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Managing Stress in the Family Business

Managing Stress in the Family Business

“Family business” means many things to many people, from the family farm to the heirs who own business empires built by their ancestors. Millions of small businesses today are family businesses. They might be a husband-wife or father-son team, they might be family members developing former farmland into a nursery or managing their golf course. They might be siblings-turned-partners trying their hand at a new business or there might be relatives working for relatives. The variations are endless because families are unique and oppportunities for family-owned and family-run businesses come in all different sizes and shapes.

As the manager of a family business you can utilize principles gleaned from the experience of others who have walked in your shoes. Much of that experience was painful. Managing family business is “tricky business.” Your stress level will be lower if you learn from the experience of others. Here are four of those learnings.

Run the family business like a business, not like a family. Base business decisions on the market, the merits of your product or service, the company’s ability to fill orders and performance levels of your workers. Do not base decisions on whose feelings might get hurt, whose loyalties could be betrayed or what old scores haven’t been settled.

Translation: the family members are challenged to put aside family dynamics in favor of business principles and business-like behaviors. Sometimes adult children need to supervise their parents in the business. Sometimes a family member needs to be the boss even though he or she may not be the oldest, smartest or most respected member of the family. Sometimes the family needs to hire an outside person to be the manager.

Be guided by the business plan. First be sure to have a business plan! Keep it up to date. One of the beauties of having a business plan is that it separates personal considerations from business considerations. The manager is simply following the plan. The unpopular decisions “are not personal.” The mere fact that you manage according to the plan serves to emphasize that business is business, no matter how many family members might be involved.

and not at any other time. Families value peace and stability. Once decisions are made there is little desire to consider change and start debating all over again, much less risk triggering new arguments. Business, however, is not like that. There must be an openness to change in light of ever-changing factors such as competition, market trends, and labor and production costs.

One big factor triggering change is Success means growth in the business and also a need to carefully consider the best use of increased cash flow funds, tax sheltering of company profits and best use of surplus funds. Sometimes family members are tempted to view company profits as their piggy bank. The manager must take responsibility to prevent raids on the piggy bank if the business is to endure and prosper long term.

Be sure to seek appropriate professional advice. Whether it be accounting, legal, marketing or tax matters, keep informed and be guided by the best current thinking. Remember, the tendency in families is to set a course and stick with it. Decisions made in the past might not fit today’s’ business climate. It is the manager’s responsibility to keep company policy sensitive to current business trends. To the extent that you report advice from professionals you are giving a second message as well: opinions based on family considerations must be considered differently than professional business advice.

Translation: in families the views of each member matter and should be considered. In families the goal is to promote good relationships and mutual support. But in business the goal is to succeed with the business. Family members are challenged to be good employees, good workers, good business directors and good team players while putting aside personal matters. Separating family from business opinions and decisions is neither easy nor totally achievable but it should be a goal.

Bottom line: family businesses vary greatly. All businesses vary greatly. The secret to managing is to stick with what successful businesses have in common: sound business practices. These begin with separating personal matters from business matters, following a sound and well-informed business plan, taking good advice and changing when change is merited.

Next Generation Issues and Solutions For a Family Business

Next Generation Issues and Solutions For a Family Business

Children may not automatically want to be part of the family business. Sometimes children who have grown up in the business become bored, uninterested or lack the desire and drive necessary to successfully run the business in the future. They may actually take the business for granted, assuming it will always be there for them. Understanding this going in, a family business can more effectively plan for generational issues in the growth and future of the business.

Preparing the Next Generation

The questions to ask are: Why do children join a family business? What are their motivations?

— To Influence the Family: This can be a good thing or a bad thing, depending on the kid’s underlying motivations. A Family Business should foster a mission which positively influences family members, not provide ammo for the children to attack each other. Positive Influences include:

– Family Education Fund/ Emphasis on Continuing Education

– Foster an Atmosphere of Openness & Learning

– Set good examples for kids to aspire toward

– Ingrain the values of Business Integrity and Ethical Responsibility

– Foster & Promote Civic Duty

– Promote & Support Community Volunteer Work, Projects and Board representation

— To Help the Family Succeed: Success for the Family Business should translate to the success of the Family. Future generations can have better lives, pursue their passions and be happier if part of a cohesive team striving for a better future for the entire family- not just those in the business.

— An Opportunity to Further one’s Career: It isn’t necessary for every family member to remain with the business. Family members should be encouraged to pursue their passions, and the family business can be the proving grounds, the incubator, for family who want to pursue other careers or possible spin off another related business. Often, children find that after working for other companies early in their careers, the Family Business is a great career destination, allowing them to reach their full potential and constructively apply their expertise and experience.

— Like the Family Business: Having a passion for the industry and business the family enterprise occupies is often a major reason why family members join the Company. What also plays into this is the requirement to work outside the Company to gain expertise and experience. When the family member returns to the family business, there is inherent respect for the opportunity given and the successful growth history of their predecessors before them. Having a firm understanding of what makes the family business special and unique creates a strong loyalty and passion for it.

— The Challenge: If family members worked in the family business from a young age, were taught the value of a dollar, went off to college and to work for an outside Company for a several year period, then returning to the family enterprise can be a fantastic challenge to pursue. For this reason, it is important the family business provides qualified family members with a real growth opportunity, a challenge to inspire drive, loyalty and passion in their career maturation.

— Sense of Duty and Responsibility: Some of the older children in the family’s next generations may feel the duty and responsibility to serve their family interests and ensure future succession success of the business. This becomes apparent after the younger children become involved in the Company and sometimes the older child moves onto another career since his or her passion was extinguished by the stress and forbearance of fiduciary responsibility. Or, it is sometimes the older children who spin off a subsidiary or new Company after feeling they have accomplished their role in the Company. It is important to encourage the family’s children to pursue their passions, no matter what industry, and gain outside experience; however, sometimes it is a necessity to have the older child assume responsibilities early on if resources are scarce in the Company’s particular Growth Stage.

— To Make Money: While this is often the number one reason family members join the family business, it is closely followed by the “Liking the Business” category. This relationship certainly makes sense: making money is a major requirement of any career but it is strongly linked to liking what you are doing, the passion factor. A well-prepared family business provides ample growth opportunities for family members to nurture their passion and be well rewarded for it through a competitive Compensation Package.

Considerations when planning and preparing for the next Generation in a Family Business

— When family members are young, have them work on simple jobs on a part-time basis.

– This provides insights into the business, helps them understand the business from the bottom up, gives them a strong work ethic and encourages them to pursue and finish higher education.

— Work for an outside Company after graduating from college to broaden training and background.

– If the family members worked in the lower ranks of the business before and during high school and during the summers in his/her college years, then outside experience can justify moving a family member into a higher position level upon entering back into the business.

— Some tips when preparing for the next generation to join the Company:

– Never allow a family member to work in senior management until that member has worked for someone else for a few years.

– Rotate the family member throughout different positions to cross train, as well as, pinpoint interests and skills.

– Promotions only come when earned, just like everyone else in the Company.

– Devote time every day, preferably over breakfast, for face-to-face mentoring, teaching and training.

– Don’t take business issues and matters back home.

– Reward the family member with responsibility so he or she can learn to manage the business in order to potentially take over or have executive level responsibilities in the future.

– Make sure the family member knows you trust him or her.

– Allow them to make mistakes and fail; give them room to grow and learn. Help them when asked; give them autonomy.

Next Generation Issues and Solutions

Here are some common main generational issues characteristic to family business operations and how to effectively deal with them.

— The Business Owner Who Won’t Delegate: A very common problem in family enterprises is the owner or CEO who can’t let go. Many owners have a strong personal connection to the business which prevents them from allowing next generations to assume more responsibility in the business.

– The second generations are “entrepreneur successors” in training and the business owner patriarch or matriarch should be very careful not to stifle that passion and drive.

– An inherent attitude that an owner’s or founder’s shoes cannot be filled is common in a family business; therefore, it is vitally important to the future continuation of the business for a clear path toward ascendancy for the next generation be established through training, mentoring and delegation of responsibility.

– Best Advice: Hire a Business Consultant to help you work through these issues in order to develop a clear ascendancy plan that is fair, yet, challenging. Establish clear goals and expectations so next generation family members can strive to attain goals and career growth, without stifling their passions and drive. The Business Consultant can bring valuable experience and objectivity to this often controversial issue.

— Next Generation Gaining Acceptance, Respect and Credibility: If a family member has worked from the bottom up during their formative years, gone off to college to earn their business related degree(s) and gained valuable expertise and experience working for an outside firm, give him or her the respect they deserve.

– Next generation members will work hard in the business if they are praised, encouraged and accepted as equals.

– Be careful not to set expectations too high, they should be in line with the family member’s training, education, personality, skills and experience.

– A next generation member should express strong interest in the family business so the family knows of his or her passion, drive and interest level.

– The next generation member should know what their capabilities are and communicate that clearly to the family owner(s).

– A next generation family member should conduct a self-analysis of goals and skills:

* What are my strengths and weaknesses?

* What areas do I need to work on or need help on?

* What other parts of the business do I need to learn about?

* What are my leadership qualities? Are they sufficient?

* What training, mentoring and continuing education do I need to fulfill a leadership role in the family business?

* Am I happy working in the family business?

– Three Stage Training Program for Family members joining the business:

* Stage 1: Initial learning stage to fully understand all the aspects and divisions of the Company: Cross-Training.

* Stage 2: Specialization in a particular skill.

* Stage 3: Become a generalist, learn to manage, motivate and lead. Need to have strong strategic Management Skills.

– The next generation should have mentoring relationships not just with the family founder/ owner/ CEO but also with experienced business people in their industry, preferably one from other family enterprises. Long-term development mentoring support is a vital component in a next generation member’s growth.

– A next generation family member should work outside the family business as this will increase his or her knowledge, experience, confidence, and most importantly, enhance credibility with family and non-family employees alike.

Family Business, Non-Family Business, Urban Myths.

Family Business, Non-Family Business, Urban Myths.

After 20 years of working with Senior Executives across the world it’s interesting to see the mistakes when appointing Senior Executives. There can be many reasons why, but one reason is not understanding the differences of working in a Family Business and a Non-Family Business. I’ve recently met several Senior Executives who are unhappy with their employment because of this lack of knowledge and understanding and I’m meeting Business owners who didn’t realise there was a difference. These Business Owners feel that money and title is enough and stick to the Mantra of “Surely experienced ‘C’ level Executives can work in any company?”

Due to the change of economy, I have become more involved with assisting Family Businesses rather than just the corporates in finding ‘C’ level people. To do this successfully I believe that everyone in the process of hiring Senior Executives must understand the differences that separate the two entities. Having worked for an English and Indian Family Business in a past life this has helped me at first hand to see the ups and downs of these Businesses; this with a theoretical base has helped with running my own companies or advising others with theirs.

One recent company I have been involved with was run and founded by a successful New Zealand Entrepreneur. He does not have anybody in his immediate family to hand the reins over to. He has tried (outside the family) executives to fill his ‘C’ level roles and has had three people in three years! What is the problem? Was this a real Family Business? Was the Problem his, or the Executives?

We discussed the reasons for the failures but in terms of assisting the owner I got him to firstly look at where his people came from. All three had been ‘C’ level people in corporates and had done an excellent job in their corporate environment. They all returned to corporate life and continued to do well in their new roles. Why did they fail then in this successful company?

What I needed the owner to do was to identify a “Family Business”. I don’t normally use dictionary definitions but feel that in this instance Wikipedia gives a satisfactory explanation of a Family Business;

“A commercial organization in which decision-making is influenced by multiple generations of a family-related by blood or marriage-who are closely identified with the firm through leadership or ownership. Owner-manager entrepreneurial firms are not considered to be family businesses because they lack the multigenerational dimension and family influence that create the unique dynamics and relationships of family businesses” Wikipedia 2014.

We looked at his company and although he didn’t have anyone in the immediate family to take over the reins he had people who owned the company in minor leadership roles. We both agreed he did in fact have a Family Business.

He thought that buying in top salaried ‘C’ level Executives from corporates would enhance growth and sustain his business. He had not seen any differences between Family and Non-Family Business.

Urban Myths for Family Businesses;

All are unstable Small to Midsize businesses’.

As an Executive I don’t want to baby sit the junior family members so they can take over my job.

A non-family member will never run the company.

Mother and Father Companies, the only people that matter in the company are family members.

Emotional hard to work places due to family disagreements/arguments.

Incompetent family members in positions of authority.

Are these statements true or are they just Urban Myths?

Family businesses are one of the fastest growing sectors of the world economy and now merit serious consideration by Senior Executives looking to advance their careers. This is an amazing turnaround from 25 years ago when nobody wanted to work for a family-owned business. There now seem to be many positives;

Patricia Epperlein from InterSearch reports that;

In the USA, 90% of businesses are family-owned. They contribute towards 40% of that nation’s GNP and pay approximately half of its total wages.

59% of France’s Top-500 industrial companies are family-owned.

It is estimated that 70% to 85% of all businesses worldwide are family-owned.

Tom O’Neil NZ Herald. Jan 2014 states;

Small to medium businesses are the lifeblood of New Zealand industry. Various sources cite family businesses as representing 75 per cent of Kiwi firms, providing up to 80 per cent of employment and 65 per cent of national GDP.

It’s interesting to note that when companies around the world state that they are a “Family Business” they are trying to reinforce positive family values of, Integrity, honesty, trust and loyalty.

Not all Family Businesses’ are SMEs. Companies like;

Porsche

WalMart

Tata Group.

In New Zealand the Talley Family (Agribusiness) and the Pandey family (Hotels).

Simon Peacocke of BDO Auckland, an accredited Family Business Advisor works with numerous NZ Family Businesses and feels that they do well because of the following reasons;

Family businesses think very long-term and are very resilient, much more so than non-family businesses.

Second and third generation family business members start their apprenticeship at a very young age. At 5 years old they are hearing their parents talking about the business so they have an incredible depth of knowledge to draw on.

Their relationships with staff and communities also tend to be different – closer, more connected, more loyal.

Staff tend to become part of the family business and to stay on as long-term committed employees.

While corporates like to be seen supporting their communities, family businesses generally don’t promote they are doing this – they just do it.

They don’t throw lots of money at things trying to get rich quick.

They also have a powerful focus on building relationships with staff, customers and suppliers.

So is it worth working for a family company? Is it better to work for a Non-Family Business? Is there any difference when the economy is good or is in a slump?

Nicolas Kachaner 2012 in the Harvard Business Review states,

“Results show that during good economic times, family-run companies don’t earn as much money as companies with a more dispersed ownership structure. But when the economy slumps, family firms far outshine their peers. And when we looked across business cycles from 1997 to 2009, we found that the average long-term financial performance was higher for family businesses than for non-family businesses in every country we examined”.

Senior Executives looking for longevity in the work place should look at the Family Business as this would take them through economies varying peaks and troughs. They will need to be aware that this will always be done in a cost effective way.

Business Consultants believe that they can tell easily if the company is Family or Non-Family Business. You just walk into the Head Office. A Non-family office has a very substantial corporate office with a “Wow Factor”. The Family business being more Frugal has very few “Bells and Whistles”. This Frugality is about the Family Business CEO looking to invest in the long term 20 year plan with the business passing down the generations. The Non-Family CEO is looking to make an instant mark and will try and outperform the person they have taken over from. There are many studies that show that Family Businesses did better in the recent Global recession for the above reason. The Family Business is frugal in the good times and the bad allowing them to weather the storms of economic crisis.

This is one of the factors that had been wrong in my client with three ‘C’ Level people in three years. His ‘C’ level people came in with a quick turnaround plan which they hoped would give a quick fix and outspending the last person in the hope that they would do something instantly. No twenty year plan for them as they had never been afforded this way of working in the past.

Do Family Businesses perform differently in other countries?

Justin Craig, PhD states,

“Interestingly, in many aspects family businesses as a sector do not vary much from country to country. There are obvious cultural differences but a business with family involvement is challenging in every country. It is also more rewarding than the ‘corporates’, let’s not forget that. Of course, there are older businesses in Europe, for example, than in Australia and New Zealand and the United States, and the mind-sets of companies in Europe will differ than in the later developed countries. But day to day the differences are not noticeable. Older businesses have more at stake and lots more to lose but they also have advantages. Family leaders still have to manage three independent and interdependent systems being the family, the business and the ownership group”.

Appointing the right Senior Executives is crucial to any company and is a costly acquisition. There are many reasons why hiring at this level goes wrong but getting it right can make a huge difference to your company.

Can Family Business Consultation Improve Your Business

Can Family Business Consultation Improve Your Business

Do you know what family business consultation is? First, let me tell you what it’s not: family business consultation is not therapy. Instead of focusing on the past and all the problems of the family, his focus is on improving the function of your business (which may of course also improve family relationships). We don’t go deep into your childhood or sibling rivalries. The results of this work are measured by improved business performance in the here and now.

In my work with family businesses, there are four components that I have found to be crucial. These include managing conflict, succession, communication, and roles.

Manage Family Conflict

As part of a family business, you know how quickly conversations can degenerate into conflict. Arguments are more likely in a family business because family members are more comfortable with each other (and, therefore, less censored) than regular co-workers. Not only can workplace conflict hurt relationships among family members, can reduce your credibility and professionalism with other employees.

To get better results and enjoyment from your business, you and your family can:

o Recognize the causes of business disagreements.

o Change the course of communication before conflict develops.

o Better understand family member’s views on business issues.

o Assertively state your thoughts and opinions.

o Develop a system for handling disagreements in a private office (not in front of employees).

Do you think you and your business will perform better with lower conflict? I bet so.

Plan for Change in Business Structure & Succession

Your business will eventually change over time. You may consider bringing on junior partners, promoting someone, or creating new titles and responsibilities for people. Family members, business partners or investors may consider a change in the business structure. Planning for succession is an essential component to the success of a family business.

To effectively plan for your business’s succession, you should be able to:

o Openly discuss issues related to succession.

o Learn how people feel about taking over the business–don’t assume that your son or daughter wants to or feels comfortable telling you how they truly feel.

o Address potential challenges to a new partnership or business structure up front.

o Anticipate family members’ and employees’ positive and negative reactions to changes.

o Ensure a smooth transition into your new business structure.

Enhance Family Business Communication

Many of the family businesses I have worked with surprised employees (and even me!) by how much they argue. In your family, it may feel normal to have disagreements or even a heated argument. It may blow over, and no one is bothered much by it.

Even when this enters the workplace, it may still feel natural to you, and you may not even notice

– but other people do. And it often makes them feel uncomfortable. Simple conflicts and communication difficulties can block your business’s ability to thrive. The good news is that these challenges are easy to address. Family business consultants helps to:

o Point out communication problems.

o Coach family members on developing new communication patterns.

o Establish regular times for family business members to have meetings.

o Make meetings more effective and efficient.

Clarify family member business roles

The fourth key point is role clarification. A common problem in many family businesses is that individual roles and responsibilities tend to get blurred. Have you experienced this? You and your family members step on each other’s toes, and it isn’t clear who’s in charge of what or whom?

Business roles are different from family roles. This can become confusing – not just for family members, but also for your employees, and even customers. An absence of role boundaries often results in communication difficulties and conflict.

To have a thriving family business you need to:

o Clearly identify and label specific business roles for each family member and employee.

o Ensure that each is content with his or her business role.

o Outline job descriptions and responsibilities for each individual.

o Create clear roles for new hires.

o Establish the organization’s hierarchy and determine who reports to whom.

As a family business, you have a unique opportunity to thrive. In my experience, family businesses have more passion, creativity, and loyalty than the average business. Once you harness these things and address the four components of conflict, succession, communication, and roles, your business will thrive. And on a final note, don’t forget to spend quality non-work-related time with your family members.

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A Family Business Affair

A Family Business Affair

Family businesses continue to form the backbone of the American economy. Did you know that 35% of the Fortune 500 companies are family-controlled businesses? Family businesses account for 50% of the United States domestic product. Family businesses generate 60% of the country’s employment and 78% of all new job creations. For example, Wal-Mart, News Corp, Tyson Foods, and Ford Motor are all family businesses. One thing that all of these businesses have in common is that they all face the same challenges of maintaining continuity, longevity and lasting success. Secondly, the controlling family’s members are currently active in top management and the family has been involved with their company for at least two generations or they plan to be.

Here are 5 tips to ensure the success of your family-owned business:

1.Most families who succeed in business would agree with Thomas Edison that success is a mixture of “10 percent inspiration and 90 percent perspiration”. The secret of building a solid, enduring family business is that everyone who’s seriously involved in it has to work and work hard.

2.The adhesive that seems to hold most successful family companies together is a combination of mutual affection, collective admiration, shared goals, and complementary skills.

3.The family member in charge of a successful family business must wear two hats. You can love your daughter (the consulting manager) even as you bring to the attention of the consulting manager (your daughter) the recent customer complaints that have not been resolved by her staff.

4.Consistency between the family’s values and the fundamental principles or the way business is done must always be in harmony.

5.It is important to take some time off and some time away from the business. A potential problem for families in business is the pressures of being constantly with the same people all of the time.

The typical family business is a sole proprietorship that is most likely to operate from the home (56.6%) as it is from another location (43.4%). The average family business is ten years old, with three out of four having been started by the current owner. Businesses founded after 1990 make up 35% of the total family business in the United States. Computers are used in 70% of all family businesses.

In general, families who operate a family business rate their quality of life as a ‘4’ on a five-point scale. Household managers often participate in the family business. Eighty-seven percent of the household managers report they would rate their level of satisfaction with their role in the family business on a five-point scale at a ‘4’ or ‘5.’

Finally, be proud of your company and your family and let the world know it. If your name is on the door, you have a double role both inside and outside the business. Your pride in the company, in the work it does and in the family that stands behind it can have mammoth management and marketing value. Family members involved in successful family businesses really let their pride shine.