I never had a chance to “inherit” or “buy into” the family business of my wife’s grandmother, my great grandfather, my grandfather, or my father. Why? The businesses did not last. They were either successful as a family life-style business, or, as in the case of my father, they succumbed to problems and went out of business. Yet, some last for many years and many generations. One company I’ve worked with started in 1869 and is currently run by the 7th generation. Others are 100 years old and run by a 4th generation family member. Some are on their 2nd and 3rd generation. A number of companies I know are still on their 1st generation after more than 30 years.
I see three things that are needed to make a family business last. In fact, those same three things are needed to make any business last:
- Healthy Business
- Family or Employee Interest
- Family or Employee Competence
A healthy business is the first criteria. Cash flow, growth potential, significant marketshare, business processes in place, inventory management, customer satisfaction. The list can be quite long. I think 4 key areas can be addressed based on what makes an individual healthy—body, mind, spirit, soul.
Just as I must keep my body healthy, so a business needs to keep its physical assets healthy. Even an e-commerce business requires assets somewhere that can scale up and down as necessary. A manufacturing business with people on site needs even its bathrooms to be acceptable.
The mind of the business begins with its culture and what people think and say, what images they see, what behaviors are encouraged. Innovation and continuous improvement are things that drive the mind.
The spirit of a company also involves its values and culture. Do you embrace change and encourage it, or do people drive a stake in the ground and say, “this is the way it’s always been done.” Are your family members and employees optimistic about the future, cheerful with each other, collaborative? Or are they pessimistic, down in the dumps complaining about management and out for themselves? I’d rather have the former spirit in my company.
The soul of a company goes even deeper. The outward facing mission of the company can drive people to accomplish the impossible. Mission statements such as the following drive emotions deep inside people:
- We make products that clean up the environment.
- Enabling education for everyone, anywhere, anytime.
- Helping people connect on a deeper level.
Without the mission, values, spirit, and culture discussed above, family and employees will see it as “just a job.” Instead of being a healthy, fun place to work, it will be toxic. But, it takes a bit more to create and capture the interest of family members and employees. And, it depends on what they want. The golden rule we get from the Bible is “Do unto others as you would have them do unto you.” That often gets misinterpreted to suggest that everyone wants what you want–so if you like bagels and cream cheese, forget getting any donuts or muffins for others. That, certainly, is not what is meant. If someone wants to learn about welding, then find a way to help them. If they want to learn more about accounting and work in that area, see what you can do. Show interest in helping your people get do learn and do what interests them, will get them interested. Teddy Roosevelt is credited with saying, “No one cares how much you know, until they know how much you care.” Care for what interests others and they will care about your interests.
My sister loved interior decorating. My oldest brother is a perfectionist and a master at anything related to building. My second oldest brother was a “get ‘er done” kind of guy who could put up walls and lay cement really fast. He also was a bit more political. Me? I fancied myself as the manager. What a great business we could do with construction and remodeling. Except, my oldest brother would have been going off the handle complaining about the other brother’s sloppy work that he had to compensate for. Each was good in some way, even competent. But not really fully competent. Even though a family, we never really were competent at working together. I fancied myself as the manager, but I was not even close to being ready and competent to deal with “managing” older siblings. Skills, emotional intelligence, and many others competencies are needed in a business, whether family or not. I heard a good example of the importance of diversity combined with competence on a Harvard Business Review podcast recently. An orchestra has a diversity of instruments collaborating to make beautiful music. How dull the musical performance would be with just a kettle drum banging out a beat. Each musician is skilled and competent at their instrument. They may even be able to substitute, if necessary, for a musician of a different instrument. Yet, imagine how poor everything would be if the musicians had a diversity of music instead of a score that combines them beautifully. It was be chaos and cacophony. Individual and group competencies need to be meshed to build a beautiful business.
Email me at paul@BusinessAccelerants.com if you would like to access the recorded video of my presentation to the Austin Family Business Program and to receive your passcode and Vimeo link.