Professional Intervention in the Family BusinessWritten by Don A, Schwerzler and David Jones
Professional Intervention in Family-Owned BusinessRunning a successful family business is substantially more difficult than running a non-family business. There are many contributing factors. Conflict between generations as to strategic requirements of business - what are goals and how do we get there. Financial information is rarely disseminated to even top managers (family and non family members) thereby thwarting those managers who, in fact, may be skilled in strategic planning, budgeting, costing, pricing, etc. A family business will generally have more severe problems in recruiting and retaining non family professional managers since upward mobility and advancement are restricted. The dynamics for successfully managing a family business are blurred and often difficult to ascertain - is it a Family First Business or a Business First Family? Because a family business tends to be more paternalistic in management style than a non family business, performance standards tend to be poorly described or non-existent for most segments of business. Because hard operations management information is scarce or not existent, outside advisors such as attorneys, financial planners, CPA's and other professional counselors rely on perceptions of reality steeped more in "how it has always been" rather than "how much better should it be". This is a crucial deficiency because it disengages professional resources from serving both business and family as well as they could if they were dealing with timely, accurate and factual operating information about business. The management dynamics of a family business are often more consensual than action or performance orientated. Thus, a family business is generally not able to react to problems and take required remedial action as quickly as a non family business. The ego of an entrepreneur is such that they feel capable of doing everything themselves. Because they feel they can do "better" than anyone else, it is difficult for them to let go - either to delegate to subordinates or asking for professional help even when they know that help is needed. Professional fees are often difficult to cost justify or value. The major contributing factor, however, is that a family business tends to procrastinate on bringing in professional resources until "ox is gored and already in ditch". The analogy of Fram oil filter commercial "you can pay me now or pay me later" is aptly applied to a family business situation except consequences can be substantially more expensive when survival of business is at stake. The family business is less objective about profitability and other types of performance standards - more forgiving or tolerant of people and work management systems of their business. With a family business being orientated to consensus, harmony and friendship (we are all part of family here at XYZ Corporation), CHANGE is a difficult process. Attitudinal platitudes such as "why fix it if it ain't broke" prevail over difficulties perceived with change. This is evident not only in internal management systems of a family business but also to professional resources. Just as members of management team are impacted by "the Peter Principle" as business grows, that same growth problem impacts on professional resources such as banking, legal and accounting. Unfortunately these changes follow generational succession rather than more immediate needs of business. Approach as part of a process rather than as an event Our experience in dealing with very unique problems confronting a family business suggests that professional intervention should be approached as part of a PROCESS rather than as an EVENT. This maximizes benefit and minimizes trauma of change. Furthermore, because problems of a family business are generally multi-dimensional, professional intervention should best be introduced into situation by taking a multi disciplined approach to avoid fragmentation and waste of time and effort that generally occurs when a single dimensional approach is employed.
| | Succession - Three Tips to Ease The TransitionWritten by Don A. Schwerzler and David Jones
Succession - Three Ways to Ease TransitionThe succession process can cause havoc in family business and family. Especially if process occurs only once and without a significant investment in planning. Here are three ideas to help ensure success for your family business. 1. Hire most competent advisors (attorneys, accountants, financial planners and family business experts you can find and afford. Succession planning is a complicated process and requires different kinds of expertise. Not every professional service advisor has special training and experience necessary. For instance, few lawyers, accountants, family therapists and psychologists are specifically trained or experienced in this field. You may wish to consider using family business experts to act as a quarterback for succession planning process. All too frequently different advisors to family business owner develop costly and ineffective sequential solutions to complexities of succession. If someone is selling elevators, escalators are usually never recommended as a means of transporting people within a building. 2. Business valuation is a critical element of succession planning. There are many reasons to value a business. Unlike socks where one size fits all, one valuation does not fit all situations. A valuation for sale to next generation of family has different formulas than a valuation for sale to someone outside family. Yet a different formula would be used for estate tax planning purposes.
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