Hiring and Promoting the Best People that Fit into Your Organization

Our guest blog post is from Bert Holeton, President of The Mastermind Group (www.the-mastermind-group.com). 

————————–

When it comes to choosing the right individual to join your organization, or the right individual to promote into a key position, or the right combination of individuals to form a team – it’s all about performance and fit. To get PERFORMANCE, you need to be able to:

- Select the right people for the right positions

- Develop the right people to be their best and deliver results

- Transform groups of people into high-performing teams

 

The right FIT elevates the performance of the right people – but fit to what?

- Their responsibilities

- Their direct supervisor

- Any group of people they need to team with

- The culture of the organization

It is possible to PREDICT PERFORMANCE AND FIT before you make decisions about people. Here’s what you need to know:

Passion & Purpose: What lies behind our innate and unchanging nature. What are this individual’s core values and purpose in life?

Experience & Knowledge: Our education, work experience, training, industry knowledge, and skills. What verified experience and knowledge does this individual bring to the position?

Critical Thinking: Our capacity to perceive the core issues that are driving the problems, conceive workable solutions to those problems, and implement those solutions. What is this individual’s capacity to leverage his experience and knowledge in this environment?

Focus of Thinking: The natural priority path we follow to face challenges, solve problems, and make effective decisions. How will this individual naturally choose to implement his critical thinking?

Workplace Motivators: The factors that drive and motivate us in the workplace, which influence our decision-making and impact how we apply ourselves. How will this individual prioritize his focus of thinking?

Natural Behaviors: The way we each deliver our focused critical thinking and core values into the world. How will this individual naturally tend to act on his motivations?

Team Dynamics: The way in which people work together – on a project team, an executive team, or a board of directors. Is there a strategic fit (alignment) or a tactical fit (balance)? Are there any potential problems – such as too many similarities, too many differences, or missing talent in any area?

Armed with this awareness, you can make people decisions that:

- Retain high-performing employees

- Increase individual and team morale and satisfaction

- Improve decision-making to achieve better results

- Align your people to the corporate goals

Ownership Transition in Family Business: Overlooked Critical Considerations

Our guest blog this week comes from Bob Gruber, President of  The Rainier Group, a professional firm with  concentrated experience in the issues that affect successful private business owners and other successful individuals including business transition services, wealth advisory services and institutional consulting.  Bob will be participating in our Succession Planning panel discussion on August 25.

———————————————-

Let me begin by defining a ‘family business’ as a private business in which there are at least two active generations. It is the transfer of ownership between the generations that is the most common type of ownership (and management) succession for established private companies in the United States.

 It is not difficult to understand the motivation behind the desire for this type of ownership transition. Predictably the older generation (G1) has spent years building and shepherding the enterprise. G1 usually sees the business as an extension of themselves- their identity and the identity of their business is comingled. There is thus a natural desire to create a legacy and give the adult children (G2) the opportunity to benefit from their succeeding ownership. G2 has grown up with the business and participated in its success through their active role as adults within the enterprise. They also see the opportunity for themselves as represented by the success of their parents. Given these motivations, an intra family ownership transition becomes an obvious objective, and it is at this point that a critical consideration is overlooked.

Regardless of the emotions involved, is the succession of G2 to the ownership of the company a good practical solution?  Objectively, does the business have the capability to support the goals of both generations and remain healthy and competitive?

Typical objectives of the older generation include the following:

-  Financial security. Subsequent to the transaction are there sufficient resources to effectively guarantee the desired life style.

-  An effective governance structure during and after the transition period. Frequently this includes powers retained by G1 at various points in the process.

-  A desire to withdraw from or significantly reduce involvement in the day to day grind of business- a loss of experience and talent.

-  Tax relief either by actions that shift the burden or a desire to be made whole by additional payments.

Objectives of the younger generation share some commonality with the older generation and also contain considerations that are different.

-  Personal cash flow needs.

-  The defined roles of family members.

-  Governance- how decisions are made and who has what powers.

-  Within the second generation who will acquire ownership and in what percentage.

-  If inactive siblings, how are the interests of active and inactive family members to be addressed.

-  Developing a strategic direction and tactical guide points that are understood and supported by all family members.

-  Agreement on an acceptable level of risk.

Any one of the above factors can create an impasse that makes an intra family ownership transition suspect and potentially impractical. Families are complex; families involved in business even more so. So it is not simply the financial issues that need to be tested before attempting a family succession effort.

Let’s assume that we have tested the waters and that no deal- breaker has surfaced. We have one more critical consideration before hitting the go button. We need to assess the future of the industry to which the business belongs and the competitive landscape. A business that has been successful can face an uncertain future due to changes in technology (video rental stores) or by increasing competition from industry consolidations. If the industry is declining or competition is becoming fiercer, an exit strategy other than retained family ownership may be a better alternative for all stakeholders.

As I type this, it occurs to me that the reader could conclude I am not a proponent of maintaining family ownership in the family business. In fact, if maintaining family ownership is a good practical solution as well as a feel good emotional decision, I prefer it believing that the family business creates a significant benefit to the community in which it is located.  The purpose of the above content is to simply state it is a good idea to look before we leap, that assumptions can be  dangerous,  and that good decisions are made when both the emotional and practical are taken into our considerations.

Why you need succession planning now!

As Chris Corrigan so aptly stated, “You can never over-prepare in business!”   Yet, we know, from strategic plans to budget plans and marketing plans to staffing plans, business owners find it difficult to fit it all in.  Now I raise the issue of succession plans… another one of those plans that doesn’t seem critical today; but, in the grand scheme of things, it is a critical factor in business continuity and longevity.  The topic is most commonly raised in connection with an owner’s retirement; but it also applies in situations of death, disability, and other withdrawals of owners or executives from the company.   

With closely held businesses, the succession issues that affect ownership also affect management because the same people typically hold both positions.  The close-knit group find it difficult to distinguish between their ownership in the company and their roles as employees of the business.  For this reason, a critical protection for the company is often missed:   You cannot fire an owner but you can fire an employee.  If an owner fails to perform his or her duties, the owner can be fired as an employee but remains an owner with a right to participate in the profits and losses of the business.  For many businesses, this just doesn’t seem “fair.”   If properly addressed up front, though, ”fairness” can be built into the formal relationships among the parties.

In most closely held and family owned businesses, the “formal relationship among the parties”  I refer to above is an agreement between owners (usually an “Operating Agreement” for LLCs and a “Shareholders’ Agreement” for corporations).  This agreement should spell out under what circumstances an ownership buyout may be triggered.  These circumstances include both involuntary and voluntary withdrawals of owners from the business.   The termination of employment would be a typical trigger of a mandatory or optional buyout by the company or the other owners.   This buyout gives the company power to determine whether the terminated person remains an owner despite his or her employment termination.  Other involuntary departures that may trigger buyout provisions are death, disability, and bankruptcy.  Voluntary departures must also be considered in these agreements.  Often an owner elects or is forced to cease participation in the business activities due to retirement or other reasons.  The agreements should address whether the company or other owners have the right to purchase the interest of the departing owner in a voluntary departure situation.  In all cases, the agreement should specify the buyout terms.    

The process of thinking through these scenarios and terms offer the business owners an opportunity to consider the critical people in the business and the confidence that the business is in good hands in the event of a planned or sudden departure of one or more owners.

Groundrules and Communication are Key to Success in Family Business

Our guest blog post comes from Steve Brilling, Executive Director of the Entrepreneurship Center and Family Business Roundtable at Seattle University’s Albers School of Business and Economics. 

———————-

It all comes down to communication—clear, concise, honest communication, with a dash of compassion thrown in. Whether it is in a legal document or simply a written memo, it is a business imperative that every family member knows the ground rules beforehand. It will save you much heartache in the future. While a verbal understanding is better than nothing, it opens the door to bad memory and misinterpretation.

I’ve personally lived through it. I allowed my daughter to be hired into our company with some trepidation but established the ground rules with both her and her boss – if Anne didn’t perform, that was between her and her supervisor and she should be treated like any other employee. Fortunately for all of us, it worked out but she did leave about a year later, after falling in love with one of our top salespeople—that’s another story for another blog.

I tell the above story to remind ourselves that establishing ground rules is important for not only the family member but also the non-family employees. They often feel very conflicted about their role in the family drama. Do they really have full authority to treat the family member as “just another employee?” Be honest with yourself—how do you really feel when your son or daughter is criticized by a non-family member? I think I have pretty good emotional intelligence but this type of situation can test your resolve.

Experience: Improving Family Business Communications

Experience is the best learning tool.  Our guest blog post comes from Bill Altland, a family business owner of Whale Tail Pharmacy in Craig, Alaska.

————————

The word that comes to my mind relating to communication issues in family businesses is the word “insidious”. It can be difficult to separate the business issues from family issues when family members are involved in both. It can be difficult to gain perspective because when these two different realms of relationships overlap, assumptions will be made. And these are not always correct assumptions. Many of my assumptions weren’t correct anyway. I took for granted that I knew what my business partner & spouse was thinking. I was surprised at just how many of her thoughts were also my thoughts about many of the perceived challenges we were dealing with.
 
I found that communications could be facilitated by intentionally stepping back and examining both the family and work relationships. This was difficult for my wife and I to do this on our own. In fact, I would go so far as to say that it was virtually impossible in our case. Business and personal life were intertwined. Too much so.
 
We found it very helpful to have somebody outside the family guide us through the process of improving communications. It had to be somebody we could trust and in whom we had confidence. A mediator, if you will. Listing challenges and concerns both separately and together as a couple was very helpful. Writing a plan with time lines was also very helpful. Having a way to measure the implementation of a plan was absolutely necessary. All of these activities helped us get to the root of our major problem – which was the identification of incorrect assumptions on each of our parts.