Having met with more than 400 families as a business consultant, Jolene Brown has heard it all. “These stories make a person feel better about oneself,” she said last week during her presentation at last week’s Cuming County Ag Day, held in West Point. Brown’s topic was, “The top ten things families do to break up their business.” She left the audience with a better understanding of what a family business should be like. One message Brown stressed was that the ideology of a “business first family” was much better than that of a “family first business.” I can’t tell you how many families have wanted for a family member to join the business. Then, when it happens, no one can get along,” she said. That’s because it’s the little things that get to a person. She used this illustration to make her point: “How many of you have been bitten by an elephant?” she asked. “I’m guessing not many, if anyone. Now, how many of you have been bitten by a mosquito?” Brown’s top 10 reasons why family business fails included:
1. Assuming all genetic relationships equal good working relationships. Acceptance in a family is unconditional, but acceptance in a business is conditional. A business is not a place to rehabilitate a family member. Giving a pyramid of labor status, Brown listed that, in working up from the bottom, a person will begin as part of labor, advance into management, take over the leadership role, then fall back into the labor category. The number one job of a leader is to replace himself or herself. Having the right leader in place is one way of making sure the business remains strong, she said, but noted that leaders are often picked based on: He’s my first son; or he’s been in the business longer; or this is the golden child.
2. Believing the business can financially support any and all family members who want to work together. The number one thing to consider, she said, is – “has the senior generation secured their financial future.” “The kids don’t need to start where you are,” Brown said. “On that note, you don’t want to bring family members into a financial mess.” When bringing family members into the business, it’s important to ask what that person brings to the business, if he/she is really needed, and does the cost equal the value that person is bringing.
3. Assuming others will/ should/must change and not me.
4. Presuming a conversation is a contract. According to Brown, the three biggest business lies are, “You work hard and someday this will all be yours. I’m going to retire. Don’t worry about your brothers or sisters, they have other jobs and are not interested in the business.”
5. Believing mind reading is an acceptable form of communication. The best way to avoid this issue is to develop some type of code of conduct, she said. This could start with the concept that there are jobs to do and we have agreed on standards and expected results. Know that results are expected and will be talked about often. One must be able to receive feedback without taking it personally.
6. Failing to build communication skills and meeting tools when the times are good so they’ll be in place to use when the times get tough. Relevant information in a business needs to be shared with the business team, key advisors, and non-business family members.
7. Ignoring the in-laws and off site family. Questions that need to be addressed here are: What is the role of the spouse (in-law) in the business? What are the spouse’s expectations of the business? Does off site family play a role in decision-making, current or future ownership? What level of empowerment do employees have and what is the opportunity for advancement or ownership?
8. Forgetting to use common courtesy. This is one of the lowest cost, highest returns policy, she said. Oftentimes one treats strangers on the street with more courtesy than family members. Instead, she said, families should ask who deserves recognition, praise, thanks, compliments and appreciation.
9. Having no legal and discussed estate, management transfer plan, or buy/sell agreement. “Parents do no owe their kids a business,” Brown said. What they do owe are morals and values, opportunity for an education, legal plans, and a listing of details. The list of details could include, what important documents are there and where are they stored, location of key for safety deposit box, list of advisors, insurance coverage, investments, and where things in general are located.
10. Neglecting vital facts of fair and equal, paying cash for emotional debts, and failing to celebrate. A key in a successful family business, Brown said, is understanding fair and equal. The two are confused when she deals with producers, she noted. Brown said her prerequisites for owning a family farm business are, “You must have skin in the game, a minimum of two years education related to ag, work experience, fire in the belly, adherence to and support of existing policies and management, and a positive reflection of this business and agriculture.”
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