By Wayne Rivers

The Daily Herald newspaper of Utah reports that a new study by Brigham Young University researchers shows family businesses are more socially responsible. They treat their employees better, they contribute to the community more, and they damage the environment less primarily because of one thing – the family name is on the line. Study co-author Gibb Dyer says, “The theory behind it is that the family has its name on the building, so if the business does something that’s not seen as socially responsible it reflects badly on the family. With other big corporations there is not that personal connection. Those managers and CEOs don’t have the responsibility to uphold the family name.”

Another interesting finding in this study was that a company’s social responsibility was greater if the founder of the company was still alive. Study co-author John Bingham said, “In some ways with the founder being alive there is a greater sense of accountability for being socially responsible and being aware of the stakeholders, more so than when the founder passes on. The findings suggest that the family plays a very big role in the values cascading down through the company and keeping those values intact and alive. Organizations that are family owned would be more likely to sponsor community enhancement projects, at risk youth programs, and provide incentives for employees to give back to those individuals who are neighbors and friends they live with.”

If any of this is a big surprise to you, you haven’t been paying attention. A family’s values are an inseparable part of the businesses they create. For example, if a family is ruthless and cutthroat, those characteristics and values will be reflected in their business behavior and, generally, in the behavior of their employees. Conversely, if the values of the family are honesty, integrity, hard work, thrift, and discipline, those values will be transmitted to the family members and employees, and that’s what customers and vendors will see when interacting with these people. Contrast the results of this survey with public and multi-national corporations which seem to view social responsibility as just another marketing gimmick they can tout. Surely not all large, public companies are bad when it comes to social responsibility, and not all family businesses are good; but the results of the study show that family businesses are “closer to the land” and are more attuned to the social needs of the communities in which they live and operate.

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
^{February 2012}

When you run a successful family business, it can be difficult to keep your employees as engaged and motivated through all the ups and downs of business. Bringing in industry leaders and well-respected experts can help reinvigorate your team to pursue their own professional aspirations as well as the goals of the company.

• Bring In an Expert
  Hearing about the latest innovations in your industry will not only teach your employees valuable new skills, but it will also allow your workers to hear of industry changes in a new context. For example, instead of hearing of a new sales strategy from the same supervisor, your staff will hear these tips from someone outside the company, which will allow your employees to engage with the information in a new way and from a new voice.
    
• Bring In a Success Story
  Without something new to spark minds and ambition, it’s easy for employees to fall into a routine. That’s why it’s a good idea to have employees engage in a presentation from a CEO who started just like they did. Hearing business consulting tips from someone who has had success can have a huge impact on the ambition and energy of your employees.
   
• Bring in a New Voice
  Because employees absorb material in unique ways, bringing in a keynote speaker who employs a different style may get through to workers who were never ignited by previous presentations. Speakers may use sounds, visual aids, hands-on learning, or movement to teach new skills that will improve productivity and output.

The best managers are always looking for business consulting advice that will engage their workforce to promote company aspirations. Keynote speakers can provide a new voice, a new career role model, or a new learning style for employees and companies big and small. For more information about maximizing the potential of your workforce, contact The Family Business Institute at (888) 438-1948.

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Stephen Covey and others have made great contributions to our wisdom literature with “7 Habits” type  of advice, and they’ve improved many lives. But what if we turned their positive exhortations on their head? What are the 7 habits one must avoid to be a good leader? Where are the landmines and booby traps associated with running amd leading a family or closely held business? And how do I know when I've blundered into a mess? Here is some counsel.

There are two components of successful family business leadership. The first is exercising the positive components of leadership successfully (i.e. creating a compelling common vision for your company, developing a strong mission, creating clear roles, responsibilities, and accountability, having internal transparency, etc.). The other component of successful leadership is to avoid making mistakes. There are two distinct sides to the leadership coin: One must simultaneously do right things right while avoiding critical mistakes in order to be a successful leader.

A January, 2012, Forbes article by Eric Jackson cites the book Why Smart Executives Fail by Sydney Finkelstein, a professor at the Tuck School of Business at Dartmouth College. Finkelstein did research on 50 formerly high performing companies like Enron, Tyco, and WorldCom in order to find out why they had gone so spectacularly from success to failure. He uncovered that the senior executives at these companies had seven habits in common which he labeled “The Seven Habits of Spectacularly Unsuccessful Executives.” If, to be a successful family business leader, one must avoid the landmines which devour unsuccessful executives, then this article could be taken as preventive medicine or perhaps even as an early warning sign. It is not intended to be a criticism of anyone’s leadership in particular, but rather as a self-check and a potential wake up call. Here’s a synopsis of Finkelstein’s seven destructive habits as they apply to family business executives:

Habit #1: They see Themselves and Their Companies as Dominating their Environment

This is the CEO’s ego talking. The majority of family businesses are – being 100% blunt – inconsequential industry forces in the long run. Think about it. If your firm were eliminated from the face of the earth, couldn’t another company in your industry fill your customers’ needs at roughly the same quality and price? Sure, there are things that you and your company do which are absolutely unique and which your clients value and appreciate, but if someone needs a new set of tires, they need to erect a 20,000 square foot warehouse, or they need 100,000 bushels of corn, couldn’t someone else step in and take your place with fairly little disruption? It’s harsh and jarring, but it’s true!

CEOs that see themselves and their companies as dominating their environments are providing valuable goods or services, but if they think they are the only ones who can provide that good or service they’re simply delusional. There is nothing wrong with a healthy ego, and it’s probably true that the absence of a healthy ego would cause a family business leader to be less successful. However, if you’ve begun to read and believe your own press clippings, you may be losing touch with business reality.

Habit #2:  They Identify so Completely with the Company That There are No Clear Boundaries Between Personal Interests and Company Interests

Family business leaders wouldn’t be the successes they are without devotion and commitment to their companies, but when they cross the line from viewing their companies as enterprises that need time, attention, and nurturing and begin to look at their companies as extensions of themselves, they have hit a tripwire. Family business CEOs who cross this invisible marker are usually easy to identify. They’ve begun to mix corporate needs and expenditures with ones which are really personal or ego driven. For example, the family business leader who used company funds to buy a 100-foot yacht for “entertaining clients” has most likely lost sight of the bright line dividing necessary company marketing expenditures with expenditures more truly benefiting himself and his family.

Another sign they’ve crossed the line is when any constructive criticism about the company is t

aken personally by the leader and is consequently crushed by his withering defense. This behavior shuts down helpful observations and team play and cuts off the CEO from valuable perspectives and information.

Lord Acton said, “Absolute power corrupts, absolutely.” Since being the leader of a successful family business is about as close in our society as we come to having royalty (outside of Hollywood stars, musicians, politicians, and athletes), they can often begin to behave more like entitled royals than hardworking family business leaders. When this transformation takes place, the leaders risk losing the trust of those who follow them.  

Habit #3:  They Think They Have All the Answers

A common stereotype for family business leaders is that they are dynamic individuals making dozens of decisions per day, dealing with crises on the fly, and sizing up situations which lesser mortals couldn’t handle. This is probably true for some family leaders some of the time, but to assume that any one individual has all the answers to all the problems faced by a family business over the course of a few months or a few years is foolish.

What would work better: A team of committed, go-getter executives bound together by a common mission and their desires for long term business success, or a company led by, as one writer put it, “a genius with 100 followers?” If the old saying that two heads are better than one is true, family business leaders would be wise to admit they don’t have all the answers and recruit the kind of talent which can consistently and quickly help them find those answers.

Habit #4:  They Ruthlessly Eliminate Anyone Who Isn't Completely Behind Them

CEOs who work hard to develop compelling visions for their companies may often think it’s their job to get everyone to buy into that vision. Consequently, there is a perception that anyone who doesn’t rally to the cause of that vision is somehow undermining the leader. And people who undermine the leader simply have to go.

It’s not necessarily true that people who dissent and offer contrasting viewpoints are undermining the leader or his vision in any way. They may simply have alternative ideas and methodologies for getting things done. Sometimes those senior managers are actually even right! Family business CEOs who eliminate dissent and the people who they believe “undermine them” usually only succeed in driving the contrasting viewpoints underground. They still exist, just out of the sight or hearing of the CEO. Executives who fall prey to Habit #4 find themselves in companies with little to no bench strength, a population of “yes men,” few alternative options when things get hairy, and an inability to attract talent later on. They can even marginalize family members who don’t cleave to their visions. One family business CEO even went so far as to drive off a son-in-law through constant criticism, fault finding, demotions, and a behind the back whisper campaign. The CEO commented to us laughingly that when he bought out his son-in-law’s shares that he had “stolen them for half of what they were actually worth.” It didn’t seem to occur to him that he was harming his oldest daughter and his grandchildren by undertaking this ruthless action. He was so determined to eliminate any dissent among his management team, so determined to be the winner in this perceived conflict, that he was blinded by the competition and his unquenchable desire to “win.”

Habit #5:  They are Obsessed with the Company Image

This negative habit relates directly to Habit #2 and smacks of narcissistic behavior. The company image is everything, and any negatives about the company are, therefore, negatives about the CEO personally! When CEOs are consumed with blatant attention seeking – think Donald Trump – they often find their attention drawn not to company strategy or operations, but drawn to their next media fix. Worse, when the company does experience success, they are reluctant to share the credit with other members of the team thereby creating a demoralizing work environment.

Habit #6:  They Underestimate Obstacles

Family business CEOs are some of the most confident people on earth. For 20, 30, or 40 years they’ve met and overcome just about all the obstacles in their way. Now, when obstacles confront them, they, because of their track record of success, underestimate the potential impact or simply fail to appreciate the magnitude of hurdles which must be overcome in order to achieve the next success. They have created an environment of unrealistic expectations which makes it hard for them to pull back from any chosen course of action. There was a story dur

ldquo;Dot-Bomb” of 1999 and 2000 of an ego driven CEO who had decided that he needed to rebrand his fleet with a new, different, splashy paint color and logo even while his company was going broke. The fleet got the makeover the CEO demanded, but the company did in fact go belly up which made this CEO the modern version of Emperor Nero fiddling while Rome burned.

Habit #7:  They Stubbornly Rely on What Worked for Them in the Past

Jackson writes, “Many CEOs on their way to becoming spectacularly unsuccessful accelerate their company’s decline by reverting to what they regard as tried and true methods. In their desire to make the most of what they regard as their core strengths, they cling to a static business model.” With all the changes afoot in today’s marketplace, attempting to run your family business the way you did 1982, 1992, or even 2002, is probably a recipe for future trouble. Wayne Gretzky said the reason for his greatness was that he didn’t skate to where the puck was, he went to where the puck was going to be. Don’t today’s family business leaders need to go where the puck is going to be? Knowing that one can’t manage millennials the way one did generation X or Y, shouldn’t today’s wise leaders develop new skills and strengths – or at least hire new skilled and strong people – to help them go in a slightly different direction? None of this means that a family business leader’s vision or mission are somehow flawed; it simply means that just as a professional golfer continues to work on and hone his swing every single day, a successful CEO needs to develop and hone new skills and strengths to cope with changes in the marketplace, changes in competition, changes in customer preferences, and changes in employee wants and needs. The Golden Rule doesn’t work anymore! The new rule is do unto others as they want to be done unto. Being able execute this “Platinum Rule” means CEOs need to continue to develop their people and emotional intelligence skills in order to get the most out of themselves, their employees, and their companies.

Jackson concludes his article: “The bottom line: If you exhibit several of these traits, now is the time to stamp them out from your repertoire. If your boss or several senior executives at your company exhibit several of these traits, now is the time to start looking for a new job.”

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Whether it is estate planning or buy-sell agreement planning, many small family businesses undertake a valuation at some point.  Assessing past performance, present financial situations, and future earnings, valuating a family business is a complex process.  Learn more about valuations for family businesses in this guide: 

Planned Valuation Use

The reason for valuating your family business can determine what valuation method you will need.  Different valuation methods provide different values because each approach highlights different information.  For example, finding the estimated value with an accounting book value doesn’t highlight the family’s long-term goals, while a discounted cash flow value is an accurate way to assess future earnings. 

Family Business Considerations

Family businesses should be valued differently than other companies.  Calculating value with EBITDA (earnings before interest, tax, depreciation, and amortization) doesn’t completely capture a family business’s value.  Because the owner’s life is so intertwined with the business, it’s important to consider expenses that include lifestyle-related decisions.  Internal structure of a family is also very different than other companies, which is often included in a comprehensive valuation. 

Valuation Components

There are many different components of the valuation process.  Using accounting techniques often draws the value from balance sheets and income statements.  Not only is it crucial to evaluate the past and present performance, but it's also important to evaluate the present value of future earnings.  Other valuation factors:

• Size and Potential of Market and/or Industry
• Customer Base
• Quality of Management Team
• State of General Economy 

Annual Valuation

Periodically updating your valuation lets you examine how your strategies are working to create value.  After evaluating how the business value changes, you can make corrections to continually increase your business’s success.  Also, consider having your valuations performed by a valuation expert for an external and impartial value. 

The Family Business Institute employs a sophisticated methodology to assess your closely held business’s value.  We do much more than determine a point-in-time number—we also recommend process management strategies to make improve your business’s value over time.  Call (888) 438-1948 to speak to one of our consultants today!

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It’s no secret that families are changing. In Prescriptions For A Healthy Family Business, we talked about how, while businesses change sporadically, families are changing constantly. Since family is the foundation of family businesses, there can be no discussion of the long term health of the family business without consideration of the long term health of the family. In public companies it’s possible, in theory, to make strategic and tactical decisions without considering the impact that longer work hours have on key executives, what relocation might mean for relations with the in-laws, or the emotional impact of letting long term employees go. That simply isn’t true for family and closely held businesses. Big and sometimes even little decisions affect the family, and, in turn, the business is affected by how the family loves or hates the new direction.

In this Family Business Institute White Paper, we’ll explore many of the trends which are currently tugging at the fabric of our families and discuss a tool which helps create better family communication and cohesion.

If you'd like to learn more about the family business consulting services we offer or to speak with a consultant today, call (888) 438-1948.

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In the search for new ways to improve business and increase the size of networks, family business owners have tried just about everything. We’ve found that one of the best ways to improve business is by learning what others in your industry are doing right and wrong. By attending an industry roundtable discussion, you can learn from leaders in your industry and discover new ways to solve problems. You may have heard about them, but what exactly are roundtable discussions? More importantly, how can they help your business? 

• What is a Roundtable Discussion?
  Industry roundtable discussions are typically held at business conferences. They are a way for non-competing business leaders and experts to present ideas to the audience, but in a less formal setting than a speech or lecture. With about seven to ten leaders at a table, the tone of the discussion becomes conversational, helping the audience learn about important issues and add their own perspective.
    
• How Can These Discussions Help You?
  As business owners, improving your business is one of your primary concerns. Attending an industry roundtable can help you do exactly that, by learning about a specific topic related to your business, and by networking with other professionals who are interested in learning about similar ideas. Additionally, industry roundtable discussions allow you to experience different viewpoints, which help your own opinions grow and evolve.
    
• What About Hosting a Discussion?
  If you want to host a roundtable discussion, then there are a few things to keep in mind. First, you’ll want to involve a roundtable facilitator who can help you involve a mix of leaders with unique perspectives. Second, prepare open-ended questions that will spark thorough and thought-provoking discussion. Lastly, remember to pay attention and take notes, just as if you were in the audience. Sometimes a response will lead you into an interesting conversation, and you’ll want to notice those opportunities.

Industry roundtable discussions are a great way to improve business practices and ideas. Whether attending or hosting, they can be an extremely valuable tool. For more information on hosting or attending a roundtable discussion, call the Family Business Institute at (888) 438-1948. We provide family business consults and attend roundtable discussions throughout the country. Specializing in process management, conflict resolution, and succession planning, we are dedicated to helping you improve your business.

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Reading the economic tea leaves at this early stage in the year, 2012 is shaping up as a time when family business leaders might finally begin to expect to make up at least some of the ground lost in The Great Recession. The Conference Board Leading Economic Index and Consumer Confidence Index are both up, The National Federation of Independent Business Index of Small Business Optimism has improved, and the Tatum Index of Business Conditions continues to rise.

The informal reports we at The Family Business Institute are receiving are also guardedly optimistic, generally speaking.

So, if things are going to gradually improve, where do family business leaders go now? On what should they be focused, and where should they spend their time?

Here are four tips for family business success in 2012:

1. Begin to think ahead six to 12 months.
   This hasn't been a luxury for many since we've all been so focused on day to day and month to month survival. Now is the time to begin to dream again and think what people, tools, and resources you're going to need as business conditions improve. Where are you going to get the things - especially people - you need, and how are you going to pay for them? Putting together business plans and pro forma financial calculations will make the going much easier.
    
2. Manage your cash.
   While cash management is a recession survival imperative, it's also vital as you begin to grow again. Growth means investing in people, equipment, and capacity, and all those drain cash. Don't dream so big you end up outrunning your headlights!
    
3. Pay Attention to Business Development.
   Make sure that Business Development (BD) has all the resources it needs to be successful. Whether you, as the family business leader, are directly responsible for BD (and in most family firms, BD is the responsibility of the CEO/President) or not, make sure BD gets plenty of attention for two reasons. Number one, you want to increase top line revenues as much as feasible. Number two, you want QUALITY BD! Consider this: if you're stuck with recession era low margin work for the next six to 12 months, that may allow your competition to snap up new opportunities with better margins fueled by increasing demand. Make sure you keep some of your powder dry to be able to take on better margin work when it becomes available.
    
4. Be ready to retreat back to survival mode and hunker down if conditions deteriorate.
   One of the silver lining blessings of a recession is that it teaches and enforces penuriousness and frugality. If things begin to slide backwards again - a financial crisis in Europe, 1980 style inflation breaks out, a terrorist shock disrupts normal business activities - don't wait to pull the trigger back to safety mode. One of the reasons family businesses suffered and even failed in the 2007 thru 2011 period is because they were too slow or were even in denial that a recession was looming. The number one culprit was that they were reluctant to reduce headcount - the single largest cost for service businesses and one of the largest for almost all family companies.

2012 isn't likely to be a go-go year like we had in the 1990s and early part of this decade, but it is a breath of fresh air to be able to think in growth terms again. Be ready to take advantage where you can as the opportunities of 2012 present themselves!

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“Cash flow” is a term that’s thrown around in business meetings and investment discussions quite often. Unfortunately, it’s difficult for many business owners to truly understand the meaning. With competing, yet similar sounding terms such as “overhead” and “net worth” it can be easy to confuse the term “cash flow” with something else.

If you think about cash flow literally, it may be easier to remember what it is. Cash flow is the movement of money into or out of an account, business, or an investment. When a business’ profits are consistently lower than its expenses, this is obviously a negative sign. So your goal should be to understand how to increase the flow of money into your business and personal accounts, while decreasing the flow out of the business.

In this video, you’ll learn about cash flow and its three main classifications. The first is operational cash flow, which refers to any money taken in or going out for business operations. The others, investment cash flow and financing cash flow, are also important for a business owner to consider in valuing the overall business success. To learn about cash flow in depth, watch this clip.

Our family business consultants can work with your closely held business to organize your cash flow operations and reduce business expenses. To learn more about our expense reduction services, visit our website or call to speak with a consultant today at (888) 438-1948.

http://www.youtube.com/v/pqWX0nQnhDQ?hl=en&fs=1

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