What’s Hot in the World of Family Business

By Harry Kras –  Family Business Resource Centre

Information about what’s going on in the world of family business keeps growing. Two Australian surveys have recently been released, the MGI/RMIT Australian Family and Private Business Survey and the KPMG/FBA Family Business Survey 2013 conducted by Adelaide University. The surveys are independent and address different aspects of family business, so reviewing the results in tandem leads to some interesting insights.

The top three issues identified in the KPMG/FBA study are:
succession
1. Balancing family and business issues
2. Maintaining family control of the business
3. Preparing and training successors

These issues are consistent with 2 of MGI’s top 3:

1. Lack of growth & profitably (no different to any other post GFC business)
2. A lack of planning and corporate governance
3. Exiting the business is a major dilemma

All of these issues obviously require attention, but as I’m a family business facilitator I’d like to focus on the issues that relate to the interaction between the family and the business and in particular those relating to business continuity, be it by sale or succession.

Some thoughts that occurred as I analysed the surveys:

• It is estimated that family businesses account for around 70% of all Australian businesses. The MGI survey has found that 25% of owner-managers are aged over 65, and that 37% of owners are in the 60 to 69 age bracket. This verifies what we already know. There is a baby boomer bubble that is working its way through our population which will impact on both the business and on the wealth and harmony of the family behind it.

• It’s been said that succession planning is viewed in the same light as diet and exercise – ‘great idea, I’ll get around to it one day’. This is confirmed by findings which indicate that though 65% of owners indicate that their businesses are not exit or succession ready, 56% don’t plan to do anything about it in the next 12 months! Unfortunately, like diet and exercise, succession is not something that will go away or be sorted overnight.

• The extent of business continuity planning is woeful. The KPMG survey highlighted that only

  • 10% have a strategic plan in place
  • 12% are preparing or training their successor
  • 10% have an ownership transfer or sale plan in place
  • 8% have a process for appointing a new CEO

Though many say that plans are being developed, it still looks like a lot is being left to chance.

• The KPMG survey found that 2/3rds of family businesses intend to pass the business to family members. This is consistent with the 44% that MGI found want to sell at some point. However the MGI study uncovered an interesting issue. 58% of respondents indicate that the younger generation are not as interested in managing the business as the older generation. So who will? Issues such as building effective management teams and identifying a non-family CEO whose values are consistent with those of the family business become major issues.

• 44% may well want to sell the businesses, but the question is – at what price? The GFC has depressed business valuations and it’s certainly not a seller’s market with so many wanting out. But here’s the dilemma. As mentioned above, 2/3rds of owners don’t believe that they are sale (or succession) ready yet more than half don’t plan to do anything about it!

• According to the MGI Survey 66% of owners believe that they have an adequately funded retirement program, however 1/3 of them are relying on the sale of the business, or ongoing family ownership, to provide the cash for retirement. So again, why the reluctance to act?

• From the current owner’s perspective there are a range of financial, emotional and control issues involved in stepping back. The GFC has impacted on superannuation and retirement savings, so personal financial security is a consideration and many are reluctant to let go until their coffers have been refilled.

• Letting go is also a daunting prospect for those on the brink of retirement. They currently lead a vibrant, purposeful and fulfilling life. Why should they willingly step into the unknown? Developing a life plan is crucial, yet KPMG found that only 9% of CEO’s have a retirement plan in place.

So what do we do with this information?

I believe that many family businesses are fast approaching the point of no return. Urgent action is required to plan for the future at a business, family and personal level. It may sound difficult, and it will invariably give rise to a number of contentious issues, but it is not as hard as it may seem. (To get you started we’ve attached a link to the FBRC Family Business Development Process below.)

As some of the issues can be difficult to address internally it’s a good idea to involve your trusted adviser. As KPMG point out, for most people developing a business continuity plan is a once in a generation event. Working with an experienced adviser who has seen it all before, and who can test your strategies and keep you on track will pay dividends in the long run, for both the business and the family.

To download the surveys click –
MGI/FBA Australian Family and Private Business Survey
KPMG/FBA Survey – Family Business Survey 2013
For a short video overview of the KPMG/FBA survey
FBRC Family Business Development Process or video

Harry Kras is a Family Business Facilitator with the Family Business Resource Centre – www.fbrc.com.au

3 Key Ideas for Success for Business Leaders in 2014

1. Is your sales team full of relationship or challenger sales people?
Greater business complexity and uncertainty is driving a rapid shift in the way customers are buying. Logically this is also rapidly changing the requirements from you and your sales team to achieve success. The perception is that the requirements for a successful sales person in the current business environment is one that has a close, friendly relationship with the customer. However research as part of the book “The Challenger Sale” by CEB (a must read!) have demonstrated that those sales people who are “The Relationship Builders make up just 7% of the top performers in sales while those they define as “The Challengers” make up 39%. The Challengers have a deep understanding of the customers industry, challenge their views and love to debate. So while it is great to have close relationships with customers ensure you and your sales team adopt a “challenger” style approach to gain greater success in 2014.

2. Are you trying to be all things to all people?multitask
Too often leaders in business are expected to be brilliant mentors, visionary, financially aware, sales savy, great presenters, strategic and much more in a long list of attributes. It’s near on impossible to be all of those things wrapped up in one neat package as a leader however socially that is typically the perception when you pick up a magazine or read a blog article relating to a business success story. The most effective leaders are those that have a great self-awareness of their strengths and weaknesses. They focus on their strengths and surround themselves with quality people to cover their weaknesses. Be careful of the trap of trying to be all things to all people and get clear on your strengths for the year ahead.

3. What’s on your technology stop doing list for 2014?
At this time of the year it’s always a fantastic time to look at what are the 20% of things you do that create 80% of the benefit and what therefore of the remaining 80% of things you do could you delegate or stop doing all together. Many do this for the various day-to-day activities / processes they are involved with but have you done a similar exercise with regard to the technology you have embraced? Between time on smart phones, blog posts, twitter accounts, email checking, phone calls, logging activity into CRM’s, posting to project management systems there is a HUGE amount of waste. Why not apply the stop doing logic to your current technology usage when planning for 2014 and reap the benefits of a dramatic increase in time / capacity.

Project Management: a Core Competency for Managers in today’s world

By Stephen Dowling, ETM Management Training

Many organizational managers may not realize it but much of what occupies their day to day business tasks is actually ‘project management‘.

stick_figures_reporting_to_manager_800_wht_9595According to the bible of project management (PMBOK®: Project Management Body of Knowledge) the definition of a ‘Project’ is:  “A temporary endeavour undertaken to create a unique product, service or result. Based on this definition could not all of the one off tasks Managers frequently perform be considered “projects”?

The important fact which is not always realised is that managing a project is VERY different to managing a routine repetitive operation.

In the business publication, Creating the Project Office: A Manager’s Guide to Leading Organisational Change, authors Randall Englund, Robert Graham and Paul Dinsmore, claim there has been a fundamental shift to project type work for all managers. “Changes in the environment, changes in customer expectations and changes in technology used in organisational processes have brought many organisations to the point where up to 80 per cent of their work is project work rather than repeat process work.”

These days all managers are involved in doing projects whether they like it or not, and if you want to be successful, having basic up to date project skills will be a big help. The impact and pain of badly run projects can be huge to any organization. Unsatisfied customers, cost blowouts, missed deadlines, lost opportunities, wasted resources, and if this is not enough, add to it the impact on morale and motivation.

The important principles of project management are quite simple and apply equally to big and small projects. All organizational managers should get to know these principles, not just the so called specialist ‘project managers’.

In our experience there are FIVE key pillars which lay the foundation for project success:

1. Project Manager (PM) – Get the right PM. This is a key role on any project and putting the right person is place is critical.
2. Planning – You’ve got to spend quality time planning with the right people. Don’t ask insist!
3. Team – Having the right people in the project team is everything.
4. Governance –
It’s very important you establish the right organization structure for the project (with clearly defined roles & responsibilities). This is not just the PM and the team it’s needs to include executive & senior management.
5. Methodology
– Projects vary greatly and it’s very important you use a “suitable” framework/methodology which fits the characteristics of the project being done. Building a bridge is very different to implementing a new piece of software.

Of all of these pillars the MOST important one is possibly putting the right PM or project leader in place. If we get this right a lot of the other pillars should automatically follow.

Take time to reflect on your own projects or organization and define areas where you need to invest greater time to improve in each of these five pillars of project success.

Can you afford not to?

Small Business Exit Strategies for Current Times

By Jeff Miles, The Business Doctor

PJ-Exit-StrategiesOver the past few years, I’ve noticed a tightening in cash being lent to purchasers to buy businesses, even good businesses. This has caused small business owners to explore some interesting new strategies when planning their exit. Let’s look at a few in the Mindshop style of Now, Where, How.

1) First identify where you are NOW

Where are you in the business’ lifecycle? Is there pressure to exit soon? Or is your exit a long way off? Understanding where you are will help you evaluate which strategies are best. For example, some require a significant period of time to prepare.

2) Stop and identify WHERE you want to be.

Some business owners prioritise the monetary value, while others place more importance on leaving a legacy. The way YOU see a successful exit will determine which strategy you pursue. For example, if you place high importance on legacy, you may not opt for a typical trade sale but want to attract a buyer by offering Vendor Terms.

3) HOW can you get from your current situation to the destination you identified?

Two key exit strategies are acquisitions and employee buyouts.

Acquisitions
Having another company acquire yours can be a great way to exit. You get to negotiate your price based on perceived value. You can win big if you convince the buyer you’re worth the risk of looking to acquire you. You can do that by looking for a strategic fit – a company that can expand into a new market or offer a complementary service to customers IF they buy your practice or company. If you have time, you can even be proactive and develop your products or service offering in a way that meshes especially well with theirs. The Competitor Analysis tool can work well here:

CompAnalysis

Employee Buyouts
Although you may not see as much money in one lump sum through an employee buyout, transferring ownership to employees or a purchaser helps ensure you maintain the company culture, get paid over a longer period of time and keep control of the transaction. There are several other arguments for it, including increased morale, increased productivity and more likelihood that the business will survive and prosper after the sale has been completed due to continuity of key people in the business.

While this was only a glimpse into a few strategies, there are many more. There’s no one-size-fits-all approach to any Merger or Acquisition; each company needs its own strategy.

3 Key Ideas to Help Business Leaders Succeed in 2013 / 2014

1. Lead and Lag indicators, what are you measuring?
When seeking to drive improved performance across your organization most business leaders focus their attention solely on key performance indicators (KPI’s) that are ‘lag’ indicators. Lag indicators are a signal of performance AFTER an outcome is achieve and include aspects such as new sales, profit, revenue and survey results. There is nothing wrong with these measures but in isolation they are only telling half of the performance story of your business and its typically too late to change anything. What organizations looking to drive improved performance should be focused on in combination with lag indicators are lead indicators of performance. Lead indicators are a signal of performance BEFORE an outcome is achieved and include aspects such as sales calls made, conversion rate of sales team, error rate on a production line and various productivity measures. Ensure in your own business both measures are focused to speed up the rate of performance improvement you are achieving.

2. Is your competitive advantage still a competitive advantage?
Competition-in-BusinessThe current information age is allowing business leaders to gain access to new business insights rapidly via the web. Advances one company had over another don’t last very long. If your point of difference over your competitors for example was ‘quality’ but within 12 months the entire market are producing product at the same quality level what do you do? Reviewing your competitive advantage (using the sustainable competitive advantage tool) on at least an annual basis will assist you to ensure you assess what competitors are doing and also what the market is valuing. It will quickly challenge you on do you still have a competitive advantage and if not then what do you need to evolve to next. No longer can you stand still for long.

3. Overcoming hurdles is the only way to boost retained learning
Traditional training and development of leaders involved establishing a range of attributes relating to a successful business leader and then running team members through a series of workshops to learn each attribute. This worked very well (and in many cases still does) to provide team members with the fundamental knowledge of what it takes to be an effective leader. However in the current fast-paced and volatile business environment so many of the issues leaders face on a daily basis are un-predictable and rarely straight forward. This requires a greater level of self-awareness, intuition, problem solving ability and people skills. Force Feeding the array of knowledge a business leader requires to be successful no longer works, it goes in one ear and out the other. What is required for high retained learning is to provide clear commercial goals, the tools for people to address them but allow them ownership of their own professional development to do the training, learn the tools and overcome the hurdles themselves. Each time they are forced to overcome a hurdle to achieve the commercial outcome retained learning rises dramatically and their effectiveness as a business leader with it.

How to Deal with the Leadership Shift

By Andrew Cooke, Growth and Profit Solutions

Businesses are under increasing stress as markets are increasingly volatile, clients are more demanding, talent is scarcer and change occurs in faster and shorter cycles.  To survive and thrive business leaders have to make faster decisions, on less information, and which have greater risk.  This has led to a change in how leaders need to think, decide and execute.

A good model, that addresses the four areas of concern that business leaders need to deal with, is the VUCA model (developed in the US Army War College).  This consists of:
andrewpic

  1. Volatility – the rate, amount, and magnitude of change
    Drastic, rapid shifts can bring about instability for organizations and leaders, but even the minor or innocuous shifts that occur daily, such as new and “immediate” priorities that disrupt plans, or the increasing need to “multi-task,” are changes that increase volatility.
  2. Uncertainty – the amount of unpredictability inherent in issues and events
    Leaders can’t predict because they lack clarity about the challenges and their current and future outcomes. Uncertainty can result in an over-reliance on past experiences and yesterday’s solutions or to analysis paralysis as we sift through more and more data.
  3. Complexity – the amount of dependency and interactive effect of multiple factors and drivers
    Complex interactivity requires leaders to think in more creative, innovative and non-linear way; to be able to deal with shades of gray (as opposed to black and white) solutions.
  4. Ambiguity – the degree to which information, situations, and events can be interpreted in multiple ways
    Ambiguity increases doubt, slows decision-making, and results in missed opportunities (and threats). It requires that leaders think through and diagnose things from multiple perspectives.

The Challenge for Leaders

For leaders the challenge is not just a leadership challenge (what good leadership looks like), but it is a development challenge (the process of how to grow “bigger” minds) to deal with the world of VUCA.  Leaders, too often, have become experts on the “what” of leadership, but novices in the “how” of their own development.

So What Can You Do as a Leader?

  1. Change the Leadership Mindset – successful tactical leaders can easily get trapped by their predictive mindset when they encounter a VUCA situation.  Your coach can provide a robust sounding board, challenge your assumptions and beliefs, and help develop new perspectives, options and ideas.
  2. Change the Leadership Approach – many leadership issues are not problems to be solved but rather dilemmas that must be continuously managed.  Your coach can help you to understand this, and to manage the issues and create opportunities from this is key.
  3. VUCA is a neutral force in the world – leaders often look at Volatility, Uncertainty, Change and Ambiguity as a negative force that they need to react to.  Your coach can help you to see the potential and  to transform it proactively and find the opportunity within.
  4. Leaders Don’t Execute, leaders execute – Leaders too often get involved in driving the efforts themselves.  The key is to think more strategically and to unlock the potential of your people so you can develop leaders at lower levels who can do the work where it needs to be done.

From The Kitchen Table to the Board Table: A Small Business Guide to Corporate Governance

By Greg Gunther, Greg Gunther and Associates

Most small business owners recognize that governance structures are vital elements of their business, but only a few manage to embed corporate governance structure into their business. The restructuring of a business from the kitchen table to the board table to suit a corporate governance framework, is an important task to be done by the management, and in the case of small businesses, the business owners themselves.

Below is a general guide for small businesses who are thinking of creating an internal framework along the lines of a corporate model.

  • Define roles and responsibilities. Well-defined responsibility, accountability and reporting lines between the management and employees are vital features in any corporate framework. These should be communicated well to ensure that expectations, priorities and business challenges are addressed accordingly.
  • Create clear and efficient policies and procedures. ???????????????????????????????????????????????????????A clear statement on management policies that covers every aspect of the business is a necessary requirement to ensure the smooth operation of your business. This may include procedures for monitoring company transactions, transparency and disclosure procedures and a code of conduct for all levels of management and employees.
  • Conduct and disclose regular financial audits. External auditors benefit small businesses just as much as they do larger corporations. Auditors are able to provide an impartial account of ways in which a small business can improve its financial standing and its marketability to investors.
  • Establish a formal recruitment and remuneration criteria. Do you need to hire a CEO/CFO and if so how much should you pay them? These and other decisions regarding recruitment and remuneration could be addressed if a corporate framework is in place.
  • Work in a transparent manner. In order to implement corporate governance in a small business, it is essential to disclose relevant information, not just internally but also to external parties. Systems should be in place to guarantee that important information is made public in a timely manner.
  • Develop an employee training and motivation program. employee-trainingSmall business owners should not only supervise and monitor job performance, but also encourage employees to undergo continuing education. This will ensure that all staff remain up-to-date with relevant regulations and business developments and maintain their motivation to improve their skills and career prospects.

Every business is different and the formalizing practices for organizations of any size should be tailored accordingly to fit its own structure, culture and business strategy.  Kitchen table meetings may work well but by adapting corporate governance, small business increases the likelihood of sustainability as well as growth.