One-third of the biggest Standard & Poor's companies are family businesses, and on four economic indicators they outperform the other two-thirds. This is according to studies by Temple and American Universities, detailed in a November 2003 BusinessWeek article, that say one of the biggest strategic advantages a company has is bloodlines.
"What the article says, even for those with small companies, is that if the family business involvement or overlap is managed, it can be very successful for the business and healthy and invigorating for the family," says Greg McCann, J.D., director of Stetson University's Family Business Center in DeLand, Fla. "If it's not, then all kinds of ... risks arise."
BusinessWeek went beyond the studies and identified five ingredients that contribute to these companies' performance: leaders growing up in a company, quick decision making, loyalty (family companies treat employees well and are apt to resist layoffs), investment in growth, and always being attentive to the business.
These themes are echoed in Jim Collins' book Good to Great. Great companies — those that last — share visionary leadership, the right people, a culture of discipline that governs actions, and the ability to confront facts and not lose faith, among other factors.
What this research indicates is that while data show it's difficult to sustain a company (McCann says less than one in three makes it to a third generation), there are advantages to setting long-term vision, whether you're starting out, at the 10-year mark, or nearing retirement.
Commitment to long-term goals can drive owner passion and purpose and help owners craft a culture of communication and leadership.
Whether you're a business rookie or veteran, understanding legacy building can help you plant a solid footing, no matter whether you're bound for Margaritaville when you shut your doors or ready to pass the reins to your next of kin.
When Iris Harrell, of Harrell Remodeling in Mountain View, Calif., decided she wanted a legacy company, she created an employee stock ownership plan to help create it. The result was a company that grew to more than $8 million, on solid margins. Harrell found dictionary definitions for "legacy." One defined it as leaving money property in a will, but the other defined legacy as "a body of persons, sent on a mission."
"That's the legacy I want," says Harrell. "There aren't that people in America who have long-term commitments that they're willing to stick out. One of most honorable things is to have positive commitment that you're passionate about to keep for a lifetime."
Deciding to create a business is a choice, says Don Blohowiak, author, speaker, and head of the Lead Well Institute ( www.leadwell.com). "Some people don't want to leave a legacy," he says. "They view their company as a means of revenue." But those who build sustaining interests can exit and still draw an income, if they plan well.
"The earlier someone makes that decision, the better able they are to run the business to that exit point, however they see it," Blohowiak says. "You can make that decision in your 20s or 30s and run your business a certain way. A lot of people never want to think about it. But it gets to purpose."
Purpose makes the difference between going to work and going to work where work matters, says Dick Heller, a Boston-based speaker and consultant. "The challenge for any businessperson is to create an environment in which that purpose is very clear."
Heller relates how a medical distribution company had difficulty with purpose. A warehouse business, its employees moved boxes and parts. "Someone there got the idea of creating a sense of purpose for the people in the warehouse," he says. "They took field trips to hospitals to see the materials they distribute where they attached to incubators with babies in them. And so they gave the people the vision for why they do what they do."
One remodeler who has incorporated purpose into his company is Warren Kaufman, of Renovations, in Carmel Valley, Calif. His clients' "vision statements" for their homes, which are dictated to him on the first sales call, set direction for his projects, and the vision is always referenced as the project progresses (see Vision Quest).
The lead carpenter passes the vision on to subcontractors, and the vision comes up when complications arise. Two-thirds of the way through, Renovations invites neighbors over for a "house blessing," serving a meal on makeshift plywood tables and beverages iced in beat-up wheelbarrows. While clients love this, it gives employees purpose: They're not "just remodeling," they're executing a vision for homeowners.
Managing, Planning, Systematizing
John Hersey, author of Creating Contagious Leadership, says it's a mistake to start in business without a company vision.
"Sometimes we never get to the 10-year mark to create that vision," he says. "People who say, 'I have no time to work on my plan — that individual is going to let circumstance dictate what his business will look like."
In the beginning you have limited control of your destiny, and you're interested in simply paying bills. But think about what you want to be, he says, because the answer takes time.
Hersey says you may not come up with all the answers right away, but at least allocate time regularly to plan. Too many business owners get intimidated with how they will do it, so it never gets done.
McCann says 70% of family businesses don't have plans. "If there's no clear plan, people measure their worth by complaining," he says. "If Company A has a plan that says Joe and Greg have to sell 10 jobs, at the end of the week you get a sense of how you did. But if there's no benchmark, people say, 'Well, I came early, I stayed late, I got an ulcer, or my wife left me.' What becomes valued is how much you're suffering, not how much you're producing."
You need time to plan, and finding time means giving up control of aspects of your business. How do you move from being a manager to being a CEO?
In Built to Last, Jim Collins says to create a "Do Not Do" list, and gracefully step back. But you need to document your processes so you can hand them over.
Blohowiak suggests breaking your business into activity areas, then taking on one at a time to systemize them. He says he himself despised system orientation ("it seemed uncreative and confining") but once he'd done it, it was liberating "because I don't have to think about it anymore. It's freedom through constraint."
By delegating slowly, you can build leadership and trust. "Owners delegate too much too fast, then become convinced they were right from the start, that no one can do it right but them," Blohowiak says.
And in growing leaders, you have to accept their different perspectives of your business and how to improve it. If you want to invite that truth and improve, you need to do so while preserving employees' dignity. "When you run the business, the business is you," Blohowiak says. "Where you start and the business starts is a blur." So when you invite input from your growing leaders, know that their criticism is of your company, or its systems, not you, Blohowiak says. "Say, 'I don't want to hear that, but I'm glad you told me,'" he adds.
He suggests systematizing the truth, bad news, or challenges: At meetings, have employees give two "thumbs up," then two "thumbs down," about issues or problems they're facing, or company policies and procedures. This way you celebrate success but also examine less positive issues.
That communication and trust is something that, if fostered in a family business, can really take it places.
Mike Tenhulzen of Tenhulzen Inc. of Redmond, Wash., recalls how his parents, Jack and Pat, talked about business around the dinner table. Regular company meetings clarified the mission, goals, and values of the firm, and also supplied job descriptions with benchmarks and performance guidelines, which helped Mike and his brother, Brian, take the helm.
Those discussions, Tenhulzen says, honestly addressed the struggles of how to build up the company's next leaders, including him.