Do You and Your Family Share a Dream?

November 19, 2007
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PHOENIX - “Family-owned businesses present a unique set of challenges,” said Tim Gregori of CORE, the Center for Organizational and Relationship Excellence, at the Clockwork 2007 Congress in Phoenix, to an audience of smallish, family-owned contracting companies.

It may have been an understatement. Some families have a hard enough time coordinating holiday meals once or twice a year. Coordinating business activities with family can be intimidating but also rewarding. It depends on these families developing and following something called a shared dream, Gregori said, as well as treating family the same as any other employees on staff.

“Leaders in family-owned businesses face the same challenges that all businesses face, plus the unique stress of combining family and work,” he said. “That means the person sharing your sink and burning the toast will also be there at work.”

HIGH FAILURE RATES AND MORE FUN FACTS

In order to be called a family-owned business, a company must employ at least two blood-related and/or married family members.

According to Gregori, fewer than 33 percent of family-owned businesses make it to the second generation. In fact, the average lifespan for a family-owned business is less than 25 years.

On the plus side, family-owned businesses allow a legacy to be defined and passed along to subsequent generations. When it’s done right, “They enhance the bond between the generations and strengthen the relationship of those involved.” They also can provide financial security for the family and allow a sense of control over the family destiny.

“They can become a defining vision for the family,” Gregori said, “illustrating their values, their traditions, and their contribution to the community. They can support the softball team or the soccer team.”

He continued, “Family-owned businesses continue to form the backbone of the American economy.” He cited the following statistics reported by the U.S. Bureau of Labor Statistics in 2004 (the most recent data available):

• Some 35 percent of Fortune 500 companies are family-owned.

• Family businesses account for 50 percent of the U.S. gross domestic product.

•They generate 60 percent of the country’s employment and 78 percent of all new jobs created.

“Without family-owned businesses,” Gregori said, “we would be in another depression.”

The importance of family businesses is clear. However, the family dynamic has changed with newer generations feeling less of a sense of duty and obligation to join the family business. On the other hand, he said, “the sense of entitlement has grown.” This is a cultural phenomenon that is not distinct to family-owned businesses.

“When internal conflicts spill out into the public, it exposes just how important formal succession plans are for the future of the company,” Gregori said. “You need future earning strategies.”

SHARED DREAMS

Part of the strategy for keeping the family business stable and moving forward is the ability to keep in touch with what got the family in business together in the first place, often referred to as the shared dream phenomenon, “a collective vision of the future that inspires family members to engage in the hard work of planning, and to do whatever is necessary to maintain the collaboration,” Gregori explained.

Similar to the way four stakes hold a camping tent in place, he said, four stakes support the shared dream:

1. Collective vision is the result of each family member involved in the business having added their dream to the plans for the company’s future.

For example, there is the famous name dream - where the family name is recognized worldwide in business (e.g., Ford). The family bank dream is one in which wealth is accumulated to finance not only immediate family, but extended family as well as future generations. The big tree dream is one in which the success of the family business provides philanthropic pursuits for the good of society.

2. The inspired family stake is the result of each family member recognizing that they are much more effective working together, and they are energized on a sustained basis by sharing more results to realizing a shared dream.

3. Maintained collaboration is the result of each family member consistently reviewing their efforts to promote a team approach to business and then sharing with the rest of the family (the buy in). In order to maintain collaboration, Gregori said:

• Determine what you believe are the three best initiatives to promote teambuilding.

• Make your family members aware of your initiatives (if you haven’t already done so), and ask for their input on your efforts.

• Develop a routine of asking family members where you can join them on projects and prepare yourself to answer the same questions.

4. Achieved goals are the result of each family member in the business completing, to the best of their ability, the tasks predetermined by them. “It’s black or white,” said Gregori, echoing the Clockwork Congress theme. “There’s no gray.”

In order to sustain a high level of achieved goals:

• Clearly define what areas the job descriptions of each family member cover and refine them to reduce overlap.

• Differentiate between repetitive tasks done regularly, and specialized projects that occur seldom, such as seasonal promotions.

• Recognize family members, along with other employees, for outstanding service on a regular basis with visible rewards.

COMMUNICATION

Good communication skills are essential for dealing with difficult situations on a day-in, day-out basis, he said. It’s true for all employees, but may be especially important for dealing with family members, whose closeness may allow other family members to drop their professional work attitude.

Gregori advised using the following tools to use for communication during heated or difficult situations:

• Identify the emotion that is ruling you. “It has been said that emotions make wonderful servants, but terrible kings.”

• Detach - not from the emotion, but from emotional decision-making.

• Allow your emotion to subside before you act. Realize that this could take some time, so don’t rush it.

“Emotional decision making results in 60 percent turnover,” Gregori said.

He offered the acronym DESC (describe, express, specify, consequences) to help the contractors remember the steps they should take to deal with stressful family situations at work:

Describe it - Arrange a private meeting with the offending party and start describing the other person’s actions and/or behavior objectively.

“Try to quantify the concerns, and avoid judgmental, absolute terms such as ‘you always’ and ‘you never.’ For example, do not say, ‘You are always late to the meeting.’ Instead say something specific, like, ‘You were 30 minutes late to last week’s staff meeting. That was the fourth time this year.’ ”

Express your concern about the consequences of the behavior on the business and family. “Keep it simple and keep it believable,” Gregori said.

Don’t say, “You are destroying the company.” Instead say, “The problem with you coming in late is that it reduces the amount of time we can spend on important decisions, and it conveys to other employees the message that the meetings aren’t important.”

Specify the behavior you want to see. “Be as specific as possible,” he said. For example, say, “It is critical that you be here on time when we call a company staff meeting.”

Consequences - “Cite the natural consequences that will occur if the behavior does not change,” he said. “Unpaid time off would be a reasonable, natural consequence.”

“Family member or not, if it appears by the repetition of the infraction that the warning is not being taken seriously, emphasize the opportunities or benefits that might be lost. Cite positive outcomes for a changed behavior.”

Sidebar: Be Inspired

Ask yourself, “When am I at my best and what motivates me to produce my greatest achievements?”

Ask your family members how they would answer such questions.

Schedule family councils or gatherings to brainstorm ideas that would motivate each of you when implemented (i.e., a trophy awarded to the family member or employee who comes up with cost-savings innovations for the current month).

Share short, inspirational stories of business at a weekly staff meeting (à la Chicken Soup for Business).

Sidebar: Create Vision

Remember and write down your dreams for the business. Invite family members to remember and share their business dreams. Schedule family retreats to discuss these dreams. Ask those you consult with to help you reach these dreams.

Sidebar: Challenges

Tim Gregori of CORE challenged Clockwork franchise contractors, “See how many you feel apply to your company.”

EMOTIONS. “Family problems will affect the business,” he said. Divorces, separations, health, or financial problems also create difficult situations for family members.

INFORMALITY. The absence of clear policies and business norms for family members leads to unhealthy informality.

TUNNEL VISION. A lack of outside opinions and diversity on how to operate the business also is not healthy for the company.

LACK OF A WRITTEN STRATEGY. Having a documented plan for long-term growth is essential, Gregori said. Too often, families in business may try to wing it.

COMPENSATION PROBLEMS FOR FAMILY MEMBERS. Dividends, salaries, benefits, and compensation for nonparticipating family members need to be clearly defined and justified.

ROLE CONFUSION. Roles and responsibilities must be clearly defined.

LACK OF TALENT. Hiring family members who are not qualified or lack the skills and abilities for the organization isn’t good for them or for the company. The inability to fire them when it is clear they are not working out is another pitfall.

HIGH TURNOVER OF NONFAMILY MEMBERS. When employees feel that the family “mafia” will always advance over outsiders, and when employees realize that management is incompetent, they will go to work somewhere else.

SUCCESSION PLANNING. “Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts,” Gregori said.

RETIREMENT AND ESTATE PLANNING. Long-term planning is needed to cover the necessities and realities of older members when they leave the company.

TRAINING. There should be a specific training program to help integrate family members when they join the company. “This should provide specific information that relates to the goals, expectations, and obligations of the position.”

PATERNALISTIC. “Control is centralized and influenced by tradition instead of good management practices.”

OVERLY CONSERVATIVE. Older family members try to preserve the status quo and resist change, especially with resistance to ideas and change proposed by younger generations.

COMMUNICATION PROBLEMS. This may be provoked by role confusion, emotions (envy, fear, and anger), political divisions, or other relationship problems.

LACK OF SYSTEMATIC THINKING. Decisions are made day-to-day in response to problems, without the benefit of long-term planning or strategic thinking.

EXIT STRATEGY. There is no clear plan on how to sell, close, or walk away from the business.

BUSINESS VALUATION. There is no knowledge of the worth of the business, and the factors that may increase or decrease its value.

GROWTH. Problems can stem from lack of capital, new investment, or resistance to reinvestment in the business.

VISION. Each family member has a different vision of the business and different goals. Are they being taken into account?

CONTROL OF OPERATIONS. “It can be difficult to control other members of the family,” Gregori said, due to lack of participation in the day-to-day work and supervision required.

Publication Date: 11/19/2007

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