BEST PRACTICES OF FAMILIES IN BUSINESS: PART 2
In Best Practices of Families in Business: Part 1 of this three-part series Jonathan Magidovitch and Shelley Taylor focused on the five Best Practices that are foundational for families in business and form the basis for a well-functioning enterprise. Of the remaining six Best Practices, three are critical for working in the here and now, and the remaining three are more forward-looking, positioning the family business for current and future success. This piece will address three practices that are beneficial for businesses that strive for excellence in their daily operations.
JOB DESCRIPTIONS AND PERFORMANCE MANAGEMENT
Do you have clear roles and job descriptions for everyone working in the business? Is every employee given feedback on a regular, structured basis so he or she knows what he or she does well and where he or she can stand improvement? (chapters 8 & 9, Keys to Family Business Success)
Roles in family businesses are typically more fluid than in non-family businesses. This is generally an asset as it allows for a smaller management team to perform the full range of roles required to run a successful business. This fluidity of role definition also creates challenges. Boundaries matter and the more fluid the work-role boundaries are, the more frequently disagreements will arise in where those boundaries are and where they should be.
Here is where family businesses need to create role clarity in a way that is unique to family businesses. Each person in the family business has aspects to their role shaped by being both a family-owner and/or an employee. It is important for your family business to create discrete means of communication where each person speaks, here as owners and there as employees. For more on this topic, we suggest looking into the literature on Family Councils, particularly the foundational piece “A Safe Place to Speak: Rules of Order for Families in Business” by Leslie Dashew.
Another issue in Family Businesses is the assessment of employee job performance. Because of their multiple roles, measuring the performance of the family employee requires looking at their employee role distinctly from their family-owner role.
Here KPI’s (Key Performance Indicators) are crucial. For each employee, there must be a job description. And, for each element of the job description, there must be an objective measure, a KPI. In their article, Performance Management and KPIs , The Mind Tools Group has this definition of KPI:
A Key Performance Indicator (KPI) is a quantifiable metric that reflects how well an organization is achieving its stated goals and objectives. For example, if one of your goals is to provide improved customer service, you could use as a KPI the number of customer support requests that remain unresolved at the end of each week. This will measure your progress toward your objective.
In a word, we want a clear job description so we can manage employees objectively rather than emotionally. For each job responsibility, there must be a measure of performance, a KPI.
Most family employees have good job security. In the healthy family business, that job security is backed up with clear job descriptions and KPIs that objectively measure performance. When family businesses manage themselves objectively, they strengthen their employees, managers and in sum their businesses. Job descriptions and KPIs provide management that is perceived as fair and rational. Add to this dedicated places where family business members can express themselves in role-specific ways and we have a recipe for harmony and business success.
Do you have strategic plans to provide a road map to success to help you reach your vision? Do you have budgets to guide your use of resources that are consistent with your plans? (chapter 12, Keys to Family Business Success)
In family businesses, strategic planning differs from strategic planning in other types of businesses. Let’s start with the common ground of strategic planning in all businesses.
Business strategy is about moving into the right place at the right time. This happens either in the market sector where your business now operates or where you can operate in the future. Strategy requires business self-assessment and a market assessment. What resources does the business possess? How might those translate into market direction for the company? Strategizing is a dynamic, ongoing process. Business strategy is a case of “You must change in order to survive.” That quotation is from Pearl Bailey. Though even with Ms. Bailey’s encouragement, change is not something that comes easily or naturally to most people.
Large businesses became large by having correctly strategized in the past. They have systems and budgets in place for strategic planning. Their boards demand maximum value today and a promise of increasing dividends into the future. However, even the most robust balance sheet still has strategic risks.
The first type of risk is failure to undertake change. This always leads to business stagnation. The only question is the speed at which competitive advantage degrades.
Second, making the wrong changes or changes at the wrong time also leads to failure. False starts in wrong directions drain a business’ finances and damage the credibility of its leadership. Think of General Electric Corporation. They have floundered for years; leaving the press to wonder if, maybe, GE’s current turnaround will stick.
Many family businesses are reluctant to engage in a robust strategic planning process. John L. Ward, Professor Emeritus of Family Enterprise at Kellogg Northwestern writes:
Many family business owners think of planning as a straitjacket that will constrain their instinctive survival skills and limit business flexibility. The nature of the planning process also requires these independently minded business owners to share decisions—and private financial statements—with others in the company. These statements represent power and information that many owners would rather keep to themselves.
Others object to planning because they think the future is too uncertain to make the effort worthwhile. Rapidly changing markets, an unpredictable economy, and the unclear career interests of offspring are just a few of the unsettled issues that they foresee.
While those are fears and impediments to successful strategy, family businesses also have inherent advantages over their otherwise structured counterparts.
Family businesses tend to be smaller and therefore are uniquely able to respond quickly to niche market opportunities. And, family businesses are in the “business of family” as well as whatever is their product or service. That is, while a public company would not guide its strategy based on the career skills and objectives of its employees, a family business may do that. Nonetheless, moving into market sectors because of the interests of a family member has to make sense given the metrics of the business and of the market. A family business selling kitchenware might consider expanding into, let’s say, horse breeding. That may give joy, but if it stretches the business too far off its base identity then that joy will sour.
In sum, then, strategy keeps businesses alive by means of methodical change aligned with the vision, informed management and with an eye on sector trends.
Do you have advisors who are challenging your thinking and proactively bringing your attention to issues that will protect you, your family, and your business? Do your trusted advisors work with the entire family business system (not just one person)? Do you have a board of directors with independent perspectives that come from outside the family and the business?” (chapters 8 & 11, Keys to Family Business Success)
Leaders rightfully give credit to their teams for successes and good results. This is not necessarily because the leaders are humble, but rather they know that they can get farther together than they can on our own. Gathering input from a variety of sources, and engaging in collaboration and teamwork, yields greater results. Similarly, those who are still building their careers look to mentors and developmental networks (people from various backgrounds or disciplines who can provide guidance and feedback) to help them develop their skills and critical thinking, and learn how to navigate interpersonal issues.
Where do advisors fit into this? Families have a diversity of personalities and viewpoints. One of an advisor’s valuable roles is facilitating conversations among family members with disparate styles and perspectives. The advisor harnesses the diversity of opinions and styles to make a cohesive whole; and she supports the family as they tap into the strengths and varied experiences of individual family members. Ensuring everyone has a voice and helping to overcome imbalances due to business hierarchies, generational imbalances, or birth order are other aspects of the advisor’s role in facilitating conversations.
An advisor also provides inputs to help families develop ideas, come to consensus and make decisions. For instance, letting go of authority and decision-making in the senior generation, and passing that on to the rising generation, is a common challenge in family business succession. An advisor can guide both generations so they can see the bigger picture. A skilled advisor brings the various perspectives together for all to see; and has the knowledge to guide the family to develop a plan and outline the steps needed to enact a successful transition.
Some families achieve great results and success without a family business advisor. But many families rely on their advisors to keep them focused on their goals, make forward progress, and have productive conversations.
Family members have many demands on their time, whether or not they work in the family business. When family members (in and out of the business) set aside time together for learning and planning they are working to ensure the health and success of the family and the enterprise now and in the future.
Furthermore, people who participate in the conversations, and have a hand in the creation of policies and documents, are more likely to embrace and stand behind those policies. By bringing in an advisor, the importance of the work is recognized by all; the family carves out a specified time and place for sharing information, developing a shared vision and building consensus.
Our worlds got a lot smaller last year. We saw fewer people on a regular basis. We missed face to face interactions, chance encounters, social time with friends and family. In this time of change, we have the opportunity to develop and grow. We can do that by tapping into best practices and embracing the knowledge and expertise of colleagues, business associates and advisors. Maybe it’s time to expand the circle again.
Shelley Taylor is a Family Business Advisor who works with business-owning families on matters pertaining to governance, structure, role clarity, next generation development, generational transitions, and family councils. ( view bio )
Jonathan advises family businesses in both the US and Israel. He consults with families in business on goal setting, role development, governance, communication, transition, leadership and culture building. ( view bio )