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.

‘You’ve Become One of Them’ – Fifteen Rules for Directors

director photoNote: This was originally published in the March 2015 issue of Private Company Director Magazine. Reprinted with permission of the editors.

“You’ve become one of them.” That’s what a fellow Director (“MoneyGuy”) said to me after one of XYZ Company’s regular board meetings. MoneyGuy was from XYZ’s lead investor group and the majority shareholder. The ’them’ MoneyGuy was speaking about was XYZ’s management team. From his tone, I knew MoneyGuy wasn’t giving me a compliment; I was being admonished because I ‘sided with management’ about a particular matter that was pivotal to the future of the company.

What had I done wrong? To find the answer, you’ll need to read the following fifteen “rules” on how to work with owners.

These rules apply to different ownership structures of private companies. In general, the shareholders in private companies are either families, private equity/venture capital groups, management/founders, or a combination of these. The rules are indifferent to the stage of the company (early stage, mature, in decline, whatever). Hopefully you will see why these distinctions don’t alter how I work with owners.

Here are my fifteen rules:

1. Remember your role as a fiduciary. MoneyGuy knew I had a fiduciary responsibility to the corporation, not just to him and his private equity firm. They put me on the Board to be ‘an outside, independent voice.’ Somehow that slipped his mind! This brings me to Rule #2…

2. Don’t be a rubber stamp. You can get rubber stamps at Staples. MoneyGuy or any other majority shareholder should realize that you are not on the Board just to be another automatic vote for them. Another Director friend told me: “There is a fine line to walk as an independent director when those sitting around the table own the company and you are effectively their invited guest.” If management knows you are truly independent and not there to throw them under the bus, this will help build trust with all.

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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 4): The Bubble

Bubble

I recently returned from my college reunion… swept back in time to the days when living in my college bubble was a secure yet liberating environment.  Those were happy personal times – times of discovery, growth, socialization, and empowerment.

Based on my experience working with ‘stuck’ companies, executives caught in a company bubble might not be having as much fun. Operating in a company bubble suggests you are isolated, cut off from outside perspectives.  Is your company operating in a bubble?

This is Part 4 in my multi-part series that explains how 5 particularly disabling conditions can exacerbate family business underperformance.

If there is a weak independent board of directors/advisors, or one doesn’t exist, then governance and decision-making at the top of a family owned company is concentrated and insulated.  Due to the historical, generational ownership structure, there is a tendency that a family business could be prone to operate in its own unique bubble. If this is the case, does the addition of weak governance to the mix cause a family company to live in a double bubble?

What’s the significance of the ‘no governance’ topic? Many privately-held companies do not have any formal board of directors/advisors.

I’ve seen first hand where the lack of solid governance makes a difference. Similar to the other issues covered in this ‘Pesky Plights’ series, the absence of good external, independent governance could have negative implications on company execution.  Weak or no governance may prevent the family shareholders from facing up to and dealing with a myriad of challenges within their company.  Carefully assembled boards bring accountability, seasoned advice, realism, objectivity, innovative ideas and often inspiration.

Consider the situation at an established – but flat and stuck – family-owned manufacturing company with no outside board (let’s call it BubbleCo).

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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 2): The Strategy Freeze

PolarBearsFightingInnovate 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.

My experience points to 10 ingredients:

  1. History and nostalgia
  2. Personality traits of the family shareholders
  3. Knowledge disparity
  4. Background noise
  5. Breakfast table scrambled eggs
  6. Cash (see Part 1 of this series – The SeeSaw)
  7. Mood of the day: comfort, fear, fatigue, ambivalence
  8. Age
  9. Lack of trust
  10. The family stew – a simmering salmagundi of any of the above

P.S. #’s 8 and 9 are smokescreens [Read more…]

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 1): The Seesaw

SeesawFamily-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.

One blog post can’t do justice to these ‘pesky plights’ so I’ve created a 5-part series. Each post describes one misstep of family business leadership that can exacerbate the 9Stucks.

  1. Family needs vs. business needs: They are strikingly out of balance. (This is Part 1: The Seesaw)
  2. Strategic direction is stymied: Conflict over growth vs. maintaining the status quo freezes the business in its tracks. (Part 2: The Strategy Freeze)
  3. Transition/succession plan is non-existent: The owners can’t or won’t let go. (Part 3: The Handoff)
  4. 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 4: The Bubble)
  5. 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. (Part 5: The Sacred Cows)

One caveat: This series is not intended to be a detailed discussion of all the intricacies and nuances related to management of a family owned business. There is considerable published content focused on all aspects of the family business: research, writing, business groups, websites, and magazines.

I simply want to help identify and evaluate these 5 disabling conditions – and suggest ways to get rid of them.

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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.

CEOs: 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’.

This tangled, unique mix of the 9Stucks acts as a significant impediment to figuring out the real, challenging issues in the organization because it is often difficult to extricate and isolate the individual components of the mix, let alone fix them.

I call the mix Stuck Salmagundi.

Salmagundi…?

[Read more…]

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.

Part 2: An Eyeful and an Earful

What I saw, what I heard…

The first post (‘A Fresh Pair of Eyes’) in The 9Stucks Boot Camp Series ended with me getting the approval for a large scale integrated consulting assignment at StorageCo.  This is the second post in the series. It will cover what I started to see and hear once the project started.

Walt Disney once said: “The way to get started is to quit talking and begin doing.”

So, that was what I did – I began doing. Digging in at PaperCo meant that I was a sponge:

  • met with many people in all functions of the company
  • gathered all kinds of paper and reports
  • absorbed data, crunched numbers, then got more data
  • soaked up the atmosphere around the plants
  • watched the products being made
  • took notes and documented what I heard

Remember, I heard these themes from Pete (the CEO) and his brother Jack in my ‘pre-proposal’ meetings:

  1. “we have a cost problem
  2. we need an objective outsider to do an in-depth look at the business
  3. the company had limited growth and marginal profits over many years
  4. most of the personal assets of the aging family owners were tied up in the business

What I found after digging in

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.

Part 1: A Fresh Pair of Eyes

This is the first installment in the 9Stucks Boot Camp, a series of five blog posts that illustrate the diagnosis, treatment, and cure of a significantly stuck company.  This series is a stuck story from start to finish.

A consulting  engagement at this “StorageCo” company is where the ‘stuck’ concept was hatched over 20 years ago.

The five posts in this Series are:

  1. A Fresh Pair of Eyes: How the project started
  2. An Eyeful and an Earful: What I found after digging in
  3. Logjam and the 80/20 Rule: Discussion of StorageCo’s business model
  4. Go with the Flow(charting): The major business process issues
  5. Coach or Food Fight Referee: The Fixes

StorageCo wasn’t a troubled company, it was a stuck company. The company’s management team didn’t know they were stuck, and neither did I. When I began this project, the 9Stucks concept was not even a thought.  This project was how I started my own boot camp years ago.

You have used or seen this company’s products

StorageCo was a proud, 100-year old, third generation, family-owned business owned by a brother and a sister. They manufactured disposable storage products that are used and consumed by millions of Americans every year.

The siblings had been disappointed with the company’s overall performance for some time.  They finally decided it was time to bring in an independent outsider… a ‘fresh pair of eyes’ to do an objective review of the business and help them craft a performance improvement plan.

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