What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

5 Pesky Plights Hurt a Family Business (Part 5): The Sacred Cows

cowI know you’ve run across Sacred Cows (“SCs”)…we all have in our business careers or personal life.

Dictionary.com defines a Sacred Cow to be: “an individual, organization, institution, etc., considered to be exempt from criticism or questioning”.

This is the final post in my five-part series that explains how 5 particularly disabling conditions can negatively impact the value of a family-owned company. I saved this particular subject for last. I find that the presence of ‘bad’ Sacred Cows is the most emotional and highly personal of all of the previously discussed performance inhibitors found in this series. 

Good SCs, like a popular brand or an established, competitive business practice, are legacies that should not be messed with. However, ‘bad’ SCs:

  • are difficult to change
  • are hard to eradicate
  • can’t be spoken about
  • can have a profound, severe impact on operations

A family-owned company’s bad Sacred Cows wander around these pastures:

  1. People
  2. Products (or Services)
  3. Places
  4. Past Behavior

People: unqualified family members with significant roles

Example: My son John is going to be head of sales (…even though his personality is abrasive); my daughter Sally will be the next CFO (…because she couldn’t handle the VP of Operations job). Brothers, sisters, sons, daughters, in laws, cousins, and more often rise to the top just because of family connections. One senior manager in a family company said to me (not so jokingly) “I’ve hit the promotion wall – guess I should have married the CEO’s daughter.” In one tense situation the owner made the decision it was less harmful to the company to pay his daughter NOT to work in the business than to keep her employed at the company.

Where this SC shows up in the 9Stucks: Ditch and Slow Lane

Possible Action: Weak, unqualified family members in senior roles can create a negative climate for the really good, capable family members or non-family employees that should and could take on more and more responsibility.  If the family leadership has blinders on about the proper roles and organizational structure, the company’s value will ultimately decline. Regular, objective reviews are a must; if the family employee can’t improve their performance either place them in a less critical role or ask them to leave the company.

Products (or Services): stubbornness to exit a line of business

Example: “Product Line A was the original part of the company.” “It’s our cash cow.” That was correct years ago, but Product Line A is now an uncompetitive, collection of commodity-like items. It’s a money loser and a huge time sink.

Where this SC shows up in the 9Stucks: Moment, Another World, Fog

Possible Action: Determine the value of the product line and decide to either sell it or shut it down.

Places: the refusal to close an underperforming facility

Example: “This is where our grandfather started the company and this is the same office my Dad used.” The space just happens to resemble a rabbit warren and the inefficient manufacturing flow hurts morale, lowers quality and blocks the implementation of lean practices.

Where this SC shows up in the 9Stucks: Rough

Possible Action: Find ways to memorialize the company’s history, then modernize where necessary.

Past Behavior: nostalgia dominates decision making

Example: A company’s heritage is important, but staying in or longing for the past does not help run the business today.  The industry, market and customers may have evolved and changed drastically from years ago.

Where this SC shows up in the 9Stucks: Another World, Moment, Rut

Action Steps: SCs that only remain for historical reasons are drags on strategy and innovation. If management does not have the desire or analytical skills to think externally, consider bringing in an outside industry expert to conduct an objective assessment of your place in the industry, your customers and competitive position.

Finally, I say ignore the bad SCs at your peril. Break the status quo, get rid of stale thinking and stop letting fear of change dominate ownership’s thinking.

Summary

I hope this Pesky Plights Series has been helpful in illustrating 5 critical issues in a family owned company. The missteps of leadership that can exacerbate the 9Stucks and harm business performance are:

(Part 1: The Seesaw) The Family needs and business needs are strikingly out of balance.

(Part 2: The Strategy Freeze) Strategic direction is stymied. Conflict over growth vs. maintaining the status quo freezes the business in its tracks.

(Part 3: The Handoff) Transition/succession plan is non-existent. The owners can’t or won’t let go.

(Part 4: The Bubble) 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.

(Part 5: The Sacred Cows) Sacred cows graze in the company’s organizational pasture. Bad SCs are things that need to be and should be questioned with management or ownership because they can wreak havoc on planning, direction and performance.

Comments

  1. Your sacred cows are well defined and do impact the business and the family.The process that is used to address the cows, is a bigger challenge. Building agreement in advance, among the family or with the patriarch or matriarch is critical for change. The replacements must be strong enough and valuable enough that everyone forgets that the cows were there.

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