doug brown paradigm associates...passions beyond the business vii recognize that conflict is a...
TRANSCRIPT
Preparing Your Family's Firm Next Generation of Leaders
Doug Brown Paradigm Associates
One thing that family business has in common with other organizations is that you will eventually leave the business one of three ways: retire, quit, or pass away. This session addresses the non-financial areas that are often overlooked when transitioning the business to others who are already working there. It only makes sense that the people you are entrusting the business to are fully prepared to continue your legacy.
2020 HPBExpo Education Sponsored by:
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Preparing Your Family Firms'Next Generation of Leaders
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Family Business Life Cycle
?Wonder
IBlunder
IIThunder
IIIPlunder
IVSunder
VRe-Wonder
Focus onBusiness
SlumberMaintainFocus onFamilyHard
Work
You
Own
Your
Job
Creation
of
Myths
Renewal
or
Slow
Decline
You
Own
A
Company
T i m e
G
r
o
w
t
h
Start-up Growth Professional MatureRe-birth orDecline
Focus on Owner Focus on Family
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Family vs. Business Conflict
Family Side
Family issues areEmotionally-based
Families share based onneed, fairness, andequality
Families strive for stability
Business Side
Business issues areRationally-based
Businesses share based onperformance andcontribution
Businesses thrive on growthand change
The inherent Conflicts between the two sides formthe basis of nearly all family-owned business
problems
Breakthrough Thinking for Your Real World • www. ParadigmAssociates.US
OWNER
-Wealth Creation
-Estate & RetirementPlans
-Buy/SellAgreements
-Board of Advisors /Directors
People Have Many Rolesand Conflicting Issues:
Breakthrough Thinking for Your Real World • www. ParadigmAssociates.US
MANAGER
-Performance Levels
-Growth and Change
-Outside Managers
-Strategic &Business Plans
-Contingency Plans
-Conformance/Stnds
People Have Many Rolesand Conflicting Issues:
Breakthrough Thinking for Your Real World • www. ParadigmAssociates.US
FAMILY
-Fairness & Equality
-Stability
-Philosophy & Values
-Personal Wealth &Estate
-Family Council
People Have Many Rolesand Conflicting Issues:
Breakthrough Thinking for Your Real World • www. ParadigmAssociates.US
People Have Many Roles andConflicting Issues:
OWNER Wealth Creation Estate & Retirement Plans
Board of Advisors/Directors
Buy/Sell Agreements
MANAGER Performance Growth & Change Outside Managers in Place Key Executive/Contingency Plan
Strategic & Business Plan Conformance to Policies & Procedures
FAMILY Fairness & Equality Stability Family Philosophy & Values Personal Wealth & Estate Planning
Family Council up & running
Problems Arise in the Overlap
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Suggestions for Families
I Regardless of age, train next gen to beindependent and think for themselves
II If younger, can next gen apprenticesomeplace other than the company?
III Have rules for entry into the businessIV Have a key employee, coach or mentor to
objectively appraise performanceV Treat family members as employees and
employees as family members
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Suggestions for Families
VI Encourage Owners to have interests andpassions beyond the business
VII Recognize that conflict is a natural part of anymeaningful relationship
VIII Plan for continuity, succession, retirement,estate taxes, and long term business strategy
IX Provide development and training for thesuccessor generation
X Remember that business is business andfamily is family
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
The Role of Every Executiveis to THINK, CHANGE andOPERATE.
Peter Drucker
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
THINK & CHANGE
Each family Business is unique however all have similar needs:
• Owner’s Plan
– Overall Plan - What’s the Family commitment to thebusiness and how do they create wealth from it
– Estate Plan - How the negative financial impact of a keyperson’s passing will be mitigated.
– Succession Plan - Who will be the new boss and how willthat person be prepared
• Strategic and Business Plan
– Knowing your markets, customers and resources whilemeeting the objectives of Family and Management
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
THINK & CHANGE
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
The future is an extension of the past
The Logical Future
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
We can plan for a different future
The Willed Future
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Suggestion for Consensus
At decision time in a meeting, each person is to raise their hand andextend their fingers in proportion to how they feel about the issue.
Number ofFingers
Level of Support
5 I Strongly Support This Decision.
4 I Support This Decision.
3 The Decision Is OK.
2 I Am Uncomfortable With This Decision, But ICan Live With It.
1 I Am Uncomfortable With This Decision, ButDeferring To The Wisdom Of The Group, IPromise Not To Sabotage The Decision.
FIST I Veto This Decision. We Definitely Need ToDiscuss The Matter Further.
Any proposal isaccepted if morethan 75% of thepotential votes(fingers) arecast AND thereare no fists.
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
THINK & CHANGE
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
THINK & CHANGE
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Keys to Managing Change
Work Hard to Get the New Vision Right
Communicate for Buy-In
Enable Actions
Create Short Term Wins
Don't Let Up
Make it Stick
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
OPERATE
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Successful Family Businesses
• Write a combination Business Plan and Family Plan
• Create an outside Board of Advisors
• Divide the Turf Explicitly
• Formalize Regular Meetings
• Use the Same Accountant for Company &Individual Taxes
• Allow Other Family Members to Offer Perspective
• Annual Retreats to Revisit the Mission
• Remember What’s Important - This is Business
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Suggestions for Ownership
Disaster Management PlanFamily Mission Statement & Beliefs DoctrineFamily Business Participation RulesLeadership Development PlanRegular Family Council Meetings
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
OPERATE
Running the day-to-day
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Position Contract Worksheet
Get agreement & Signatures for eachposition / function in your organization -whether held by family or not:
1. Accountabilities to be achieved by this function.
2. The specific work the occupant of the functionmust accomplish.
3. The standards by which results are to beevaluated.
4. The authority necessary to perform this function.
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
OPERATE
Running the day-to-dayGoals Achievement relatedLeading People
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Understand People
Understanding How People Process information &Human Motivation:
-Natural talent for Judgment & Decision Making
-HOW they tend to ACT- Understanding HumanBehavior
-WHY they do things- Values, Attitudes & Beliefs
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
OPERATE
Running the day-to-dayGoals Achievement relatedLeading PeopleEmbrace Business Process Improvement
Breakthrough Thinking for Your Real World www.ParadigmAssociates.US
Replacing the Irreplaceable You
• Your Outlook:– Monarch - Dies in the Office– General - Says “I’ve let go” but really hasn't– Ambassador - Unobtrusive mentor– Governor - Creates Continuity of Command
• Easing Your Transition– Find another Mission– Outside Board– Sharing the Hiring Process– Get Help From Advisors to Quit