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Family Business

May 2, 2011
Written By: Michelle Clark, Ph.D.

This month I’ve worked with a number of family-owned businesses on succession planning. A significant focus has been on retirement. It’s not an easy topic, but in my experience, succession goes more smoothly when there has been deliberate, careful thought given to how you approach your retirement.
At every stage of life we have prepare for the next step. In high school, part of your “job” was to prepare for college. In college, part of your “job” was to prepare for the world of work. In a career, part of the focus is on preparing for the next “job.” Yet, somehow, we often have the expectation that financial preparation for retirement is all that is needed. Retirement, too, calls for a period of exploration, examination and preparation.
Or more simply: those who are most successful in retirement have:
1.     A sense of meaning and purpose in retirement.
2.     A strong spousal relationship that can adjust to change.
3.     Planned a gradual transition.
4.     Good health.
Conversely, those who struggle with retirement typically are:
1.     Defined by their job.
2.     In a spousal relationship that has rigid role definition.
3.     Dealing with an abrupt transition from work to complete retirement.
4.     Facing failing health.
So which retiring executive will you be?  How will you get there?  What does a successful retirement plan look like?  Planning actually starts earlier than you might expect.
In your 50s:
This is likely the stage when your children are gone and family demands decrease.  Find a non-profit with a mission that engages you and get involved in civic activities in a manner you didn’t have time for in your 40s.
If you are married, this also may be a time to reconnect with your spouse. With children out of the house, now is the time to redefine your relationship as a solo partnership. Work on rebuilding intimacy and interdependence that may have slipped way.
Manage your health. The choices you make now will have a major impact on your ability to enjoy retirement. Join a gym, walk with your spouse or learn to cook.
Build your leadership team. Growth and development of your successors doesn’t occur in 12 months. The time is now to build bench strength, create development opportunities, give the team an opportunity for solo responsibilities, and move out the people who are not suited for leadership.
In your late 50s/early 60s:
Begin trying out retirement. If you have done your homework with the next generation, they are ready to lead without daily oversight. What would it be like to modify your work schedule? Are there major time intensive tasks that you can hand off? How can you switch from “doer” to “coach”?
Try out retirement with your spouse! Use your adjusted schedule to take extended times away. Learn from each other what works and is challenging about this freedom. Use this time to strengthen your relationship and plan for your future together.
Stay fit.
Continue to search for ways to contribute outside of your specific work role, either for pay or no pay. Serve as a mentor or consultant to promising emerging leaders, find passion in the mission of the non-profits you support, connect with adult children.
Accept that change and transition brings with it some losses. Prepare in advance for the changes that may be the most difficult for you. One of the signs that you are in transition is that today is measured against the past. As you move successfully through transition, today will be framed with a focus on the future.
Seek out connection with others who are going through a similar transition. This is not the time to isolate.
If you had children who went to high school and then college, you practiced the art of supportive disengagement. You learned to let the child make his/her own decisions even when you disagreed. The same will be true for your business. There will be moments when watching others make choices you disagree with is challenging. Commit to coping with that challenge productively.
What do you need to do to be ready for retirement?

August 20, 2010
Written By: Michelle Clark, Ph.D.

One of the biggest challenges of a family business is managing competing values. The table below describes some of the competing values between the family system and the business system.  

In the family system, effort counts. For example, in a family, how hard a family member tries typically is more important than the quality of their performance.  Decisions about inheritance are often based on treating children equally. In a business system, performance counts and rewards are based on results. In a family business where one family member’s performance exceeds another’s, this can create values conflict around succession and compensation. For example, a savvy business succession strategy might be to center the highest percentage of business ownership with the most competent successor. A family inheritance strategy would normally be to divide assets equally among all children.
Differences Between Family and Business Values

Family System
Business System
Development and support of family members
Profits, revenues, efficiency
Deeply personal, of primary importance
Semi-personal or impersonal, of secondary importance
Informal, unwritten rules based on shared history
Written and formal rules, often with rewards and consequences written out
Support generally unconditional and based on who you are; effort counts
Support conditional on performance and results; employees can be promoted or fired
Caused by death, divorce, or illness
Caused by retirement, promotion, or departure
Based on family position or seniority; may be fluid and depend on situation
Based on formal position in organization hierarchy
Lifelong and based on one’s identity in the family
Short-term; based on rewards received for employment

So, what are the strategies for dealing with values conflict in your family?
First, the more your organization can agree to family business policies in advance of the values conflict, the better. One example of planning in advance might be a family compensation policy that identifies how salary decisions are made and how raises are decided upon. Second, avoid demonizing family business members who protect the values of the business over the family or vice versa. Both the family and the business are important. People who identify and champion the values of either have something valuable to add to the conversation.
Always shoot for the win-win.

July 23, 2010
Written By: Michelle Clark, Ph.D.

In any given communication the non-verbal portion of the communication is far more powerful than the verbal content. According to the University of California, communication messages weighed 55% by facial expression, 38% by tone of voice, and only 7% by content.

Young children are very adept at observing and learning from their parents’ non-verbal cues. A raised eye-brow, a sigh, or faster walking pace can all be subtle “tells” that guide children how to anticipate their parents’ reactions, even in those situations where the parent’s thoughts are not shared out-loud. Because parents have absolute power over young children, a child learns these cues with survival intensity. Children also learn these cues from siblings, especially with the siblings who are flushing their head in the toilet. This is true in healthy, functional families, and even more so in troubled families.
Fast forward 20 years. Family members bring this highly nuanced radar for family member non-verbal communication to the workplace. As a result, family members are likely to respond more strongly to facial expression and tone from other members than from non-family staff members.
On more than one occasion, I’ve heard a family business leader say something along the lines of: “I have no idea why my (child/employee) always takes me the wrong way. None of the non-family members who report to me react like this.”
The unfortunate challenge of family business communication is that in negative situations most family members tend to speak with less care to family members than they might to non-family members. Think of the last argument you had with a family member in your family business. Recall exactly what you said, and the tone of voice you used to say it. Then ask yourself, “would I have communicated this way to one of our non-family business members?”
Here are two strategies:
Recall that family members are highly adept at reading your non-verbal cues. Effective family business communication requires you to be highly self-aware. Family members may be accurately reading your underlying feeling, but misinterpreting the cause. For example, your family business employee child may be accurately reading that you are angry and disappointed, but not know that those feelings are directed at yourself instead of him/her.
Actively chose not to live in your family baggage. It may be true that 25 years ago your father’s anger lead to punitive verbal attacks that left you feeling powerless and ashamed. In the midst of an adult-to-adult difficult conversation with your family-business leader father, you may need to look at the intensity of your reaction and ask yourself, how much of your reaction is coming from the present? Your father has matured and rarely behaves badly when angry any more, and you are no longer powerless in the face of his anger.
Set family agreements to foster family communication that avoids building resentments. Asking yourself, “would I talk this way to someone who wasn’t family?” is often a good cue.
Some of these ideas are drawn from:
Fishman, A.E. (2008). 9 Elements of Family Business Success: A Proven Formula for Improving Leadership & Relationships in Family Businesses. New York, NY: McGraw-Hill.

June 25, 2010
Written By: Michelle Clark, Ph.D.

Editor’s note: Michelle Clark wrote the following piece for the May 15 issue of the Business Record about the hard conversations family businesses must have to remain focused and productive. 

Family business members are required to have hard conversations at a level that most outsiders can't imagine.
  • Which of our siblings stands out as reliable, smart and good with people?
  • When will Dad die, and how soon do we need to begin preparing to replace him?
  • Who in our family will inherit the family legacy and why?
Family business owners know that they need to establish clear performance expectations for family members, craft a succession plan and hold one another accountable, yet many don't. It is obvious why. These conversations can be excruciating and awkward.

Family business members often feel that they are in a lose-lose situation. On the one hand, they know that in order for the business to survive, they must bring in only those family members who are the right fit; set expectations and give one another hard feedback about performance; and plan for who will take over the operation in the next generation.

On the other hand, for some, attempts to have such conversations haven't gone well, and the consequences for family relationships were unpleasant.

Family businesses, including family farm operations, are a key driver in the Iowa economy. It is in the best interest of everyone in the state that family businesses successfully negotiate difficult conversations so they survive.

Fortunately, there are strategies to effectively manage these conversations. These strategies start with questions such as:

When did your family have a really hard conversation that went well? If your family was able to have a productive and respectful conversation about what to do about your grandfather with Alzheimer's disease after your grandmother died, reflect on that conversation. What made that hard conversation go well? Who took what roles? What personal agendas did people put aside? Then ask, what can we learn from that conversation that applies to the hard family businesses conversations?

What should we do with these answers?

Plan for a hard family conversation as if it were a meeting with your biggest client. Go through the list of all the items you would pay attention to for such a meeting: Choose the best location and timing; decide who should be there; list the strengths of each participant and how can they be used most productively; and define the desired outcome, along with a plan to avoid being sidetracked from reaching it.

Commit to value both the family and the business. The only "good" solution is one in which both the family and the business win.

Get out of isolation. In your community or your industry, there are many businesses that are family-owned. Look for others who have similar businesses or family structures and get to know them. Talk about the challenges of family businesses, and you might find advice from someone who has been there.

If you have tried everything you know how to do and still feel "stuck," it's time to ask for help.

Michelle Clark is a business psychologist with Jensen Consulting, specializing in family-owned businesses.

May 14, 2010
Written By: Michelle Clark, Ph.D.

Reflecting back on our Family Business Forum has continued to remind me how much work and feeling is involved in family businesses. Like all businesses it is tough to work both in and on your business. Now add in the family dynamic. It’s tough enough to find  time in the day to accomplish everything that must be done, but how do you to find the energy to have difficult conversations with your family member owners and employees?

Our first Family Business Forum achieved everything we set out to do. The conversations that we had were lively and extremely focused! This is why the Family Business Forum was convened. Each participant made a sacrifice when they made time to step out of the business for an entire morning. Everyone was set to work on these hard questions, which demonstrate a passion for both the business and the family. 
In particular, I have carried one conversation with me. On participant was moved to share his regret about oversights that occurred in his family business and the impact those oversights had on both the business and the family. The loss of opportunity and the pain that a family business can go through can be avoided. It reminded me of how important it is to not ignore these issues because they won’t go away.
So, where do we go from here? 
Each Forum participant (and many of our Family Business clients) have embarked on an ongoing, changing journey. Questions abound. Who do you want to take over your business when you retire? What is the timeline for this? Is there someone capable of running your business? What happens to all of your hard work in the event of a tragedy for you and your family? Navigating all of this seems an insurmountable task. However, you have started to think about these issues. Now, you need to keep the momentum going and start working on a plan for your family.
It won’t always be easy, it won’t always be fun. It will be worth it! You love your family and you are passionate about your business. The costs of inaction can be devastating. Implementing plans for your family business can help prevent you from living with a feeling of regret. How do you want to be remembered and what do you want to have happen for your business? 
Now is the time to start answering these questions.

April 9, 2010
Written By: Michelle Clark, Ph.D.

The other day I ran across an article reminding readers that during difficult economic times there is typically growth in self-employed and small business sectors as unemployed Americans seize the opportunity to start their own businesses. This isn’t surprising, but it made me pause and wonder just who are the people who are leading this growth. 

One segment is likely a growing group of family-owned businesses that have been labeled “copreneurs” -- dual-career couples who also share an entrepreneurial business enterprise. In fact, according to the U.S. Census Bureau Survey of Business Owners, 10.1% of all businesses (corporations, partnerships and sole proprietorships) are run by married couples.
Married couples who run a business together receive much less attention in the family business world, which focuses primarily on multi-generational family systems. Coepreneurs face unique challenges. One of those challenges is having all the family’s financial resources “in one basket,” In many entrepreneurial companies, the family stability is “subsidized” by one spouse who works in a salaried career with health insurance benefits, a steady income over the year and a moderate amount of job security. Even if that spouse is involved in the business – working weekends, providing accounting support or helping make strategic decisions – the day to day responsibilities fall to just one of the spouses.
Coepreneurs are a true partnership where a couple has decided to go into business together – all the eggs are in one basket, so to speak. Even though it can be more stressful than other partnerships, in our own work with family businesses, we have seen many business/marriage partners who survive and thrive. They accomplish this in the same manner that any successful family business does. They communicate. They set ground rules. They keep perspective. They have the tough conversations.
In the upcoming spring newsletter, we cover the topic coepreneurs in more detail, but I thought it was worth introducing the term here because they are a growing segment in the business world. In fact, if you and your spouse are coepreneurs, I invite you to comment below with tips on how you have found success working together.

March 26, 2010
Written By: Michelle Clark, Ph.D.

All families fight!

Families in business together face additional challenges far beyond those of most families: more proximity, less ability to “disconnect” when tensions are high, financial interdependence, and an intermixing of childhood roles with adult responsibilities. Friction between loved ones and business interests is what makes family businesses unique. Effective family businesses manage both family and working relationships productively, and most need assistance to accomplish this smoothly.
The consequences of family business conflict are twofold. In the business context, unmanaged or unresolved conflict can create havoc in the work environment, waste resources and prevent the realization of goals. In the family context, unmanaged or unresolved conflict can cause strife, tension, and competition for power -- leading ultimately to fractured relationships, resentment and distrust. Simply stated, a healthy family business is dependent upon, and interdependent with, a healthy family.
These activities help avoid conflict:
  • Clear expectations regarding pay, time-off, job descriptions and performance evaluation
  • Strategic planning that assures agreement about business goals and strategies
  • Communication training for effective negotiation and disagreement
  • Mutual agreement regarding appropriate work/family boundaries
  • Succession planning
  • Clarity regarding financial legacies and estate planning
  • Facilitated family business meetings that address issues in a timely and productive manner
These are indicators of a need for conflict resolution:
  • Reoccurring arguments that never seem to get resolved
  • An on-going feeling of “stuckness” or hopelessness regarding resolution
  • The “family” part of the work is harder than the work itself
  • Deterioration of family relationships outside of work
  • Triangulation and alliances
  • Conflicts that raise questions about the succession plan or family members staying in the business
When your family business is stuck in a conflict, it often is helpful to have an outsider assist with conflict resolution to: 1) develop procedures for problem solving, communication and solution implementation, 2) serve as a translator of family and business members’ communications, promoting empathy and understanding 3) educate family and business members on how to negotiate and communicate more effectively, 4) serve as a reality-tester, exploring the validity of members’ views and positions, 5) assists the members in reconciling differing interests, diminishing hostility and establishing trust, and 6) assists the members in drafting action plans for solution implementation

March 14, 2010
Written By: Jensen Consulting Admin

If you work in a family business you can't miss:

The Art of Family Business:
How to Have a Healthy Bottom Line and a Happy Thanksgiving Dinner

Thursday, April 29 | 7:30 – 10 a.m.
Registration begins at 7:15 a.m.

Glen Oaks Country Club
1401 Glen Oaks Dr, West Des Moines, IA

Cost: On us, but please register before Tuesday, April 27 by calling 515.875.4858 or emailing sarahz@rjensenconsulting.com.

Running a family business brings complexity to both the family and the business that few outside of a family business truly understand. At their best, family relationships bring levels of loyalty, rapid action and communication that non-family businesses strive for but rarely achieve. At their worst, family relationships can drain the life from a thriving business endeavor, with anger, resentment, hopelessnessand exhaustion poisoning both the business and the family.

THE FAMILY BUSINESS FORUM examines the overlap of business and family relationships and spotlights the difficult conversations successful family businesses must have in order to thrive as a family and a company.

You will leave this session with:

• A written assessment of the strengths and weaknesses of three aspects of your business: family relationships, business systems and ownership systems.

• A list of critical conversations every family business must have.

• Practical suggestions to address business/family overlap.

• An overall strategy to navigate the family dynamic to achieve both a

successful business and Thanksgiving dinner.

Our own Michelle Clark, Ph.D., brings hands-on experience assisting family businesses to productively manage transitions, have difficult conversations, and build business systems that serve both the bottom line and healthy family boundaries.

March 1, 2010
Written By: Michelle Clark, Ph.D.

During a recent consultation, I was again reminded of the importance of emotional intelligence at a team level, and that team emotional intelligence is not simply a sum of the emotional intelligence of its individual members.

In their 2001 article in the Harvard Business Review, Vanessa Urch Druskat and Steven B. Wolff suggested that group emotional intelligence “comes from norms that support awareness and regulation of emotions within and outside the team. These norms build trust, group identity, and a sense of group efficacy. Group emotional intelligence isn't a question of dealing with necessary evil-catching emotions as they bubble up and promptly suppressing them. Far from it. It’s about bringing emotions deliberately to the surface and understanding how they affect the team's work. It’s also about behaving in ways that build relationships that strengthen the team's ability to face challenges.”
Here are some practical tools I have found to be effective for teams:
Set group ground rules: Not every team member has the same expectations about what productive and respectful team behavior is. Formally agreeing to ground rules and revisiting them regularly can create healthy group norms. Here are some ground rules many organizations include: 1) disagree passionately behind closed doors, demonstrate a united front outside, 2) everyone participates, no one dominates, 3) speak up in the meeting, no “meeting after the meeting,” 4) when you have strong feelings about a topic, have face-to-face discussion; don't send prickly emails.
Select a process observer in team meetings. Most groups are effective at managing the content of meetings (e.g. did we cover the agenda? What decisions need to be made?), but often gloss over the process of the meeting (e.g. two members dominated the discussion and the remaining eight sat silently with their arms crossed). Addressing the process can feel awkward. One strategy is to designate one person to take a process observer role, usually on a rotating basis. Here are some questions the process observer might ask: “Are we following our group ground rules right now?” “Is this a productive discussion?” “What might we do to assure all voices are heard in this discussion?” After the process observer asks the question, there is a group round-robin with each person either answering the question or passing.
Use personality inventories. Diverse perspectives make for better discussions and outcomes, yet significant differences in work-styles can create conflict and distrust. Group interpretation of personality inventories can increase openness about differences, give the group shared and neutral language to discuss differences, and increase a group's ability to tap into individual's sweet spots.
Druskat & Wolff (2001). Building the Emotional Intelligence of Groups. Harvard Business Review, 81-90.

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