation and new directions. It resulted in his highest degree of lifetime productivity.

Jones writes “Paul Klee’s innovation stayed vibrant to the end. It was unceasing because he never let the sense having arrived take over. Search and growth were essential aspects of his practice, one complimenting the other, neither of them fully complete.” 

“Klee was always building on past achievements, often re-using sketches and half-finished compositions as the basis for new paintings. Inspiration of this kind is intimately related to growth.” 

I think the above statements are key. It’s important that a parent, in turning over control of the family business, not see this as a personal having arrived at the end. As Paul Klee found new expression through the updating of old sketches, and remarkably through the limitations of disease, a new life of growth and accomplishment can be born out of the hard work, skills, connections and wisdom built over a lifetime…so far.

 

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

04/20/19

Impermanence And Continuity

Construction on the Cathedral of Notre Dame was begun in 1163 and completed in 1345. Today, 856 years later, it stands in its home city the awesome result of 182 years of hard work, dedicated intent, inspiration, innovation and Gothic artistry of the finest quality. Last Monday, April 15, 2019, this center of devotion and indescribable beauty caught fire and underwent millions of dollars In damages.

It’s a tribute to its unquestionable and continued value that those millions of dollars for repairs have been pouring in. Albeit among controversy as to just how to accomplish the task, the cathedral will be restored.

Family businesses too can have long histories. They too have been built, over centuries, by devotion and dedication, innovation, inspiration, hard work, high standards and pride.

Japan’s Hotel Hoshi Ryokan is the world’s oldest family business. It was founded in 718 and is now, more than 1300 years later, under the management of its 46th generation of family members. The family’s watchwords: diligence, humility and resolve. https://www.ho-shi.co.jp/en

But is it permanent? Arguably nothing is. Paris’ historic cathedral will never again be exactly as it was on that day, centuries ago, when it was completed. Hoshi Ryokan has unquestionably undergone many changes to ensure continuity over the centuries—to keep up with the times; to add value that attracts today’s visitors. Change, whether accidental or intended, is perhaps the only constant.

Most family businesses are far from permanent. It’s an accepted fact that most do not last beyond their third generation. For them, that which built a monumental cathedral and a 46-generation business is missing.

Contemplating all this, I stopped to read Seth Godin’s blog entitled Impermanence. https://seths.blog/2019/04/impermanence/. With regard to whether the future will or will not turn out the way we hope it will, he offers the following:

“We have much less direct control over the future than we hope, and that it will always surprise us.”

“We can’t control the future, but we can bend it. And we can’t freeze the world as it is, but we can figure out how to be a part of it.”

To build a family business with a basis for continuity, one can take inspiration from those long-ago builders who intended a great cathedral; saw it standing complete after nearly two centuries of continued work; inspiration also from the Hoshi Ryokan family, whose values transcend time. Accept surprise, and intend your business to be part of the future, both permanent and impermanent.