Mistaking Your Way to the Top

Last week, I read an interesting article called Common Mistakes Every Entrepreneur Should Avoid.  All of the listed pieces advice are excellent, and should be followed as best one can. I would advise you to read it.

However, keep in mind that making mistakes, and learning from them, will be the best thing that can happen to you and your business.  This is how you learn, really learn, what works and does not work in your business world.  Oftentimes, things that sound good in theory, or look good on paper, may not hold up in the cold light of reality.  

This is no sin.  This is how great businesses are built.  But...if you repeat the same mistake twice, it might be time to look for something else to do.  You shouldn't have to be hit with a hammer more than once to know that it hurts.

Family Business Transitions

I want to share a brief but informative article I recently read by Josh Patrick on Divestopedia, called "8 Issues To Think About In Family Transitions."

In the article, Mr. Patrick raises eight big matters to consider and figure out before transitioning a family business to the next generation of family members. You might think some of these are obvious, but oftentimes, as business-owners AND heads of families, we are sometimes too close to the matters at hand to see them in their proper perspective.  As the son of a small business owner, I had direct experience in this matter.

This is a good list, and I have just a couple things to add to what Mr. Patrick listed. 

Point #4 urges the owner to make sure the kids can actually grow the business, once they are leading it. However, in my view, the only way the owner can be confident of that is to allow the kids to TAKE RISKS. Many old-school business owners become more fiscally conservative as they get older, and are averse to taking calculated risks to grow the business. Don't shackle the kids with that kind of hesitancy. Most businesses do not grow by simply doing the same thing, year after year.

Point #7 urges the owner to fully let go, once the business has been handed off to the kids. This is rarely an easy thing to do, even when the owner has been pining to step away from the business for a while. My take on this is, when you leave the business, stay gone. Don't try to be the "helpful adviser." This will make it harder for you to move on to the rest of your life, and it will provide the kids a convenient crutch to use, instead of learning from their own mistakes.

Take a minute to read Mr. Patrick's article. If I can be of any help in your family business transition, please don't hesitate to call.

Some Lessons Learned about Leadership

Leadership is something like defining pornography: you know it when you see it.  (So I've been told!)

I have read umpteen articles on “What makes a Good leader”, or “Five Ways to be a Good Leader” or "7 Things Good Leaders Don’t Do.” etc., etc.  Here are my two cents in the debate.

I have owned and/or operated seven businesses in my career. I think, looking back, that I have made just about every mistake one could think of, several in the area of leadership.  Hopefully, I can save you some trouble.  Here is what I learned, in no particular order of importance:

• Sometimes your employees know more than you do. In other words, you don’t know everything - irrespective of the fact you are the boss. Therefore you must listen to your employees. They actually like it when you ask them questions and you listen to their answers. You can get some really great ideas from them, plus their buy-in to change is more enthusiastic when they've had a hand in creating that change.

• Delegate Responsibility! You can’t do everything yourself. If you think you can, you are dead wrong. Oh, and by the way, along with the delegation of responsibility goes Accountability. If you are going to give them responsibility - and you should - then they have to be held accountable for both the good and the bad.

• Communicate. Your employees, your customers, and your vendors should all be familiar with your Mission for the company, as well as your Vision. What's the difference between the two? I have always defined it like this:

• The Vision Statement is for the investors, stakeholders and/or lenders. It talks about what your business wants to do.
• The Mission statement is for the employees, customers and vendors. It talks about how your business wants to do it.
  
  
• Be Inclusive. Your employees know a lot about your business operationally, customer relations, finance, etc. Run things by them, see what they think. Listen to their responses. Allow them to be part of the team.

Try this stuff.  It really works!

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.