2017 FEUSA Family Business Survey

downloadFamily Enterprise USA is a 501 (c)(3) organization dedicated to educating lawmakers and growing public support for family businesses across America. Each year, Family Enterprise USA surveys business owners across the country to learn about their challenges and ensures that their voices are heard on Capitol Hill.

Based on the findings of the 2017 study, which is an aggregate of thoughts and opinions from 186 family-owned businesses, we learned the following:

  • Most family businesses (76%) saw their business revenue grow in 2016 and are confident about the business’ ability to increase revenue each year.
  • The majority (72%) say they plan to hire additional employees in 2017, an increase from 66% in 2016.
  • Business owners share, in their own words, the impact of the regulations on their business. The common themes are around estate taxes costing money, resources and time that they could have put into growing their business.
  • Aside from creating jobs, 92% of business owners pursue civic engagement by sharing their time, talents and resources in their communities.

Please click this link to read the entire 2017 report. For comparison, if you like to also read the 2016 report, please click here to download it.

It’s Not What You Think: Five Myths About Family Business Conflict

All families, and particularly family business will face some level of conflict. While many will avoid conflict at all costs, often facing these challenges will have numerous positive outcomes. Continuity Partners and Deconstructing Conflict Co-Authors, Doug Baumoel (78) and Blair Trippe share some of their recent findings based on years of work in working with family businesses and dispel a few of the myths surrounding conflict.

Myth #1: A Family Business Experiencing Conflict Is “Dysfunctional”

It is only through being challenged by conflict that we learn, grow and advance as individuals, families, companies and societies. Therefore, a healthy family system processes conflict constantly. Well-managed conflict can lead to new approaches, innovative strategies, and resilience. In a family business, it is completely normal for deeply-caring individuals to struggle in coming to consensus over the governance, succession and growth of their enterprise. Sometimes, external factors that are beyond a family’s control can cause stress and conflict in their company. While there are no easy answers, it is absolutely possible for families to learn to manage family business conflict in constructive ways that ensure the success of their families – and their businesses.

Myth #2: A Family Business That Never Has Overt Conflict Is in Optimal Shape

The absence of overt conflict is often a cause for concern since it usually indicates that families are ignoring or avoiding difficult conversations because they worry that they will lead to disagreements. When families spend a lot of energy avoiding conflicts, it can often drain their enterprise of innovation and resilience, leaving them “stuck” in patterns that may no longer serve them well.

A stuck family system will miss valuable opportunities, because paralysis often prevents important decisions from being made (e.g. planning succession to the next generation, growing the business, adapting to new economic circumstances.) Furthermore, a stuck family can ultimately experience more severe strife and infighting than if they had acknowledged their differences earlier on and found ways to manage them.

Myth #3: Conflict at Work is Just About Work

Being family often complicates the management of conflict in business. In addition to managing the substantive business issues at hand, family members are trying to negotiate how they will stay together as a family in the process. Disputes in family enterprises are unique because these continuing relationships matter greatly, and parting ways is usually not an acceptable outcome for most family members.

Emotions run high in every family, and these emotions are amplified when a family experiences conflict over running the business. Sibling rivalry and complex struggles over power-sharing – along with rebellion – are all normal family processes that don’t show up in the average business, but they are common phenomena in family businesses. Ultimately, failing to acknowledge and manage the unique family aspect of these conflicts will lead to greater discord, and the wasting of precious business resources like time, money, human capital and the family’s good name.

Myth #4: Family Members are the Only Ones Suited to Understanding and Handling Their Conflicts

While family members are most-definitely the experts on what is going on in their family business, being stuck usually comes with limited ability to see beyond themselves and find creative ways to move forward. In these situations, a trusted outside party can often offer new ways of analyzing the data and looking at the big picture. Seeking outside help with assessing and managing family conflict can enable stakeholders to gain new understanding and perspectives on their conflicts and work together to find ways to move forward.

Myth #5: Family Business Conflicts Need to Be Severe to Benefit from Conflict Management Guidance

When families gather to brainstorm and problem-solve in less stressful times, they often can discuss more “loaded” topics and better plan how they might handle a situation when it unexpectedly arises. This is a golden opportunity for forward-thinking families to convene and use their strengths and talents to plan for the future. There are many strategies and tools that families can deploy to help them manage unanticipated conflict and ensure that their enterprise will run smoothly.

Reprinted with permission. 

 

 

When Family Gets in the Way

THE SCENARIO:

Phil works for a family business (a wholesale tool company) and began the succession planning process a few years ago when two brothers stepped down from management and Phil took over. He’s having some significant challenges with an employee who is the only remaining family member involved in the daily operations. Phil has been working with an outside consultant who has helped him to set clear performance expectations and culture norms for all employees. However, the family board (which represents the employee’s grandfather, uncle & father) seems to be a lingering issue.

WHAT WOULD YOU DO?

woodWe’ve asked James Wood, Cornell EMBA 2016, to weigh in. James was Chief Strategy Officer, and Senior Vice President for Clemens Food Group, a family owned business, for over 16 years and author of The Next Level: Essential Strategies for Breakthrough Growth. Currently he serves on the board for several family-owned enterprises.

To me this is a case of bringing clarity to the distinction of roles between: 1) Shareholder (owner) 2) Board (governance) and 3) Management. Many family businesses get into trouble because they don’t see or manage the differences between these roles and it all gets enmeshed and confusing. The way it should work is that the Shareholders give direction to the Board for meeting high-level performance expectations, and then the Management is accountable to the Board for effectively delivering on those expectations. The Shareholders are also responsible for legacy planning around next generation succession and preparation.

If I were Phil I would start by gaining alignment with the Board around the three separate roles and expectations for each.

Shareholders should be asking, “Am I getting sufficient returns from this investment?” focused on the following criteria:

  • Expected returns
  • Liquidity needs vs. reinvestment into growth opportunities
  • Exit strategy (sell vs grow)
  • Shareholder Unity (legacy planning, next gen succession/prep, family office, settling shareholder disputes, rules of engagement on family members working in the business, etc)

Board Members should be asking, “Is management delivering shareholder expectations; does the strategy make sense; and do we have the right leadership in place to execute?” Their focus should be on governance, leadership, strategy and risk: with the following criteria:

  • Integrity of strategy
  • Financial performance hurdles
  • Capital structure
  • Meeting criteria for growth Investment decisions
  • Risks assessment and mitigation
  • Executive team competency/succession

Management should be asking, “Do I have sufficient market intelligence, human capital and sustainable infrastructure to execute effectively?”– Their focus should be on operations and strategy, such as the following:.

  • Shoring up core competencies
  • Capitalizing on competitive advantages
  • Building organizational and operational infrastructure (which includes hiring/firing people)

Once Phil has gained clarity around these functional roles, he can attack the issue of the non-performing family member:

  1. As a Manager, he should have the ability to hire and fire as he sees fit, regardless of whether family member or not. The Board should support him around this decision (assuming he has well-documented rationale for why this person doesn’t meet performance expectations).
  2. However, the owners’ responsibility is to have a clear plan of where they see the next generation as far as succession/leadership and how those folks are being developed towards meeting that goal to effectively sustain the family business (knowing that typically 3rd gen destroy the business). It sounds like this has been vetted out already and this non-family person has been chosen as the successor.
  3. If the working family member is not seen as a future leader (obviously since the non-family friend is the one who is being groomed for future leadership), then it should be seen more straightforward as a performance issue. Then the owners should creatively “manage” him through the transition out of the business (keeping him whole financially, giving feedback on entitlement vs. earning your keep, helping get a job somewhere else, etc).

The outcome depends on the emotional/family dynamics between brother / uncle / grandfather and how objective they can be regarding this person. This can definitely be a sensitive area, but it can work. It does involve some orchestration and plenty of pre-game work ahead of time but gets more objectivity around “doing the right thing” vs. turning it into personal or family politics.

Do you have a family or business issue you would like addressed? Please submit your cases or scenarios to dgv9@cornell.edu.