How to Make It Cool to Work for a Family Business

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Let’s face it, working for a family business isn’t considered by most professional managers to be a great career move. Many managers believe the career prospects will be limited, as the top jobs will most likely go to family members. Also, many picture themselves in the middle of a medieval court full of intrigues and fights between rival heirs, struggling to keep themselves impartial. So, no wonder family businesses have a tough time attracting talent!

So, how to make it cool to work for a family business?

Outstanding company values, great leaders, a challenging job, attractive performance-based compensation and a culture of empowering and developing people, these are the keys to attracting and retaining talent for any company including a family business.

Take, for example, Roche. The Swiss Pharmaceutical giant employees more than 60,000 people; yet it is still controlled by the founding family. “There is a culture at Roche that nurtures talent,” says Alexander Zehnder, at the moment seconded to Genentech in the US, a member of the Roche Group. “This culture gives employees the opportunity to develop knowledge and skills, on- and off-the-job, and to gain international experience.”

Another example is the Bonnier Group, a Scandinavian media conglomerate of over 200 privately owned companies and currently in the sixth and seventh generation. Here, to make it more attractive for non-family managers, the governance structure is shared with non-family executives, with a non-family member either holding the chairmanship or the presidency.

Some of you may be thinking- these are huge companies you are talking about, they can afford to have all these systems in place and they will attract good people anyway. Well, this is a bit like the question “What comes first, the chicken or the egg? I believe that these are big, successful companies because they have put these systems to work in the first place.

So, let me sum up the must dos for making your company attractive to talented executives independent of its size:

– Great Values
People want to work for a company that cares about its people and that has a mission that motivates them.

– Great Leadership
People choose companies for their leaders. Great leaders do treat people with trust and respect. They build the capacity to achieve results, knowing that they do this by unleashing the talents of their people

– Performance-based culture
The combination of a strong performance ethic and an open and trusting environment achieves great job satisfaction.

– Attractive Compensation and promotion policies
Your company will get the best from your family and non-family executives if key management positions are open to non-family members, assigned based on competence, and utilize performance-based compensation.

I suggest making the promotions criteria a bit harder for family members, the reason being that as family members they will be in the spotlight. If they are clearly better no one will object.

– Family employment policy

While having members of the family working in the company is in the company’s interest, because they have stronger commitment and loyalty to the company (after all they own it), having family members that are not up to the job is dangerous and irresponsible.

A transparent family employment policy, which establishes the criteria for family members to join the company, will help you to avoid a tough time with your sister desperately wanting to get his dropout son into the business. Also, it will show non-family executives that jobs are not awarded on family merits, but on actual capabilities and performance.

If you link the points above with the flair of working for an innovative entrepreneurial company, able to adapt and respond quickly, with long-term vision and strong commitment to their customers and employees, all characteristics of family business, Wooow! It really sounds cool to work for a family business!

Written by Carmen Lence coach and Consultant at NextGen LLC

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Dennis Jaffe on How to “Make it Happen” for the Next Generation Owners of Family Business

For 40 years, Dennis has helped families manage the personal and organizational issues that lead to successful and fulfilling transfer of businesses, wealth, values, commitments and legacies between generations. He is professor of Organizational Systems and Psychology at Saybrook University in San Francisco. Dennis received his BA in Philosophy, MA in Management and Ph.D. in Sociology from Yale University.

As both an organizational consultant and clinical psychologist, he is one of the architects of the emerging field of family enterprise consulting. As a founding member of the Family Firm Institute, he has presented at many of their annual conferences, served on their board, written frequently for their journal Family Business Review, and was awarded the Richard Beckhard Award for contributions to practice.

In this interview, Dennis Jaffe share his experience in helping next generation members of family business to create a future for themselves and the keys to succeed at succession.

Do you want to gain control of your family Business? Buy it!

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Jamie Calvetti, President of James Calvetti Meats in Chicago

After 32 years working in the family business and running it before his father’s passing, Jamie Calvetti found himself as an equal co-owner with two more siblings that were not involved in managing the business. The situation got to a point that he had to buy his own business to gain control. In this interview, Jamie Calvetti, President of James Calvetti Meats, one of the USA’s leading purveyor’s of prime quality meat products, shares how to go about buying your family business and what he learned from his father’s mistakes.

What were the main challenges that you faced working in your family business?

In family business, there is a lot of jockeying back and forth. My father was aggressive, charismatic and well known around the country. He slowly allowed me to manage some pieces of the business.

I had been gainfully working and managing in the business since I started. I learned everything that I could about the business. I bought computer into the business in 1982 for logistic and accounting functions. Email did not exist in 1982. I managed to processing, logistics, personnel, accounts receivable and payables and some purchases. I had my own sales, but of course there was many times that competition was a problem. I did everything an entrepreneur does in a business.  In 1986 I started up business in Japan (the country was too small for my father and myself to compete within). Shortly after that I started up sales in Europe. Between the time 1986 and 1991, I traveled, on business, to Japan and or Europe about 15 times.

In 1991 I was able to manage the large multinational business customers we had because of the change in technology. That was the advent of email.  Major customers starting using email to communicate, which I was very proficient. My father’s style of communication did not work for the new younger buyers/managers.

My father felt that I was taking him away from the business. There was a competition between my father and I and competition between the siblings.

Was there any succession planning?

There was no formal succession planning. My father’s accountants came to him and said he needed to move some of his shares to his children for tax purposes. He wanted to split it equally. The accountants, unbeknownst to him and me, gave me a tenth of 1% more than my other siblings.

Were you the only sibling working in the company?

One sibling was. He was in charge of the newspaper for the first 15 years and then in charge of Internet marketing the last 15 years.

Do you think that equal is not always fair?

It wasn’t. The accountants set it up. When my father passed away there was jockeying for position. At that point, my father was 89 years old, and I was running the business.

My dad was very good at running a business and did not melt the company. Because of that, the company was and is very well financed. We left quite a bit of cash in the business.

I had to buy both my siblings out over three years and both were major negotiations. There were bad feelings involved and it took a very aggressive attorney to take care of things on my side.

In the meantime, we had to run a business. I could see down the line that with all these buyouts I was going to need to start growing the company again. We were in the airline and food service business and we stopped growing after 9-11 and didn’t diversify. I tried to diversify a couple of times and it failed. Ultimately, I went back to my core business. I reduced my salary and reduced expenses where it was necessary to generate the cash for the buyouts.

What were the keys to raise capital to buy your siblings out?

You have to make a profit, have good cash flow, and show and prove that to the bank. Handle your personal finances properly and correctly. Be conservative with the money that you do have. I had my  broker contact the bank and give a referral. I come from a place where my dad wanted to pay everything in cash. We paid cash for a building, and in about 17 years the value of the building doubled and there are no loans against it.

You just have to play it right and you can’t be the guy that has a $1 million dollar house with an $800,000 mortgage. You will not get the financing even though that is your personal stuff they are going to look at it. They are going to see that you are too much of a risk taker or you don’t know how to run your money.

I also look at my cash position every day. I know what my accounts receivable, accounts payable, loan, and my cash positions are. I also know what my estimated payouts are for the following week. In the meat business, you have to pay your bills in seven days because we buy a perishable product. You should also follow the markets. When we made a lot of money, instead of taking it out, I loaned it back to the company. It was advantageous to me because I could pay myself interest more than market rates.

It also showed the way that you ran the company.

Right. I had stable employees. You bring the banks in show them the business-that is not normal. You show everything to them and show them you can make money in various economic conditions.

When your father passed away there was no real succession plan. What would you do differently for your children?

I don’t have any children but I do have a stepdaughter. I would never burden her with this. What I would do different than my father is I would determine who was most interested in the business and most capable. I would move those assets upon or before my passing to that person. Then, I would compensate the others.

How is your relationship with your siblings now?

We have a strained relationship.

Do you think that all this pain could have been avoided with proper planning?

Maybe. Entrepreneurs are a special type of group – they are very competitive at least my father was. He was competitive with his children. I can remember a couple times, that he wouldn’t be so happy  that I would bring in a huge order. It was a strange situation.

What advice would you give next generation members that are considering buying their Family Business?

  • You first have to know how to run the business profitably and conservatively. You should not take a $500,000 salary, take cash out the business, and expect the bank to finance the business.
  • Have to have your own money in the business too.
  • Have a great reputation in your industry, better reputation than everybody else.
  • Pay your bills on time or early. That gives you power to do the things you want to do or at least it helps you.
  • Then you have to run your personal life properly. Don’t have a $1 million house with $800,000 loan.
  • You have to be and work at the job. You can’t be on vacation all the time.
  • You have to have stable employees, be a good manager, and a good communicator.

What about you? Have you ever been in a similar situation? What other resources could have been used to take control of the company? Are banks the most likely founding source for family business buyouts? Please, share your experience, we can all learn from it!

Written by Carmen Lence, Coach and Consultant at NextGen Consulting and Coaching LLC. www.nextgenfamilybusiness.com