Keeping the Family Business “In the Family”
by Ira Miller
The Chemark Consulting Group
Irecently interviewed the founder and CEO of a successful small business and his two sons. The founder wants to grow the business and
ensure a place for his sons. The boys want the
business to succeed and become the foundation
for employment in their community and wealth
for the family for generations to come.
We have put together a three-step game plan
for this business that brings the sons into the de-cision-making process both as executives and
owners. The three steps include:
1. Finding Capital (pricing models; cash cycles; packaging models)
2. Strategic Direction (external view; internal view; implementation of change)
3. Organization Impact (structure/ management; policies/methods; involvement)
In the process of discovering this particular
family’s goals, I came across a number of “gaps”
that we will need to bridge as we work together.
As you will see below, Priscilla Cale and David
Tate have identified some of the more frequently
encountered gaps in family-owned businesses.
Excerpted from “Building Commitment in the
Family Business Begins with YOU,” By Piscilla
M. Cale, MBA and David C. Tate, PhD
Generational differences between owners and
successors can account for some of the interpersonal challenges that surface in family-owned or closely held businesses. Members of
the veteran generation may see Baby Boomers
as self-absorbed and view those of Gen X or Y
as stubborn, unaware and disrespectful. Baby
Boomers may characterize members of Gen X
or Y as rude, impatient and having little regard
for established processes. And members of Gen
X or Y might characterize Baby Boomers as
workaholics, self-righteous and clueless. Either
way you slice it, those in Gen X and Y are of-tentimes (and unfairly) labeled as irreverent
and uncommitted.
But when it comes to family businesses,
most family business owners want the business
to remain family-owned. And so, members of
the senior generation face a dilemma: while
they may want to transition the business to the
next generation, they are fearful that the next
generation is not or will not be as committed
to the business as they are.
In a number of surveys, commitment is ranked
as the second-most important successor attribute—
just behind integrity. Conversely, lack of committed
leadership has been cited as a barrier to succession.
So, for family business leaders, the question becomes: How can I build commitment in successors?
Here are a few tips on how leaders can foster
commitment in the succeeding generation.
Exhibit commitment
One gripe heard from successors is that it is unfair
to expect them to be committed to a business that
(a) doesn’t have an established plan for succession;
(b) doesn’t have leaders who have built an estate
plan that protects corporate assets; (c) doesn’t have
formally identified career paths and job descriptions; and (d) doesn’t have a strategic plan. And
their concerns are not baseless. In fact, only about
one-third of family businesses have a strategic
plan, one-third have built a succession plan, one-third have an estate plan (that goes beyond a simple will), half have developed job descriptions and
only one in five have descriptive career paths by
job function. So for the next generation to be committed to the business, leaders must exhibit commitment by establishing plans and processes that
will ensure there will be a strong business that can
survive beyond the transition of leadership.
Appreciate different work styles and the effi-ciencies technology brings
Globalization of the late 20th century (and the
dotcom era) has brought much efficiency to the
boardroom, and it also allows leaders to delegate
tasks to others more effectively and outsource
those tasks that are not value-added. Technology
allows leaders to videoconference, work remotely,
monitor progress toward goals and be plugged in
virtually anywhere and at anytime. Yet, just because successors may not physically be at the office
for 12-hour stretches every day doesn’t mean
they’re being unproductive. Understand that technology brings opportunities to have a work/life
balance, and brings about greater efficiency that
places less cost demands on the business.
Be a participatory leader
When leaders involve successors in current business decisions, it fosters buy-in and feelings of inclusion. It also generally leads to better decisions
(being that the leader has considered multiple opin-
ions) and helps successors to believe that the business will be strong enough to survive a transition.
In fact, studies of leadership in family firms found
that participative leadership was associated with a
number of positive results, including favorable
family and financial outcomes, greater employee
satisfaction and greater levels of commitment.
Be transformational
Closely related to participatory leadership, transformational leaders motivate others and help to
build cohesion in ways that increase loyalty. There
are four ways in which leaders can become transformational: (1) by giving individual consideration to employees and acting as a mentor or
coach; (2) by articulating a compelling vision and
communicating optimism about future goals; ( 3)
by providing intellectual stimulation and challenging employees to think, learn, and share ideas;
and ( 4) by exhibiting charisma, pride, respect,
trust, high standards and ethical behavior.
With a new generation entering the business
comes a new set of norms and practices that
sometimes mystify those members of the senior
generation. But change is natural, and new ways
of working are an integral part of evolution. Just
remember, though: nobody wants to be part of a
sinking ship. If you want to attract, retain and
build committed next generation leaders, incumbent leaders must put forth the effort first to let
successors know that they are doing the important work to make sure that the business is safe,
strong and an exciting place to work that offers
opportunities for personal and professional
growth. And so, here’s our advice to family business leaders: Be committed to build commitment.
What you can do now
It seems to me there are four steps to take as
you contemplate leadership succession to the
next generation:
• Accept that you will not work forever. Desire
for the next stage of life or Mother Nature
will ensure that this assessment is correct.
• Make your own, private assessment of the
leadership potential within the next generation.
• Ask them about their desires for their life.
Does or could it include running the family business?
• Find someone who can guide you, your
business’ owners, family and leadership
through the planning and execution of the
transition. CW
