It has been said that in the next five or six years, 40% of all family enterprises will change hands. That means that every year, thousands of family companies are wrestling with issues like management transition, successor development and ownership transfer. However, working on transition issues may not amount to much if you haven’t taken steps to keep the entrepreneurial spirit alive.

[Read more...]

Have you ever noticed that family conflict seems to surface more around the Holidays than at any other time of year? For many families, Thanksgiving is a time to gather together, share a meal and renew family ties. Unfortunately for others, it’s an opportunity to get together and resume the family feud. [Read more...]

At a recent meeting, a business family I’ve been working with expressed how frustrated they were with the lack of apparent progress toward their succession goals. As the conversation began, the group appeared to be divided, with half insisting, “it’s not all that bad,” while the other engaged in finger pointing and wanting someone to “fess up.” It seemed they were getting nowhere until the question was asked:  “What’s the real conversation this family needs to have that you’ve been avoiding?”

[Read more...]

How well do you really know your family members?

One night after work a few weeks ago, my husband and I were having dinner and sharing tidbits from our day.

“So how was your day?” I asked.
“Not bad,” he said. “I did some work on my internet marketing strategy.”
“Sounds interesting. Who are you working with on that?”
“Todd Baylor. I really like his approach.”
“Todd Baylor? From ABC Marketing Strategies?” I asked.
“Yeah, that’s the guy. Do you know Todd?”
“Sure, I know Todd. How did you meet Todd?”
“Oh, I haven’t actually met him yet. I just know him from LinkedIn.”

With the explosion of social networking, it seems that we all know a lot more people than we used to. But do we really know all these people, or do we just know a little about them?
[Read more...]

Last month’s news that Steve Jobs was stepping down as Apple’s CEO put succession planning in the headlines. But you don’t have to be the most valuable company in the world to be concerned about succession. Every day, hundreds of owner-managed and family-owned companies wrestle with this issue without ever making the news. And while nearly all would say it’s important, very few are actually doing it. In fact, according to one study, the number of U.S. companies with a succession plan has decreased in the last five years. When it comes to succession, why do we say one thing, and do another?

Reason #1: The immediate future is the one you’re focused on.
It’s not surprising when leaders focus their energy on dealing with the immediate – especially now, with the uncertainty in our economy. But the economy alone can’t account for the widespread lack of succession planning in private companies. It wasn’t a top priority before the recession and it’s not one now. The reality is, unless a top leader pushes succession planning because he or she thinks it’s a vital, strategic issue, it won’t happen. Day-to-day business concerns will always get first dibs on your time.

Reason #2: You’re not ready for the difficult conversations.
Very often, when we say “I don’t have time,” or “the business needs my attention,” what we really mean is “I’m not prepared to look it (or them) square in the eye.” There’s no getting around it – succession planning requires difficult conversations and self examination. But instead of putting it off because you’re not ready, think about what you can do to get ready. Susan Scott, author of Fierce Conversations, said it best: “The most valuable thing any of us can do is find a way to say the things that can’t be said.”

Reason #3: You don’t have a good reason to.
Whether you’re 48 or 68, stepping away from the business can seem like it’s light years away. So it may feel like there’s nothing pressing you to plan now. But in the back of your mind, there’s that niggling doubt. So how can you inject a sense of urgency into your thinking? You could set yourself a challenging goal, or give yourself a limited timeframe for taking the first step. You could “burn the boats” and go on record so there’s no turning back. Or you could recalibrate your thinking by talking to other business owners who’ve navigated succession. Widen your perspective and you might find just one good reason to start.

Reason #4: You’ve thought about ownership, but not management succession.
When private companies talk about succession, they’re almost always referring to ownership – who will own shares or control the business in the future. Management succession on the other hand, is all about who’s going to operate the company in a way that makes the shares worth having. It means preparing people to do the work that needs doing so that the company continues to be viable. Ask yourself these questions:

• Has anything changed in the business in the last two years? Have the demands increased? Are any new skills required?
• Will you have any retirements other than your own in the next five years? If so, how will you replace the talent?
• Can you fill those positions without over-promoting people and risking the “Peter Principle”?
• Do you have the people in place right now to fill key positions without making costly external hires at the last minute?

If you haven’t thought about management succession, you may be planning, but only partially.

Reason #5: You’ve developed a successor, but not the organization.
Business sustainability is all about replacing reliance on individuals with creating organizational systems. (This is one reason why franchises have a much higher rate of success than other small businesses.) When asked “What’s your succession plan?” far too many owners answer: “Karen. She’s been working here 20 years and knows everything I do.” But what happens if Karen decides down the road she doesn’t want to be the CEO? Or gets lured away by a competitor? Or the unthinkable happens and Karen becomes disabled? Some owners tell themselves they’ve planned for succession because they’ve chosen a successor. But it’s much more than that. Succession means developing the organization and its systems so that if something happens to an individual, the business can go on.

If you’ve been telling yourself that you don’t need to worry because you’re not ready to retire, or you have good people to step in, or you’ll figure it out when the time comes, take another look at the reasons why.

In the world of family business, it seems that some “generally accepted” axioms are out of date, yet still frequently quoted. Some might argue that these popular sayings simply condense truths that everyone knows. But the dangerous thing is that these truisms (however true they were to begin with) are often accepted without question. Their very familiarity can block critical thinking and reflection. Here are four family business axioms that may need to be put out to pasture.

Shirtsleeves to shirtsleeves in three generations. This saying is so universal, it appears in almost every language and culture: clogs to clogs (Scotland), stalls to stars to stalls (Italy), rice paddy to rice paddy (China). Certainly, we have an intuitive sense that the three generations phenomenon can be the case. Family business statistics also bear this out. However, it isn’t pre-ordained for every family business. And it doesn’t take into account the new businesses that are started in succeeding generations. The adage isn’t helpful or necessarily true, it’s just fatalistic.

If you fail to plan, you plan to fail. Does anyone plan to fail? Really? The advice behind the words is good (planning is important), but it’s a bit too simplistic to be very helpful. People put off planning for all kinds of reasons – indecision, uncertainty, fear, inexperience, conflict avoidance, simple procrastination. Knowing what we should do doesn’t have nearly the impact as understanding why we are or are not doing it.

She’s the Chief Emotional Officer. This pseudo title might seem catchy, but it usually reflects an assumption that the husband / father is Chief Executive Officer, while the wife / mother is the Chief Emotional Officer who tends to family relationships and makes sure everyone is playing nicely. No doubt, this is still true for some families. But in others, the roles aren’t nearly so clear cut. Also, whether referring to a man or a woman, the phrase sends a subtle message that the emotional life of the family or the needs of individuals is one person’s role. In reality, it should be part of everyone’s thinking.

You just have to separate business from family. This one ranks up there with another favorite: “It’s not personal, it’s just business.” As any family business will tell you, it’s never just business. As if it were that simple. And it’s bad advice to boot. The combination of business and family is what makes family businesses unique and powerful. The better advice is not to separate the two, but to accept that priorities in one or the other may overlap or be in conflict and need to be consciously managed.

Let’s lay these family business axioms to rest. Their popular wisdom is misleading at best and insulting at worst. More importantly, they’re a poor substitute for the deeper thinking and intentional discussion needed about legitimate family business challenges.

When asked about their top concern, compensation in family companies tends to rank right up there with succession planning. It’s a tangible symbol of the family enterprise’s multifaceted relationship with family members and others it employs. It’s very easy to confuse a paycheck with rights of ownership, or a bonus with parental affection. But that confusion can send a mixed message that impacts both the business and the family.

[Read more...]

Merger and acquisition activity for family companies, which slowed during the recent recession, seems to be making a comeback. In December 2010, several prominent family enterprises made headlines. The Pritzker Group, a private family investment firm run by two brothers, ventured into health care with the acquisition of a medical device company. Tishman Speyer Properties, run by a father and son team, acquired a real estate holding company in Chicago in a transaction estimated at $385 million. But what happens after the headlines?
[Read more...]

Three stories in which something went wrong, but something bigger went right

In a classic case of turning lemons to lemonade, insurance company Aflac held open auditions in six cities last week, searching for its next “quacksperson.” The former Aflac duck voice, comedian Gilbert Gottfried, was fired after posting controversial statements on Twitter about the recent tragedy in Japan. But Aflac found a creative way to turn around a regrettable situation with a sense of humor. In doing so, what could have been a terrible PR incident for the company will probably end up becoming a case study. Lemonade lesson: When mistakes happen, don’t duck and cover.
[Read more...]

If you’re feeling burned out in the family business, you’re not alone. Even the most successful people experience it from time to time. It can happen when you’re feeling overwhelmed by business or as the result of prolonged tension in a relationship. Whatever the cause, burnout doesn’t happen overnight, and it’s tough to fight off when you’re right in the middle of it. So it’s important to recognize three sources that can lead to burnout – boundaries, balance and boredom – before they threaten your health, work, relationships and the family business.
[Read more...]