Schooling the World Economic Forum
Last month, the World Economic Forum’s online publication, Agenda, featured an article provocatively entitled “Are Family Firms Damaging Europe’s Growth?”
The article was written by Oriana Bandiera of the London School of Economics and Andrea Prat of Columbia University; both authors are also affiliated with the Center for Economic and Policy Research. They presented results from a study they conducted indicating that family business CEOs work fewer hours than non-family CEOs. The authors argued that “hours worked by the CEO are strongly correlated with firm productivity.”
Their concluding paragraph suggested, “Would an increase in taxation that affects the owners of family firms bring about an increase in productive efficiency?”
Dennis Jaffe, a family business adviser and an emeritus professor at Saybrook University, and Isabelle Lescent-Giles of San Jose State University, fired back with a rebuttal, which they posted on Medium.com. “Measuring CEOs’ contributions to society by the time spent in their office, rather than their efficiency and effectiveness as both leaders and managers, is dangerous,” they wrote. “And measuring firm performance on short-term profits only rewards asset stripping, and ignores the contribution of firms over the longer term.”
Jaffe and Lescent-Giles cited multiple academic research findings that show family companies outperform non-family firms when the variables measured are growth and value creation over time.
In their rebuttal, Jaffe and Lescent-Giles acknowledged that there are problems associated with family control. “If the needs of the family are able to undermine good business practice, they can be incredibly destructive,” the write. “In our own recent study of long-lasting family businesses, we have come to see … that the advantages of the family business have to be developed over generations.”
In their conclusion, Jaffe and Lescent-Giles offered this smackdown: “The field is complex and developing nicely, and we do not need simplistic generalizations or conclusions from single studies to move forward.”
Creating a more humane workplace
The technological advances that have put a wealth of information at our fingertips and enabled us to stay constantly connected have resulted in our being always on the job -- or at least expected to be reachable at any time. In a New York Times opinion piece last May, Tony Schwartz and Christine Porath of consulting firm The Energy Project said what we already know all too well: Being always on call and contending with myriad interruptions from the tasks at hand causes burnout.
Burnt-out employees, Schwartz and Porath noted, are not engaged with their organization or its mission. “Demand for our time,” they wrote, “is increasingly exceeding our capacity -- draining us of the energy we need to bring our skill and talent fully to life.”
Schwartz and Porath added that the most satisfied and productive employees are those whose employers help them meet their “core needs”: physical (having a chance to recharge their batteries at work), emotional (feeling valued and appreciated), mental (being able to focus on their most important tasks and having flexibility in where and when they get their work done) and spiritual (doing what they enjoy most and feeling that their work has a higher purpose).
What’s more, the authors noted that employee engagement is correlated with higher performance at work. “Put simply,” Schwartz and Porath wrote, “the way people feel at work profoundly influences how they perform.”
About a decade ago, Charlie Luck, the third-generation CEO of the Luck Companies, undertook a major initiative to change the culture of his company. The business, which is based in Richmond, Va., produces crushed stone, sand and gravel; owns tennis court company Har-Tru Sports; and has a real estate development division. After Luck observed backstabbing and competition for resources among his employees, he decided to remake the organization to focus on values and improve the way people related to each other.
A 2012 article in Family Business Magazine described the Luck Companies’ culture transformation, and the boost in morale and financial results that followed. The company instituted leadership training centered on its values of integrity, commitment, leadership and creativity. Training programs taught employees how to understand others’ values and work styles, and how to give and receive feedback. One tool presented was the “pause button” -- in tough situations, associates were trained to stop and allow themselves to carefully consider what to do.
The result? Not only did morale and productivity improve in the workplace, but also Luck Stone employees reported that the interpersonal training helped their relationships at home.
Charlie Luck will be speaking about his company’s values at Transitions East 2015 later this month.
“In a numbers-driven world,” Schwartz and Porath wrote in the Times, “the most compelling argument for change is the growing evidence that meeting the needs of employees fuels their productivity, loyalty and performance.” That is a compelling argument for taking steps to make your business more humane.
Development plans for the whole family
Family business consultants and researchers have produced a wealth of literature on training and developing future leaders of the business. Often overlooked, however, is the fact that other family shareholders need training and development, too.
Family shareholders who don’t work in the business might be tremendous family council members; those with high potential could be groomed as a future chair of the council or the family assembly. Other family members might be well suited for service on the family foundation board. Those with strong business skills might be a good fit for the board of directors of the family business.
All too often, family members are thrust into these roles without training; they are given the jobs solely on the basis of their family status. Experience has shown that this is the wrong way to appoint a successor CEO, so why is it so common when installing family members into these other key positions?
As family business consultant Jim Barrett wrote in The Family Business Mentoring Handbook, “Even though these are not managerial roles, they involve as many hassles as full-time company positions do -- and they also can be just as satisfying. Family and business leaders must train next-generation members to assume these positions so that problems, frustrations and disappointments can be avoided later on.”
In the November/December 2014 issue of Family Business Magazine, several family business members comment that family council committees can serve as a good “farm system” for future family leaders. Committees can be organized to perform a variety of functions, such as planning the next family meeting or developing a new family policy. The committee experience can help family leaders identify which family members have leadership potential. Likewise, family members who serve on committees may discover they have a passion for the family business that they hadn’t recognized before.
A panel presentation at our Transitions East 2015 conference will focus on developing talented and committed family members for a range of roles in the family and the business. As Meghan Juday, family council chair and a member of the board of directors at IDEAL Industries, wrote in our November/December 2014 issue, “In order for the family to be the best possible partner with the board and management, it is critical to have the right people in these important roles.”
The power of your family brand
Our second Transitions East conference, back in April 2011, included a group of sessions organized around the theme of “Family Legacy as a Strategic Advantage.” Several family business leaders -- including Ross Born of Just Born Inc., Tim Hussey of Hussey Seating, Mark Peters of Butterball Farms Inc. and Scott Livingston of Horst Engineering -- spoke about how they use their family legacy and brand to manage internal family issues, attract and retain employees, develop strong relationships with vendors and build customer loyalty.
A newly released study confirms the power of a family brand. The survey, conducted under the auspices of tax and advisory firm Ernst & Young and Kennesaw State University’s Cox Family Enterprise Center, studied 1,000 of the world’s largest family businesses. The researchers found that 76% of respondents refer to their enterprise as a family business in corporate communications. The most common reason cited was that the family strongly identifies with the company and believes that the business is a large part of who they are as a family. Another frequently noted reason was that promoting the family connection helps differentiate the company from its competitors.
At a workshop held during the Transitions East 2011 conference, Ross Born and family business adviser and researcher Dennis Jaffe prompted attendees to consider what action steps they could take to translate their family history and the legacy they wish to leave into a robust, clearly understood brand that supports a successful family business. Born and Jaffe asked participants to identify the enduring “core” or “soul” of their brand as well as factors such as the emotional and functional benefits to the customer and the objective, measurable attributes of the brand.
The Ernst & Young/Kennesaw State University survey report noted that branding the company as a family business helps to promote family cohesion. “Family business branding connects the family to the identity of the business and promotes pride in participation, even if family members aren’t directly involved in the business,” the report said.
Astrachan commented in the survey report, “Quality products and services are requisite for business success, but family businesses can do something others can’t. They can tell the story of the family, its struggles, failures and successes, and in the process customers and stakeholders identify with the company and gain greater faith in its trustworthiness.”
Starting ‘the other talk’ with your kids
In bygone days, many kids first learned about sex from classmates on the playground because their parents were too uncomfortable to broach the subject of “the birds and the bees.” Today, most parents recognize that “the talk” is an essential responsibility of parenthood -- and that “the talk” is not just one conversation but, in fact a series of discussions that begin simply when the children are young and become more detailed as the kids mature.
While sex is no longer a taboo topic, parents remain skittish about initiating “the other talk” -- a conversation about money. Even those parents who acknowledge the importance of an early start never seem to get around to it. In a recent study by Merrill Lynch’s Private Banking & Investment Group, for example, 39% of respondents asserted that it’s never too early to begin talking to children about responsible financial behavior, and 11% said these discussions should begin when the kids are ages ten to 13. Yet only 14% of these study participants said they actually raised the issue when their kids were nine or younger (see FB, July/August 2014).
Experts say that frequent, open and wide-ranging discussions about values, work, entrepreneurship, legacy and wealth help the younger generation develop a healthy attitude toward money -- and that the kids can hold up their end of the conversation. In the January/February 2015 issue of Family Business Magazine, Jeff Savlov, a family business/family wealth adviser trained as a therapist and psychoanalyst, explains that even elementary-school kids are able to participate in meaningful conversations on these topics.
Our January/February issue also features an interview with Scenic Root, a perceptive young lady who at age 13 is an old hand at having frank conversations about the advantages and disadvantages of growing up with wealth. Scenic -- a fifth-generation descendant of C.J. Root, whose company created the original Coca-Cola bottle -- has had in-depth discussions about the connection between business and family with her father, Preston, since she was a small child.
Whether you broach these subjects with your kids or you don’t, they are watching family members’ relationship to money, to the business and to the family legacy, and their future habits will be based in large part on these observations. Opening a dialogue with them is likely to be a revelatory experience.