5 Pesky Plights Hurt a Family Business (Part 3): The Handoff
I ran outdoor track both in college and high school. Since I was a fast runner (back in the day) I always ran one of the legs of the 4×100 and 4×200 relay teams. Our relay teams practiced daily on perfecting the handoff – passing the baton. We had the relay leg transitions down pat. Unfortunately family-owned businesses may not plan for a leadership transition and may bungle, delay or simply avoid the handoff to the next generation of family leaders or to non-family executives.
This is the mid-point in my multi-part series that explains how 5 particularly disabling conditions unique to a family business can exacerbate business underperformance.
This post is about companies with non-existent succession/transition plans. When owners can’t or won’t let go, four of the 9Stucks (Ditch, Moment, Slow Lane, and Another World) get really amped up and push the stuck company into a deeper hole.
Family company leaders often stay in their roles too long. But staying too long is not the problem; being in a zone of leadership indecision creates troublesome ripples throughout the entire company.
FamilyCo was one of my stuck manufacturing clients. I was hired by the company/family to do a ‘fresh eyes’ assessment of their business. The company wasn’t in trouble but it had hit a wall and was stagnating. It didn’t take me long to figure out there were issues with the senior team, the company’s competitive position and a number of important operational functions.
Some facts:
- Jack (second generation) was the CEO and the son of the founder; at age 70 he worked full time at FamilyCo
- Jack’s 2 children (son and daughter) both worked for the company. The son (Bill, age 42) ran operations (manufacturing and engineering). The daughter (Susan, age 40) was head of marketing. Bill and Susan worked well together.
- Sales was led by a non-family member and he reported directly to Jack. In the last few years, the sales team had experienced significant turnover.
- The CFO was also a non-family member and had worked for Jack for many years. He was nearing retirement. His duties included many administrative functions and human resources.
- There was no Board of Directors/Advisors
The children told me: “Dad was the driving force to get the company to where it is today, but now we think he has blinders on; he doesn’t acknowledge all the changes in the industry, the shifting customer demands or the need to upgrade our facilities, systems and equipment. He is living in the past. You (me) need to talk to him about letting us run the company.”
Okay…now what?
Read More5 Pesky Plights Hurt a Family Business (Part 2): The Strategy Freeze
Innovate and grow or maintain the status quo?
The process of making this basic strategic choice can be an exciting journey forward, or a source of conflict in a family-owned company.
Why? What causes a family company to be frozen in its tracks over this fundamental question? And what can be done to thaw the ice, or better yet, prevent the business from becoming Stuck in the Moment?
You may be thinking…’Conflict among the shareholders of a private company over strategic direction is common and good.’ You’re right! Debate over the best go-forward strategies and tactics can be healthy and productive. In companies that are not family owned, the conflict tends to resolve itself in a timely and orderly way. This is especially true in companies with outside institutional investors who don’t tolerate indecision for extended periods of time.
In some family-owned companies, the strategic discord festers and lingers. A ‘strategic fog’ permeates the boardroom, family gatherings and the company’s hallways and cubicles. Critical decisions are delayed and significant opportunities ignored. The disagreement can go dormant but then suddenly explode. This can be debilitating to the business and to the shareholders.
What has always intrigued me is not the presence of a rift over the strategic direction of a family business. My question is why the conflict becomes so pervasive and common.
Read More5 Pesky Plights Hurt A Family Business (Part 1): The Seesaw
Family-owned companies are plentiful in number and unique in character. Like any other type of company, these businesses are not immune to being infiltrated by the 9Stucks. In fact, a family business is fertile breeding ground for a unique 9Stucks mix that is often configured with a twist and a flair for the dramatic.
I’ve regularly experienced 5 missteps of leadership that can exacerbate the 9Stucks:
- Family needs vs. business needs: They are strikingly out of balance.
- Strategic direction is stymied: Conflict over growth vs. maintaining the status quo freezes the business in its tracks.
- Transition/succession plan is non-existent: The owners can’t or won’t let go.
- Governance and decision-making at the top is concentrated and insulated: There is a weak independent board of directors/advisors, or one doesn’t exist.
- Sacred cows graze in the company’s organizational pasture: Top leadership spots are based on birthright or longterm ‘family favorite’ status rather than skills. These sacred cows crowd out talented non-family leaders.
One blog post can’t do justice to these 5 ‘pesky plights’ so I’m creating a 5-part series.
Read MoreBring On The Stuck Company Cast
9Stucks is a business diagnostic tool that identifies nine distinct yet interrelated business challenges that cause a company to underperform and restrict innovation. The 9Stucks are patterns…recurring conditions I’ve seen and experienced fixing stuck businesses for the last 20+ years. These 9Stucks are real, not theoretical.
One reader of the 9Stucks blog said to me: “I may be stating the obvious, but when I think about your 9Stucks, I think about PEOPLE. Don’t the people in a company have a big impact on creating, causing or maintaining all of the stucks?”
Hmm, good catch…
People are the driving force behind the 9Stucks.
They are the actors and actresses who have leading and supporting roles in an organization’s stuck performance, a performance that can carry the same degree of drama as any stage play.
Introducing the Stuck Cast.
Read MoreQuick! Exit! Uh…not so fast
Exit Planning is a trendy topic, especially for owners of stuck companies who often develop the itch to sell their business when raw emotions push aside rational thought.
Exit Planning means helping prepare the company and shareholders for an ‘exit event’ (aka Sale).
The idea of “It’s time to sell the business” becomes more top of the mind when the owner(s) of a stuck company grow weary of dealing with their own personal collection of stucks. Here are some points of frustration…
- the owners fighting with each other (Stuck in a Ditch)
- the fun is gone for the CEO (Stuck in a Ditch)
- overbearing customers (Stuck in a Rut)
- disgruntled employees (Stuck in the Slow Lane)
- a rapidly changing industry (Stuck in Another World)
- declining margins (Stuck in a Maze)
- ubiquitous competition (Stuck in Traffic)
Since I have been asked about Exit Planning/Selling a business frequently in the last couple of months, I thought I would share an email I wrote to the CEO of a stuck company who was contemplating selling. Here goes:
Read MoreHow Scrooge and Marley Became Unstuck
Scrooge and Marley PLC was stuck.
I don’t identify my clients by name, but given the widespread publicity and overall notoriety of this particular company, I felt it would be beneficial to reveal the real ‘story behind the story’. This is a case study about how Scrooge and Marley PLC became unstuck.
Jacob Marley died while he was still employed at the company. There was no key man life insurance; they were too cheap to buy a policy. After Marley’s death, Scrooge became the sole shareholder and he decided to run Scrooge and Marley as he saw fit.
Little did Scrooge know that Jacob decided to maintain a Board observer role.
Read MoreCEOs: How To Deconstruct A Stuck Company Stew
Is your company’s value ebbing or declining?
Do you know ALL the reasons why your company is underperforming, or can you only pull apart some of the reasons?
Figuring out why shareholder value is deteriorating can be easy if the issues are really obvious. It can be hard and confusing if the overall situation is a quagmire.
The 9Stucks collection identifies the most common causes of why a company isn’t meeting shareholder expectations. For those of you who have looked at the 9Stucks, each standalone Stuck is straightforward and uncomplicated. Most of the significant, contributing issues that cause a company to be stuck are not hard to uncover if you know where to look.
However, the 9Stucks are usually not limited to just one or two. A stuck company always has A COLLECTION of the 9Stucks. The breadth of the collection determines the overall organizational ‘stickyness’.
Read MoreCEO: Does Your Team Have Control of the Ball?
“The only players who survive in the pros are the ones able to manage all their responsibilities.” – Tom Brady, Quarterback of the New England Patriots
Football, rugby, or any other sport organized around a finely-tuned playbook, requires players to understand roles and execute plays in both familiar or unplanned situations. Each player has defined roles and responsibilities based on his skills; that player is fully aware of his role, the roles of others and has studied the plays. A solid playbook enables a cohesive team to maintain control of the ball and win.
Does your company’s playbook have:
- unclear roles and responsibilities (Stuck in the Slow Lane)
- players with missing skills (Stuck in the Slow Lane)
- undefined or unfollowed business processes (Stuck in the Rough)
This all too common, weak people/process combination creates lots of broken plays. Basic things like roles, skills, processes really should be a given in any organization.
But if that’s what’s ‘supposed to be’, then why have I regularly seen many corporate fumbles, pigpiles, tangled situations and outright conflict over ‘who does what and how’?
Read MoreHow To Boost Cash Flow: 11 Recommendations That Worked
BuildingCo was constantly in a cash crunch.
The company manufactured a line of building products, had one production facility that supplied 12 regional warehouse/distribution centers and was founded by two entrepreneurs. BuildingCo was well positioned in a steadily growing (at the time) geographical region of the US. To help fund the company’s growth, management used a combination of outside capital from 2 private equity groups, mezzanine and senior debt.
However, as the velocity of growth accelerated, the company regularly bumped up against their line of credit availability.
They were running on cash fumes.
Read MoreEmotional Venting in a Stuck Company. Episode 3: Operations
This final episode explains emotional venting related to internal confusion over the company’s OPERATIONS. When I stick my head under the hood of a company and listen, I often hear lots of clanking, banging and rustling from the CEO, Board, and investors about:
- the overall business model
- cash (or the lack thereof)
- the capital structure (translation – too much debt, not enough equity)
- pricing
- costs: fixed and variable
- business processes, weak systems, old equipment
- the basic forces of producing and executing
Read MoreRecap of Episodes 1 &2: Episode 1 pointed out the emotional ebbs and flows associated with LEADERSHIP in a stuck company. Their voices express what they live everyday.
Episode 2 gazed outward at the emotional toll inflicted on the business by a host of ever changing dynamics broadly called EXTERNAL FORCES. What’s happening to us?! Can a company be a victim? Maybe so, but maybe not…
Hostess Brands: Stuck in Their Own Twinkies
“Serving up family time, one smile at a time.”
- Tag line from the Hostess Brands website
Today I’m announcing that …
Hostess Brands Joins the Top 20 Stuck List
The creator of Twinkies becomes the latest iconic corporate brand to ‘get listed’. Here is my Top 20 Stuck List ranking so far:
- Hewlett Packard - Call the Handyman: These Garage Doors are Broken
- Yahoo – What Marissa Mayer Should Do To Unstick Yahoo
- Hostess Brands
- TBA (Hint: baseball team from Boston)
- Numbers 5-20…More to Come (any suggestions?)
Hostess filed Chapter 11 (again) this year. Do you Wonder (sorry, bad pun) what happened to drive them back into court a second time? How is it possible that a well known, ubiquitous US corporation that sells millions and millions of sweet, spongy, crumbly, powdery, chocolate and squishy things each year can’t pay its bills?
Find out why Hostess is Stuck and my Top 10 recommendations to fix the company once and for all.
Read MoreEmotional Venting in a Stuck Company. Episode 2: External Forces
CEOs and employees of stuck companies reveal three recurring themes when I interview them during coaching sessions. These themes launched a series of three blog posts about ‘Emotional Venting in a Stuck Company’.
Episode 1 illustrated the importance of listening to the emotional reactions of a stuck company’s key people about LEADERSHIP – the unfiltered, raw, spill your guts variety. Their voices express what they live everyday. Episode 3 will cover internal confusion about OPERATIONS.
This second Episode documents the wide range of emotion about a company’s EXTERNAL FORCES. External forces have a decided influence on your corporate strategy. The key external forces that impact your organization are:
- economic
- political, governmental
- social, cultural, demographic
- technological
- industry specific
- customer behavior
- competitive pressures
The external forces can be an impending threat or they may present strategic opportunities for your business. Your interpretation of and reaction to these external forces directly impact the strategic decisions you make.
Read MoreEmotional Venting in a Stuck Company. Episode 1: Leadership
“When people talk, listen completely. Most people never listen.”— Ernest Hemingway
When you are trying to figure out why a company is underperforming, where do you begin? What should be your starting point?
You can learn a tremendous amount right away by simply talking with, and listening to, the company’s people — the CEO, the management team, the employees, the investors, the Board, and other key shareholders.
Although that sounds obvious or even trite, it’s just common sense. Listening carefully to what people are saying, absorbing it, and twirling it around a bit is a necessary prelude to delving deep into data. If a company is stuck, emotions may squelch thoughtful, deliberate action, especially if the stuck situation has been going on for some time.
Read MoreStuck in the Rough: Is Your Company Overgrown With Weeds?
Growth is great, but not when unchecked growth sprouts weeds in your company’s halls, cubicles and production space.
I recently worked with the CEO (Rob) of a company (ServiceCo) that provides outsourced business transaction services to large corporations. Rob should have been ecstatic with his record level order backlog. Carefree, happy days were ahead!
But Rob wasn’t happy. He was pretty glum and for good reason.
Read MoreWhat Marissa Mayer Should Do to Unstick Yahoo
What do Hewlett Packard and Yahoo have in common? Each company:
- has a very new or relatively new CEO
- is in the heart of Silicon Valley (they are almost neighbors!)
- has an internationally recognized brand
- is STUCK
Back in May I wrote about Hewlett Packard’s long, steady slide to become a stuck Company. That blog post was entitled: Call the Handyman: These Garage Doors are Broken.
Today, Yahoo officially joins HP as a member of the 9Stucks club.
Read MoreFounders: Are You Stuck Before You Start?
Where Start-ups Get Stuck – and How to Avoid Going There
Between us, my long-time friend (and fellow blogger) Andy Palmer and I have started a lot of companies. We also advise many other companies and look at even more pitches from start-ups. A shared observation is that while a few start-ups shine (or at least glimmer) and go on to some success, other start-ups seem stuck before they start. Why?
Read MoreStuck in a Rut: Is It Time to Fire Your Customers (Part 1)?
“You want me to fire some customers and give up hard-earned revenue!
What kind of advice is that?”
That’s what Steve, the CEO of one of my ‘stuck’ client companies said to me when I urged them to get rid of some long-time customers.
Less can be more. Don’t be Stuck in a Rut.
Read MoreCEO Peer Groups: The Regular Crowd Shuffles In
As a facilitator of a CEO Peer Group**, I’ve learned a lot about CEOs and how a peer group can be of great help to them. While individual differences exist as they would in any group, there are some common themes:
- CEOs are surrounded, but can be lonely
- CEOs whimper, wag and bark
- CEOs do a lot of things right – their instincts are good
- CEOs can be housebroken – obedience training works
- CEOs have courage
CEOs are surrounded but lonely
Read MoreCustomer Satisfaction: Can I Take Your Order Please?
There should be no confusion about what a customer expects from the business relationship with a supplier. A critical aspect of a company’s go-to-market tactics is having clear processes and effective systems that create strong connection points to the customer.
What are you most critical business processes? How are these related to customer satisfaction?
Read MoreStrategic Planning: It’s Not a Paint By Numbers Process
Is there a typical, common format for companies to use for a strategic planning process?
There are countless books, articles, and volumes of research in the public domain about strategic planning. With so much of this information out there and available, why do many leadership teams often struggle with ‘the planning process’? Why do some companies become Stuck in the Moment?
The design of an effective and custom strategic planning process depends on a number of factors:
Read MoreWhat a Day for a Daydream…Is Your Company Stuck in Another World?
What a day for a daydream
What a day for a daydreamin’ boy*
Is your company stuck in the past…is your industry slowly (or quickly) changing? Have your customer needs moved away from your old product/service offerings?
More importantly, if this is the case, what are you doing about it?
Read More
