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Joining the Family Business: Is it Right for You?

If this is an option for you, congratulations! Family-owned or -controlled businesses play a key role in the global economy. “They account for an estimated 80% of companies worldwide and are the largest source of long-term employment in most countries. In the United States, they employ 60% of workers and create 78% of new jobs.”[1]

Whether or not to enter the boardroom with your family could very well be the most important decision of your life. Just like choosing your spouse or your life partner, it is THE decision that can make life grand or encompass you with battles that are too close for comfort. It can be a very rewarding career and provide many opportunities for advancement and a secure future. But, if things go south, if the family members don’t have the same vision, the same values and lack trust in each other, leaving the family business can be as emotionally and financially difficult as leaving a marriage.

What are some of the things you should consider?

  • Is the business a family run business or a business owned by family and run by others?
  • Has the current generation installed effective family and business governance systems to prevent family tension?
  • Does one person have the clear authority to make decisions or will everyone have equal say?
  • What are the plans of the current generation of owners in regards to their retirement and do they align with your expectations for ownership?
  • Are your siblings, cousins and other family members who are involved in the business on the same page as you regarding future benefits and compensation?
  • Are you willing to start at the bottom to increase your chance of success?
  • Do you have the patience to wait on the current generation to retire so your ideal senior leadership position opens up?
  • Are your family communication systems functional or dysfunctional?
  • Have you analyzed the company profit and loss statement and balance sheet so you know what you’re signing on for?
  • Is the business a piggy bank for the family life style or is it run like a business, with a plan and intent on sustaining itself?

While there are numerous cases of family enterprise success stories, cases of harmony, health and longevity seem to be exceptions to the rule. According to the Family Business Institute, only 30% of family businesses last into the second generation; 12% are viable into the third. There are still many businesses that do succeed beyond the next generation and several generations beyond that and yours could be one of those.

If the business is small and there are many owners who do not currently work in the business but derive benefits like income, stock value appreciation or other goodies such as tickets, cars and phones … proceed cautiously. Many larger later-generation family businesses do thrive with inactive owners who receive dividends. Working for family business owners who feel entitled but are not helping create value could end up being frustrating and cause family tension.

If the business does not have a family employment policy that addresses employment, compensation and benefits AND the current owners are lacking a plan, I would advise you to look elsewhere for employment and reconsider the family business five years from now.

If you expect to be in a senior leadership position in five years, your expectations may not be met unless there are health reasons that cause the current generation to retire. It can take 15 to 20 years for a very capable next generation leader to rise to the top. If you are banking on an open position being available when you are ready, you may find yourself waiting decades for elderly owners to officially retire.

How do you increase your chance of success?

  • Start at the bottom! Learning the business from the non-family employees will enable their respect and empower. Employees as well as your other family member business owners will be more willing to follow you some day if you do.
  • Do what you love! Also consider if you would enjoy the people you interact with every day, such as the other employees, customers and vendors. If you are only considering the family business because you need a place to work and know it isn’t really what you love to do … don’t do it.
  • Trust your gut! If you trust the other members of the family and relatives in the business now, things are more likely to go smoothly. If you would think twice about lending them money, your car or tell them your deepest secret, listen to your instincts and don’t go into business with them. If they don’t trust you now, it probably won’t get any better. Pay attention to that red flag. It’s there for a reason.

[1] Leadership Lessons from Great Family Businesses, Harvard Business Review, April 2015

87% of Professional Services Firms Don’t Grow Beyond 10 Employees … Why?

I took a quick look at some 2012 census information to verify some surprising data I had read and compared it back to a blog I wrote several years prior based on 2008 census information. In 2008, 95% of firms reported they are smaller than 10 employees and 99.5% were less than 100 employees. In 2012, 87% of professional services firms reported they are smaller than 10 employees and 98 % are less than 100 employees. Growth has been the trend, albeit small growth. If your company (or employer) has crossed the 100 employee threshold of late, WOW that is a big deal, congratulations. If you make it above 500 employees, you are larger than 99.6% of the firms reporting. But why do so few make it beyond 10 employees and only 2 percent get larger than 100 employees?

There are some predictable barriers to growing your business that you should be aware of and plan for as part of your strategic planning and execution process. Much has been written about this but here is my take from my experience as CEO of a 550 person firm. The good news is if you want to grow, and not every firm does or should, these barriers can be overcome with sound businesses processes and some hard work I should add.

The barriers to growing your business tend to fall into several categories:

  • people
  • processes
  • policies
  • market conditions or dynamics

So what keeps the smaller businesses (or units within a business) small?

  • Leader Insufficiency
    • Leading change rather than just suggesting, is critical to success. Normally it is a failure to delegate or no one to delegate to. Unfortunately until there is a willingness and ability to delegate you are basically working at a job and not working at growing a business. To grow your business you will have to invest in good people and then delegate results not tasks. As a general rule delegate the results that can be achieved by others. Once you are able or willing to invest in good people you will need some business processes, policies, systems and structures, in place to allow you to go about your job as a leader and visionary for your company.
  • Cash Flow
    • As you grow, market dynamics kick in and the barriers to growth go from getting customers when you are small to cash flow as you add staff. Initially the first barrier you face will be all about getting and growing revenue. Many small businesses never overcome this barrier. As revenue grows, cash will become king and you will need to introduce some business processes to collect and retain cash.

Once you get to a point where the competition takes you seriously gross margin will come under pressure and you will need to respond. Your competition, large and small will see you as a threat and may engage a pricing strategy to test your business skills.

Lastly as you get bigger it will be necessary to deliver predictable profitability to keep your constituents happy. These constituents could be family, banks, investors, and partners and they will have expectations that you need to meet. These constituents would likely prefer to see a plan for several years of sustained profitability than a single year of larger profits with increased risk.

I would love to hear about the barriers you have faced as you have grown your business and the strategies you put in place to address them.

Are YOU Keeping Your Top Talent

In a competitive market for top talent it is neither easy to find top talent nor keep them. Let’s face it most great companies have figured out that real success comes as a result of the hard work of their truly top performers. Don’t confuse the term top performers with highly paid employees as top performers can, and must, exist at all levels in an organization. This blog deals with what a leader must do to keep his or her top performers.

So what is the secret to keeping top talent?

First: Do you know them, really know them? “Knowing me” can vary by generation or demographic so be careful not to be too forced or rigid as you attempt to get to know your “A” players. Do you know what motivates them, do you know how best to communicate with them, do you know their weaknesses and their strengths? Do you team them with people who can fill in for their weaknesses?

Second: Do you empower them? Do you get out of their way and let them do their thing or do you feel compelled to create processes and boundaries to manage them? Some managers fear top performers yet great leaders recognize them as racehorses and know how to let them run. Like a racehorse it is sometimes necessary to hire someone just to clean up after your thoroughbreds. Your “C” players will resent the A players because they often test organizational limits and the C players often are handed a shovel to clean up any mess.

Third: Are you willing to develop them? If you ever find yourself thinking your top talent is a threat to you or your business and you need to limit what or who they know you will lose them eventually. Invest in them to make them more valuable not less.

Fourth: Do you inspire them? Will they follow you as a leader? Have you created a compelling vision for your organization that they want to be part of and help you achieve? Don’t expect them to work for anyone they don’t see as a top player.

So now you know the secret to keeping top talent? ……………..YOU!

Jeff

Mentoring Future Great Leaders

So how do you become a great leader?

Allow me to borrow some lyrics from Simon and Garfunkel’s “ Fifty Ways to Leave Your Lover”

“The answer is easy if you take it logically

I’d like to help you in your struggle to lead

There must be fifteen ways to become a great leader……….”

1. Be genuinely interested in your team, but be yourself

2. Be fair, honest and friendly…… “you don’t need to be coy Roy”

3 .Impress people with your charm, not your power

4. Allow others to be important and feel important, give away power…… “throw away the key Lee”

5. Put the organization first, your team second and yourself last

6. Keep trying, keeping moving and know when to change direction…….. “make a new plan Stan”

7. Maintain a positive attitude, be optimistic, smile

8. Not all good ideas are your ideas and not all your ideas are good……..don’t “ just listen to me”

9. Give your enthusiasm to everyone around you

10. Allow yourself and others to fail………….”and set yourself free”

11. Never stop learning

12. Keep your promises and hold yourself accountable

13. Be predictable………..”you don’t need to discuss much”

14. Discover, communicate and live your core values

15. Align your organization around a vision that has meaning for your team, clients and stakeholders. Set priorities to achieve that vision………..get everyone to” hop on the bus Gus”

“It’s not my habit to intrude but there are fifteen ways to become a great leader”

Good luck and never let your ego get in your way of being a truly great leader

Jeff

Plan to leverage lower cost natural gas and natural gas liquids, part 2

Come on baby light my fire ………

The time to hesitate is through. It’s time to use natural gas to light that fire. Gas prices were at a 10 year low this year .Switching, or switching electric power generation from coal to natural gas, has been on the rise since the abundance of reliable low cost natural gas has occurred these past two years. Since 2006 natural gas has grown as the fuel used to provide nearly 25% of electricity in the US. It use for power generation is forecast to grow to up to 50 % in the future. I realize there is resistance to fracking and the development of unconventional gas, but the time to hesitate is through. Let’s examine some of the consumer and environmental benefits at a high level.

For the consumer there will be considerable utility cost savings and new job creation. Lower energy and feedstock prices ( see part 1;plan-to-leverage-lower-cost-natural-gas-and-natural-gas-liquids-part-1 ) will create a manufacturing resurgence .As LNG and CNG infrastructure is built out and truck and auto fleets switch we could see gas powered vehicles accounting for as much as 25% of the fuel used for transportation at some point in the future. This will result in lower operating cost and significantly lower emissions. With the switching to gas for power generation the US has recorded the globes largest reduction in greenhouse gas emissions, by about some 450 million tons.

The fire we need to light is one of energy policy leadership. We need to set a clear direction for our country of energy security and significantly increase our reliance on domestic energy. We need to get behind shale oil and gas production. Lastly we need streamlined, predictable and consistent regulation.

You know that it would be untrue .If I were to say to you: Gas prices won’t get much higher. We have the potential to be an energy exporter if we have the political and corporate will. As a country we need to decide if we will let global market forces dictate gas prices for the long term.

As a business growth consultant I see potential to reverse our economic decline, create jobs, and allow many privately and closely held businesses prosper. We need a good national strategy aligned with our domestic and foreign policies and the commitment to execute the plan to achieve that strategy.

Time to set the economy on fire, yeah

Jeff

Plan to Leverage Lower Cost Natural Gas and Natural Gas Liquids — Part 1

“Something’s happening here……..”

And as the Buffalo Springfield song goes… what it is ain’t exactly clear. So what’s happening?

We are on the verge of a significant change in the availability of lower cost energy in the United States. The growth of the natural gas and oil industry in America and Canada has the potential to
lead us into a new industrial resurgence if not a revolution. Along with natural gas there are abundant other natural gas liquids such as ethane and propane that will be produced and processed in the US, specifically in the Northeast.

The significance of these liquids may not be exactly clear to you, and I would suspect the same with most individuals living in North America. In a few years, once the infrastructure is in place to transport and process these liquids, it will allow our country to return to a model of lower cost manufacturing. Any process, product or service that uses polyethylene, plastics, specialty chemicals, fertilizers and the like will be impacted in a positive way.

So let me get to the point of this blog. While it isn’t exactly clear when, what and where this will occur it is abundantly clear that many opportunities will present themselves to you and your business if you are prepared to take advantage of them. Conversely, the availability of low cost energy and petrochemical feedstock can present a threat to your business if your competition plans and executes a strategy to leverage these changes and enter your market. The good news is that you have time to plan as the abundance of gas and associated liquids will not be able to fully get to market until the necessary infrastructure is in place. This will take anywhere from one to five years.

Regardless of your emotional feelings or environmental position relative to hydraulic fracturing or “fracking”, as it is commonly referred to, increased natural gas production in North America is going to happen. As you and your executive team update your SWOT analysis and strategic plans, take these changes into account.

Something is happening here and one thing is exactly clear. Many businesses and organizations will benefit from this energy boom if they plan and execute properly. Follow my blog over the next few weeks if you want to learn more about the soon-to-be-changing manufacturing landscape in the US and Canada. Also I will be sharing some surprising facts about the positive impact the abundance of low cost natural gas is already having on our environment. Feel free to drop me an email with any specific questions you have.

In the meantime everybody look what’s going ’round.