Family business executive coach Don Schwerzler has been working with family business owners and their families for more than 50 years. Dealing with the complexities of family business dynamics requires skill sets that are not easily acquired. “In non-family businesses, you tend to find rational problems and rational solutions – whereas in family businesses it is not uncommon to be dealing with rational problems and emotional solutions,” observes Schwerzler.
The major reason business owners reach out to a family business executive coach is to help deal with change management. In today’s digital age, successful family businesses are being defined by their ability to change, and to be able to do it quickly! As a professional resource, a family business executive coach often acts as a “sounding board” for business owners – someone who is not part of the business and not part of the family, someone who can offer objective feedback to the decision-making process. An option for family business owners to consider - joining our Family Business Executive Roundtable.
“Family businesses are prime targets for Merger and Acquisition firms – they generally view family businesses as “under performing assets” says Schwerzler. If the M&A firms can make a lot of money developing the potential of a family business, why not the family? A family business executive coach can help a business owner develop the true potential of their business – not only for the present owner/managers, but for also developing the potential of the next generation of owner/managers.
Studies show that only about 30% of family businesses successfully transition to the second generation; 12% successfully transition to the third generation; and only about 3% successfully transition to the fourth generation. A family business executive coach can help a family business owner beat the “succession odds” by helping to formalize the management style of the business; developing and updating strategies; resolving inter and intra generational disputes; and helping transition the business from one generation to the next, or to help prepare the business for sale if that is the better option for the owner.
Managing a generational family business is not easy. First generation owners often are operating on a shoestring – short on money, time and having to rely on his/her entrepreneurial instincts to survive and make the business grow and prosper. Decision making is simple and basic, right or wrong! Second generation family businesses - The evolving family business models are described as “sibling partnerships” that populate second generation family businesses. Some of the siblings may be owners but not involved in day to day operations. Members of the management team can be blood relatives as well as spouses of blood relatives. Third generation family business - The next iteration of family businesses is “cousin consortiums” – here it gets especially complex dealing with multiple owner/shareholders. A family business executive coach can help the management of a family business make better decisions for both the business and the family.
Crisis management is another reason for a family business owner to reach out to a family business executive coach. In a family business, problems that arise in the business will impact the family and family problems can impact the business. Examples include the death or incapacitation of the owner, divorce, drug and alcohol addiction can have devastating legal consequences to the business and the family. Unresolved family problems in a family business can wreck the business and destroy family relationships. Business disruption problems caused by floods, fires, hurricanes or pandemics such as Covid-19 force the business owner to consider re-opening in very different circumstances – or maybe not even opening at all… A family business executive coach can make a huge contribution to the health and well being of the business and the family.
borrows from both consulting and therapy (HBR)
A family business executive coach can also be used to support HR functions – helping recruit and interview candidates (both family and non-family executives) for senior level management positions; assisting in negotiating employment strategies & contracts and remediating employee disputes. A family business executive coach can also play a role in matching the needs of a family business owner with appropriate professional service providers such as lawyers, accountants, consultants and financial planners.
ORGANIZATIONAL DEVELOPMENT - BEHAVIORAL ASSESSMENTS
Organizational Testing can produce terrific results. We have been involved with behavioral assessments and skills testing for more than 30 years. Today, the testing protocols and the applications are considerable. When we first started using assessments, it was to better define the success potential when hiring sales personnel. Now testing instruments touch every area of business organizations:
Clerical & Administrative
Accounting & Financial
Data Base Management
Enterprise Resource Planning (ERP)
And much more...
If you are a family business owner and would like to know more about how behavioral assessments can improve your hiring outcomes and/or to improve employee retention and performance, our experienced advisors can help. In fact, if you are business owner and would like to try a demo, let us know and we will send a link to you.
BEHAVIORAL ASSESSMENTS CREATE a PREDICTIVE INDEX for SUCCESS
A challenge (think frustration) for many family business owners is closing the gap between the visionary entrepreneur and the management team. The entrepreneur may have a great idea – but does not have the right people onboard to implement new innovations in strategy and practices of the business. The quickest way to close that gap is using a proven strategy based on science and analytics – Behavioral Assessments. Likewise, the on-boarding process for new managerial talent is critical – it will determine the future success of the business!
Success for a family business is now being defined as how rapidly it can react to change. Behavioral Assessments can create a Predictive Index for dealing with change management. “For some family businesses, there is not much difference between a rut and a grave – just that one is longer than the other,” notes Schwerzler. Behavioral Assessments provide a predictive index to understand how well (or not) an organization can change. In days gone by the mantra for many family businesses was “why fix something when it is not broken”. According to Schwerzler, the new mantra for family businesses should be “if it’s not broken, break it”!
Building Trust is a primary objective for family businesses investing in team building initiatives. With the surge in “working at home” situations brought on by Covid-19. Behavioral Assessments can be a huge influencer in making effective changes in the workplace – and especially team members working remotely.
“Trust has many benefits for organizations: These include promoting cooperation within and loyalty to the group employees belong to, sharing information, and increasing individual and in turn organizational performance. As these positive consequences are valuable for organizations to weather any crisis, COVID-19 can be considered a reminder for many business leaders that one of their main priorities should always be to build trust”, suggests David De Cremer, professor in management and organizations at NUS Business School at the National University of Singapore.
How best to “scale” a family business is a frequent question we are asked. The first step in building a house is the laying of the foundation. The foundation will determine the size and functionality of the house. Likewise, the foundation of a family businesses are the employees and the management teams. To successfully scale a business, a family business must have the right people doing the right jobs at the right time. Many family businesses fail to reach the true potential of their business because they fail to have a solid foundation – especially as the business interfaces with innovation strategies and the ability to engage new technologies. Behavioral Assessments enable a business owner to understand the strengths and the weaknesses of the foundation (management team and employees) of the family business.
Succession planning in a family business is a great time to “revision” the family’s business. For many family business owners, the focus is on the transition from one generation to the next. But Schwerzler says that “transition” is only one component of the succession equation: “Transformation” is the other important component. How receptive is the management team to the next generation of owners? The attitudes and abilities of the management team will impact the succession process. Behavioral Assessments provide a predictive index for dealing with organizational change and, according to Schwerzler, should be considered part of the succession planning process.
Exit planning is different than succession planning and usually means preparing the business for sale. Merger and Acquisition firms tend to target family businesses as “under performing assets”. It is easy for a potential buyer to value the business, to evaluate equipment and facilities. But the most important asset for many family businesses are their people. Behavioral Assessments can demonstrate the creativity of the management team and their ability to learn and assimilate change. Behavioral Assessments can add another “value” determinant to exit planning strategies.
MANAGING A FAMILY BUSINESS
According to Schwerzler, “There is a “sea change” underway in thinking about how family businesses should organize themselves to maximize the potential of their business. “Business as usual” is no longer an option. For many years, “succession” has been the focus of attention for family business owners. But if the business is unable to adapt to the newly identified changes in business management, the focus of their attention will shift from succession to survival”.
To demonstrate current how management theory is changing, we would like to share an excerpt from an article in the HBR:
Learning, not knowledge, will power organizations into the future; and the central champion of learning should be the manager.
Restrictive to expansive: Too many managers micromanage. They don’t delegate or let direct reports make decisions, and they needlessly monitor other people’s work. This tendency restricts employees’ ability to develop their thinking and decision making — exactly what is needed to help organizations remain competitive.
Managers today need to draw out everyone’s best thinking. This means encouraging people to learn about competitors old and new, and to think about the ways in which the marketplace is unfolding.
Exclusive to inclusive: Too many managers believe they are smart enough to make all the decisions without the aid of anyone else. To them, the proverbial buck always stops at their desks. Yet, it has been our experience that when facing new situations, the best managers create leadership circles, or groups of peers from across the firm, to gain more perspective about problems and solutions.
Managers need to be bringing a diverse set of thinking styles to bear on the challenges they face. Truly breakaway thinking gets its spark from the playful experimentation of many people exchanging their views, integrating their experiences, and imagining different futures.
Repetitive to innovative: Managers often encourage predictability — they want things nailed down, systems in place, and existing performance measures high. That way, the operation can be fully justifiable, one that runs the same way year in and out. The problem with this mode is it leads managers to focus only on what they know — on perpetuating the status quo — at the expense of what is possible.
Organizations need managers to think much more about innovating beyond the status quo – and not just in the face of challenges. Idris Mootee, CEO of Idea Couture Inc., could not have said it better: When a company is expanding, when a manager starts saying ‘our firm is doing great’, or when a business is featured on the cover of a national magazine – that’s when it’s time to start thinking. When companies are under the gun and things are falling apart, it is not hard to find compelling reasons to change. Companies need to learn that their successes should not distract them from innovation. The best time to innovate is all the time.”
Problem solver to challenger: Solving problems is never a substitute for growing a business. Many managers have told us that their number one job is “putting out fires,” fixing the problems that have naturally arisen from operating the business. We don’t think that should be the only job of today’s manager. Rather, the role calls for finding better ways to operate the firm — by challenging people to discover new and better ways to grow, and by reimagining the best of what’s been done before. This requires practicing more reflection — to understand what challenges to pursue, and how one tends to think about and respond to those challenges.
Employer to entrepreneur: Many jobs devolve into trying to please one’s supervisor. The emphasis on customers, competitors, innovations, marketplace trends, and organizational performance morphs too easily into what the manager wants done today — and how he or she wants it done. Anyone who has worked for “a boss” probably knows the feeling.
The job of a manager must be permanently recast from an employer to an entrepreneur. Being entrepreneurial is a mode of thinking, one that can help us see things we normally overlook and do things we normally avoid. Thinking like an entrepreneur simply means to expand your perception and increase your action — both of which are important for finding new gateways for development. And this would make organizations more future facing — more vibrant, alert, playful — and open to the perpetual novelty it brings.
Joseph Pistrui is Professor of Entrepreneurial Management at IE Business School in Madrid.
Our family business executive coach can help a family business owner develop and manage organizational changes and to develop and manage the succession process – helping the senior generation with exit strategies and successfully on-boarding the next generation of family owners and managers.
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