Developing the Next Generation of Leaders

By Jonathan Habbershon, High Center research associate

Phil Clemens, Chairman & CEO, Clemens Family Corporation
spoke to High Center members on May 10

Why train a next generation of leaders?  That was the question presented by Phillip Clemens, the Chairman and CEO of the Clemens Family Corporation and the keynote speaker at the May 10^th event for members of the S. Dale High Center for Family Business at Elizabethtown College.  Clemens began with a sobering truth that all business owners need to remember: “None of us has a guarantee of how long we’ll be around.”  Being prepared is the only way to ensure that when tragedy strikes your business and your family, both will rise from the ashes to find success. 

The value of solid leadership

Phil described the importance of solid leadership within the family.  The existing generation needs to develop leaders in the next generation.  Many businesses name a successor but don’t give much thought to the person’s ability to lead.  Developing adequate leadership can allow a succession to go smoothly and equip the successor with necessary skills to maintain the family business.  Through the course of leadership development for the next generation, a successor will hopefully become apparent to all and thus can have “buy in” from other family members.  The “buy in” from the rest of the family can support and encourage the successor spurring them towards success within the family and the business.

The timing of transitions

a slide from Phil's presentation

After the next generation’s development was discussed, Phil turned to the current generation of family leaders.  He emphasized the importance of timing with the transitions.  Family business owners can stay too long or not long enough -- both are a hindrance to the growth of the business.  When family members openly dialogue about what the current generation of leadership wants for their life and the business, these conversations help to avoid this problem.  The incoming generation can learn what the current generation’s wishes are for the business, their retirement and the future generation’s involvement.  No family members should ever assume anything about the succession plan.  When family members make assumptions about who will take over, when, how, and what will become of the business, they soon realize that someone else had a different idea than they did and friction turns into fighting.  Open communication is the only way to avoid the issue of assumptions and the possible fighting that could ensue.

Both generations involved in the handoff

The current generation has to establish what a smooth transition would look like for succession.  According to Phil families essentially have one good shot at a transition. After that any attempts will be uncomfortable and could possibly cause more problems for the family or the business than if proper preparations were made at the outset.  Honest and open conversation allows for all expectations to be understood and heard by all family members.  True investment in the next generation of leaders will help ensure that a transition is being made smoothly and to the right candidate.  The future of the family business rests with the next generation;  it is critical for the current generation to be thinking about how to make a smooth handoff. 

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.

Integrating Social Media into the B2B Marketing Mix: One Success Story

Kristy Mellinger
Hometown Provisions

by Kristy Mellinger, Marketing Director, Hometown Provisions

If you're uncertain whether B2B's should be engaged in social media marketing on Facebook, Twitter, and Linked In, this is the story of how I successfully integrated social media into Hometown Provisions' B2B marketing mix.


As a bit of background, Hometown Provisions is a family-owned wholesale foodservice distributor that sells to restaurants, supermarkets, pizza shops, farmers’ markets, educational facilities and more, in Pennsylvania, Maryland and Delaware.



Hometown Provisions
Headquartered in Lancaster, PA

In November of 2009, I was lucky enough to enter the business as the first Marketing Director, so I was able to create the company’s marketing strategy and plan and guide it as it developed.

I chose to redesign our website as my first task, because I did not think the information that our previous website had on it represented our company accurately. I wanted our staff to confidently direct customers to our website for useful information. My goal in the website redesign was to make sure that there was enough information on our site to meet our current and prospective customer’s needs as well as potential future employees, and ultimately, to increase company awareness and revenue and create lead generation.

In order to accomplish my website goals, I integrated social media into our site, by putting direct links on our website and having a blog within our site. I wanted open and honest communication so that customers were as informed as they wanted to be, so that their expectations were met. and that no information was ever misleading. Social media allows for this two-way communication with our customers while increasing our Internet presence.

Here are the steps that I took to incorporate social media into our marketing mix.


Screenshot of new website

1.  I chose to use Facebook, Twitter, LinkedIn and a Hometown blog (What's New) on our website. Facebook because of its user friendly interface for posting company information, pics and articles. Twitter won a spot, mostly because of the additional exposure that it gives our business and my web designer recommended I use it (which now I am grateful that I did). LinkedIn was chosen because of the professional exposure it gives us, being able to use it for job openings and to possibly draw future employees to our company. Lastly, I started a blog on our site that allows me to post monthly specials, weekly recipes and important delivery or closure announcements.

2. Being a B2B business I was not sure exactly how social media would benefit our customers, but I still decided to incorporate it into our website and figure it out as I learned more about what our customer’s needs were.

3. After the website was launched I began to figure out a schedule for Hometown’s blog, Facebook and Twitter pages. What truly helped me was to study the food industry and to find articles and other blogs that would assist me with my posts. I joined a few industry relevant groups on LinkedIn. I also signed up for email lists on food related blogs. From all of this information I sift through and decide what information would be relevant to our customers.

4. What I like about social media is the amount of open communication that happens. I have found it helpful to “follow” or “like” customers on Twitter and Facebook and to support them by promoting different deals that they have going on. It is also nice to learn more about our customers based on what they post!

5. Most recently I incorporated email blasts, through Mail Chimp. This service allows customers to sign up for a weekly email newsletter, that sums up the week and gives a sneak peak into future specials that will be on sale the following week. Readers can sign up for the newsletter list either through our website or Facebook.

6. I have been able to track the success of our social media through Google Analytics, Facebook Insights, Mail Chimp’s reports, and lead generation. I have seen an increase in the number of visits to our website over the past year and I am able to pin point which blog posts draws more people to the website. All the parts of our social media are very much connected. Apart from the internet reports some of the best news for me as Marketing Director is to hear a new customer found out about us on the Internet, which is all information that we keep track of.

All in all, social media has been a success for our B2B marketing mix at Hometown Provisions. I have found that social media provides opportunities to not only inform, but also to engage and build a community of support for our brand and product. One trick that I have used throughout this whole process is to stay focused on Hometown’s marketing goals, who our target audience is and making sure that we stay true to our mission statement. (Before making marketing decisions, I like to look at all three of these statements):

Mission Statement
Our mission is to provide personalized service and quality products that meet or exceed our customers' needs and expectations.

Commitment
We strive to develop lasting, family-like relationships with all of our customers, employees and vendors, and to treat them in a fair, honest and caring way.

Vision Statement
Our Vision is: #1. Be a great wholesale food distributor for our customers and vendors. #2. Be a great place to work. #3. Have the financial strength to accomplish #1 and #2.


Kristy is a graduate of Babson College, where she earned a BA in Business Administration/Marketing. When she is not blogging, tweeting, or studying analytics related to the Hometown Provisions website, she enjoys cooking, traveling, and doing anything active!

Spotlight on Richards Energy Group: a member's member

Richards Energy Group is an independent 'energineering' firm (and a family business) dedicated to cutting energy costs and one of our valued High Center members.

Founded in 1995 by Frank Richards and headquartered in Landisville, Richards Energy Group has been an approved electric supplier in PA since 1999 and is also licensed by the Pennsylvania Public Utility Commission.

Frank and his team kindly offered to answer our questions about Richards Energy Group for the benefit of "High Ground" readers:

What services do you provide to businesses? We help industrial & commercial customers manage electric costs, including competitive power purchasing, lighting retrofits, energy audits, demand response programs for backup generation, utility bill auditing, and cost analysis.

Do you have other family businesses as clients and why have they come to you? Many of our clients are family businesses. We are local, strive to do what's best for each client, have substantial expertise and focus on service and value. So, our values are closely aligned with many other family businesses.

“We consider ourselves to be quite knowledgeable in the retail food business however, when it comes to electricity usage and procurement, it becomes necessary to have a trusted partner like Richards Energy Group assisting us with conserving, buying, and auditing our electricity usage.”
                      -- Jeffrey Good (Amelia’s Inc., Center member)

Essentially, what is your value proposition? We help clients understand and control energy costs. We invest our talents to provide optimal solutions to reduce both energy consumption and energy expenditures. We only recommend projects when the payback is good.

Now that PPL rate caps are gone, is it a good time to upgrade to high efficiency lighting systems? Absolutely. Efficient lighting upgrades are always a great idea, but now with the higher electric rates, the paybacks are faster. The systems we design usually cut electricity usage in half while improving light quality.

Does PA Act 129 (Energy Efficiency and Conservation Act) help even more? Absolutely again! Rebates are available to customers of PA utilities, and in some cases have actually covered the entire cost of materials for our retrofit projects. But the funding for this program, entering its third (and potentially last) year is being quickly consumed…dollars for some utility rate classes are already depleted, so there is some urgency to getting projects into the rebate pipeline right now.

Where does the money come from for Act 129 rebates? Great question…there’s a clue to the answer on every one of our electric bills…a line item that states “Act 129” or “Energy Efficiency”. So the short answer is YOU and me. Since we have to pay for it anyhow, we might as well try to get some benefit from it.

What is the REAP users group? REAP is a unique electric power purchasing consortium established in 1998 to take advantage of the buying clout a large group can exercise over electric suppliers. REAP is an acronym for "Richards Energy Affinity Program." I created REAP, making it a "strong" group...clients give us the authority to sign electric power deals for them, so we can act quickly and effectively when opportunities arise in the volatile energy futures market.

You actually sign the Supplier Contracts? Yes, and we don't take that lightly...we also review those contracts thoroughly, and review the bills when they start coming to be sure clients actually get the deal they were supposed to. It's a unique approach, but it has served our clients well.

Does REAP work? Yes...in fact, in 2003 and 2004, REAP comprised most of the load actually shopping in all of PPL. We now actively manage 1 billion kWh of industrial/commercial accounts, and provide shopping solutions no one else can offer.

A final word? We like our customers and we like "win-win". That might sound worn out, but it rings true for Richards Energy.

Your 'familiness' has brand advantage



Michael N. McGrann
Executive Director, High Center

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

Following our final breakfast seminar of the 2010-11 series (which included a case study of rebranding by Center member Stauffers of Kissel Hill), one of the attendees asked, "Should we be upfront and out front with customers that we are a family business?"

Without knowing anything about your particular family business brand, I would say yes, that you should be promoting the fact that you are a family business. Why? Because your customers care deeply that you are a family business. Many Fortune 500 companies market the fact that are family business. At the end of each add from Johnson Wax we hear the announcer say: “S.C. Johnson, a family company.” Ford Motor Company, Enterprise Car Rental, and local food manufacturer Dietz and Watson are but a few of the companies who market their “familiness” for good reason: research shows that consumers are more loyal to brands they know to be owned by family businesses.

So if consumers are happier buying from family businesses, why not let them know about your commitment to them and to your business? Let them know that your family stands behind your product and that they are sharing in your family’s heritage and tradition of great products and services. Consumers are hungry for the stability, the honesty, the commitment inherent in purchasing from a family business.

In addition, when you market, or even brand, your “familiness” you are distinguishing your product from your competition in a way that is truly unique. In doing so, you create the potential for a competitive advantage because you have something (your family name… which creates loyalty) that can never be copied.

One of my favorite examples of marketing your “familiness” can be seen in this advertisement for Columbia Sportswear. As you watch the video, ask yourself, what are they really selling?

While it is also true that your familiness can constrain your family business, if you haven't identified your resources and capabilities that sets your family business apart from other businesses, you haven't tapped into a critical resource for competitive advantage.

Mike's bottom line: For a host of reasons, you should not only be up front about being a family business, you should embrace being a family business.

Some good economic news because of family businesses

American family businesses expect to hire in 2011 says the Family Business Institute. Read all about the importance of family businesses to the US economy at this post. See the related article on PR Newswire here.

Confessions of a Gen-Nexter: I’m 25… and Still Have Rules to Follow



Kate Groshong
Elizabethtown College
Class of 2008

by Kate Groshong '08,  Brand Specialist, North Star Marketing

When working along side a family member there are certain rules that one should follow. Certainly you think that at this age you shouldn’t have to follow many rules anymore, but growing older I have realized that sometimes the rules later in life are just extensions of the ones we learned at home or in the sandbox.

The following are 5 rules I follow when working with my mother . . . or at least try to follow.

1. Call your parent by his or her first name – It is hard after 25 years of saying Mom all the time, but at work I have learned that my boss is Kae. This keeps things professional and helps to remind me that I am in the confines of our business, not our home. This is also very important so that you don’t immediately show your cards. Clients or people who aren’t aware that you’re family should find out in time, not immediately. It helps to build your credibility.

2. Don’t barge in - Remember that when you’re at work your office is your personal space, just as your boss’s office is their personal space. I always knock before entering Kae’s office as a sign of respect and to make sure I am welcome at that moment. I will admit that if I am very excited about something I sometimes knock as I’m entering her office, but in that moment I am sure she wants to hear the information just as much as I want to tell her!

3. There’s time for work talk and time for everything else talk – When Kae and I spend time together in our off-time we allow certain time to talk business. Once that time frame, or topic, is completed we don’t discuss business anymore. For instance, I cook Kae dinner about once a week, so we agree that we can discuss work during prep time and eating. After that we move on to subjects that aren’t work-related.

4. You’ll have to work twice as hard – When you enter business as “the boss’s kid” you automatically have a stigma. People think you’re making more than them for half the work, when in reality you’re probably faced with more pressure and more work than others with similar work experience. Remember that you’ll have to work twice as hard to earn an equal amount of respect, and don’t be mad about it. At the end of the day your work will be better and you’ll gain trust from your colleagues. It may not be fair, but it is the way it is, and you’ll end up better for it.

5. Family comes first – Of all rules, I believe this is the most important. You can lose your home, you can lose your car, you can even lose your business and you will survive without all three. But you can’t survive without family. Remember that your family always comes first. Do your best to protect your family’s values and the traditions they hold sacred. If you do this with honor, at the end of the day everything will always work out.

 

Kae Groshong Wagner



**If you like hearing about me and my mom, you should come hear my mom! She’ll be sharing the importance of building your Family Business’s brand on May 5, 2011. We look forward to seeing you there!

Expect to see more of Kate's "Confessions of a Gen-Nexter" posts on High Ground.









Thoughts for a New Year in Family Business

If your family business is heading into 2011 without a succession strategy, there's simply no way your family business will be able to compete in the long run. Succession planning is a strategic issue.

Give your family business what it deserves in 2011. Resolve to address succession issues this year. If you're ready to work on succession planning, the S. Dale High Center offers personalized consulting services to family firms throughout North American and Latin America.  Email the Center for more information.

Leadership transitions--What could be more vital to a family business to manage well?

Leadership Transitions Panelists: Phil Clemens, Tony Martin, Dana Chryst, and Matt Diller

A diverse family business panel featuring family business principals Phil Clemens, Tony Martin, Dana Chryst, and Matthew Diller will discuss leadership and their views on leadership transitions during the S. Dale High Center's next breakfast seminar on Thursday, January 20, 2011, from 8:15 to 11 a.m.

Leadership transitions in family businesses are potentially volatile events. Typically, there tends to be a serious failure to plan adequately for leadership transitions in family businesses.

Consider these daunting statistics related to family businesses compiled by Key Resources:

• 88% of family owned businesses plan to stay in the family
• 47% expect leadership to change within 5 years
• 42% have not yet chosen successors (of the CEOs 61 years and older, 55% haven't yet chosen a successor)  
• 13% of the family members said the CEO would never retire; 34% said they were not aware of the successors intentions
• 20% have not yet completed estate planning

Is there any process more important than transitioning a company from one senior leader to another?

Because each principal represents a different viewpoint and level of responsibility within their family businesses, the panelists will offer wide-ranging experiences and varied expectations and results regarding leadership transitions in their companies.You'll hear from several generations during the "Leadership Transitions" panel--senior executives, rising executives, and next generation executives.

Moderated by S. Dale High Center Executive Director Mike McGrann, the panelists will be asked about some of the processes and best practices they have employed or are employing to ensure successful leadership transitions, and how their family businesses prepared employees and customers, other family members, and themselves for transitioning senior and executive leadership.

A videotape of this event will be available shortly after January 20th through The Network of Family Businesses website. If you live in Central Pennsylvania, and would like more information on this event, call the S. Dale High Center at 717-361-1275.

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.

Getting started with your family meeting

by Mary Beth Matteo, Founding Director of the S. Dale High Center for Family Business

Family meetings are a great way to begin to chart a family’s future.

John Ward, founder of the Family Business Consulting Group, has some of the best “sample questions” we’ve seen. Here are just a few to get you started:

Succession
• How do we assure our parents’ lifelong financial security?

• How will we pick the next president?

Participation
• How do we decide which family members can join the business?

• How do we determine titles, preparation and authority?

Compensation and Ownership
• How do we evaluate and pay family members?

• Who can own stock in the business?

Harmony
• How will we deal with conflict (generational, between siblings, with in-laws)?

• Who will lead the family activities and traditions into the next generation?

Responsibility
• How do we help family members in financial and/or career need?

• How do we cope with publicity?

• What’s our responsibility to the community?

Sum and Substance: every family has a different character and set of priorities. No matter what they are, it’s worth the effort to begin talking about them. Nothing like a written agenda, and working through each issue, one by one!

Family meetings part of good governance

by Mary Beth Matteo, Founding Director of the S. Dale High Center for Family Business

Family Meetings are one of the first steps in building strong governance. Family constitutions, mission statements, as well as succession and ownership plans, are all outgrowths of effective family meetings.
According to John L. Ward, luminary in the field of family business, there are ten reasons to hold family meetings:

l. Build a stronger family

2. Build a stronger business

3. Plan for the future ownership of the business

4. Plan family participation in the business

5. Help children manage inherited wealth

6. Open up the succession process

7. Preserve family values, traditions and history

8. Professionalize the business

9. Manage relations between family and board of directors

10. Recognize and resolve conflict

Look for more information next week: key questions to ask in a family meeting and whether or not you should use an outside facilitator.

How family charters get you off the hook

by Mary Beth Matteo, Founding Director of the S. Dale High Center

Many family business leaders don’t like the idea of written rules because they seem too confining and rigid. But the conflict that arises when there are no rules creates ambiguity and distrust. Consider these two cases:

Story #1: Two brothers, Jack and Sam, each have a child in the family business. Jack’s daughter, Joanne, has just earned an MBA from Wharton and hopes to become the CFO some day, maybe even president. Sam’s son, Rick, is manager of operations, has worked in the business his entire life, and according to his father, has shown more commitment than his cousin Joanne. The fathers and their children have become enraged about what they consider to be preferential treatment. Rick is getting paid less than his cousin. A job was specially created for Joanne. Rick claims Joanne is getting special treatment, when she has no track record and he does. The list goes on……

Story #2: Mary Jane is the only child of the founders of ABC Corporation and though she is an owner, she’s never worked at the family business. However, Mary Jane’s husband, Walter, became CFO when they were first married and has become an integral part of the business and a part owner. Now, fifteen years later, Mary Jane and Walter are going through a brutal divorce. The family is at each others’ throats over whether Walter should stay, how they can buy him out if necessary and whether he should have claim to company assets. The list goes on……………
It’s vitally important to define the rules of the game before the game begins. Not in the middle. Family constitutions are a good place to start and typically include things like family employment policy (compensation, rules of entry, etc.) and ownership policies ( buy-sell agreements, prenuptuals, etc. )

Sum and Substance: to use an analogy, imagine the Colorado River. If you take away its boundaries—the Grand Canyon—the river becomes nothing but a big messy puddle! Boundaries cannot be too tight because people will rebel. Or, too loose, because people will feel like there’s no one at the helm. But a river with good boundaries flows smoothly and reaches its destination.

quote of the week . . .

“The intent of all governance tools is to enhance the capability of the family business system to produce distinctive resources for competitive advantage by driving ambiguity out of the system. This will specifically improve the system’s ability to generate high levels of trust.” 

-- Bill Alexander ”Good Governance: Impacting Your Bottom Line”

The three responsibilities of a Board of Directors

by Gale Martin, Director of Marketing and Membership at the S. Dale High Center for Family Business

Blanching at the thought of instituting a Board of Directors for your family business? You're not alone. Many family business executives don't like the idea of empowering a group of people who'll now make decisions the chief executive is fully capable of deciding him- or herself.

According to Bill Alexander, the May presenter at the S. Dale High Center's Educational Seminar Series, such a concern may be unfounded, that there are three (and only three) functions of a Board of Directors for a family-owned business:

1. Ensure the company has a clear direction (approving strategic and annual plans).
2. Ensure assets are properly employed to the benefit of shareholders (approving human resources plan and capital expenditures).
3. Ensure there is empowered and competent leadership in place (electing officers).

Now that sounds like a reasonable set of responsibilities for a board of directions--one that supports family business executives without interfering in issues that aren't the board's concern.

Based on Bill's guidelines for boards of directors, have you ever served on a board or staffed a board where directors where given responsibilities outside this well-defined purview of what boards should do? If so, what were the results?

So, a board of directors isn't for you? You have options . . .

by Mary Beth Matteo, Founding Director of the S. Dale High Center

What if a board of directors is not for you? Three things usually present obstacles to developing and implementing a board of outside directors: you believe your company is not big enough; it would be very difficult to “staff” a board with the required data; or, your company doesn’t have the funds to pay outside directors.
So, what are your options? The best way to answer this is to look, first, at when a board is most useful. Here are a few reasons to look to outside advisors:

• Your company is embarking on something new, e.g. entering a new market or developing a new product

• You are entering a period of rapid expansion and your company would benefit from the advice of a company that has been through it

• You have faced some major setbacks and would benefit from the insights of a company that has successfully weathered a storm

• Your company is doing strategic planning and could use advisors to force you to think outside the box

You have a couple of choices in lieu of a full board:

• A Board of Advisors, hand-picked to address a particular issue

• A mentor or business advisor, an expert in a particular field

• A consultant

• Peer Evaluation Teams, a carefully selected group of peers, such as one sponsored by your trade association

Sum and Substance: any of these options is a good first step, sometimes an all-important one. However, it’s important to remember that there are certain things only a Board of Directors can do. Only a Board of Directors can guide your company over time. Only a Board of Directors can “take you off the hook” by providing objective standards for your family! Only a Board of Directors can remove the ambiguity from family business decisions, and build trust! These are also important aspects of family governance.

Entertainment Pic: Big Night

Looking for an entertaining video or DVD rental that turns a gimlet eye on family business? Dale High of The High Companies and Executive-in-Residence at the High Center recommends Big Night, a 1996 release directed by Campbell Scott and Stanley Tucci. Big Night is about a failing Italian restaurant run by two brothers, Primo and Secondo, who gamble on one special night to try to save the business.

Primo, played by Tony Shalhoub (TV's "Adrian Monk"), is a temperamental Italian chef who refuses to make routine dishes because they are a waste of his supreme talent. Secondo, played by Stanley Tucci, is the smooth-talking business man, who's trying to keep the restaurant afloat, despite the fact that few people actually eat there.

The critics called it, "Impeccably crafted, wonderfully acted" and "delectable, warm, funny, and poignant."

Big Night: "In love and life, one big night can change everything."

Family Business in Wall Street Journal--Small Business Section

Tuesday's WSJ ran an interesting feature on a family business who provides an unusual and  newsworthy service--timely, too.

Do you know what world event is coming to Vancouver, British Columbia, in 2010? One family business helps generate the necessary hoopla for this event. If you missed the article, you can read it here.