How Many Hats Are You Wearing in Your Family Held Company?

When you work in a private or public organization, your role is clearly defined; you do not face the ambiguity that comes with family and ownership. However, when you hold a position in your family company it gets complicated. As a shareholder member of the family you wear more than one hat. The tough part is figuring out which hat to wear when faced with a particular situation.

Three Hats

A family member may hold many positions within the organization. Regardless of their role, each member wears three hats as a shareholder that works in the family company, and each hat requires a different approach to the business. Deciding which hat to wear in a given situation is not always black or white.

Owner

Owners have a financial stake in the success of the business; they must see the big picture and focus on the long-term goals and strategy that drives the company to success. Their financial and emotional investment in the company is high and if the enterprise fails to prosper their entire economic well-being could be at stake. The pressure of being a business owner increases exponentially when the financial health of your extended family is also at risk.

There are many rewards and challenges that come with being an owner in a family held organization. One of the most stressful times for most owners is when the interests of the business conflict with the family. E.g., when the Director of Sales fails to hit established sales goals the company suffers a financial setback. If the Director repeatedly fails, they must be removed from their position in order to ensure the survival of the organization. In a typical employment situation, the Director would either be fired or demoted. However, when the Director is your brother you are not just firing a poor performer, you are negatively affecting the economic situation of your family member. In this scenario, the Owner hat must be firmly in place in order to make the correct decision for the company because erring on the side of the family could cripple the business.

Positional Role

Each family member working in the business holds a specific role in the organization. They may manage other family or non-family members, or be an individual contributor. They are still owners regardless of their position in the company.

Being an owner/contributor is a delicate balance. Your relationship with non-family staff can be complicated because they know you are also an owner. They may not be willing to share information with you in the same way they would with other team members. The good news is there are actions we can take to minimize the potential negative impact of the “owner” perception.

  • Hold everyone in the business to the same standards to reduce the risk of being treated as “the boss” rather than a team member.
  • Avoid calling family by relationship—i.e. use Susan rather than Aunt Susie.
  • Treat family as peers rather than relatives.
  • Promote the most qualified person regardless of family association by benchmarking the position within the company and appropriately aligning people to positions based on their knowledge, skill, and ability.

The goal is to remove the owner hat and focus on the job at hand.

Family member

Family members may decide to sell their interest in the company. Alternatively, they may choose to leave their role in the organization to try something new. The owner and job role are transient and subject to change--we make a conscious choice to wear these hats. We are born wearing our family hat; we do not get to choose.

The informality and comfort level we have with our family can make it difficult to treat each other as peers and co-workers. We may shout at each other and use harsh words during a disagreement; something most of us would never consider doing with unrelated co-workers.

Setting ground rules can help everyone understand when to wear or set aside their family hat.

  • Benchmark the position; define key accountabilities (KA’s) and objectives for each position within the organization.
  • Clearly define the level of autonomous decision-making authority for the job.

Practical Application

Stop to consider which hat you are wearing in critical situations, and make a conscious decision about whether it is the right hat. Mentally step back and try to view the circumstances objectively.

Find a mentor or external advisor to use as a sounding board when you are unsure which hat is appropriate for a particular situation. Remember, it is always better to seek counsel than to worsen the situation by acting incorrectly.

Establish a board of directors that includes members who are not family, who understand the culture of the company and are external to the organization. When the majority of the board members are independent, it takes the family bias out of the decision-making process and focuses objectively on the business at hand.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.

 


Three C's

Why the Three C’s are Critical to a Successful Family Business

I have come to realize that many of the issues I see when I work with family businesses are due to a breakdown in one, or all of what I call the Three Cs--communication, collaboration, and cooperation. Effectively achieving the three Cs is a challenge in the best circumstances, but when you factor in the family dynamic and emotional baggage; it can become almost impossible.

The Complexity of Families

People and families are complex, and they come with their own strengths, weaknesses, opinions, and biases. When families come together to run a business the complexity increases exponentially.  The adage that familiarity breeds contempt is never truer than when you are dealing with dysfunction in the family business! Conflicting personal interests; sibling rivalry; old wounds from family feuds, and perceived favoritism are just a few of the familial issues that can muddy the waters. Unfortunately, the family dysfunction often adversely affects the health of the business. More than one family company has closed its doors due to a lack of communication, collaboration, and cooperation. The good news is that with work, focus, and intent these issues are not insurmountable!

Personalities Abound

Humans are multidimensional, and as such we all deal with the stress of family dysfunction differently. Some of us are pacifiers, trying to keep the peace and maintain the family relationships. Some are bullies that attempt to get their way with badgering and controlling behavior. Some are victims who blame their shortcomings and failures on circumstances beyond their control and never take responsibility for their actions.

Finding Common Ground

Whatever the personality type, we all have the same desire to be respected, valued, and understood. We need to know that someone appreciates us, and can see our point of view because this is how we know we’ve made a connection. Self-awareness and awareness of others is central to finding common ground on which to build or rebuild a relationship. Creating a connection to others is a fundamental building block for trust.

family-business-dysfunction-1

The Simplexity of the Three Cs

Dysfunction is so rampant in some family companies that members have come to accept it as a condition of doing business. As a result, they tolerate bad behavior on the part of others. However, playing family politics or pretending the problem does not exist worsens the issue and doesn’t address the required evolution necessary to minimize the dysfunction. Although we may never eliminate the family dysfunction, it can be addressed through authentic and transparent communication, collaboration and cooperation so that it does not negatively impact the business.

From Complex to Simplex

Simplexity is a phrase I coined to describe the process of breaking an extremely complex concept or issue into simple points. In this case the complex issue of dysfunction in the family business can be boiled down to a collapse in one or all of the Three Cs. Think of the Three Cs as the legs of a three-legged stool--take away one leg and the stool cannot stand on its own. The simplexity of minimizing dysfunction in the family business or organization comes from valuing and balancing the relationship between communication, collaboration and cooperation.

three-cs

In order for a family company to achieve optimal performance, they must determine which leg(s) of the Three Cs stool are broken and then take action to deal with the situation. For example, a breakdown in communication will adversely impact collaboration and cooperation. When we identify and correct the challenges to effective communication we are shoring up the foundation of the Three Cs stool.

The more awareness, understanding and action created around improving communication, collaboration and cooperation, the greater the capacity of the people to understand how their contribution impacts the organization. Raising awareness is the first step toward maximizing family relationships and addressing family dysfunction.

In our next article, we’ll explore the first C—Communication and offer guidance on how to deal with dysfunctional communication.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.


Achieve Peak Performance from a Board of Directors

Selecting a board of directors is a critical stage in building a business, be it a privately held/family owned firm or a public corporation. The first step in achieving peak performance from the Board of Directors is selecting board members that are a good match for the organization.

Board members should share an organizations core values, and understand the company culture in order to be an asset, rather than a liability. When members appreciate the founding principles of the company, there is a greater likelihood that they will integrate quickly into the business and become valued contributors.

Achieving peak performance from the board of directors begins with selecting the right people. So how do we select a board of directors that will become engaged and productive members of an organization’s management team—not a thorn in their side?

Clearly Communicate Culture and Core Values

A company’s culture is a set of values, practices, and beliefs that are shared by the people that make up the organization. Although the founders first establish the culture of the company, as the company grows and begins to take on people, the culture will be influenced by the sum of the workforce. For example, during the startup phase of a business the culture may be to work 16 hour days, and sleep on a cot in the corner of the office. However, as the company expands and desires to attract talent, the culture shifts to a more balanced work life.

Core values are the building blocks of an organization's culture. While Apple values innovation, Ben & Jerry’s value sustainability. These are key differentiators between brands, and core values can give a business a competitive advantage in the marketplace.  Clearly, Apple Computer’s “Think Different” commitment to innovation gave them a distinct advantage as a startup, and continues to be the driving core value behind their success.

It’s difficult to communicate concepts like culture and core values to others unless we have clearly defined the parameters ourselves. If a company’s leaders haven’t analyzed what makes their business or culture unique, this work should be completed before the search for board members begins.

Cultivate Awareness of Self and Others

Self-awareness is the capacity to understand your own personality. Self-aware people know what sets them off; what motivates or demotivates them; and they tend to have a higher level of control over their emotions. It’s much easier to maintain self-control and objectivity when one recognizes what triggers a particular set of feelings or reactions. This is an extremely valuable quality to cultivate in your leadership and team members, and should be a required characteristic for board members.

Awareness of others is as critical as self-awareness--let’s face it there will be times that the board member and senior leadership won’t see eye to eye. When people are skilled at observing and interpreting the emotions in the “room” they are able to focus and guide the conversation to a mutually beneficial result. During times of contention, awareness of others and one’s self can be the difference between resolving the conflict and continued dissension.

Foster Diversity

We’re not just talking about gender, race or cultural diversity; we also mean diversity of thought. There are a plethora of studies that demonstrate diversity has a positive impact on the company’s financial success. According to research in McKinsey Quarterly  “for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile” so let’s concede that demographic and cultural diversity are no longer optional for companies that want to succeed in the global economy.

Success in business requires diversity of thought, because thought diversity is the antithesis of groupthink. Where groupthink encourages uniformity, thought diversity disregards the status quo, and allows people to realize their full potential by tapping into their cognitive style.

Fostering diversity in the members of the board of directors will ensure business challenges are approached from many perspectives. Some may see risk; other’s opportunity; and both should be carefully considered before critical decisions are made.

Avoid the Yes

It’s easy to be comfortable around people that agree with you. The challenge is dealing with individuals that dispute your assumptions.  The fact is we learn more from those that confront our beliefs and force us to see things differently. The worst thing we can do is frame ourselves with people that agree with us completely. Take a chance, test yourself, and avoid the “yes."


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.