Money Talks: Family Committees Lead to Failures

June 30, 2008
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Terry Nicholson

In the world of contracting today, the family-run business is just as prevalent as ever. It’s not unusual to see family members working together trying to make money every day. However, as you’ll see, that family focus can sometimes lead to family failure.

At a recent manufacturer’s meeting, I was approached by a family-run business that needed help. In this company, the father, mother, brother, sister, and son-in-law all were working to make ends meet. They were struggling to survive and were desperately seeking some assistance to get moving in the right direction.

I could tell they needed help, so we sat down around a small table and started talking about the business. As they told me about their situation, they started listing off all the traditional problems (excuses) that companies face. You know the ones:

• “Competition is fierce.”

• “The economy is tough.”

• “Consumers are only concerned about price.”

They threw out every excuse expected to be heard from a struggling business owner.

After they got all of their problems out on the table, I began to ask some diagnostic questions about the business. What I discovered was that they may be facing some minor external problems, but the majority of their problems were internal.



INSIDE OUT

External problems are those outside of the company and outside of your control. These include some of the things previously listed, like competition and the economy.

Internal problems, however, are the items that can be controlled within the company - the things you can take action on today. It’s easy to point fingers at the external problems, but the internal ones are often hard to accept responsibility for because they admit personal failures.

By asking the right questions, I unearthed some of their internal problems and shed light on what they needed to do to improve.

For example, their labor percentage was too high in their service department when compared to their revenue. Their overhead expenses were way too high and their replacement pricing was too low. The office to field employee ratio was too high as well.

As we went through each internal problem, I asked who was responsible for that area of the business. The answer I received was always the same, “We just look at what needs to get done, and we all go to work on getting it done.”

There was no polite way to say it, but this family management committee they had put in place was failing and it was destroying the company. No one was responsible, and as a result, nothing ever got done. Every person needed to be responsible and accountable for a specific job function and its specific results.



KEY ROLES TO PLAY

In any contracting company, there are four key leadership roles and depending on the size of the organization, there may be additional leadership roles that spin off from these segments.

The four main roles, however, are general manager, sales and marketing manager, administrative manager, and operations manager. Of course, in a small company, you may find that you wear more than one of these hats, but in this family, no one wore any of the hats. They didn’t have defined job functions, which meant they didn’t have clear objectives. Every person on the family management committee was busy being busy, but they were never responsible for anything. They were constantly in a firefighting mode because no one was working to prevent the fires.

In that meeting, we clearly developed who was going to hold these key roles when they returned to their company and what responsibilities that entailed.

The operations manager would be responsible for hiring, training, and maintaining the field personnel and achieving the desired field ratios.

The administrative manager would be responsible for the financial details of the business, taxes, human resource issues, and making sure the company is compliant with all laws.

The sales and marketing manager would be responsible for generating service calls and sales leads to achieve the budget.

The general manager would be responsible for holding the management team responsible to achieve a profit and the desired results.

With a manager in place for each key position, it was now each individual’s responsibility to achieve the necessary results. If someone didn’t achieve these results, the family would be able and required to take action by increasing the training or facilitating the replacement of the family member in that position.

By the end of our visit, this family saw the truth. Family committees usually lead to family failures.

If you and your family work in a business together, develop an organizational chart with clearly defined roles and objectives so that everyone knows what’s expected of them. Each person will have a newfound focus and results will soar as people are held accountable. Business will become fun, and customers will receive a higher level of service.

And that is how a family makes money every single day.

Publication Date: 06/30/2008

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