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Helping Family Businesses
Prosper Across Generations®

How to Succeed in a Family Business

By Christopher J. Eckrich, Ph.D. and Stephen L. McClure, Ph.D.

 

Family business consultants have found it useful to understand whether the business we are working with is a family-first business or a business-first business. You may find that thinking about the company you work for in these terms is helpful to you, too. Let's begin with family-first businesses.

 

A family-first company is one whose owners tend to think that providing employment and other advantages to family members is one of the primary purposes of the enterprise. Having all (or most) of the kids working together in the business represents success to this family. The business performance is of course important, but hitting on all eight cylinders all the time is secondary to employing the new son-in-law, even though his training and experience don't fit the business at all. He's joined the family; he's got a job. Often, the failures of individual family employees may be viewed as learning experiences that don't necessarily require a lot of follow-up.

Our company is a much stronger company because we have so much family involved, these families say. They believe that the family's values are the right values to make the business a success. Out of that belief, they fill key positions with family members. As a result, the business's strategy, management and finances are influenced by the number of family members in the business and their skills and interests.

Suppose a family owns a grocery business with three stores. Dad, the founder, is the CEO. Mom is the COO, overseeing the front office, human resources and customer service. Son Joey heads the meat department. His sister, Meg, runs produce. Two other brothers and Meg's husband each manage one of the stores. The business provides a good living for the family and its employees. More important, it serves the core purpose of giving family members the opportunity to work together running a business the way they feel is best and earning a good living at it.

A family-first business can work well in a protected niche environment that is, when competition is not so fierce that the company is forced to move toward pure accountability. Some of the most successful family-first businesses are those that provide an experience for customers, or where customer service is a major factor. Good examples are restaurants where the family members are front and center, yet it could also be the supplier to the restaurant and many more like it, where relationships are key. They know the customers and make them feel at home. The collective family is a key part of what makes such businesses successful.

You probably know of some family farms that have expanded and diversified, evolving perhaps into a cluster of businesses, including a pick-your-own operation, a restaurant featuring home cooking, hayrides and other entertainment, a country gift shop, a produce market, a Christmas shop and perhaps a petting zoo. The founding parents children and some in-laws probably each run a major facet of the operation, and perhaps there s a non-family employee or two to handle positions that family members are ill-equipped to manage such as a controller. Or, there may be one star non-family employee who has been with the company since he was a college student and has been, in a way, adopted by the family. For the most part, people in senior positions are probably not paid what they re really worth, but because most of them are family, they're willing to sacrifice a lot more than non-family employees might for the same positions.

Non-family employees can have a great deal of fun in such a business and will most likely enjoy the we're all family environment. But they're also going to see that key spots are filled by family members. Essentially, there's little or no opportunity for upward advancement. If you have your heart set on running a business someday, this may not be the place for you. What's more, it may be clear that the business is not going to adopt professional management practices over time the way another business might. It s less likely to be performance-oriented than other companies and less likely to be on the cutting edge. That is not the strategy of a family-first organization. Family-first companies that value relationships over capabilities may have a blind spot.

Consider the W.P. Smith Company located in Bakersfield, CA. It's a fictitious example, similar to hundreds of family-first firms we know and it will make our point. Customers and employees might identify this company as a family-first business, yet contrasted with family-firms on that end of the continuum; they are not family first in all respects. They are proud to have their family working with them in this produce processing and distribution business. The four family members in the second generation fill major management positions except the CEO slot. Dave Powers, the non-family CEO says, In this company we have fun, we all know each others families, and I am like a big brother to all the younger family members who work here and even the ones who don't. The four brothers meet every week. One issue that I've been discussing with them is that their long-term customers are putting pressure on us for better pricing because our competitors have adopted efficiencies that allow them to beat us. The brothers insist that they will be okay as the customers are long-term friends; and loyalty is what the family stands for. They say the customers fall into the market segment that knows quality service and integrity ultimately saves them money and they are willing to pay more for it. Dave knows this was true in the past, yet he is concerned that the business might need to provide both loyal relationships and better pricing.

What You Can Do

If your company is a family-first organization, chances are you can't expect a more impressive title or an innovative strategic leadership position in the marketplace. Still, there are some tactics you can choose to advance your career and assist the business.

Gain additional trust, responsibility and compensation without the title. Don't push for the limelight and don't compete with a family member for a leadership position. Do, however, ask yourself, What can I offer to the success of this business from a strategic or tactical standpoint? Build your knowledge and experience by taking on challenges for which family members lack knowledge or interest. Understand the owning family's goals and values, and act accordingly. Be vigilant to problems that may blindside the family and play a key role in confronting them. Realize that loyalty may be the most highly valued attribute that you can offer.

Quietly initiate change. Suppose you've been reading up on strategic planning and you know there are some things your company could be doing. Don't demand that the organization adopt professional management practices or change. Don't insist that it meet your standards. Don't even ask permission. Instead, consider what elements of strategic planning can be worked into what the company is already doing. Then, just informally and unobtrusively get the job done. That's the forgiveness route. Do it, and, if necessary, ask forgiveness later. The key is to work with the flow and help the business accommodate the kinds of advances that fit within its culture and values. Speak the family's language instead of expecting the family to learn to speak a new one.

Recognize that if you're part of the business, you are part of the family. When invited to dinner or family events, you and your family are expected to attend. But remember, THEIR family should and will get center stage.

Willingly take on the role of helping new family members learn how to adapt and be successful in the business. Encourage others around you to do the same and to focus on the value multiple family members bring to the business. It is all too easy to sit back and take pot shots at the family. Be a leader in discouraging a we-they atmosphere among employees.

Reprinted with permission of the authors from Working for a Family Business: A Non-Family Employee s Guide to Success. ©2004, Family Enterprise Publishers. www.thefbcg.com.

 

 

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