“UNLEASH YOUR FAMILY BUSINESS DNA”
by REG ATHWAL, FPSA
World-Renowned Family Business Executive Advisor, Author & Keynote Speaker; Founding Partner & MD, RTS Global Partners
FAMILY BUSINESS MATTERS with RTS GLOBAL PARTNERS :: SPEAKER SERIES
THE 6 PRINCIPLES FOR SECURING FAMILY COMMITMENT AND PARTICIPATION
One of the critical goals of any family business is to provide a future for family members that include both job and financial security. Yet there have been many instances in which family members have walked away from businesses that took years for a parent, grandparent, aunt, or uncle to build, in favor of other opportunities. Even wildly successful, massive organizations experience this phenomenon. In 2011, Joss Kent left his job as CEO of Abercrombie & Kent, a tour and travel company founded by his grandfather and father, to become CEO of safari company and competitor &Beyond.
While we don’t know why Kent left or how his family reacted, this type of action often makes founders feel angry or resentful, and they are left won- dering why talented family members are using their skills elsewhere, when they could be helping to perpetuate the family dream. They are often left with less-skilled family members, those who don’t have as many opportunities elsewhere and for good reason, or who don’t like challenges and so are attracted to the family business because it’s “easy.” They wonder how they’ve failed to instill values such as loyalty and commitment in talented family members. Family members who start in the family business but then leave are often accused of things like snobbery or of not thinking that the business is “good enough” for them, of an inability to get along with others, or of failure to respect historic business principles.
The solution to the problem, quite simply, lies in creating procedures and policies that attract and retain top employees. Non-family businesses often have entire sections of their human resources department devoted to this one goal. Your family business should pay equal attention to attraction and retention.
You’ve probably heard this said before: “An organization is only as good as its people.” You’ve most likely heard this said because it’s been said a lot, and it’s been said a lot because it’s unequivocally true. This statement is true for all businesses, whether we’re talking about family businesses or non- family businesses.
A 2009 Gallup Employee Engagement Index reports only 33% of workers in the U.S. are actively engaged, feeling invested in what they do and in their company, while 49% consider themselves non-engaged, putting in time to get a paycheck. The remaining 18% claims to be actively disengaged, and are miserable enough to routinely sabotage the accomplishments of other employees. Furthermore, the report states actively disengaged workers cost the U.S. more than $300 billion annually in lost productivity. There’s no doubt, your ability to attract and retain key employees will have a direct impact on your organization’s ability to meet its goals, and on its long-term success. It’s really quite simple.
Or is it? Attracting and retaining family members is easier in some ways than attracting non-family members, but also comes with a very unique set of challenges, some of which are quite difficult to overcome.
When you build a business, you are pursuing a dream. In order to fulfill that dream, you must build a cohesive dream team who can see it to fruition. Non-family businesses know this, and spend lots of time ensuring that the right people are in the right jobs. They search high and low for the right candidates, and once they find them develop elaborate compensation and benefits packages designed to ensure that employees are motivated to perform in their specific job roles. They provide atmospheres that allow them to use theirs skills, and give them plenty of opportunity for upward mobility. If they are in need of additional education as they grow, the organization often facilitates or supplies it. They encourage employees to share their input, and reward employees for positive change. They create team atmospheres that allow employees to contribute meaningfully, and make them aware of their important contributions. They have systematic procedures for motivating, encouraging, and evaluation. And they provide strong, supportive leadership.
The area of attraction and retention is frequently overlooked by family businesses. Family businesses don’t search for employees, as they are “born” into the organization. Because their involvement is accepted as “status quo,” they are often not formally motivated and encouraged in a way that’s beneficial to the business. In many situations, systematic motivation, encouragement, and evaluation is totally absent, as parents believe that children and other family members should automatically “see” the rewards of working in a family business. In some family businesses, creativity and input is stymied, as employees are expected to adhere to historic principles and policies in atmospheres where change is not welcome. In other situations, upward mobility is all but impossible, as job positions are tied to family hierarchy and position rather than to performance, skill set, ability, and compatibility.
When you build a family business, not only are you developing and supporting that business, you are also developing and supporting family members. One can’t exist without the other. Both are hands-on, and require systems, protocols, and actions to succeed. Your goal, as a family business owner, is to develop commitment, continuity, and a strong sense of community among family members, so you can transfer that strength to your business foundation. These things won’t happen by themselves; you must drive them.This is why RTS Global Partners, and its Founding Partner created “The Family MBA Program” for the next generation back in 2010 to address this important issue. More information on this visit the www.RTSGP.com website.
One of the most time-consuming aspects of any businesses is finding the right employees to support the business. If you’re coming from a non-family business, there are some distinct disadvantages when it comes to hiring. Businesses have entire departments devoted to this one task, and it can still go wrong. Resumes full of lies, manufactured recommendations, outgoing, charming personalities that wow you in the interview and turn out to be anything but, or personality types that simply aren’t suited to the job despite adequate education and experience—human resources departments have seen it all. When all is said and done you hope for the best, but it’s very difficult to get a true sense of a person, and whether they are truly the best candidate for the job, from a couple of interviews and a few pieces of paper.
One of the benefits of running a family business is that you don’t have to search far and wide for potential candidates. Your pool of candidates is already determined, and you don’t need to rely on resumes and recommen- dations. Not only do you know your potential employees personally, you’re also very aware of their strengths and weaknesses. This should make it easy to ensure that people are in the right jobs, and allow you to build strong business DNA using The DNA Model.
But this awareness creates a disadvantage as well. Many family businesses simply don’t take the steps necessary to “attract” their “employees,” or create an atmosphere in which it’s attractive for them to remain. Why shoot fish in a barrel? Some businesses simply overlook the attraction process, expecting that family members will be naturally attracted, while other businesses give attraction a lower priority because they are busy with “more important” things.
As a result, many family businesses fail to attract the best family members into the business. Quite frequently, the most competent family members are attracted to job opportunities elsewhere. The family business is left with the least talented family members, while those who could do the most for the organization are doing the most for someone else. It’s incredibly frustrating for the person leading the business to watch talented siblings, children, grandchildren, or cousins simply walk away from it. If the person currently heading up the business is the parent who built that business from scratch this can be particularly heartbreaking, as part of the “dream” typically includes putting your business into the capable hands of your children and watching them take it to the next level.
To understand why people walk away from the family business for other opportunities, you have to understand what attracts people to a job in the first place. This article explores The 6 Principles behind attracting and retaining your most talented, competent family members.
Principle #1: Employees want to be placed in situations that use their skills, knowledge, and education
If anyone can enter the family business regardless of skill set, knowledge, and education, competent family members will look for other opportunities that recognize and reward these attributes. No one wants to spend time and effort gaining skills and knowledge, only to find themselves working in an atmosphere where they aren’t respected or required. Family businesses can place value on skills, knowledge, education, and experience by creating higher standards of entry for family members who want to enter the business, and by encouraging and facilitating continuing education for current employees. Requiring family members to have a certain amount or specific type of education or experience before entering the business, rather than allowing anyone to join based on family ties, will encourage the most competent family members to come on board. Non-competent family members, on the other hand, will get the message that they’ll need to either acquire the necessary skills and education or find another place to work, which will have the added benefit of weeding out those who aren’t truly suited to the business in the first place. Putting selective policies in place will not only attract the right family members, it will provide a better atmosphere for both family and non-family employees who are interested in upward mobility.
Case Study: Wal Mart, United States
Samuel Robson Walton, the oldest son of the founder of Wal-Mart and current chairman of the board of directors, earned the experience he needed to lead the retail giant in a unique way. After earning a bachelor’s degree in business administration and a law degree from Columbia University, Walton moved back to Tulsa, Oklahoma, and worked for the law firm used by Wal-Mart. Nine years later, Walton was named senior vice president, then succeeded his father when he died in 1992.
Principle #2: Employees want to work for organizations that focus on competence, earned privilege, and growth opportunity
In non-family organizations, how well you perform determines your job position, your upward movement within the organization, your level of responsibility, and ultimately, how you are compensated.
Family businesses are far more complicated. Quite often an employee’s job position, responsibility, upward mobility, and compensation are inextricably linked to his or her family position. Older siblings, and in certain cultures family members of certain genders, may be given the best jobs with the most responsibility and pay, allowing no growth opportunities for other family members regardless of performance.
In order to ensure that talented family members are attracted to and remain in the business, you must focus on recognizing and rewarding competence. Policies should be put in place that allow employees to earn their positions, to be rewarded for performance, and that allow them room to grow and develop. These merit-based policies should be applied to all areas of the business, including management, compensation, and succession. A member who feels that he or she is forever stuck in one position, regardless of how well he or she succeeds, will almost certainly seek new opportunities where he or she can be motivated and challenged to succeed. Talented people with lots to offer rarely strive to be Willy Loman in “Death of a Salesman.”
Case Study: Kongo Gumi, Japan
Until recently the oldest family business in the world, Kongo Gumi constructed Japan’s first Buddhist temple and continued to build sacred temples in Japan for 40 generations. One of the reasons for the organization’s enduring success were the succession principles that were quite unique among Japanese family businesses. Instead of basing succession on gender or age, they were willing to pass leadership to the most qualified, capable person. The 37th leader of the business, for example, was the grandmother of the man who was at the helm when the company was liquidated and taken over by a larger construction company.
Which perhaps brings us to a second lesson that Kongo Gumi can teach us. The reason for Kongo Gumi’s demise was a combination of collapsing land prices, exploding real estate values, and a secularization trend in Japanese culture. Had the organization strayed farther from its roots by responding to market trends, embracing change, and diversifying, it may have lasted into its 41st generation and beyond.
Principle #3: Employees want to be in an environment that promotes growth, change, and evolution, and gives them a sense of independence and control
One reason why some family members aren’t attracted to the family business is they feel that policies and procedures that were put in place by the founder are engraved in stone, and they don’t believe they will be able to exercise their ideas, creativity, or freedom. This makes them feel like a marionette on strings, rather than an independent worker who is valued for what she can contribute. She feels unable to control not only the contributions made to the organization, but the trajectory of her own career.
One way to make employees feel independent and in control is to welcome and reward input. Regular family business meetings that apprise everyone of what is going on, and allow them to give their input and ideas, will make employees feel as if they have a stake in both decisions and outcomes. Building this kind of team-oriented environment will go far toward building loyalty and commitment.
It’s also important to create an atmosphere in which “change” is welcome. Family businesses typically develop a rich integrity of goals throughout the years, and most of the time this can be viewed as a positive. However, this rich integrity of goals can also create resistance to change. Family businesses can become “stuck in their ways” regardless of market needs or new competitors that come on the scene. This can be frustrating to highly talented workers who want to keep pace with industry change, and may encourage them to leave the family business and pursue another organization where they can put their knowledge to the test.
It’s more important to be attached to the concept of being “in business together” than it is to be attached to the original business the founder created. Promote an atmosphere where change is welcome, by allowing members the opportunity to explore diversifying or expanding the core business. Give family members latitude and the control they need to branch out, create new revenue streams, or otherwise create new opportunity for both themselves and the business. Not only will this create a vibrant, open-minded, and creative atmosphere, family members will be excited by the opportunity to create positive change. This creates a win-win situation for both the business and the individual. In “The Family MBA Program” developed by RTS Global Partners, we build a customized program for each new family member with our clients, to incubate a new business within 12 months, focused on their DNA and passions. With one client three new members all achieved this goal their first year, adding 3 new businesses to their portfolio (in low-income housing, healthcare and food products), encouraging expansion in new areas and ultimately retaining the next generation, whilst growing the family wealth pool.
Case Study: Eu Yan Sang, Hong Kong
The story of Eu Yan Sang illustrates what can happen when an organization lets go of the past, and cultivates an environment in which family members are encouraged to effect positive change.
Eu Yan Sang, one of Asia’s biggest consumer healthcare product companies, had very humble beginnings. Started by Eu Kong in 1879, who began by peddling alternative healthcare products to opium-addicted miners, the firm was expanded by his son, Eu Tong Sen, who went on to build operations in tin mining, rubber estates, and finance. Soon, the organization comprised more than 1,000 properties in Hong Kong, Malaysia, and Singapore.
Eu, who had 13 sons and 11 daughters, gave his sons 13 equal shares in the business. But conflict ensued, and the fact that no one had a majority vote meant that decisions were not made. By the mid-1980s all divisions of the family business had either failed or been sold off, except for the original healthcare business, Eu Yan Sang.
More than a century after the business was started, Eu Tong Sen’s grandson, Richard Eu, took the helm of the fourth-generation business against the wishes of his own father, who saw much more in his son’s future than a failing business. Rather than stick to the old formula, he used his education and business acumen to invigorate and change the business. He carefully assessed the company, and then gave it a modern overhaul from top to bottom. He created a new branding and marketing strategy, improved quality control, and developed an extensive distribution network.
Once again, Eu Yan Sang was a household name in Asia. Today, in addition to shops in Malaysia, Hong Kong, and Singapore, Eu Yan Sang has expanded into manufacturing, retail, wholesale, and clinical services, and offers more than 300 products under the Eu Yan Sang brand.
Principle #4: Employees want to share values with the organization they work for
When you work for an organization that shares your values, it exponentially increases the meaning of your work.
The business values should naturally align with the family’s values. Unfortunately, many businesses neglect to identify and share these values with family members. As a result, they remain unspoken. Family members may not be aware of the business values, or they may misunderstand them. With our clients at RTS Global Partners, we solve this problem by creating a “Family Values Charter” by working our way through over 350 values to eventually decide on the Top 5 to 10 that will govern how family members behave and decide on what business to launch in the future and how they conduct business with each other as a united family. This conditions the young children and next generation to understand “how things are done around here…”
Why do you think so many organizations spend so much time identifying and communicating their values? It’s not because they’ll look nice in a gold frame in the boardroom (though they may). Clearly articulating your business values, and drawing a line between those values and your family values, will create the type of unbreakable bond that all but ensures attraction and retention. Know what your values are. Communicate them. Make your family members proud to work for you. Embed these into your “Family Retreats” and all family and business gatherings.
Principle #5: Employees want to feel they can walk away when more suitable opportunities arise
One reason why family members may be hesitant to join the family business is that they may feel it will be impossible to leave, should they decide that’s best for them. Founders send out a vibe that it would be “ungrateful” or “unacceptable” for their children, grandchildren, nephews, or nieces to walk away from the business they spent years building, and sometimes institute certain policies, such as selling their shares at a “discounted” rate, that make it financially difficult for family members to leave once they are there.
Not everyone in the family will be suited to the family business, and when you really think about it, it doesn’t make sense to keep family members involved who have no interest or desire to be there. If you make it impossible or unpleasant to leave the family business, you’ll end up retaining plenty of employees you would be better off without. But you may also prevent truly outstanding, well-suited employees—those who have other options because of their skill set, education, and experience—from joining in the first place. If you create an atmosphere where employees are free to come and go per their needs and desires, desirable employees will be more likely to give the family business a try, and won’t feel “forced” into a decision.
Case Study: ROI Group, Australia
Investment firm ROI group not only makes it easy for family members to leave the business, they actually encourage it. Believing that the most successful businesses are built on a meritocracy, ROI separates those who are truly interested in and suited to the business from those who are merely along for the ride by encouraging all family members to work outside the family business before seeking senior positions.
At RTS Global Partners, we help clients prepare a “Family Constitution” that encourages the next generation to work outside of the family business for 3-5 years before joining as a full member. This way they can experience what it is like to be an employee and work in a professional environment, whilst learning new skills in new environments, and then they bring that value to their family business.
Principle #6: Employees want competitive salary, benefits, and perks packages
To attract your most competent, skilled family members, it’s important to offer compensation packages that are on par with, but that do not exceed, those of your competitors. There are tons of resources, including websites and salary surveys, that can tell you how a particular position should be compensated, based on position, experience, and number of people in the business, location of the business, industry, etc.
It’s much better to have a policy that advocates sticking to competitive compensation packages, rather than to base your compensation packages on what a certain family member “needs,” or to pay employees based on where they fall within the family hierarchy. The best employees want to be compensated according to performance and merit. In a future article, we’ll define “Vision, Intention, Purpose (VIP)” and values, show you how to develop and write charters, statements, and discuss the importance of aligning your family’s VIP, and values with that of your business.
❑ An organization is only as good as its people.
❑ Attraction and retention is often overlooked by family businesses.
❑ Many family organizations fail to attract the best family members into the business.
Six Principles of Attracting and Retaining Employees
❑ Principle #1: Employees want to be placed in situations that use their skills, knowledge, and education.
❑ Principle #2: Employees want to work for organizations that focus on competence, earned privilege, and growth opportunity.
❑ Principle #3: Employees want to be in an environment that promotes growth, change, and evolution, and gives them a sense of independence and control.
❑ Principle #4: Employees want to share values with the organization they work for.
❑ Principle #5: Employees want to feel they can walk away when more suitable opportunities arise.
❑ Principle #6: Employees want competitive salary, benefits, and perks packages.
©2015, All Rights Reserved, Reg Athwal, RAW Group & RTS Global Partners; Extracts from the Book – “Unleash Your Family Business DNA”.
For more information on how we can help you DNA profile all family members, develop a Family MBA and define family business job roles write to the author in confidence: firstname.lastname@example.org.
About RTS Global Partners
We offer leading-edge scientific and practical advisory, consulting, education and venture solutions to family owned businesses and conglomerates, as well as large corporates with an entrepreneurial DNA. We also provide superior management consulting services for businesses who want to transform their human-capital and grow into new markets across Africa and Middle East.
As a rapidly-growing advisory and consulting firm, we have members supporting 90 key clients in 8 countries and adding value to millions of employees with our collective knowledge capital, DNA systems and DNA processes. Our company is the creator of the ‘Unleash Your DNA’ brand and ‘The DNA Model’. 80 percent of our senior leadership team are client-facing professionals from different nationalities. We have plans to expand our Partner Network to 22 countries by 2022 across Africa and Middle East and service 22,000 clients, which is all part of our Vision 2022.
Contact us to learn more about how we can help you transform your business.