Two second generation brothers are the President and Vice President of the family owned business. Their sister is a minority shareholder and sits on the company’s board of directors, but she is not an employee. Their father, the Founder, still participates in some projects, but he lives in Florida during the winter months and is no longer in the lead. I’ve advised four different companies with this leadership configuration.
In one company, having a sibling on the board who was not working in the business every day provided important assistance when it came to finalizing annual projections and budgets. She could ask questions. If the logic behind the projections wasn’t clear to her, the brothers knew they hadn’t thought things through well enough. She cared about the long term legacy of the family business and she cared about her brothers. When it sounded like they were gearing up for aggressive growth, she appropriately wanted to hear that they had some contingency plans. The board served well but didn’t interfere.
In the second company, the conservative Vice President sought his sister’s support whenever he felt pushed by his brother, the President, to do more or grow the business faster. When the President permitted this process to continue, he abdicated the authority of his role as President. The limiting factor, not the optimizing factor, dominated important decisions about goals and pacing. He needed to become more Presidential for the business to start growing.
The third company had a conservative operations-oriented President and an aggressive marketing/sales focused Vice President. They recognized their differences and prepared projections separately based on their areas of expertise and then presented their logic to one another. Most years they could address concerns, agree on projections, and move forward. A few times, they needed to solicit the input of their expert advisors. They did not bring their sister or other board members into the discussion. This worked for them. But in my opinion, not keeping their board and all shareholders informed about the logic behind projections and budgets posed an unnecessary risk.
The fourth company had two ambitious brothers with aggressive projections. They wanted to reinvest in the business while their sister wanted to draw down out her share of larger net profits. Essentially, she had a very different philosophy and approach to the business. The President needed to reinforce his leadership and had to purchase her shares so they could keep moving forward.
Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions. Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability.™ Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com
Do most family owned businesses have another layer of complexity when it comes to acquisitions? In my experience…yes. If there is a power struggle within the family, there can be conflicts over strategic priorities. Sometimes, the “next” generation feels compelled to prove that they are smart, capable, and more current. Wouldn’t it be impressive if he/she can execute an acquisition? If a bright young man feels emasculated by the way the family business operates, discussions about acquisitions can become very heated.
Plus, there are clearly some people who view having executed at least one acquisition as a rite of passage … some kind of sign that they are now true executives. You can almost hear the thunderous Tarzan yells and the pounding of clenched fists on big hairy chests in the background. The sociologists of this world might compare it to a hunter posing with one foot on his captured prey.
Think about this. How do most acquisition discussions start in the first place? A Baby Boomer business owner is approaching retirement and wants to cash out. So he/she or a business broker contacts competitors to see who might be interested. If you really know your priorities before you are contacted, you know whether you were looking for more customers, improved technology, expanded services, or increased production capacity. If you aren’t centered, you can lose a great deal of time evaluating the entire company, getting to know people, being distracted from what you were supposed to be doing, etc.
I’ve been a growth strategy consultant for over 30 years now and I’ve noticed that the business owners who are centered and know their priorities don’t become as distracted when an acquisition opportunity comes their way. I’ve also noticed that they tend to offer to purchase assets rather than acquire entire enterprises. That way, they end up with the technology, production capacity, products, or customer base they really wanted without taking on the debt, unwanted inventory, or complex people issues of another company. They seem to recognize that employees from the other business will know they can apply for positions.
But a bright, ambitious frustrated next generation family member may not see the possibility of an asset purchase if he (yes, usually he) is trying to prove something.
Are the discussions about acquisitions in your family business about improved technology, speeding up production, expanding into new markets, or introducing new products? Or is it actually about egos, the right of passage, and demonstrating that something can be conquered (even if communication within the family can’t be)?
Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions. Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search, etc) help privately held midsized companies achieve accelerated growth with sustained profitability.™ Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com
Ask teachers, parents, and business owners who employ young adults about attitudes these days and you will undoubtedly hear a litany of stories about two very different types of behavior. There are ambitious young people who show up, work hard, want to learn, and solve problems. And then there are the young people who act like they are doing employers such a huge favor by just being there. Their feeling of entitlement is so evident in their behavior. Clear communication, customer service, promptness, dependability, and initiative just don’t seem possible to people who feel entitled. They can become very sarcastic, resent their jobs, and eventually take it out on customers. Isn’t it funny that the behavioral patterns seem so dichotomous? What ever happened to moderation?
Sometimes conflicts over immigration patterns add another layer onto these unattractive entitlement behaviors…and so does being a family owned business. Think about it. How does your nephew really come across to customers and vendors if he felt forced to work in the family business, had dreamed of another career, or is bored to death by his job?
Yesterday, I was interviewing some of my client’s customers as part of a strategic assessment/growth plan for their business. I was on the phone with an agricultural supply company interviewing the guy who provides things like pots and shears for my client’s very large landscaping business. Apparently, this guy felt that my interview was a safe situation to relax and show his true colors. Out came the sarcasm. Out came the complaints about his having to get off of the phone to go push rock salt around during snow storms. Out came the irritation with the company’s accounting system when I asked about how much my client purchases from them each year.
This guy made that business look really bad! He represents the 3rd generation of this family owned business. What if I were a prospective customer? What if I could recommend to one of their largest customers that they should revisit their choice of suppliers? What if I were a strategic planning consultant who works with family owned businesses and could advise his father, aunt or grandparents to take a deeper look at how their young relatives are behaving when the boss is not around? What if I authored blogs on a weekly basis? What if all of those things were true!?
No company is immune to this. Is it time for you to consider doing “secret shopper” research?
My sister likes jewelry, so I went shopping at a gemstone store recently. Trust me on this. The fact that this business is family owned was NOT a benefit to me as a customer. The jewelry designer’s mother is clearly tired of catering to his demands. But she is his mother and apparently feels STUCK there. His wife was equally miserable! Apparently the purpose of this family owned business isn’t about gemstones, customers, money, or family. It was all about a prima donna jewelry designer who had enslaved his relatives.
I know another company President who insists on paying all 7 of his offspring the same salaries despite the fact that one son is the full time CFO and one daughter is a part time marketing clerk. Can you imagine how non family staff members feel and how they view their compensation?
I know a Mid-Atlantic based company that has a Colorado branch now. They were sending so much money to support his snowboarding, why not throw a bit more money at it?
Sometimes the real purpose of being “family owned” is to provide jobs for otherwise unemployable offspring.
As the New Year starts, pause for a second and reflect on the BIG decisions made by your family owned business in 2010. Which ones were made to compensate for non-performing relatives? Which decisions were an attempt to force accountability and fairness?
If the purpose of your being “family owned” translates into honesty, excellent customer service, informed employees who truly understand products/services, a sustained commitment to quality and innovation, etc…then the public will care that you are “family owned.”
90% of privately held companies view themselves as “family” businesses. So this year, I’ll be emphasizing growth strategies for family owned businesses and sharing ways to make sure that “family owned” is an attribute…and not a warning.