Succession Planning -Part 9: Family Member Needs a Job.

Your Brother-In-Law (or Cousin or …) Needs A Job?

One of the most common problems in a family business is the hiring of relatives who do not have talent. But what are you to do when your sister or another close relative says, "Bob needs a job badly"? The emotional aspect of such family relationships is hard to fight. But try to go into it with your eyes open. It will be hard to fire Bob if he turns out to cost you more money than his presence is worth, that is why in Succession Planning -Part 9: Family Member Needs a Job we discuss guidelines when hiring family.

The main thing is to recognize the talent or lack of it. Suppose your brother-in-law, for example, has little or no ability as far as your company is concerned, Perhaps you can put him in a job where in spite of his weaknesses he can make a contribution and not disturb other employees.

The major concern is not necessarily the relative but how he or she affects other employees. In some cases, a relative can demoralize the organization by his or her dealing with other employees. For example, he or she may loaf on the job, avoid unpleasant tasks, take special privileges, and make snide remarks about you and other relatives.

If you are stuck with such a relative, try putting him or her in a job where he or she will have minimum contact with other employees, out of the mainstream of decision making. For instance brother-in-law Bob might be placed in a sales office in another city some distance from the company's headquarters where he will be under the supervision of a top producer. Another alternative is to change his attitudes by formal or informal education.

The key is to see that the non-talented relative does not affect the relationship that you, the manager, have with other members of your staff. Other employees will respect you for keeping relatives in line.

Strange things sometimes happen. There is always the chance that the non-talented relative may be under your direction and turn into an asset for your company.

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Succession Planning - Part 8: Different Opinions

Different Opinions

Different opinions do not always produce discord, but sometimes they cause the sparks to fly -especially in a family-owned company. Emotion is an added dimension as brothers and sisters, uncles and aunts, nephews and nieces and fathers and children work together in such a small business.

For the individual who must head such a company, the important thing is to recognize this dimension of emotions and to make objective decisions that are difficult to come by in such situations.

Many times when members of a family are active in the business, it is hard to make objective decisions about the skills and abilities of each other. For example, one says about another relative, "He was lazy when we were kids, and he's still lazy." Or a disgruntled wife says about an aunt. "What does she know about the business? She's only here because of her father's money."

If such emotional outbursts affected only the family, the manager might "knock a few heads together" and move along. But often it is not that easy. The quarrels and ill feelings of relatives have a way of spreading out to include non-family employees.

Then the manager's problem is to keep the bickering from interfering with work. You cannot afford to let the company become divided into warring camps. You have to convince non-family employees that their interests are best served by a profitable organization rather than by allegiance to particular members of the family.

Another aspect of the emotional atmosphere is that often non-family employees tend to base their decisions on the family's tensions. They know how their bosses react and are influenced by this knowledge.

Is the Manager Really in Control?

The president of a small company is not always necessarily the person in charge. In many family-owned businesses, the elder statesman of the family becomes president or chairman of the board of directors. But day-to-day management is in the hands of other members of the family.

In some cases, even the best hands are tied as the family member tries to manage the business. For example, the ceiling on the amount of money that can be spent without permission from the rest of the family may be too low for the situation confronting the company. Having to clear operating expenditures may mean missing opportunities for increased profits, such as taking advantage of a good price on raw materials or sales inventory.

In other cases, a manager may be in a bind because of emotional involvement. For example, you may feel that you have to clear routine matters with top family members because "Uncle Bill never lets you forget your mistakes." Personalities and emotional reactions create bottlenecks that work against an efficient operation.

Efficiency may be reduced also by relatives who indulge in excessive family talk during working hours. The manager should set the example and insist that relatives refrain from family chit-chat on the job.

In some family-owned companies, the day-to-day manager may be a bottleneck. You may be a bottleneck because you do not have the ability to delegate work and authority. You may be the manager because of age or the amount of capital you have in the business without regard to your qualifications. In other instances, you may hold up progress because you do not listen to others in the company.

One solution is for other members of the family to persuade such a manager to let someone else run the day-to-day show, perhaps a hired manager.

If a member of the family has to be in charge of operations, he or she should be capable of using efficient management techniques and be thick-skinned enough to live with family bickering and tough enough to make his or her decisions stick.

One way to obtain objective control in a family-owned business is to hire an outside advisor to help advise on, and implement changes needed to the day-to-day operations. An efficient hired advisor will see to it that all employees - family and non-family alike - know to whom to report at all times and that emotions are kept from effecting the profitable operation of the enterprise..

Definite lines of authority are even more important when a member of the family manages operations with other relatives filling various jobs. The responsibilities of family members should be spelled out. "Family employees" should discipline themselves to work within the bounds of these lines of authority. Even then, it is wise to have a non-family employee high in the organization so that he or she can be involved in operations and help smooth out any emotional decisions which family members may make. If this is not possible…. Hire an outside advisor to perform this fuction.

The manager's authority to suspend or discharge flagrant violators of company rules should also be spelled out. Management control is weakened if special allowances are made for "family employees".

An important question connected with authority is: Who takes over when something happens to the family member who heads the business? A position may be "up for grabs" if the family hasn't provided for an orderly succession. This need is especially critical when the top family member is approaching retirement age or is in poor health.

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Problems in Managing a Family Business

Problems in Managing a Family Business are somewhat different from the same problems in a non-family business. When close relatives work together, emotions often interfere with business decisions.

In some family companies, control of daily operations is a problem. In others, a high turnover rate among non-family members is a problem. In still other companies, growth is a problem because some of the relatives are unwilling to plow profits back into the business.

When you put up your own money and operate your own business. You prize your independence. "It's my business," you tell yourself in good times and in bad times.

However, "it's our business," in a family company. Conflicts sometimes abound because relatives look upon the business from different viewpoints.

Those relatives who are silent partners, stockholders, and directors see only dollar signs when judging capital expenditures, growth, and other major matters. Relatives who are engaged in daily operations judge major matters from the viewpoint of the production, sales, and personnel necessary to make the company successfully. Obviously, these two viewpoints may conflict in many instances.

Family members who have no talent for money or business can aggravate this natural conflict. Sometimes they are the weak offspring of the founders of the company-sons and daughters who lack business acumen-and sometimes they are in-laws who must be taken care of regardless of their ability or the company's needs.

Basically, the management problems that face the manager of a family-owned business are the same as those that confront the owner-manager of any small company. But the job of the "family manager" is complicated because of the relatives who must be reconciled to the facts of the market place, the business, and the future.

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Successon Planning Part 6: Family Strategic Planning

In Successon Planning Part 6: Family Strategic Planning the emphasis is to develop a framework that allows a family business to be well run and to understand the structure that is needed to address the issues specific to the family owned business.

Objectives and Goals

You should set reasonable objectives for the firm, based on the mission statement, to ensure accomplishment of the firm's mission. Objectives should be clearly stated, realistic, measurable, time specific and challenging. Objectives can be created for:

ü revenue growth,

ü earnings growth,

ü sales and market share growth,

ü new plants or stores, and

ü product/service quality or corporate image.

Strategies

Strategies are determined by your answer to the earlier question: "What will the firm be like in the future?" Your strategic options include the following:

1. Stability--success is derived from little change (rare).

2. Profit strategy--sacrifice future growth for profits today.

3. Growth strategy--growth may be achieved through vertical integration (expansion from within), horizontal integration (buy a competitor), diversification, merger or retrenchment (turnaround or divestment).

Action Steps

Once the strategy is selected, action steps should be specified that will guide the firm's daily activities. An example of an action step is creating a budget to project the costs of a strategy. This process also is known as tactical planning. The steps in tactical planning should be practical and easy to implement and account for; their purpose is to convert goals into manageable, realistic steps that can be individually implemented.

Family Strategic Planning

The entire family should develop a mission statement or creed that defines why it is committed to the business. By sharing priorities, strengths and weaknesses, and the contribution each member can make to the business, the family will begin to create a unified vision of the firm. This vision will include personal goals and career objectives.

Important issues to consider are how to set priorities for the family and the business, i.e., decide which will come first the family or the business. How you answer this question will influence your planning. Some family members will opt for the business first, reasoning that, without a business, there will be no financial security for the family. Others will opt for the family first, reasoning that no business is worth the loss of family harmony. A third alternative is to serve both family and business perhaps not equally, but as fairly as possible. Under this alternative, all decisions are made to satisfy both family and business objectives. For example, a family may have a policy that any family member may join the business, but he or she must meet the requirements of the job. You may find this is the best alternative because it forces a commitment to both the family and the business.

The Family Retreat

Trying to plan a business strategy during normal office hours is almost impossible. Plan a family business retreat to discuss the goals of the individual family members and the goals of the business. The first retreat should focus on reviewing the firm's history, defining family and business values and missions, creating a statement about the future of the business and reviewing areas that need more attention.

The purpose of the retreat is to provide a forum for introspection, problem solving and policy making. For some participants this will be their first opportunity to talk about their concerns in a non-confrontational atmosphere. It is also a time to celebrate the family and enhance its inner strength.

A retreat usually lasts two days and is held far enough away so you won't be disturbed or tempted to go to the office. Every member of the family, including in-laws, should be invited. Begin plans for your retreat about six weeks in advance. Note: If you have a trusted business advisor have them work with you on your agenda and planning

Once you have picked a time and place, establish a tentative agenda. Your actual agenda will be tailored to meet the unique needs of your family and business. Usually families will identify some of the following issues for discussion at their first retreat:

q A family creed or mission statement.

q Management succession.

q Estate planning.

q Strategic business planning.

q The reward system.

q Performance evaluation.

q Communication within the family.

q Preparing adult children to enter the business.

q Transition timing.

q Exit and entry policies.

You may consider using a retreat facilitator. The facilitator helps identify issues for discussion before the retreat and keeps the atmosphere non-confrontational during the retreat. The facilitator does not solve the family's problems but guides the family in doing so.

The retreat is the beginning of a process. When a consensus is reached by the participants, policies should be set, courses of action planned and responsibility for implementation assigned. When agreement cannot be reached, further discussions should be planned, possibly with the continued assistance of the facilitator.

One important outcome of the retreat should be plans for periodic family meetings and retreats in the future, so the dialogue will continue. Open communications will enable the family to come to grips with problems and issues while they are fairly easy to solve. Once family members have reached a consensus on the continuity of the firm and their roles in it, you can begin planning for succession.

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