Thoughts on Exit Strategies for Family Businesses

I read an interesting article the other day, discussing exit strategies for family businesses.  This led me to the following thoughts...

An exit strategy for a family business can be a very tricky undertaking. Is it the best way to preserve wealth? Will it satisfy the wants, needs and desires of the younger generation? Will bringing in a professional manager to run the business be the best thing to do?

Many family businesses started out because the founder had an idea, worked for someone else and didn't like how the employer was running the business and wouldn't listen, or he/she couldn't hold a job. Thus the beginnings of a family business.

As the family business grew and prospered, members of the next generation were welcomed in the business. Some thrived, while others did not do so well. However, the family business kept growing.

At a certain point, the founder decides it’s time for him to go. This is because of health or he/she is smart enough to realize things have changed and the next generation is many times better equipped to handle the changes. 

But other times, the founder doesn't want to give up the reigns. “What will I do every day? I hate Florida.”

There are other instances where the next generation just isn't up to the task of “taking the business to the next level.”  There are Big Issues that must be addressed sooner rather than when it’s too late.

A family business can be looked at as a vehicle to provide a lifestyle for the entire family. If there are issues/problems that cannot be solved any other way, then a sale is a serious decision to be investigated carefully.

·         Will the business go on under the present circumstances?

·         Should we bring professional management?

·         Is the value of the business as such that the family can continue on in the present lifestyle without all the stress and tension?

All valid issues that must be addressed trying to keep the emotion out of it. Not an easy task.

I have had this experience, and my final decision was to sell. 

What will your decision be?

Family Business: Which is It?

I’ve heard it said about many great businesses, that they treat their employees like family.  But in a family business, one of the best things that can be said is that they treat family like employees.

This is not just wordplay here.  This is strategy.  While businesses that treat their employees like one big happy family can be nice to work for, rest assured that they do not, as a rule, dish out the family treatment for everyone, regardless of their value to the business.  No, this type of treatment has to be earned, through dedication, loyalty, and most importantly, performance.

The same principal needs to be applied in family business.  Promotions, raises, added responsibilities should not – MUST not – be doled out based on bloodlines.  In a successful family business, all such rewards for family members must be clearly earned, utilizing whatever metrics are used to evaluate non-family members.  There must be demonstrable evidence of worthiness, otherwise company morale will fall.

Hard-headed family business owners might say, “The hell with that!  If I want to promote my kid to Manager, or VP, I will do it!  It’s my business, and if other people don’t like it, they can go work somewhere else.”

Yes, that is exactly what they will do: go work for someone else.  Taking with them everything they learned (the good, the bad, and the ugly) from your business.  Nothing like giving your competition some highly-trained employees!  Brilliant move, Dad.

Company morale is the invisible secret sauce behind most successful businesses.  With it, businesses are capable of great things.  Without it, the work is so much harder.  So when you bring in your kid with the newly-minted degree from the local college, and put him or her in charge over a group of employees with years of company service and industry experience, at least one person will be happy.  Your relationship with the kid probably got a boost.  But your business?  That hissing sound you hear is the air being let out of the tires that drive your business to success.

Having the same last name as the owner of the business may well serve a person in getting hired, but after that, he or she absolutely must be held to the same standards as every other employee.  Make that one of the guiding principles of your business, and you will have one less thing to worry about, which is the perception of nepotism. 

Look at it this way: if your kid is such a hot-shot, he or she will get to a position of responsibility within the organization based on the quality of his or her work.  Getting those kind of positions simply based on blood is not good for the rest of your employees, your customers, your vendors, or you.  And really, not for the kid, either.  (Born on third base, thinking he hit a triple.)

I know this is a sensitive issue, and it’s easy to take a hard-line stance on it when you have no skin in the game.  But therein is the value of a trusted business adviser, especially one who has run family businesses before.  Having someone that the owner can trust with such sensitive matters is invaluable in keeping the company grounded in its business mission, without the drama of the family dynamic interfering. 

Think about this a bit, and let me know if you want to talk it over.

Decision Making (or Not)

It has been my experience both when I owned my own business and while working with clients: the Decision Making Process is arduous, difficult and sometimes gut wrenching and very time consuming.

      Example: Termination of long time employee(s)

I found this to be the most difficult of all decision. People who had been with me for many years were just not able to perform as the business grew. They had reached their “Peter Principle” - the level of their incompetence. They were dragging down their co-workers, slowing growth and causing co-workers and themselves not to receive bonuses. Working with them for long periods of time, coaching them to change, were fruitless.  But you just can’t seem to terminate them.

Well, you finally decide it has to be done. When it’s over and they are gone, you look at yourself in the mirror and ask “Why didn't I do this a long time ago? Everything is running a lot smoother. My team is happier, productivity has increased dramatically and teams are receiving bonuses again! Why did I wait so long?"

You waited so long because you're human.  You weren't just dealing with numbers on a spreadsheet; you were dealing with people who you've known for years. There is no easy answer to these situations, and each situation is different. I am not advocating “pulling the trigger” too soon. However, putting off the inevitable for too long can cost you a lot on the long run. I know, I've been there.

You Might Be a Lousy CEO…

You’re the boss.  The CEO.  The Chief.  The Head Cook & Bottle Washer.  You want to grow your business the right way.  That involves what you don’t do as much as what you actually do.

So, I’m going to talk to you about some blunders that CEOs make. Before I start, don’t think for one minute that this writer has not made plenty of mistakes, goofs, blunders, and done some pretty dumb things in his time.  Therefore, I know from which I speak.  And if you are doing some of these things listed here, then frankly, you might be a lousy CEO.  So, don’t do these things.  Don’t even think about doing anything remotely similar to these things.  You know better.  You’d think most CEOs would know better.  I shouldn't even have to mention this stuff, yet I see CEOs – prominent celebrity CEOs as well as Small Biz CEOs – do these things all the time.  It makes me nuts.  So, I want you to look at these blunders, and swear to all that you hold sacred that you will not make these mistakes. 

Otherwise, you might be a lousy CEO if…

·         You believe your glorious past performance guarantees future success

Yeah, you were a hot shot in college.  Maybe such a hot shot that before you finished college, you figured out how to make a lot of money.  Your academic and early business achievements may have gotten you to the executive table, but they are not going to keep you there.  You have to continue to learn, adjust, adapt, and think on your feet.   When a business crisis or challenge arises, no one is thinking about the awards you won back in the day.  Your past glories will make for great retirement stories someday, but a reputation earned years ago will not help you solve today’s challenges.  You not only need to stay current, you need to stay ahead. 

·         You think just because you know some things, you know everything

You got to the position you’re in because you are smart.  You know some stuff.  You know enough of what’s needed to be known to be a CEO.  Congratulations.  That’s pretty good, and you should be proud.  But, I am sorry to say, it does not qualify you as Top Level Genius and Overlord of the Business World.

Typically, CEOs of new businesses know a lot about their business’ industry, products / services, and marketplace, but maybe not so much about the nuts and bolts of leading a business.  Older businesses often seek more seasoned leadership, people who know the details of what it takes to run a business in practically any industry, but may not know all that much about the widgets their company produces.

To hear a leader speak publicly about a business matter or a product matter, and show a lack of understanding is damaging to the business as a whole.  It’s embarrassing.  Bottom line, you look like an idiot when you delve into the deep end of the pool of areas where you lack expertise.  Resist the temptation to do so.  Keep this thought in mind as we slide into the next point.

·         You still feel like you have to have a hand in every aspect of the business

You’re the CEO, not because you can do each job better than everyone at the company, but because you can do one job better than everyone else.  While everyone admires a “roll-up-your-sleeves-and-work-side-by-side” kind of leader, the fact is, your business should not need you to close new business, correct errors, sign checks, answer phones, stuff envelopes, or any other day-to-day chore.  Not that it’s beneath you; it is just not the best use of your time.  The best use of your time is helping the company establish its place in the market, and creating a positive work environment for employees.

Here’s the key to delegating: hire well.  In every department.  In every position.  If you take the time to hire well, most of the hard work is already done.  Hire a great CFO and let him or her do the financial job.  Hire strong heads of marketing and sales, and get out of their way as they bring your business to customers.  Delegate and Trust!

·         You don’t play by the rules of the game, and seek to circumvent them for your own gain

It wasn’t easy for you to become CEO of your business, and no doubt there have been a lot of blood, sweat, and tears of joy and sorrow as you made that climb.  But more than likely, you did it the right way, and you impressed the right people.  So now that you’ve made it, don’t get cute and see what you can get away with.  Just don’t.  Time and time again, you read in the business pages about this or that CEO, either diverting funds, or hiding accounts, or fudging documents.  All of these so-called leaders were once honest, hard-working, talented, visionary people like you.  But many of them got what my mother would call “too big for their britches.”  It’s typically not just the CEO who suffers when caught playing loose with the rules.  Often, it’s the entire business that pays the price, and it impacts employees and their families. 

·         You mistake your employees for friends

Compassion. Loyalty.  These are admirable human traits, especially for those in leadership positions.  But these traits can sometimes blur your business sense when it comes to employees.  It is possible that solid, dependable employees outlive their usefulness.  It sounds cold, but at some point it makes business sense to replace the long-standing employee with some combination of quicker / better / cheaper. 

In a family business, this sensitive issue becomes even more so, because not only is someone losing a job, but they can’t help but feel they are losing some standing in the family, as well.

As a CEO, your first priority is your business.  So if making personnel changes to long-term employees who may also be members of ownership’s family is warranted, then that is exactly what you have to do.  Suck it up.  Do it, get it done with, and move on.  You can’t let a problem linger, or allow performance to deteriorate, simply because of personal feelings. I know it is easier said than done. I've been there! I waited far too long to do what had to be done. I felt so much better afterwards. I looked myself in the mirror and asked: “why did you wait so long?” The business thrived, my managers were much happier. They had fewer problems to deal with so they could get the job done!

·         You’d rather “do” than “lead.”

There is a big difference between working IN the business (making sales, running projects, installing new shelving in the warehouse, taking over when something doesn't go well) and working ON the business. Planning for future growth, thinking about new products and markets, giving your team what they need to execute well, understanding the financials inside and out – all of these things are what propel you and your business forward. A lousy CEO has their fingers in everything. An effective and successful CEO has just one finger on the pulse of the business.

·         You worry more about the day-to-day than the long-term

With your plan in place, it is the responsibility of your management team to execute the plan. You have the metrics to measure progress, etc. Trust them to do the job!  As CEO it is your responsibility to look out over the horizon to see what the changes and challenges will be. If you delegate properly and let your people do their jobs you will have plenty of time to do this, and do it well.

10 Ways of Failing at Strategic Planning

We all know how important Strategic Planning is to the future success of any business. So why do so many companies fail at creating a good plan and assuring a successful implementation?  Here are some of the main reasons they fail.

1.    The CEO is not committed to the process

a.    If the CEO is not committed to the plan, how can you expect management to be committed to it? Lack of full commitment gets the process off to a bad start, one that is destined to get worse.

2.    The plan is not created collaboratively

a.    When management and staff are told “this is it, now get going,” no one will take ownership of the plan.

b.    Without as many people as possible / practicable involved in the creation of the plan, the staff won’t take it seriously because it won’t be relevant to them.

3.    The CEO fails to make sure the right people are responsible for implementation of the plan 

a.    If you don’t have the right managers in the right positions, success will be very elusive.  Otherwise, you are depending on luck when hard skills are required

4.    The CEO does not oversee / manage the process

a.    Without oversight from the top, managers will resort to processes that are familiar to them, whether or not they are in tune with the new plan.

b.    The plan soon becomes a vague notion of its original form.

5.    No metrics, or poor metrics, are created so that progress, or the lack of same, cannot be measured properly 

a.    Your managers will not be informed of what they doing well, nor where they are deficient.

b.    Without tangible evidence, your people will feel as if they are running in place, and thus, never win the race. 

6.    A lack of communication from top down and down up

a.    Without two-way communication, the plan ceases to be a plan, and instead becomes an announcement.

7.    Don’t review and / or update your plan on a regular basis

a.    Continuing to implement an old plan in a changing business landscape will ensure that new customers, with new needs, will not bother with you.

b.    It also means that your innovative and visionary employees will be seeking jobs elsewhere.

8.    Don’t share the rewards of a successful plan with your employees.

a.    If you think they should simply be happy to have jobs, then you will have a team of people looking to do the minimum required to get paid.

9.    Don’t delegate responsibility

a.    When the CEO tries to do everything himself / herself, it undermines the morale of the managers. This weakens the entire organization.  

10. Don’t hold people accountable

a.    If you don’t hold your people accountable for executing the plan, then when it fails, the plan gets the blame.

b.    Non-performers keep their jobs and continue to non-perform, and the plan gets kicked to the curb.

Now, if you do exactly the opposite of what is listed above, your chances of creating and implementing a successful strategic plan are much improved.           

The CEO must be involved in the process of the plan’s implementation. Working with the managers for mutual success is an essential part of the whole process.  Successful businesses cannot operate in a vacuum.  Communication has to be a two-way street.  All members of the team must be informed of their progress. The more communication, the better for everyone. But communicate the important stuff; don’t inundate your team with info that they can’t use.

Remember that a strategic plan is a living, breathing document. The world changes, and so should your plan.  An annual plan review, at minimum, is necessary.  Quarterly would be better!

Monetary rewards and teamwork are the essence of a successful plan. Your people should be rewarded for a good job, but with the full understanding that not meeting the goals means not receiving rewards.

Finally, once a plan is created, communicated, and implemented, you must let your managers manage.  Don’t worry, there are plenty of other things for the CEO to do!

Business Strategy: How to Get There from Here

Business strategy is a substantial element to any – or shall I say, every - organization.  And as your business gets larger, the strategy becomes more and more important.  From even the smallest business, it all starts with a vision of your company.  As a small business owner, you have your own goals and objective.  You form a strategy in your mind, whether you realize it or not. Even from a bodega, a little mom & pop convenience store somewhere, or a gas station, all the way up to the huge, multi-national businesses of today, such as technology, distribution, manufacturing, food service, restaurants.  Everything starts with the owner’s vision, and a strategy on how to get there.

For example, restaurants owners typically have great visions of their company and the image that they want to project.  This applies to the ambiance of the room, the atmosphere, training of their staff, the product that they put out.  It’s all in the owner’s mind.  And then he’s got to execute this thing, which is the really fun part (depending on how you define “fun”).

The thing to remember when you’re thinking of business strategy is that, number one, everything comes from the owner of the company.  That vision is what the company should be, what he or she wants the company to be, going forward.  That direction comes from the top. The commitment.  The vision.  The goals and objectives.  All of that has to be communicated from the owner, through his top managers.  

And the top managers have to buy into that, because from here on, it’s a collaborative effort strategy.  Owners get to set the vision, but you have to create your strategy amongst all of your people.  You just can’t sit down and pull a strategy out of your hat and say, “Okay boys, girls, this is it.  Go do it.”  They're not going to embrace it, no matter how good a strategy it may be. 

You have to be inclusive; you can’t create it and do it all yourself.  Some people still try to do that, but for the most part, a quarterback can’t do everything alone.  He’s got 10 other men on the field to help him out. He’s also got coaches, training, options.  That old-fashioned notion of a quarterback on one knee drawing out a play in the dirt is just not relevant anymore. 

You have to communicate the vision and communicate what it is that you think has to be done to your top managers. You must articulate what’s in it for them, to get them to buy into it, to put some skin in the game.  They have to be able to have input into the creation of the strategy, so that it’s a buy-in, in a co-creation.

The vision and missions tells everyone who you are, what you are and who you want to be.  You have to stress the communications to all employees, customers/clients and the vendors with whom you do business.

This is all pretty basic stuff, which makes it all the more difficult to execute.  Execution will require the right people in the right positions to make sure the strategy is carried out properly.  Hold those people accountable by creating metrics to measure their progress.  A business strategy is a living thing. It will change as the times change. It is not set in stone. It has to reviewed, tweaked, and updated regularly.

That can be really tough, especially for small and family-owned businesses. Well, in the family-owned business, you know you’ve got to stop arguing long enough to figure out a strategy. “And dammit, we’ll do it this way, ‘cause I’m the Daddy and I say we’re going to do it this way!”  Seriously, that's how many of these businesses are run.

That may not be the best way to run the organization, but it could be worse. When the patriarch or the matriarch is taken out of the picture, it becomes very dysfunctional, very quickly.  Everybody starts fighting.  It’s not very pretty. This is why it is crucial to keep the vision of the business at the forefront when creating the business strategy, and to have buy-in on this strategy from all senior management.  Figure this stuff out in advance, with everyone’s agreement, and then you have one less thing to fight about when that time comes.

So, to reiterate…

• CEO is to create the vision and oversee execution
• Create strategy plan collaboratively with top management, so there is buy-in
• Have the correct people in the right positions to execute, and hold them accountable
• Communicate up, down and sideways, and do so frequently

If the business strategy is born out of a solid vision, and holds true to that vision, it makes the execution of day-to-day business much clearer to the staff, and creates trust in the eyes of customers and vendors.

3 Things You Should Know to Run a Successful Business

1. Communicate: To your employees, the Company Vision and Mission. I know you hear a lot about “this vision thing,” and that's because it’s very important. It’s how you see your company and what you want it to be to your employees.
2. Communicate: To your customers, so they know what you do and why you are unique. This is your business' value proposition.
3. Communicate: To your suppliers, investors and bankers about who you are, what you are, and what you want to be. Communicating these ideas will help you get there. 

The Vision is probably banging around in your head. Write it down! Show it to your management team and the rest of your employees. They will appreciate it. They will give you feedback. They will understand your company better, and you may understand it better, yourself.

The Mission should be prepared inclusively. The more people who participate in the process the more they will all take ownership and pride in it.

Put your Mission Statement everywhere: in the office, on your stationary, your business cards, your website, on your trucks, if you have them. The more you and your employees see it, the more it will become ingrained in your day to day operations.  The more your customers see it, the more they will connect it to the products or services you provide.

Try this; I have done it. It really does work.  Feel free to call me and let's talk about it!