My Family Business

ME:  Dad, can you tell me when the store opened, what it was called, when it closed, and what you did there? Any detail would be helpful.

DAD:  Hoye’s Market opened in 1930, at the height of the Great Depression. The family resided in a 3 bedroom apartment above the store.

It was a small neighborhood market that catered to working class families that resided mostly in the neighborhood. It had a small stock of can goods, full produce line and custom cut fresh meats,  fresh milk, breads, and pastries. It opened before frozen foods were developed. There were no shopping grocery carts. Each customer was waited on independently. It was before electronic calculators or calculators. Orders were “added” on the side of paper grocery bags. Individual attention was given to every shopper by a clerk who would put your shopping order together for you and then package it, add it up and collect payment.

Regular customers ran individual credit accounts that were usually paid on a weekly basis. Credit cards or personal checks were not in use.

Some customers traveled many miles (gasoline was .17 a gallon) for the “cut-to-order fresh meats and fresh produce”.

Hours were 8AM to 8PM Monday thru Sat. Busiest days were Fridays (payday) and Saturdays. Some customers shopped at the store at the same day and time each week, as if it was “their turn” to shop. Others met their friends there each week. Most of the customers were “on credit” and known by the owners (Mom and Dad).

I was expected to be available on Saturdays to help out where needed.  My work consisted of stocking shelves, setting out produce and delivering orders (free delivery in the neighborhood). Before I was 16 and had a drivers license, I would deliver orders to homes in a delivery wagon. I also visited a few “shut-ins” or people who couldn’t physically come to the store, to take and deliver their weekly grocery order.

Occasionally, I would drive to the early morning wholesale produce warehouse to pick up orders waiting for Hoye’s Market. He personally selected the produce and each piece of meat. This was “personalized” quality control that appealed to his customers. He knew which cuts of meat would be selected by his regular customers and way they wanted it cut.

During WWII, my Dad had to take a job in a war plant and my mother ran the store until he got home about 4:00 PM. Hours were shortened to Tuesdays thru Saturdays. Some customers continued to come to the store on Mondays and would ring the door bell for the upstairs apartment and I would come down and wait on them.

At the end of WWII, food rationing was over and what was the “super market” era began. My father could buy the super market “lost leaders” cheaper than he could buy from his wholesale distributor. The neighborhood store was replaced by the larger, better stocked and sometimes cheaper super markets. Names like A & P (Atlantic & Pacific), First National and Piggly Wiggly, Stop & Shop, pushed the comprehensive small, family owned, neighborhood market to close. Hoye’s Market held on until about 1951, when the business was closed. It was interesting for me to note that the personalized individual credit accounts continued with weekly payments for another 3 years. Everyone paid-up!

Don’t Let Resentments Fester: Make a WISH instead

We are all aware of how resentments can fester among family members when conflicts are not constructively and proactively addressed.  The tension builds over time as the behavior is allowed to continue, and then suddenly, tempers flare, or people cut themselves off from one another.  Ultimately, and unfortunately, both the business and the family suffer. What can you do to prevent this?  I would suggest that you learn how to “make a WISH.” Some of it may sound familiar to you, perhaps a bit too “touchy feely” even, but it’s an easy and effective way to deal with a frustrating situation constructively. I wrote the acronym down and stuck it on my computer screen to serve as a reminder for me. So, let’s say  you need to confront someone who is doing something that you find distressing, frustrating, upsetting, or just plain annoying.

Here’s how it goes:

W:  When you do/say_____________________ (describe the behavior or comment here).

I:  I feel/I can’t___________________(frustrated, disrespected, confused, stressed, underappreciated, not cared for, angry, worried, concerned, fearful, upset, irritated/I can’t do my job, I can’t work, I can’t accomplish this task).

S:  So, Could you please___________________(not say that to me anymore, not say that to others anymore, not do x anymore, do x instead, help me understand why you did x, help me understand, explain to me).

H:  How can we work together to make this better for both of us?  How can I help you?  How can we build an even stronger partnership/friendship/relationship?

This is an extremely effective way to resolve a conflict before it gets out of hand.  It takes a bit of practice at first and might feel awkward at first.  But any new skill you learn to master will feel that way in the beginning.  The key is to name the specific behavior as factually as you can.  Don’t say “when you disrespect me.”  Instead, try “when you tell people I never come into the office…” Then you own your feelings.  You say “it makes me feel like you don’t think I’m doing a good job, working hard enough, and that makes me feel disrespected, hurt, angry, frustrated…”

The important point is that you have to ASK for them to stop doing the thing that is bothering you.  In sales they say “if you don’t ask, the answer is always NO.”  So ask.  In sales they saying is “If you don’t ask, the answer will always be no.”  Ask them to take an action, whether it is to help you understand why they are doing x or y, or just ask them to stop it.  “So I would really appreciate it if you would not say that/do that anymore.”

Finally, and critical to the success of this method, is the action you take to own your part in the situation and take responsibility, and possibly (gasp!) change your own behavior.  How can I make this better for both of us?  Do you need to see my calendar?  Do you truly believe I am not working when I am out of the office?  Do I need to be more accountable to you or the group?  Is there a deeper issue here that I am contributing to that I might not be aware of? What can I do differently, now that I’ve asked you to do something differently?  This levels the playing field, creates reciprocity in the relationship, and makes it more of a partnership.

Try this out–write the WISH acronym down somewhere.  Introduce it at the next family meeting.  Try it on your spouse or a friend.  Pledge your commitment to continuous improvement of this and all of your relationships and see what happens. Then write me back and tell me all about it.      -K

Hug Your Customers

Al “Buzz” Horton, Horton Fruit Co., Louisville KY, with an “Internal Customer”

Last week, during one of our blustery “snow days,” I had a phone chat with Jack Mitchell, our upcoming speaker on March 26th at the Family Business Center.

As you know, he wrote a book called Hug Your Customers that he will discuss, along with the transition story of his third generation family business.

Here’s the funny part though: After we hung up, I actually felt “hugged.” In other words, Jack made me feel for those 20 minutes like I was the most important person in the world. And that he genuinely cared for me. It wasn’t just customer service “polish.” I looked forward to talking with him again. I wanted to extend the same warmth to others. When you meet him, you will feel the same way.

What would your business (and life) look like if every person you came into contact with walked away feeling like I felt on that snowy day, after a brief phone call with Jack Mitchell?
What if we all just extended ourselves a little bit more, every day, instead of wincing at the word “hug?”

Here are a few highlights from my talk with Jack:

-Jack’s dedication to and focus on customer relationships and people is so strong that he likes to say “Oh and by the way, we sell clothes.”

-As a family, they have made family harmony a top priority, which he calls “the family hug”. As Jack puts it, “family harmony is the greatest hug of all.”

-The “hug philosophy” of his family business is basically and extension of both his personal and family values, resulting in a unique and extremely effective method of personalizing service.

-Jack even refers to his “employees” (a term he dislikes) as “Internal customers” and “hugs” them as much as he hugs his external customers.

-In addition to his philosophy of customer service, Jack will tell the story of how they transitioned the business from one generation to the next, including the role of the role of their advisory board, family council and family business consultant in the process.

-Jack has presented at several other family business centers throughout the Northeast and comes highly rated. He is a faculty member at Colombia University.

-Buzz Horton, of Horton Fruit Company, will also present March 26th. The first time I met him he gave me a tour of his plant, and he hugged about twelve people in a one hour period. No kidding.

If you want to learn more about putting people first and how it can transform your business and your family, don’t miss this opportunity to meet and learn from Jack Mitchell and Louisville’s own Al “Buzz” Horton.

There will be a group hug at the end of the presentation, but don’t let that scare you away (just kidding).

Hugs,

Kathleen

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Why Leadership Matters

Bill Joiner, our guest speaker for our Annual Family Business Summit, has written a book called “Leadership Agility: Five Levels of Mastery for Anticipating and Initiating Change.” His basic premise is that the world is moving faster, is more complex, and organizations that are not nimble and flexible (i.e. Agile) enough to anticipate and respond appropriately will not remain competitive. You can’t have an agile organization without agile leaders. But sadly, only a small percentage (10%) of leaders have the necessarily level of agility to effectively deal with the rapid rate of change and complexity in our world, according to his extensive research.

This has implications for the small business leader, for large corporations, but also for our community and our economy. How do we create more agile leadership? Bill outlines the ascending levels of agility and what they look like in action in his book.

Here are some highlights from Joiner’s book that really caught my attention:
-Agility is the ability to take wise and effective action amid complex, rapidly changing conditions.

-Agile leaders adopt “a participative approach to transforming organizations.”

-As change accelerates, so does uncertainty and novelty: future threats and opportunities are harder to predict, and emerging challenges increasingly include novel elements.

-In an increasingly interdependent world, the most successful companies will be those that create strong, timely alliances and partner effectively with customers, suppliers, and other stakeholders.

-Developing truly agile teams and organizations is an unfamiliar and demanding task.

-The old school style of leadership, which Joiner calls “Heroic Leadership,” is marked by overcontrol and underutilization of subordinates and does not meet increased demands for collaborative problem
solving, teamwork, and continuous organizational change.

-By contrast, the “Post Heroic” style of leadership that is needed today is marked by efforts to create highly participative teams and organizations characterized by shared commitment and responsibility.

-Leaders with the highest level of agility demonstrate qualities such as emotional resilience, a strong capacity for dialogue, and an ability to generate win-win solutions.

Fair is Not Always Equal in the Family Businesse

Please don’t divide business ownership equally among your children. We did that when they were children, divided up the toys and the pie or whatever it was we were sharing equally, to reinforce the message that we don’t favor or love one child over another.

You simply can’t apply this logic to business transition. The prevailing wisdom is that transferring all of a business to the business-active child (BAC) and making an equitable distribution of other family assets to inactive children (and perhaps to the BAC as well) is the fairest plan of all.

It’s also very important that each member of the family understand why this is fair. They must understand that if the BAC is wildly successful in growing the business over time, it was in fact done by her own efforts and that she was not given “more” than the other siblings at the onset. There may eventually be dramatic income or lifestyle differences between siblings as a result of giving the BAC the business asset. What will you do as a family when that occurs, when the BAC is driving a much more expensive car and sending their children to better schools than her siblings? Will the siblings feel slighted?

This is why family conversations about estate planning and wealth transfer are absolutely critical. And that conversation should be recorded and written down, so that ten years later, the siblings who did not get the business asset will remember a) what it was worth when their sibling received it and b) that they agreed that the BAC should get the business asset in the first place.

Fairness is a completely subjective notion, which is why you must present your idea of what is fair to each member of the family to make sure that all agree, from where they sit, that your solution is indeed, fair. Not necessarily equal, but fair.

For more information on this topic, read John Brown’s article: https://www.exitplanningforadvisors.com/ingredientthree

Back to Basics: The Purpose of a Family Council

We feel like we are constantly reinforcing the message “Get a Family Council.” You are probably tired of hearing it, but the truth is…we will not be ignored!

The very first thing you need to do after you read this post is to buy the book, “The Family Council Handbook: How to Create, Run, and Maintain a Successful Family Business Council” by Chris Echrich and Stephen McClure. (Both authors have presented at our FBC educational forums, by the way).

Then, you should turn to page 81 and repeat the following sentence 3 times:

“…the family council is a forum for monitoring the goals and progress of generational transition.”

You don’t need a family council if you are not going to transition your business to the next generation. But if you are going to do that, then yes, you need to separate family and business issues and try to be as objective and inclusive as possible. The authors go on to specify the role of a family council in more detail:
-the coordinating body for education
-providing the gentle nudge that gets family estate planning accomplished (note the word “gentle” here!)
-arranging signed shareholder agreements
-establishing the vision for ownership, governance, and the critical role of the family in the next generation
-creating a definition of family

These are just some of the roles of the family council. The list goes on and on, but this is a good place to start. Really, the point is simply to start. Have a meeting. A family council starts out in its’ infancy as a simple family meeting where the implications of change in the business are discussed in the context of their impact on the family. Fairness should come up a lot as a barometer of progress. Fairness is a subjective notion, but it is absolutely essential that everyone affected by the process of generational transition understands the process and has input into the process, and indeed, feels that it is reasonably fair.

The family must also decide at the onset of their family meetings how they will define “family.” What are the parameters for participation? Will in-laws be included? Adopted children? Step children? Same sex marriages? Co-habitating couples? Loyal lifelong but non family business partners and their families? Families have gotten more complex and the family must decide what the parameters are before deciding who may participate.

Interestingly, and almost magically, this discussion in and of itself will unveil the collective values of the family (which of course may in fact vary among individual family members). Identifying those values that the collective shares in common is a monumental task in and of itself. A great place to start is with the values of the founder (usually Grandpa or Grandma, or both). What kind of people were they? What did we admire about them? What do we want to preserve as we move forward? How did they do business and what made them successful? These types of conversations offer rich soil for the family to plant the seeds of growth.

Not to oversimplify, but really, the best way to get started is to simply get started. Talk about the founder. Take pride in what you have accomplished to date. Reinforce your commitment to one another and to family. But the important thing is to simply begin.

This is all just a fancy way of saying “talk to each other.” And sooner rather than later.

Market Basket- A Lesson in Leadership and the Impact of Family Conflict

What does the Market Basket situation teach us about family business leadership? If you aren’t familiar with the story–a massive strike ensued after Arthur S Demoulas ousted his cousin Arthur T Demoulas in a board room coup. Arthur T was beloved by employees and customers alike. Sales have dropped 90% as a result of the strike and a mass customer boycott. The entire $3B, 71 store company may go down in flames as a result.

Meanwhile, Arthur T is trying to buy out his company at 50.5% in order to regain control of the company and restore himself as President. All of his offers have been rejected by his cousin Arthur S. And the value of the company of course is plummeting as sales nosedive. Thousands of employees simply refuse to come back to work for anyone except Arthur T. Two Governors have gotten involved, due to the sheer economic impact of their failure to settle the family dispute. Market Basket has more than 25,000 employees who work at stores and other facilities throughout Massachusetts, Maine, and New Hampshire. About 10,000 work in New Hampshire and a similar number work in Massachusetts. “Your failure to resolve this matter is not only hurting the company’s brand and business, but also many innocent and relatively powerless workers whose livelihoods depend on you,” the Governor Deval Patrick wrote in a letter to the company’s board Aug. 8.

What I have seen over and over again is that employees and customers are given secondary consideration when succession plans are being drawn up, or when family conflict continues to fester. Families do not realize the extent to which their misalignment affects everyone and everything around them, and the extent to which it can undermine the entire infrastructure they have built. If you take the time to ask employees and even customers how they are affected by family conflict, the intensity of the response you will receive will no doubt surprise you. Many times a successor is being lined up to take over a family business, but none of the employees want to work for that person, nor do they trust him/her. Is this a good leadership choice for the family and the company? Have you included a variety of stakeholder perspectives before deciding upon a successor?

As far as family conflict goes, you may think employees and especially customers aren’t really affected by the disrespect you show one another, by your lack of role clarity, by your inability to share power, or by the occasional management team meeting scuffle, but trust me, they are.

Just ask them. Or find a trusted adviser and have them do it. Get a 360 review done by key employees before you choose a successor. Find out what they truly think about the person you see fit to take the helm one day.

The Market Basket story is not just about the impact of family conflict. It is about leadership. Ultimately, a true leader inspires loyalty and trust from employees and customers alike. Does your chosen successor demonstrate this ability? Do they motivate and encourage others and gain respect as a result? Do they treat employees fairly and demonstrate respect themselves?  Does your successor choice build bridges or stir up discord and confusion? If you can’t confidently answer affirmatively to these simple questions, I would seriously reconsider your successor choice.

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MARKET BASKET UPDATE AS OF DECEMBER, 2014:  ARTHUR T WINS!

Capping the epic summer battle over the Market Basket grocery chain, Arthur T. Demoulas completed a $1.6 billion deal Friday to buy out his rival cousin and take control of the family business.

http://www.bostonglobe.com/business/2014/12/12/demoulas-closes-deal-buy-market-basket/AXcJOLvTuttlxqo2qb2e6O/story.html

What does a Family Business Board do?

Mark Silverman, in a heady paper called “An Evolutionary Model of Family Business Boards,” points out that effective boards of publicly traded firms showed significant, sometimes close to double the rate of, return in the stock market versus other firms.

In a family business, the need for an effective board may be even prove to be more valuable than in other businesses. We can’t agree more here at the Family Business Center.

What tasks does a board take responsibility for? Consider the following:

-shaping the vision and long-term strategy of the company
-identifying major threats and opportunities for the company
-evaluating mergers, acquisitions and sales of business divisions
-monitoring and evaluating strategic implementation in the company
-hiring, evaluating and firing of CEO
-planning for succession
-developing external relationships for the company

The counter-balance to an effective board of directors is a family council. These are in turn complimented by a strong management team. The problem with many 2nd and even 3rd generation family businesses is that the same people sit on all three bodies, if they are separate at all to begin with. Except for one trained family representative on the Board and the CEO and possibly one top manager (if he/she is a family member), the family should NOT be directly involved in any of the tasks listed above. Think about it.

Your First Family Meeting

I’m frequently asked to help family businesses conduct their first several family meetings. What are the reasons to conduct a family meeting? What does a sample agenda look like?

One of my favorite guides to family meetings is the book “Family Meetings:  How to Build a Stronger Family and a Stronger Business” by Craig Aronoff and John Ward.

In this book they clearly list the 10 reasons why a family business should hold family meetings:
1.  Build a stronger family
2.  Build a stronger business
3.  Plan for the future ownership of the business
4.  Plan family participation in the business
5.  Help children manage inherited wealth
6.  Open up the succession process
7.  Preserve family traditions, values and history
8.  Professionalize the business
9.  Manage relations with the board of directors and the family
10. Recognize and resolve conflict

I would recommend that before the actual meeting begins, that you circulate this list and ask family members to simply circle their top three priorities.  Then, at the first meeting, review each reason and discuss the top three choices.  From there the agenda of the first several meetings can be shaped.  Ask participants to explain why they feel that their chosen priority is important at this stage of the family’s development. This is the “why” of the family meeting equation and become the goals and objectives, of the family meeting and eventual family council.

The “what” comes next.

What particular issues should the family meeting address?
If the family is in the founding or (G1) stage, it is not too early to have family meetings.  The nuclear family can get together regularly to focus on family participation, succession, leadership transition, “letting go,” and cultivating family skills.

As the family business approaches the sibling partnership or (G2), they can get together with their spouses begin to focus on team building, establishing common goals, stressing mutual interests, family harmony, and family education.

In the cousin consortium stage or (G3), members of the third and subsequent generations join the meetings, whether they work in the business.  Here the family begins to address more complex shareholders issues such as liquidity, allocation of capital; fostering family commitment to the business, family tradition and history and family projects.

Again, it makes sense to review these with the family at the first meeting and determine which activities resonate most with the participants.  Is there a lot of energy around family education?  family tradition?  team building?

The next entry will address the key polices and documents emerge from the Family Council.

http://www.efamilybusiness.com

Leadership and Followership in the Family Business

I just listened to a lecture by our former Dean at the UofL College of Business, Dr. Robert Taylor.  He is now with the Oliver Group, one of our Professional Advisor Members.

The topic was “Leadership and Followership.”  Leaders need to cultivate good followership amongst their followers in order to be effective.  How do you do that?  First you have to model the behaviors you are looking for.

Followers get in up front, make their wants and needs known.  They get UP FRONT.  This means they let their leaders know things like  “This is what I expect, this how my group can succeed. This is what I need.”  Wouldn’t your job as a leader be a lot easier if your followers gave you that kind of information, and, dare I say, guidance?

Good followers are just as important as good leaders.  After all, we can’t all be leaders, can we?  (Try telling that to a group of PTA parents!)  But followers are in no way passive.  Indeed, once the follower has expressed their wants and needs, then they must have the ability to negotiate and compromise, ultimately for the benefit of the organization.  They ask questions like “How can we as followers agree with each other as to how we will share the resources? What is the good of the whole so we can succeed as a group?”  Think of how powerful this notion becomes in the context of a family business.

There are many styles of followership, just as there are many styles of leadership.  As a family business, you will need both good leaders and good followers.  If you are a next generation leader of a family business, identify your style and remember, being a good follower can be just as valuable to the health and sustainability of the family business as being a good leader!  The Family Business Center can help you determine what your style is.

Parents know which children have good “followership” qualities and which ones have good leadership qualities.  But remember, leaders and followers are essentially MADE, not BORN.  While children may demonstrate these innate abilities and skills, they still need training, coaching, and skill development in order to maximize their overall impact on the organization.  Encouraging pride in and rewarding followership may also require a profound cultural shift in an organization dominated by King Dad.  But keep in mind that collaborative leadership is the way of the future, and healthy family businesses will be well positioned to adopt to these changes.

www.olivergroup.com