Tag Archives: family business

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.

 

05/24/20

Challenges Facing The Artisanal Family Business

Artisanal family businesses are found in many areas of our economy today. The common thread is that their craft is passed from generation to generation.

Some of these artisanal family businesses are struggling under the weight of newer business models. Wanting to see a way forward as well as sustain their legacy, intergenerational family members can experience conflicts when confronted with calls for innovation and entrepreneurial action. A stalemate is dangerous to all.

In this light the axiom, ‘respect the past while keeping an eye on the future’ comes to mind. Respect for the values, accomplishments and legacy that are the foundation of the family is a force that can propel future success, and equips the family with a vision of what the next generations might realize.

04/24/20

Shifting Sands

I’m now going into my second month of ‘sequestering,’ a term I like better than ‘staying-at-home,’ or ‘social distancing’ (a misnomer because my social interaction has zoomed along with Zoom).

Thinking through topics for this week’s blog I settled on the quality of empathy among leaders in times of uncertainty and stress. Writers on business leadership in times of crisis call attention to their being proactive, keeping their team members safe, and providing them the same amenities they want for themselves: the ability to work remotely and the tools to do so. They also stress the importance of communication and transparency regarding plans for employee lay-offs.

The stressors in family businesses are more complex. They are the products of the interconnection and interplay among the family, the business and the equity members—their conflicting needs and demands. Essentially there are three teams that need taking care of instead of one. Here, honest communication is key. It’s important to clearly share among all concerned what you know; what you don’t know; what actions are being considered, and decisions as to which will be implemented. And it’s particularly important these days to communicate with an emphasis on empathy.

Our understanding of COVID-19 is changing daily. We continue to travel into uncertain terrain, trying to figure it out as we go. In my conversations with family businesses undergoing stress in these unprecedented times I have reminded them of their shared values and asked that they exercise empathy. I advise them to give each other slack—so as to remain balanced—as they travel together in our present landscape of shifting sands.

04/11/20

COVID-19: Responding to the waiting game

As the COVID-19 pandemic sweeps across the world and America, I’ve felt that I could not post a blog without addressing this unprecedented-in-our lifetime pandemic.

While waiting to see how the coronavirus pandemic and sheltering-in-place will play out, and grappling with my own anxiety and uncertainty, I paused my blog and newsletter for a while. I wanted to prepare a response that’s reflective of my own experience; and not to offer an interpretation of the information that’s changing as a fast as it’s being presented.

Professionally I’m a resource and advocate for family businesses. I teach best-management practices of multi-generational family enterprises; work with family members on improving family dynamics; advise on business growth and entrepreneurial leadership. Personally, I’m a husband; father; believer in higher purpose in our lives.

In my virtual-video conversations with clients I see people grappling with uncertainty, yet plowing ahead. And I see others for whom the pandemic is overwhelming, if not paralyzing. I understand both reactions.

Settling into our new reality, my internal strategy for maintaining a practical, emotional grip on the situation has become, “I can do only what I have control of: washing hands, social distancing, and doing all I can to keep my family safe and healthy.”

As I write this, there appears to be a glimmer of light. The number of new cases is stabilizing in major cities around the world. Still there remain precautionary statements that the disease might return. We should not let our guard down too soon.

I’m grateful to and appreciative of the many first responders and healthcare providers who continue to put their lives on the line for us. And I appreciate and support those businesses that provide essential goods and services we all need to in order to survive.

We are all human. We are all striving to keep our families safe, sane and healthy. I am striving to remember all the lessons I’m being taught by this pandemic. An axiom pertaining to family businesses transitions comes to mind: “respect the past and keep an eye on the future.”

03/14/20

Family Business Under New Management

Seth Godin recently posted a blog entitled: Under New Management. In it he wrote:

“That’s a pretty silly thing to write on the store window.

It says to loyal customers, “watch out, someone new is in charge.”

And it says to strangers and the apathetic, “this place failed.”[1]

How often do you see a sign on a store reading: “Family Business: Under New Management?” We rarely do. But what would it mean if we did?

The most likely interpretation is that the business transitioned from one generation to the next. That’s significant. But there are other important ways a family business can come to be under new management.

The three-circle model of family business developed by Renato Tagiuri and John Davis in 1978, describes three interdependent and overlapping components of the family business system: the business, the family, and the ownership. In each of these, new learning, under new management can occur every day.

Business owners recognize improvements can always be made to their management and operational practices. But the family and ownership subsystems are often overlooked.

We have come to recognize that multi-generational success of family business is dependent upon a co-evaluation and perhaps “new management” of each of these systems, and their complex interactions.

Godin continues: “If you think about it, though, every day, every store is under new management, if we define ‘new’ to mean, “we learned from what happened yesterday.”[2]

[1] Under New Management. Retrieve from: https://seths.blog/2020/03/under-new-management-2/

[2] Ibid.

02/29/20

Envisioning Family Legacy

While consulting with the head of a family business, I frequently raise the subject of “legacy.” It comes up in connection with strategies for helping family-businesses move along the path of intergenerational transition; toward multi-generational success. Often however, at the mention of this word, I’m met with a sort of attention disconnect. For my client, the challenges of managing the business day-to-day overshadow any thoughts of building a legacy. It seems that this short-term focus creates a sort of mental cloud that diffuses any comprehension of what legacy is. This cloud cover affords no vision of the importance of legacy, or of its function or its range. It’s as though contemplating a legacy for future generations demands too much energy right now, and is seen as a luxury.

What is it about the idea of a legacy that’s so daunting? According to the Merriam Webster online dictionary the noun “legacy” means:

1: a gift by will especially of money or other personal property: BEQUEST// She left us a legacy of a million dollars.

2: something transmitted by or received from an ancestor or predecessor or from the past[1]

This kind of disconnect is not unreasonable when legacy is perceived only according to these definitions. But in my experience legacy in family business is far less strictly defined. It’s much broader, and in many respects less tangible. It includes family history, values, stories and reputation. It reflects the family’s accomplishments and bears witness to its challenges. Legacy is the imprint left behind by previous generations for following generations to learn from and experience.

It’s said in family-business-advisory circles that legacy springs from seeds planted in a garden by earlier family members who, while they will never see the resulting fruit, provide for future generations. In that sense each family business’ legacy exists even before its birth.

It may be helpful then, for family-business leaders to understand that their task is not to create a legacy from scratch but rather to sustain the stories that inspire family members across generations, together with a shared set of attitudes, values, goals and behaviors that characterize their own particular family.

The result is a multi-generational culture of harmonious family relationships, shared wealth, ownership, meaning and purpose.

[1] https://www.merriam-webster.com/dictionary/legacy

 

02/16/20

This Is What I Want

While teaching my class on Family Business Management at Baruch College in New York City, I’ve had the opportunity to draw a parallel to the well-known axiom related to real estate—location, location, location. When applied to family businesses, it’s communication, communication, communication.

Critical for any business as well as any relationship, in family businesses the mandate for communication is needed to address the challenges of business operations, ownership, family dynamics, family-business goals and shared values.

Lines of communication are often thought of with regard to these collective concerns. But there’s an aspect of communication in a family business that’s not commonly addressed, and yet, if neglected, can precipitate internal discord and even cause the business to ultimately fail.

In a recent interview with Tharawat Magazine, consultant and author Chris Yonker touches upon the necessity for individual family members to feel free to communicate, and pursue, their own interests and individual values:

“Yonker’s outlook pushes for the assignment of roles within the organisation or otherwise based on interest rather than obligation or expectation; to Chris, success is the alignment of purpose and place.”[1]

Pressure upon next-generation family members to join the business can be obvious, or subtle. They can be driven by a sense of duty; a feeling of indebtedness to the family history; parental expectations. Often they feel deeply inhibited with regard to saying what role they are genuinely interested in; what kind of future they want for themselves. According to Yonkers: “Those in line to take over must have the opportunity to speak up if their interests lie elsewhere and, in doing so, bring clarity to the question: who is most fit to lead?”[2]

The wrong person in the wrong job can create many kinds of problems, particularly when they are placed in a leadership position. They may be ineffective, causing confusion, conflicts on the job and among family members, and even loss of valuable employees and necessary talent.

It does no good and potentially great harm for the business or the family to force a young “heir apparent” into a role they are not interested in, or unfit to fill. Given the complexity of the issue and of family dynamics in general, uncovering these types of concerns may necessitate calling in a skilled family-business consultant.

[1] McCabe, M. (2019, October 15) The Path to a Harmonious Business. Tharawat Magazine. Retrieved from https://www.tharawat-magazine.com/sustain/yonker-harmony-family-business/#gs.cbp8bi

[2] Ibid.

01/31/20

Professionalizing The Family Business

Professionalizing a business means to change its model from owner-centric to management-centric. A business dependent upon the owner’s presence to generate revenue and profit undergoes a metamorphosis into one which operates according to established systems and processes. Responsibilities to keep these systems on track are delegated to staff experts. This model allows the owner to focus on what they do best; that which brings about the most progress. Fast-food restaurants are commonly cited examples of business systemization. Staff members are trained to run the business and produce a consistent product.

In an owner-centric business nearly everything revolves around one individual. The problem with this model is that we all have the same 24 hours a day and the 7 days a week in which to get our work done. As the business grows, so grows the work load. Ultimately it becomes too large to be successfully managed by a single individual. After reaching this point, continuing as an owner-centric business results in stagnated growth or owner burn-out, or both.

Understanding the significance of creating systems and processes is a necessary step in undertaking professionalization. Such operations, when in place, enable the business to respond quickly and appropriately to the swift changes in today’s business environment.

Young family businesses—first and second generation—may typically struggle with professionalization, just as any young non-family business might. One may think, however, that a 125-year-old family enterprise will have long ago accomplished professionalization. This is not always the case. Myriad factors influencing business activities today may leave next-generation leaders behind. What worked to bring the business into the twenty-first century may not be what’s needed to continue into the twenty-second.

For all business types on the brink of the professionalism metamorphosis, things get complicated. For family businesses it’s even more complicated. They are built on an interacting three-part structure: the business, the family and the ownership. Clearly the business system needs to be professionalized. But the family system needs to undergo professionalization as well. I will address this in upcoming newsletters.

01/4/20

Family-Business Ikigai

Over the holidays I was given a copy of Ikigai, The Japanese Secret to a Long and Happy Life, written by Héctor García and Francesc Miralles.

Ikigai (生き甲斐) is a Japanese concept meaning “a reason for being.” The word, translated into English roughly means, the “source of value in one’s life;” the “thing that you live for” or “the reason for which you wake up in the morning.”[1] The literal meaning is contained in the Japanese characters. 生き, “life” and 甲斐, “to be worthy.”

As I read the book, my uncle Nick came to mind. I recognized then the importance of Ikigai to an individual in a family business like ours. Uncle Nick was a master carpenter, and through his craft he provided well for his family. He was also a mentor, a bearer of family values and the custodian of a strong work ethic; in nearly 40 years he rarely missed a day’s work. I recognize now how profoundly practicing his craft and providing for his family gave him his purpose, his reason for being. Sadly, he passed away within 2 years of retiring. We’ve felt his loss keenly. Looking back, I see that one reason for his untimely demise was that he no longer had a driving reason for continuing to live. Nor had he thought to try and find one.

To understand the basis for living a long life the authors of Ikigai studied communities around the world in which there was a population of individuals 100 years of age or more.

They found that these individuals had purpose and remained active—mentally, physically and spiritually. They found people who had Ikigai.

They found centenarians that were doing:

  • What they loved
  • What they did well
  • What the world needed
  • Work that could make a difference

The found individuals whose lives were about connecting, creating, serving, teaching, building, healing and nourishing others.

It’s widely known that living with purpose and meaning protects against stress and illness.

In western culture, retirement too often carries with it a sense of abandonment of purpose. This was the crisis my uncle experienced. In Ikigai, retirement is seen as a transition, if not an evolution. The process of discovering what to do next is built on a group of principles: passion, values, what the world needs, where you can make a difference and more. (See figure.)

Helping a leader, who has been at the helm of a family business for many years, discover a new purpose—that which comes next—is an important practice that successful multi-generational family businesses undertake. It’s a critical step for preserving the family’s tangible and intangible assets. Importantly it also fosters a significant sense of fulfillment for all family members, supporting successful transitions across generations.

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

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.