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

Manage Family Business Succession To Reduce Its Sting

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



Choosing a successor can be hard
on siblings.

Did you know that family-owned businesses are responsible for 60 percent of total employment in the United States? Here’s a chilling statistic from the Mass Mutual Family Business Survey 2007: 

Fifty-five percent of CEO’s set to retire in five years have not yet chosen a successor.

If family businesses constitute the backbone of the

American economy, why are nearly half of their executives compromising future viability by failing to put a succession plan in place?

Succession is a tough nut.

Leadership succession is hard for everyone. According to a recent article in Newsweek, large publicly traded firms struggle with succession. It’s an inherently difficult process. Add to that process all the family dynamics that have given family businesses a negative connotation, especially in the U.S, per that same Newsweek article. Throw in a host of family business leaders who equate succession with death because they have nothing to transition to once they are “out” of the business because they failed to acknowledge their own departures, and it's no wonder succession is easier to avoid than tackle head on.

For the successor generation the succession process can be painful, too. It can feel as though the child chosen to succeed the outgoing leader has won the prize whereas all other children in contention have lost. Who wants to create that kind of conflict and tension within the family?

How to manage family business succession.

The good news is that succession can be managed with a good process that is neither magical nor difficult to understand. One of the things family businesses can do is empower a board that includes a few directors outside the family business to help manage the development of new talent and choose a successor. The final decision can be based on requirements that have identified the most qualified successor to lead the business (as opposed to perceived favoritism), which will minimize family pain.

If you are five years out from your retirement, there is still time to roll out a healthy succession plan. The longer you wait, however, the more you limit your ability to develop a talent pool of successors.

Mike McGrann

Mike’s Bottom Line: Succession doesn’t have to be all gloom and doom. It can be managed if executives can get their head around two things—plan for business leaders to transition up and not out; and follow a proven process of using a board to help manage succession.

Co-Presidency Doesn’t Work for Most Family Businesses

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

Mike McGrann

It’s not uncommon for family businesses to have two rising executives (two siblings, two cousins, etc.,) both of whom feel they are the right person to become the next president.

If that sounds like your family business, should you be thinking co-presidency? It may seem like the easy answer to a tough succession decision.

However, the fact that it is an easy answer does not make it the right approach. There’s a good reason why the United States has only one president. I am reminded of a comment from former U.S. President George W. Bush, the guest speaker at the 2011 Lancaster Chamber dinner, who said, “The President gets lots of input from many sources. My job was to make the call based on the information available.” In this system, there is no ambiguity about who is responsible for making the tough call.

Family businesses, like all organizations, require a clear hierarchy to function effectively…and having one highly qualified individual at the top of the organization is the most effective way to achieve a clear hierarchy. The challenge with co-presidencies is that, by their very nature, they lend themselves to ambiguity about who makes what decision, and when that decision can be made. This kind of ambiguity at the top of an organization is deadly and quickly leads to confusion, organizational inefficiency, lack of productivity, etc.

Is a co-presidency right for you?

Often the decision to appoint co-presidents is often made because of the potential family conflict that would arise if one family member is chosen over the other. The merit of who is really most qualified to lead the company gets lost in the fear of conflict and hurt feelings that one family member “won” and the other “lost” in the succession marathon.

This is not to say that co-presidents cannot work. In fact, Mars and Smuckers, two of the most competitive and successful food manufacturers in world have long history of effective leadership from two brothers who served as co-presidents. Tim and Richard Smucker operate their business based on a clear set of roles for each brother, constant communication between them, and a high of degree of trust in each other.

So if you are leaning toward co-presidents, you’ll need crystal clear roles and a process for resolving disagreements when the roles of the co-presidents overlap (A&B below). A Board of Directors can be effective in this role.

Mike’s Bottom Line: If you are going to appoint co-presidents of a company, it should for the right reasons: you have two highly qualified family members with distinct skill sets whose roles and responsibilities have been clearly delineated—not because it is the easiest way to avoid a family conflict.

World Business Forum provided quality thinking time on important issues

 by Mike McGrann, executive director of the S. Dale High Center for Family Business

One of the benefits of attending the World Business Forum was that it provided a time away from the office in which participants were encouraged to think… rather than do. Jim Collins, author of Good to Great, encouraged participants to create time for disciplined thought. He referred to this as “creating white space” in your calendar to think. I know that I spend a great deal of time doing stuff and not enough time thinking about where our Center needs to be in the next five years… about how my classes at E-town need to change… about where I, as an individual, need to grow and change. The few times I have done this since returning from the World Business Forum have been incredibly productive. It is a practice I will continue.


I found several other points raised by Collins to be particularly compelling for leaders:

1. Double your ratio of questions to statements.

2. Continually ask yourself: “How is my industry changing, and what are the brutal facts?”

3. Create a to do list and a NOT to do list and rank it … with no ties allowed.

4. End our obsession with titles – great people have responsibilities, not a title.

5. Companies are more like likely to die of indigestion from trying to swallow too many opportunities… than starve from a lack of opportunities… so FOCUS.

6. Set a BHAG (Big Hairy Audacious Goal) 10-15 years in the future for your organization.

I also found Al Gore’s discussion of the relationship between climate change and capitalism particularly interesting. Some still doubt whether global warming is occurring, and others doubt that man is the cause of changes in the global climate. But it seems to me that these debates are avoiding one of what Collins calls a “brutal fact”… which is that man is pumping tons of carbon dioxide into the earth’s atmosphere. And the other brutal fact is that if you change the inputs to a system, eventually you will change the outputs. How long will this take? Perhaps 5 years, perhaps 50, perhaps 500… but eventually the ecological system of the earth will breakdown if there is no change to our current levels of CO2 output. As Gore pointed out, capitalism’s great challenge and great opportunity is to find ways to address this problem now in a way that creates economic opportunity. Ultimately, policies that inhibit economic opportunity create more poverty and further degrade the planet.

Mike McGrann was one of five business faculty and students attending the 2010 World Business Forum in New York City, representing Elizabethtown College and the S. Dale High Center for Family Business, made possible by The High Companies, headquartered in Lancaster, PA.

Receiving Feedback Well Builds Better Business Relationships

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

Perhaps the most important component of hearing feedback is to accept that we, as humans, are just like your company’s balance sheet: on the one side we have assets, and on the other side we have liabilities.

Most people will admit that they have both assets and liabilities, strengths and weaknesses, but when the discussion moves from the theoretical ( “Yes, I know that I have strengths and weakness”) to an actual conversation about a specific mistake or weakness, things become much more difficult.

In fact, most of us, when confronted by a co-worker or loved one with feedback about how we have hurt them, we become defensive… sometimes even aggressive. We do not like to be confronted with the liability side of our personal balance sheet, so we deny that it exists (defensiveness) or we cover it up with aggression. I am sure we have all met folks who get angry when confronted with feedback they do not like. The problem for a leader who gets angry in the face of difficult feedback is that his / her employees quickly learn to tell the boss what he / she wants to hear. Since some news is good and some is bad, a leader who only hears the good stuff is only getting half the story. This compromises his / her ability to effectively lead the organization.

The challenge for great leaders is to truly accept responsibility for both sides of their personal balance sheet. Once we accept this as part of being human, we no longer have to become angry or defensive when someone points out a weakness.

For instance, why should I upset about something  I know is true? If someone points out to me that I have brown hair, I do not need to get upset because I know it to be true. Similarly, if a co-worker tells me I could have improved the marketing presentation, since I know that I am flawed, I can accept the possibility that my presentation was less than perfect. In fact, I can learn to ask questions to better understand how I might improve.

Receiving feedback is certainly not easy. However, start with a small step: the next time someone gives you feedback that is upsetting, cut yourself a break and admit that you are not perfect. You might have blown it. Explore the issue with questions and try hard not to react with defensiveness or anger.

Mike's Bottom Line: In receiving feedback from others, you not only gain information that can help you do better next time, but you also build a stronger relationship with a valued employee or co-worker.

Relationship building: Giving feedback

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

One of the keys to any effective working relationship is the ability to give feedback in ways that individuals can "hear" it--and the ability to receive feedback without becoming defensive. Some rules of the road when giving feedback include:

1. Be succinct. Provide specific feedback about a behavior or actions that you would like to see changed or improved. Focus on "actionable items" that an individual can actually change vs. personality traits. For example, if you tell someone he or she lacks charisma, there is not much they can do to become more charismatic. However, if you tell someone that you would like to see more energy and a greater sense of urgency, they can deliberately work to portray more energy and urgency in the workplace.
2. Be brief. Hearing honest feedback is tough enough without feeling like you are getting a lecture. If you really want someone to hear your feedback, you need to keep it short and specific. The longer you talk, the less likely the other is to hear.
3. Be congruent. Speak from the heart with your feelings and beliefs about what you need or wish to see happen. Begin with "I" statements such as "I feel," "I believe," "I would like" that indicate your sentiments. Avoid statements that begin with the words "you always" or "you never" as they force the receiver to defend themselves. If you want the other person to hear your opinion, share it in an honest way . . . your true feelings. Leave the attack, aggression, and other distractions at the door.
4. Be empathetic: Remember that the recipient's ability to hear your message depends in large part how you deliver it. Do so with empathy and care--remembering that it is always hard to hear tough feedback.

Mike's bottom line:  The mark of a good leader is a willingess to give feedback that is succinct, brief, and congruent, and delivered with empathy for the subordinate.

Counter-intuitive skills required for building relationship power

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

If you want:

• To be heard, you must first be willing to listen.

• To be trusted, you must first be willing to show that you trust.

• Others take responsibility for their part, you must first take responsibility for your part.

• A team that is willing to change, you must demonstrate that it is okay to fail.

• To improve communication in your team, you must surface conflict.

• To influence, you must first be willing to be influenced.

• To be viewed as a strong leader, you must demonstrate humility.

Mike's Bottom Line: Power has to be earned, and the route to earning it may neither be easy nor obvious. As far as relationships go, the effort, however counterintuitive, is worth your investment.

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.

From the board room to the dinner table: Relating to your adult children peer-to-peer

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

Great business leaders who empower individuals and create honest dialogue in the workplace can create outcomes as successful in the home as they are on the shop floor. So, here are three tips from the business world to better interaction with your teenage child:

1. Great business leaders create an environment of open and honest dialogue in order to build a great team. Give your teens space to have a real voice around the house. I am not speaking of the kind of voice for which we as parents often feel we need earplugs. Rather, do the hard work as a parent to ask three, four or five questions of your kids to ensure that you really understand their perspective on an issue. In doing so, you demonstrate to your child that i) their opinion matters, ii) that you care deeply about them, and iii) they don’t need to shout because they will have a turn to express their needs. Once you demonstrate this to your son or daughter, you have a much better chance of them actually listening to you. Great business leaders understand that they must create an environment of open and honest dialogue if they are going to build a great team. The more your family functions like a team, the more fun it is. While somewhat counter intuitive, the reality is that if you want your child to really listen to you, you must first demonstrate that you are listening to him/her.

2. Great leaders realize that words are cheap, but action is deep. Do as I do, not as I say. Kids, like employees, are always watching the boss. The leader who demands great customer service, but belittles an employee in public has little chance of success. Similarly, the way in you treat your spouse is the model for how your child will treat his or hers someday. The way you treat your child is the way he or she will treat you, and the care you demonstrate for yourself is how your child learns to care for him/herself.

3. Great business leaders understand that they can treat their subordinates as peers, without fear of losing their place in the hierarchy. Great business leaders often speak of creating “peership” within their hierarchy. By this, they mean that they will seek feedback, ideas, and challenges from anyone in the organization. They want subordinates to tell them why an idea is a good one or bad one. It is in this kind of dialogue that employees feel empowered, engaged and confident. Confident leaders know they can have this kind of dialogue without abdicating their position as the company’s final decision maker. Similarly, the goal with our children should be for them to feel confident that they can share their ideas and challenge their parents in a respectful way… and that their ideas will be respected. This does not mean that their ideas are feasible, but their ideas, their wishes are always welcome. It is said that one of the marks of a great parent is how quickly you can establish a peer-based relationship with your child. You can do so with the confidence that giving children a voice as a peer does not mean abdicating your role as parent.

4. Make time for meetings. Great business leaders make time for their team. Most often this implies regular face to face discussions of tactical issues to ensure alignment and to help the team stay focused on important issues. Similarly, families should make time for regular meetings with parents and children to discuss the issues that are impacting the well-being of the family.

5. Great leaders open themselves to feedback. They understand that only by demonstrating a willingness to grow and change personally, can they expect their company grow and change. This implies an openness to feedback and willingness to reflect on how their actions are impacting the team. Similarly, parents who demonstrate that they are willing to grow and change as parents are more likely to see the changes they wish to see in their children.

Mike’s Bottom Line: Embrace openness. Be authentic. Be a leader. Connect. Encourage feedback.