Build your ownership team for long-term success: Family business retreat

Dr. Stephen R. Treat, facilitator

Long term competitiveness in a family business depends on the unity of the family ownership group. Investing time and effort in the shareholder team of the family business is a critical strategy issue.

To help you achieve your goals of family unity and long-term prosperity, the S. Dale High Center for Family Business at Elizabethtown College is offering a two-day retreat for family business owners on Thursday evening, October 13, and all day Friday, October 14, featuring expert facilitators trained in family business dynamics: Dr. Stephen R. Treat and Michael N. McGrann.

This retreat includes sessions to help you build ownership unity while defining the strategies and structures that are necessary for success across multiple generations. The outcome of your investment will be a stronger ownership team and critical tools for strengthening your business.

This seminar will provide you with tools to:

• Manage "difficult conversations"
• Improve your leadership of the family system
• Develop stronger communication skills
• Develop skills for next generation of entrepreneurs
• Strengthen accountability and feedback throughout the organization
• The retreat will also include two facilitated family meetings.

Dr. Stephen Treat is a senior therapist and an ordained minister who maintains his own clinical practice at the Council for Relationships in Philadelphia where he works with individuals, couples, and families. He has counseled companies such as Accenture, ASI, Cigna, as well as many family-business organizations. He received his doctorate from the Andover Newton Theological Seminary in 1976.

Michael N. McGrann is the executive director of the S. Dale High Center for Family Business. He has conducted seminars for family businesses, executive education programs, and personalized educational workshops for family groups around the world. He also provides consulting services to family businesses that need assistance with leadership transitions, developing accountability structures, empowering next generation teams, building unified shareholder groups, and identifying the unique characteristics of a family business that can produce a competitive advantage.

The retreat is on a cost-basis and is open to High Center members ($2,000 for up to four family shareholders) and non-member family businesses ($2,500 for up to four family shareholders). For the retreat schedule and other information, click on the link to the PDF. Or contact the S. Dale High Center for Family Business at Elizabethtown College by emailing fbc@etown.edu or phoning us at 717-361-1275. You may also visit our website at www.centerforfamilybusiness.org

Family Businesses Need to Care for their Ownership Group to Stay On Top

by Mike McGrann, Executive Director, The S. Dale High Center for Family Business

Family meetings can have enormous impact
on the long-term success of a family business

Leaders of publicly traded companies spend up to 50% of their time dealing with Wall Street analysts and market expectations in order to please their shareholders. This often leads to a short-term perspective and over-emphasis on quarterly vs. long-term results. One of the advantages family businesses have over publicly traded firms is that they don't face this kind of short-term pressure.

However, I can tell you from experience that one of the weaknesses of family firms is that they often don’t spend enough time focused on their shareholder groups.

Things couldn't be simpler when the founding entrepreneur is also the Chairman of the Board and the sole shareholder. Yet when family firms become multi-generational, the leadership model of the founding entrepreneur no longer works. A shareholder group comprised of multiple family members, multiple family branches, even multiple generations requires proactive management… if the family wishes to remain a family business. Ultimately, it is the unity of the family shareholder group that determines the long-term success of a family firm.

One of the most powerful tools for building this ownership unity is a family meeting. In fact, the simple act of holding a family meeting in which information is shared and ideas are considered has an enormous impact on the family. Our research shows that family meetings lead to higher levels of trust and satisfaction, a sense that we share beliefs, overall perceptions of agreement, more positive views of the future, and lower perceptions of risk.

This last impact can be particularly powerful – when a shareholder’s views their stock as less risky, they implicitly require a lower return on capital… thus the firms cost of capital declines... and the opportunity for higher overall return on equity exists.

If the prospect of a family meeting is a little daunting, consider that you really only need focus on these big picture issues:

a) what are the goals of the family and what are the values that should be reflected in the business;
b) how are we creating accountability for our management team;
c) what kind of performance do we expect from this business (at a big picture level…);
d) how should the family interact with the business (is working in the business an entitlement or an opportunity?)

Mike's Bottom Line: Your family business may be the furthest thing from a publicly traded company. But if you treat your ownership group with equal or greater regard than CEO's, you'll gain the dividends of a stronger company.

Stauffers of Kissel Hill rebranding a triumph (and for good reason)

by Gale Martin, Director of Marketing and Development, S. Dale High Center for Family Business at Elizabethtown College

Last week, one of our Center members, Stauffers of Kissel Hill, detailed their rebranding process at a Breakfast Seminar, an event at the heart of our programming for members, and the last of the 2010-11 series.

Just prior to Stauffers sharing their case, brand expert Kae G. Wagner, president of North Star Marketing, shared the following slide, the Adizes Organizational Lifecycle:

During the case study presented by Stauffers' principals, COO Jere Stauffer and Marketing and Branding Director Debi Drescher, marked their own status on the Lifecycle graph Kae presented as somewhere between "recrimination" and "entrenched bureaucracy."

Stauffers of Kissel Hill's humble origins
as a roadside stand

Following a site visit and no-holds-barred critique from a peer group within the garden center industry, the Stauffers' ownership team knew they needed to change and that they needed to put a plan in place to accommodate wholesale change.

For a family owned and operated business to admit that strategic improvements were necessary to remain competitive is a feat in itself. One reason family businesses succeed against daunting odds is the deep pride owners take in the business. Such extreme pride can make it hard for family business leaders to hear any criticism--period.



Their customer- and quality-focus were hampered
by an outdated look. (Before rebranding)

Eight years ago, Stauffers launched a branding campaign that succeeded, owing to strong personal values that informed their corporate values, a desire to put the health of the business ahead of personal agendas, and sheer pluck and determination.

Listening to and processing feedback

Jere Stauffer mentioned that industry peers gave the ownership team pages and pages of criticisms to chew on. Both the ownership group and the executive management team put their own fears of being criticized aside, which allowed them to really hear the recommendations made, take them into account, see patterns in the various critiques, and emerge with a prioritized list. That's no easy task, listening to critical feedback about the business that you parents or grandparents founded, a business in which most of these folks grew up.

Working toward consensus and a common goal

While everyone charged with rebranding Stauffers of Kissel Hill had their own ideas and opinions about what the new brand should look and feel like, eventually consensus had to be reached to allow the company to move forward. For some, that meant their favorite design or brand tenet wasn't selected. With so many stakeholders involved and no single stakeholder possessing the equivalent of the line-item veto, it is worth repeating that gaining consensus was no easy task. More than one family business has been thwarted at this stage because individual egos loomed larger than the overarching desire to see the family business succeed. Ultimately, Stauffers' stakeholders kept the bigger picture in focus, subordinating personal agendas.

Perseverance



A display from the newly rebranded garden center

 Across eight locations in Central Pennsylvania, reaching hundreds of employees at every operational level, spanning five years and counting, including the worst economic downturn since the Great Depression, Stauffers of Kissel Hill demonstrated the perseverance necessary to successfully roll out a new brand.

"Everybody was on board," Mike McGrann, executive director of the High Center said. "This allowed them to be truly systematic in their roll out, across all aspects of their business. Every manager and every employee was made part of their rebranding."



The new Stauffers of Kissel Hill Rohrerstown store!

In rebranding themselves, Stauffers of Kissel Hill engaged in an awe-inspiring process that other family businesses can learn from and realized jaw-dropping results.

Congratulations, Stauffers of Kissel Hill, and best wishes for continued success!

For more information about Kae G. Wagner's brand presentation, see this post by Scott Heintzelman, the Exuberant Accountant.

Should we hire in-laws… or not?

by Mike McGrann, Executive Director
S. Dale High Center for Family Business

This is an important question – one that most family business owners struggle with at some point in the life cycle of their firm. Some families say yes. Some say no.

However, a simple yes or no doesn’t apply to the broader question for family ownership teams: “How will we manage the influence of our in-laws?” The answer should be considered from three perspectives:

1. As a potential employee of the business
2. As a potential shareholder
3. As a stakeholder in the family firm
   

As a Potential Employee
Most of us would agree that highly qualified in-laws can be productive and loyal employees and that it would be a loss to not hire them simply because they are married to family members. However, the decision to hire in-laws can dramatically impact the organization and the family and should be made within the context of a discussion at the ownership level to define the “rules of the game” for in-laws. A Family Member Involvement Policy clarifies how the family and the business will interact. Among other things, such a policy should define the process by which family members and in-laws are:

• Hired
• Evaluated
• Promoted
• Fired

The boundaries for in-law employees should be very clear: “You will be treated like any other employee.” In addition, they must be willing to accept their place within the organizational hierarchy – and to respect this hierarchy at all times, which means a deliberate conversation prior to hiring.

The reality is that treating an in-law (or working family member) like “any other” employee is extremely difficult. A Family Employment Committee can ensure that the hiring, evaluation, promotion, and (if necessary) firing of in-laws (and family members) occurs according to norms established by the company.

As a shareholder
A second consideration is whether a family will allow in-laws to own stock in the company. Most families we know prefer to limit ownership via stock restriction agreement to direct descendents (or adopted children) of the founding family member.

As a stakeholder
In-laws have an important and influential roll as stakeholders in the family business system. Their influence (positive or negative) comes via their relationship with the family member. They should be managed by the family business system leader. In addition, the policies that family members establish – such as the Family Member Involvement Policy - impact their children. Thus, they should be informed of what is happening in the system.

If your family has created a Family Member Involvement Policy, share it with the in-laws and ask for their input. They do not have the right to approve or change the policy, but their voice / opinion should be considered. Why? 1) Because asking their opinion makes them feel a part of the process and builds a relationship with them, and 2) because the policy will impact their children.

Families should include spouses in part of a family meeting at least once a year. Possible agenda items for a meeting with in-laws could include:

• A brief and general overview of what has happened in the business over the last year.
• A brief description of the plans for the coming year.
• An update on the creation of any family policies or structures. (Family member involvement, perks, vacation, etc.)
• Other topics related to the family.

A presentation from a local expert on an issue of interest to the group (Parenting skills, communication skills, building healthy marriages, estate planning, etc.)

Mike’s Bottom Line
Give in-laws what they deserve: information and a voice (not a vote). In doing so you will build trust, and hopefully, ensure that their influence on the system is positive.
Do you have a Family Member Involvement Policy in your family business? How has it worked for you? Feel free to leave a comment or take our poll in the sidebar.