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Family & Business = Oil & Water?

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They say mixing family and business is like mixing oil and water. Or do they say it’s like mixing oil and vinegar? Depends what they mean I suppose. And who are ‘they’ anyway? Oil and water can’t mix so I guess those ‘theys’ are saying family and business can’t mix, as if it’s a rule of science like gravity or picking up dropped food off the floor within two seconds being OK. Even then, we can still find examples of oil and water being productively associated. For example, in many commercially produced chicken nuggets, oil and water are significant components and they can coexist due to the inclusion of detergents which prevent the oil and water from separating as they are naturally inclined to do. So, that’s good. Mixing family and business is like mixing oil and water – it’s OK in the presence of detergent. This simile seems like a lot of work.

No one says mixing family and business is like mixing oil and vinegar. I just said that because it seems like a much more practical piece of imagery. If you take terrible olive oil and mix it with terrible vinegar, you’ll get a terrible salad dressing. If you take a good olive oil and mix it with a good vinegar, you’ll get a good salad dressing. Now we’re cooking (figuratively.) Lousy businesses plus dysfunctional families don’t mix well, unless you’re their receiver or solicitor, in which case, they’re probably lucrative clients. It’s similar to manufacturing the drug ‘P’ – it’s all about the quality of, and chemistry between, the ingredients. Now we’re really cooking (different kind of figuratively.)

Good salad dressings and good meta-amphetamines require good recipes. You can’t just chuck ingredients in the mix and trust dumb luck. Yet, that is what many people do when it comes to family and business. Any business benefits from clarity of roles, process and expectations – family businesses moreso. Yet many families hesitate to draw up some papers. Maybe it’s because it has the whiff of pre-nup about it? I’ve never been on either end of a pre marriage contract so I’m just speculating but I always assume it must be an interesting conversation to start. “Yes I’ll love you always forever but just in case…” Fifty percent of marriages end in divorce. We probably wouldn’t accept a toaster with that level of failure rate. At least you can return the toaster. Ironically, a common wedding gift is a toaster. Hopefully it’ll be one of those modern ones that allows for different settings because that’s one of the things you should found out before, “OMG, they have their toast on the lightest setting possible. That is effectively nothing more than warm bread. What else don’t I really know about this person? What else have they been hiding? My mother was right.”

If you try and Google search ‘families working together, you get a raft of results about how government departments can work with families to get them out of hospital, out of jail, out of debt or into jobs, into houses or into study. Government seems to focused on getting families into or out of things. It’s like all the government does is act as a huge doorman. (And just like a real doorman, you’ll find you get in and out a lot better, if you slip them a few sly dollars.)

A 2014 survey conducted by PWC internationally, and including New Zealand, assessed the state and intentions of family businesses compared to businesses generally. Eighty three percent had at least one conflict management process agreed in advance, This is good advice for businesses generally but essential for family members either in business together, working together, or just sharing a room. If you had a teenage daughter and a teenage son, and they co-purchased a car, they’d want a system pre-agreed for who gets it Saturday nights. Even when my kids were just out of car seats, they worked out an odd-numbered day / even-numbered day system for who got to sit in the front. (Those of you with multiple siblings from your own youth will have already raced ahead and done some maths, noting those months with thirty days and thirty one days. To ensure even more fairness, they did a six monthly switch on April 1st and October 1st. I don’t know what the future holds for my kids but that system of theirs fills me with some hope.)

That same survey raised hopes with the 83% then dashed them by revealing that only seventeen percent of family business owners had any kind of succession plan in place. There are plenty of issues arising when there is doubt and uncertainty over who gets what. The bible is full of them. What I found particularly interesting in the survey was that thirty six percent of current owners of family businesses intended to pass on ownership to the next generation but not management. Rightly or wrongly, and each case on its merits, I think all cases require forethought on the part of the elders and clarity on the part of the younger. It’s all academic to me – all I inherited from my forebears was terrible eyesight and skinny calves.

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In Business, Does Family Matter?

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Families can be great for drama on TV but they are a potentially good or bad mixed bag in the workplace.

One theme of this issue is ‘family matters.’ That sounds like the title of an 80s sitcom where conflict arises after the first act, it seems to have heightened at the end of the 2nd act, yet the dad sorts it all out with some patronising moralising at the end – all with terrible clothes and hair. That’s not the kind of family matters Employment Today is talking about but I think there is a parallel with families in the workplace – especially that 3-act dramatic structure.

In the first act, an entrepreneurial business person through innovation, managed risk-taking and effort establishes a business and gets it through to a moderate level of success. In the 2nd act, the business is passed down to the next generation. Raised in an environment of hard work and sound business thinking, the business is grown and perhaps even transformed into something well beyond even the wildest aspirations of its original founder. And in the 3rd act, the grandson gets busted on meta-amphetamine charges and the only thing higher than himself is his own sense of entitlement.

I gave a series of presentations around the country last year about engaging employees and building teams. One of my suggestions was that it would be better for employees who neither fitted your workplace, nor achieved performance standards, to not be there. This could be achieved by a rigorous recruitment process minimising the chances that they’d arrive in the first place, or a managed process if the lack of fit and performance wasn’t identifiable until it was too late, following all the dotted i’s and all the crossed t’s of the law and due process. The general thrust of my point was that it was better to deal with such situations early before they demotivated others in the team or had other negative flow-on effects. “Go ugly early,” I say. Better to deal with a pimple than a volcano.

People would come up for a chat afterwards and share tales of the ‘rotten apples’ spoiling their barrels. In probably about half of these cases, the employer had a beef with an employee who also happened to be a family member. This muddied the waters somewhat they reckoned when it came to my sage and independent advice to go ugly early and deal with it as soon as possible. I disagreed then and disagree now – it makes it even more important to deal with it right away. This at least lessens the stress to the employer and the inevitable damage to the business and the central familial relationship, plus strains and breaks of other family ties when people take sides. (I think this is how the Hatfields and McCoys started.)

Quite apart from the drama of having to fire a sister-in-law or the irrationality of delaying that action, even if the sister-in-law is an adequate performer some workplaces have nepotism risks. If it’s your business and you can do what you want to, that’s one thing. Remember that episode of ‘Friends’ where Brad Pitt showed up in a cameo role while, in real life, he was married to Jennifer Aniston? Well, that didn’t turn out too well, did it?

The Government has a list of guidelines for employing family members online. (Does anyone else find it concerning that the Government consider themselves experts at employing family members? I meant the New Zealand Government, not the North Korean one.) I like how in their list, they stipulate that they’re referring to people you’re married to, civil unioned with or in a defacto relationship with. (As opposed to a dejour relationship?) They’re very clear to point out that they’re not talking about your ex. You’re fine to employ your ex. I guess New Zealand’s too small.

Accounting firms have similar lists of advice. Many recommend that if your intention is to employ your kids and one day hand over the keys to them, that you should send them out into the big wide world first – to gain different perspectives, experiences and network. Accounting firms recommend this, as do organised crime families and for much the same reason. How much stress did Chris and Adriana cause Tony Soprano? Well, that didn’t turn out too well, did it?

So, family matters might range from inheritances and intergenerational business ownership to employing family members to ‘bring your daughter to work day’ (which is a terrible idea if you own a strip club.)

Employing family members should be treated the same as employing anyone else. The same rules, expectations, support and remuneration should apply. That said, obviously you’d like to groom them for future leadership and you should have a structure in place for this – as indeed you should for any future leaders. The only real difference should be how much worse it is when they forget your birthday morning tea.

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Family Business: When It Comes To Business, Don’t Mess With The Family

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Employees are sometimes heard to say that their workplace is, “like a family.” I always like to presume they mean that in a positive sense and they don’t mean, “like the Bain family.” But is it really a good idea to run a business like a family?

I’ve just completed MCing a series of regional awards dinners around New Zealand for the dairy industry. Hundreds of people from, or supporting, the dairy industry all scrubbed up and dressed up in places like Hawera and Awakeri. I wore a custom-made tuxedo but if I could have found one by Swandri, I would have worn it.

This was my second year of hosting them and, more significantly than just being around successful business people, I was exposed to the system that nurtures, develops and challenges them. You can wax romantically about some rose-tinted vision of families as much as you like but this industry’s consistent success is driven by a system deliberately designed to be progressive and improving continuously on a nationwide basis.

I’m not sure these days what mental images are struck in people’s heads when they think of dairy farmers but old stereotypes should be long gone. I estimate about half the category winners are women. They’re all very online. Many are not from a long line of dairy farmers.

That said, a lot of emotional acceptance speeches are given thanking mums and dads. (When I said “emotional”, I meant emotional. It wasn’t a euphemism for drunk, a.k.a ‘tired and emotional.’ There was only one really drunk speech and that was superbly hilarious for four minutes. I stopped him at four minutes. Trust me, no one ever finishes gracefully after four drunk minutes.) The genuinely emotional and sober declarations of thanks frequently cited the parents and preceding generations. Often there was a joke about providing babysitting services but it was quickly and demonstrably evident that it was much more than that. From capital investment, advice, motivation, assistance and connections, these business families help each other. It goes beyond help into intergenerational sustainability and this is where I think it can be truly powerful to run some businesses like certain kinds of family.

If you ever want to play an original drinking game at a dairy awards, just skull a shot every time someone says the word “sustainable.” You’ll be having an early night I assure you. They say it a lot because they mean it a lot. Environmental sustainability is critical to these best of the best, because it’s also about being economically sustainable. These people don’t have perverse short-term contractual incentives like some corporates designed to encourage the boosting of quarterly profits. This is about the long term in a truly inter-generational sense. I doubt many bank CEOs planting a tree will be in the job when that tree matures.

Forbes recently ran an article noting how the companies with the greatest combination of scale and longevity tend to be family businesses, or at least were family businesses originally. Many of these were over one hundred years old. A similar proportion of family businesses fail along the way as non-family ones but a disproportionate number of stayers are handed down on blood lines.

The NZ Institute of Directors estimates that about half of businesses are family businesses. They cite the advantages of adaptability, ingenuity and passion, strong relationships with employees, suppliers and customers, and the ability to retain corporate or specialist knowledge within the company.

My friend Mike has a model of family business that says the first generation has the idea and the passion, makes the sacrifice and gets it going. The second generation takes it mainstream and optimises production, distribution and marketing. The third generation has a sense of entitlement and wastes it away, embarrassing everyone along the way downhill. New Zealand has a few famous surnames conforming to this model.

Dairying aside, the first thing I thought of when writing an article about running a business like a family was The Sopranos. Tony’s management style was effective in the short run but it didn’t end very

 

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