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.

An Ounce of Prevention

By Joe Molony, Elizabethtown College professor of accounting and senior advisor to the S. Dale High Center

As one who still reads the local papers on a daily basis, I am astounded to see the frequency with which a trusted, loyal employee has been caught stealing hundreds of thousands of dollars from their employers who often are family-owned and operated businesses.

Why does this happen. Are employees just not trustworthy? Well, maybe they are or maybe they aren’t, but even the best of us often succumb to temptation especially when we are most vulnerable and the temptation so easily available.

The point is we owe it to our employees to avoid putting them in potentially compromising situations.

The appropriate cash controls need to be in place. If you haven’t got the right checks and balances in your accounting system, you are inviting that employee to dip into the till should they run into financial difficulties such as unexpected medical expenses, loss of spouse’s employment, or mounting personal debt. Of course, some may be motivated to raise their standard of living with access to easy money. And who can blame them if no one seems to know or care? If you really cared, you would be monitoring the flow of cash.

The saddest part of all is that it isn’t very hard to do. Here are a couple of recommendations for your consideration:

1. Have an accountant perform an annual audit. Just the idea that someone will be checking their work is often sufficient to deter an employee from dishonest acts.

2. Have someone who was not involved with the transaction being paid be the check signer. They should review the documentation and question anything that appears unusual. Involving more than one person in the transaction will require the dishonest employee to gain the cooperation of another employee thereby creating a road block that may also deter them.

These two simple suggestions just might save you enough money to retire early! ( And keep your employees out of jail).

Book Pic: Managing for the Long Run

by Gale Martin, Director of Marketing & Member Relations at the S. Dale High Center for Family Business

In most of the literature reviewing best business practices, researchers agree that family businesses have been long ignored. If not for the egregrious practices of publicly held corporations headlining the nightly news of late--massaging numbers to earn annual bonuses, allowing core competencies and competitive advantage to atrophy in favor of short term gains--family businesses might've continued to be discounted. Not surprising that they would be overlooked, until you look closely at other data such as:

• Family-held businesses account for half the employment in the United States
• Family-held businesses account for 78% of new jobs created
• Family-held businesses make up 35-40 percent of Fortune 500 and S&P 500 companies

In a 2005 publication called Managing in the Long Run, Danny Miller and Isabelle Le Breton-Miller, both affiliated with the University of Alberta, looked to family businesses to illumine best business practices. That's right. Selected family businesses were exemplary in their business practices. Their carefully researched book reveals that  family-held businesses did a better job in the long run of sustaining success. Managing in the Long Run seeks to explore why this is so.

The family held firms analyzed in Managing for the Long Run all demonstrated what the authors called The Four C Qualities:  connection, command, continuity, and community.

Because this book offers real lesssons to family businesses such as 1) how to configure and shape your "C" qualities to support strategy; 2) how to troubleshoot problems; and 3) how every manager can build on these findings, the Gen Next Affinity Group at the S. Dale High Center has selected this book as their 2010 read and will report their exploration here on High Ground in several installments.

Look for the first detailed review of initial chapters of Managing in the Long Run in April.