Managing Owner Expectations During Uncertain Times
I am the third generation CEO of a company owned by myself and three other cousins. I am the only family member working in the business. Over the past five years, our business has done well and we have been able to pay substantial dividends to all shareholders. While I warned my cousins, who all sit on our board (along with our CFO and two outside advisors), that they should not base their lifestyle on these dividends, they have gotten used to the extra cash flow. As you might guess, the current state of the economy has affected our business, similar to many out there. While we are not in danger of closing our doors, we have had to make several cutbacks on staff and other expenses. The challenge I face is that my cousins are overreacting to the changes we are making. While we are being prudent and making cuts to ensure long-term survival, they interpret these actions as a signal of crisis. I get at least one call a day asking for an update on sales and cash flow. They are even asking me to confirm whether we will be able to meet payroll. And, if I’m not available, they call other senior employees to get the information. In the meantime, I am trying to keep the business afloat and don’t have time for these distractions. What can I do to acknowledge their concerns but not let them derail the business?
It is impossible these days to turn on the computer, radio, or television or open a newspaper or magazine without being warned that the sky is falling and we should all run for cover. The level of information we have gotten used to receiving 24-7 from media of all types means that we cannot turn off the stress created by uncertain economic times. Compounding the problem, stress causes people to act irrationally. So, you have shareholders who are surrounded by external information, most of it bad, who do not have the full picture you have concerning the state of your business. I sympathize with the fact that you do not have time to manage them and the business. Having them get information from other senior employees is not a good idea either. They will distract those employees from their jobs and may raise concerns with staff that owners could make an irrational decision, such as selling the business. And, this could create confusion around whom employees answer to—you or the owners.
The best thing you can do in this situation is set up a regular, structured channel of communication between you and the other owners. If possible, schedule a biweekly conference call during which you go over key numbers. Keep the call to 30 minutes in length. Send out monthly financials with a short memo explaining variances from your budget and how you are addressing those variances. Explain why you are making changes and what impact you hope they will have. And, reinforce rules on chain of command. Explain why it is important that owners seek information from you and not other employees. On the business front, you may need to get your senior staff together and reassure them of the steps you are taking. Explain that the owners are anxious because they are dedicated to the business and want to see it succeed. It may even be helpful for owners to voice their support of the business to employees, so the employees know that the owners are not considering selling the business or making more drastic cuts.
You also mentioned that you have paid good dividends over the past few years. Now is the time to start managing expectations about what dividends may be for the next year or two. Revise the budget, if you have one, to reflect the current economic environment and determine what level of dividends may be possible. Warn your co-owners ahead of time that they may need to rein in their personal spending to avert potential disasters down the road.
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