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June 13, 2003 Issue #014 Family Business Experts

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In This Issue...

1. Our Managing Director Announces -

2. Business first family...Family first business

See Responsibility Diffusion in Best Practices section

3. Best Practices

Responsibility Diffusion

4. Around the Family Business Experts web sites

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SPONSOR MESSAGE #1

1. Our Managing Director Announces -

The last month has been busy "behind the scenes". But I am proud to announce that our Family Business Experts web site has been accepted and listed in the Yahoo directory. This is a major step for us in bringing our consulting practice into the online world. It is also a reminder that the expertise of our web master, David Jones, is available to all our clients.

Corporate social responsibility has gradually been increasing in emphasis in both Europe and North America. Big corporate situations like Enron, Arthur Andersen, WorldCom, Sunbeam, Investors Overseas, and - just this week - ImClone and Martha Stewart prove that the interest is sorely needed.

We have been pondering how this relates to many of our clients who are medium and small-sized family businesses. Somehow, "corporate social responsibility" just seems like a big and cumbersome topic and is hard to relate to.

But, there is a link; and our family business clientele needs to be aware of the potential problem... after all if two gigantic organizations like Enron and Arthur Andersen can be totally obliterated from the business scene, well... smaller businesses are vulnerable, too.

That link is responsibility. And the way is shows up in our businesses is through what we call Responsibility Diffusion. So, we have a new article on our second web site, and have chosen to devote this issue to a summary of the problem. Read on and learn how to recognize if responsibility is a potential problem in your family business.

Don Schwerzler, Managing Director
Family Business Experts

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SPONSOR MESSAGE #2

2. Business first family...Family first business:

See Best Practices below

More businesses than ever are using the Internet to reach local markets. If your business isn't one of them, you're going to be left behind.

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SPONSOR MESSAGE #3

Responsibility Diffusion

We find that one of the most critical impediments to successfully growing any kind of business is responsibility diffusion. And the larger the business grows - the larger the problem becomes!

With family businesses, responsibility diffusion can occur because of the overlap of roles between family members who work in the business and those who do not.

Family dynamics and responsibility diffusion

Family dynamics that can influence responsibility diffusion include:

• Fear of causing hurt feelings
• Sibling relationships defined by birth order, gender and education
• Lack of knowledge or understanding about some segments of the business
• Lack of formalized communications, meetings and infrastructure
• Fear of being disrespectful
• Lack of training in working together as adults thereby creating a tendency to revert to parent and child roles in making decisions
• Perceived lack of economic parity gained from the business by family members

In the operational assessments we conduct, we find that there is almost always a direct correlation between service issues, other problems associated with responsibility diffusion and the lack of a system for ensuring accountability throughout the business.

In recent years, many business experts have focused attention on the level of "service" a business provides to both its internal and external customers - such as customer service, customer care, customer relations, sales, and business development.

"Poor service" can be measured by many factors such as a reductions in new customer acquisitions, reduced repeat business from current customers, demands from customers to reduce price because of service related issues and most generally, a high level of frustration by the customer constituency.

To better understand responsibility diffusion, consider a one-person business. Quite simply, when something doesn't get done or done correctly, only one person is involved in the chain of responsibility. Oh sure, one can try to blame it on bad luck, poor timing, etc - but most likely it can be attributed to poor judgment or poor execution - maybe both!

At the other size extreme, consider what happens as the business organization grows. The excuse mechanisms that cause responsibility diffusion seem to grow even faster! Both Europe and North America are seeing much more emphasis on corporate social responsibility as our largest corporations exhibit some shocking evidence of responsibility diffusion - Enron, Arthur Andersen, World Com, Sunbeam, ImClone, Investors Overseas, IBM...

Founders of successful family businesses understand this concept better than anyone because they fight the battle of responsibility diffusion on a daily basis.

Symptoms of responsibility diffusion

Here are some symptoms that could indicate your organization might be infected with responsibility diffusion:

1. When employees routinely do not show up for work on time - is it because of "traffic", problems with the car, etc. Or do they admit they did not leave home early enough?

2. When work assignments are not completed on time, do you hear things like: "I would have finished the work on time but I had a bunch of phone calls that I had to deal with"; or "There were other fires I had to fight." Or do your people admit they did a poor job of scheduling their time.

3. When you ask why a particular goal or objective was missed, do you get a lot of "its not our fault" reasons why the goals were not met. Or does someone admit that perhaps he or she and their people did not work hard enough (or smart enough) to get the expected results?

4. When a competitor wins a bid on some business project, did you lose the bid because your price was too high; your quality of product or service was higher than what the customer wanted to pay; the competitor "bought" the business. Or does someone admit they failed to do a proper job of salesmanship?

Getting the picture? Listen carefully when explanations are being given!

But be warned! If the assignment of responsibility is used to embarrass, shame and humiliate individuals - like a club - you risk developing an organization of lemmings who comply rather than embrace responsibility.

Family business owners, managers and employees in successful businesses tend to shoulder and incorporate responsibility as part of the process of continuous improvement. Responsibility is considered a positive notion instead of a negative consequence. Responsibility diffusion can be minimized and sometimes even eliminated!

Responsibility Diffusion

4. Around the Family Business Experts web sites

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Check out our latest on Responsibility Diffusion.

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