Learning from a book about visionary family businesses

by Gale Martin, Director of Marketing, S. Dale High Center for Family Business

The S. Dale High Center offers a Generation Next Affinity Group for young people committed to their family businesses. We meet every other month between October and June to discuss issues concerning their work and work life as they prepare to assume responsibility for running their family businesses.

Since one of the members requested more information on best practices, for the last several meetings we have discussed Managing in the Long Run: Lessons in Competitive Advantage from Great Family Businesses by Danny Miller and Isabelle LeBreton-Miller (Harvard Business School Press) as part of our work in this group.

Thus far we have learned about four categories of exemplary family businesses:

• Brand Builders
• Craftsmen
• Operators
• Innovators

According to the authors, Brand Builders are image masters who create perceptions of themselves and their prompts that prompt customers to buy from them. Estée Lauder, Hallmark Inc., and L.L. Bean, Inc., are all family businesses who have created a brand that is highly sustainable as a competitive resource. The authors stated that Estée Lauder dominates the United States cosmetics markets with a 40 to 45 percent share. Hallmark lays claim to 55 percent of the U.S. market and is the only brand name card 80 percent of Americans can name. Miller and Le-Breton-Miller stated that L.L. Bean is the world's number one outdoor specialty products and sport catalogue retailer. Each of these companies, several generations old, had the vision to make choices in brand building that would position them competitively in the market. They committed themselves to offering a distinctive product that creates an emotional link with customers and to promote that product in unconventional ways--Hallmark, for instance, was told they can't sell a greeting card by turning it over and reading the name of the company that created it, which is exactly what they've done since the 1930s Hallmark they first advertised their cards on the radio.

The Craftsmen are family controlled businesses for whom nothing less than perfection is acceptable. They craftsmen they cited included the Adolph Coors Company, The New York Times Company, and Nordstrom, Inc., to name a few. Craftsmen adopt the highest standards for their products, are willing to wait years for decent ROI, and are known to sacrifice a great deal just to do things right. The pursuit of quality has served as their conduit to sustaining their reputation and economic well-being of the family.

The Operators focus on efficiency, making great use of routines, procedures, and automation to sustain their efficient model. Cargill, IKEA, and Tyson have all refined their operations based on sustaining a vision of an economy-driven business model that targets value-sensitive clients. Operators are also highly committed to consistent senior leadership.

The last group we studied were the Innovators, or family controlled businesses who have distinguished themselves by taking risks and by continually challenging the frontiers of their industries. Corning, Fidelity, and Motorola were all mentioned as Innovators for whom renewal is a guiding precept. They exhibit an unfailing discipline, committing unprecedented resources to R&D, to sustaining a culture of creative new ideas that keeps moving the company forward.

No matter the category, all these extraordinarily family businesses possessed guiding principals--a vision--of the kind of company they wanted to be and what they needed to do, in the long run, to get there. The family businesses have embraced different paths to success, carefully examining what kind of business they wanted to be, based on their values, staking their reputation, their viability, on their values and vision.

What is your vision for your family business? Have your staked your business model to your vision, your operations, your brand?

Harvard Business Review Press has made an excerpt of Managing in the Long Run available here.

3 things values can do for family businesses

At a recent meeting with a third generation family business, it became apparent that the values that drive their business—the organizational culture around how they treat customers and employees, i.e., what’s important in the workplace—had never been set down on paper. When questioned about it, they explained that everyone at their place of business understood their values intuitively—that writing them down hadn’t been necessary.

Occasionally, when led by a strong first generation family business leader, businesses can get around clearly articulating your family values with little negative impact. However, when leadership passes to the successor generation without intentionally articulating and sharing their values, that company risks a scenario where the employees are all marching in different directions, as if to different drumbeats. If that’s disastrous for a marching band, it takes an even heavier toll on any family business’ ability to compete and be successful.

To put it simply, everyone within your organization needs to know the drumbeat. They need to know how to march. Just as surely as the drum major must lead with his baton, it is the responsibility of family business leadership to move from intuitive to intentional by driving organizational values into their organization, especially in successor generations.
How can strong organizational values impact your family business? Here's three ways:

1. It can improve your top line. What do customers want? Unless they are buying a commodity product, they want to be treated well and with respect. And that only happens when your employees feel as though they are treated well and with respect. Contented employees equals happy customers. Happy customers want to do business with organizations that make doing business pleasurable. If customers and employees are treated well by a company, it is no coincidence. These companies have a really strong culture built on a foundation of well defined values.
2. It can improve your bottom line. Good values also reduce costs by improving productivity and reducing turnover. Firms that have strong values and deliberately drive those into the business have less turnover than their competitors. Values-driven companies have significantly less turnover than their competition. There is a clear bottom line impact from reduced turnover. The cost of turnover has been reasonably estimate at 150% of salary because of expenses such as recruitment, training, low productivity and new hires.
3. It can make you feel great about where you work. What could be better than coming in the door every day to a place you want to be, where you feel passionate about the work you're doing and where meaningful relationships are growing right alongside profitability.

Values-based organizations support a vision for the kind of workplace in which you and your employees want to spend the better part of your day and the best years of your lives. It isn't easy to uphold your organizational values day in and day out. It means making tough decisions in terms of hiring, firing, incentive structures, and employee compensation and evaluation. But the outcomes justify the extra effort.