Tag Archives: entrepreneurship

06/4/20

The Passage In-Between

Below is the letter I sent to my graduating seniors at Baruch College’s Zicklin School of Business in New York City, where I’ve taught Family Business Management and Entrepreneurship for the past 10 years.

As I was acknowledging the students’ accomplishments and, upon graduation, their facing a transition into the unknown, I thought of parallels to family businesses I have known. They too managed transitions. Both the graduating students and the family businesses have come to that place where one door closes and another has yet to open. For the family business, this is where the parent, as the incumbent generation, and the adult child, as the rising generation, reflect on past accomplishments and encounter a sense of an uncertain future.

For family businesses, these are times of opposing life stages, where the parent’s tolerance for risk decreases and the child’s desire to bring change increases. Here the parent is transitioning from ‘doing’ the work of the business to being a ‘memory holder.’ At the same time, the child is transitioning from a supportive role to one of leadership — to being held accountable for the future of the business, the family, and the positive continuation of their legacy. As the transition occurs, there opens an ‘in-between passage’ wherein the role changes are not yet recognized or feel correct. This is a ‘liminal space’—a place of both uncertainty and opportunity.

Here is my letter to my graduating class:

Congratulations to those of you graduating. 

I expect when you first started college, you could not envision how your graduation would be. You may have had, upon starting college, a feeling of entering unknown territory – a liminal space – an in-between place where one door has closed and before another opens. 

Then over time and after hard work, you settled in, moving forward and upward in seniority among college students. Suddenly the time has come, and another liminal space appears. 

2020 continues to be a year unlike any other any of us have experienced prior. Anticipations and expectations evaporated in front of our eyes, replaced with ambiguities, uncertainties, and even, perhaps, chaos. And the year is not over yet. 

As entrepreneurs, we need to be able to accept the ambiguity within liminal space. It is the space where normal and familiar activities cease. It is the threshold if not substance upon which creativity and innovation thrive. 

Trite as it is, the future is yours. And remember; as you embark on your new ‘you,’ you may fail at times. It’s what we do. Remember then the imperative truism of entrepreneurship — that the creative process succeeds for those willing to fail fast and fail often, for creativity is a cyclical and spiral process that can require constant re-invention. If there is any lesson to take away, this may be it.

 

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.

08/16/17

Toward A Family-Business Exit Plan

In the course of investigating the perceived crisis in business transition planning, U.S. Trust Company collaborated with the Eugene Land Entrepreneurial Center of Columbia Business School to produce a white paper entitled: The Owner’s Journey: Experiences Shared and Lessons Learned.*

The white paper reads as a thorough, in-depth, many-faceted alarm bell. The clarity with which it makes the case for early transition planning—in its multitude aspects—cannot comfortably be ignored—and certainly not by family businesses that wish to survive and transition their mission, vision, knowledge and wealth to future generations.

The authors found that few entrepreneurs started companies with the sole goal of getting rich. Rather they launched companies to fix a problem, to create something new, to act upon an insight that they alone saw, or simply to make the world a better place.

Getting rich or creating a legacy family business may not be the primary motivation of an entrepreneur, but as time goes by:

…capturing wealth and ensuring the sustainability of one’s life’s work becomes, very important.

To attain these goals, broad and careful planning is indispensable. For any business this is a lengthy and challenging process. For family businesses the difficulties involved are even more complex.

Families who have significant business assets need to acknowledge that there are two dynamics: one for the family and one for the business, and these dynamics need to be addressed in coordinated estate, exit and succession planning.

Several exit scenarios are described in the white paper. But for family-business owners, the most desirable among them is to pass the business on to a new generation of family members. However, the authors warn, an owner cannot always count on his/her children to be part of an exit plan. In keeping with the paper’s theme of long-term planning, a list of recommendations are supplied for preparing a family’s next generation to effectively take their places within the business, with a view toward multi-generational success:

  • Communicate your goals regarding the company with family members regularly.
  • Expose children to the business at an early age.
  • Encourage children interested in the business to educate themselves in appropriate skills with formal education and job experience outside the firm. Determine the appropriate person in the family with the right temperament, skills and experience for leadership.
  • Working with a professional psychologist can help with decisions about family succession.
  • Having a board with a majority of nonfamily members can be helpful in professionalizing the plan.
  • Regular family meetings, which can include a third-party expert in family business dynamics, can be helpful.

These recommendations are recognized family-business best-management practices that every family business would benefit from. The emphasis however is on persistence and flexibility through inevitable changes, while preparing for and accepting an unpredictable future.

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*All text in italics are direct quotes from The Owner’s Journey: Experiences Shared and Lessons Learned. Prepared by Eugene Lane Entrepreneurship Center at Columbia Business School in collaboration with U.S. Trust, Bank of America Private Wealth Management

04/29/17

Innovation—The Fail Factor

Nothing stays the same. Things find fresh avenues of growth and prosper or become stagnant and fail. This is certainly true of family-led enterprises. As a family business continues from generation to generation, significant social and economic changes can nullify what had been their core business. A culture of innovation is needed to ensure continued multigenerational success.

Two things are sure about innovation. One: It is necessary for long-term survival. Two: it is prone to initial failure.

Innovation undertaken when beset by hostility, by doubts; under pressure to succeed; under fear or failure, situates the whole process on unstable ground.

In Failing Forward: Turning Mistakes into Stepping Stones for Success, author John C. Maxwell writes: “To succeed you have to be open to problems. You have to be open to failure.” He presents examples throughout his book of many well-known people who failed—on average more than once—before succeeding.

As it goes in entrepreneurship, so it goes with innovation. The message: don’t be afraid.

04/6/16

Precarious Placement

Positioning the second generation as managers, responsible for overseeing the processes and systems established by the founder is a not-uncommon practice in family business; but this custom sets up a potential problem. The second generation never develops the entrepreneurial skills necessary to take the business into the future during the time of their leadership.