Family Business, Non-Family Business, Urban Myths.

After 20 years of working with Senior Executives across the world it’s interesting to see the mistakes when appointing Senior Executives. There can be many reasons why, but one reason is not understanding the differences of working in a Family Business and a Non-Family Business. I’ve recently met several Senior Executives who are unhappy with their employment because of this lack of knowledge and understanding and I’m meeting Business owners who didn’t realise there was a difference. These Business Owners feel that money and title is enough and stick to the Mantra of “Surely experienced ‘C’ level Executives can work in any company?”

Due to the change of economy, I have become more involved with assisting Family Businesses rather than just the corporates in finding ‘C’ level people. To do this successfully I believe that everyone in the process of hiring Senior Executives must understand the differences that separate the two entities. Having worked for an English and Indian Family Business in a past life this has helped me at first hand to see the ups and downs of these Businesses; this with a theoretical base has helped with running my own companies or advising others with theirs.

One recent company I have been involved with was run and founded by a successful New Zealand Entrepreneur. He does not have anybody in his immediate family to hand the reins over to. He has tried (outside the family) executives to fill his ‘C’ level roles and has had three people in three years! What is the problem? Was this a real Family Business? Was the Problem his, or the Executives?

We discussed the reasons for the failures but in terms of assisting the owner I got him to firstly look at where his people came from. All three had been ‘C’ level people in corporates and had done an excellent job in their corporate environment. They all returned to corporate life and continued to do well in their new roles. Why did they fail then in this successful company?

What I needed the owner to do was to identify a “Family Business”. I don’t normally use dictionary definitions but feel that in this instance Wikipedia gives a satisfactory explanation of a Family Business;

“A commercial organization in which decision-making is influenced by multiple generations of a family-related by blood or marriage-who are closely identified with the firm through leadership or ownership. Owner-manager entrepreneurial firms are not considered to be family businesses because they lack the multigenerational dimension and family influence that create the unique dynamics and relationships of family businesses” Wikipedia 2014.

We looked at his company and although he didn’t have anyone in the immediate family to take over the reins he had people who owned the company in minor leadership roles. We both agreed he did in fact have a Family Business.

He thought that buying in top salaried ‘C’ level Executives from corporates would enhance growth and sustain his business. He had not seen any differences between Family and Non-Family Business.

Urban Myths for Family Businesses;

All are unstable Small to Midsize businesses’.
As an Executive I don’t want to baby sit the junior family members so they can take over my job.
A non-family member will never run the company.
Mother and Father Companies, the only people that matter in the company are family members.
Emotional hard to work places due to family disagreements/arguments.
Incompetent family members in positions of authority.
Are these statements true or are they just Urban Myths?

Family businesses are one of the fastest growing sectors of the world economy and now merit serious consideration by Senior Executives looking to advance their careers. This is an amazing turnaround from 25 years ago when nobody wanted to work for a family-owned business. There now seem to be many positives;

Patricia Epperlein from InterSearch reports that;

In the USA, 90% of businesses are family-owned. They contribute towards 40% of that nation’s GNP and pay approximately half of its total wages.

59% of France’s Top-500 industrial companies are family-owned.

It is estimated that 70% to 85% of all businesses worldwide are family-owned.

Tom O’Neil NZ Herald. Jan 2014 states;

Small to medium businesses are the lifeblood of New Zealand industry. Various sources cite family businesses as representing 75 per cent of Kiwi firms, providing up to 80 per cent of employment and 65 per cent of national GDP.

It’s interesting to note that when companies around the world state that they are a “Family Business” they are trying to reinforce positive family values of, Integrity, honesty, trust and loyalty.

Not all Family Businesses’ are SMEs. Companies like;

Porsche
WalMart
Tata Group.
In New Zealand the Talley Family (Agribusiness) and the Pandey family (Hotels).
Simon Peacocke of BDO Auckland, an accredited Family Business Advisor works with numerous NZ Family Businesses and feels that they do well because of the following reasons;

Family businesses think very long-term and are very resilient, much more so than non-family businesses.

Second and third generation family business members start their apprenticeship at a very young age. At 5 years old they are hearing their parents talking about the business so they have an incredible depth of knowledge to draw on.

Their relationships with staff and communities also tend to be different – closer, more connected, more loyal.

Staff tend to become part of the family business and to stay on as long-term committed employees.

While corporates like to be seen supporting their communities, family businesses generally don’t promote they are doing this – they just do it.

They don’t throw lots of money at things trying to get rich quick.

They also have a powerful focus on building relationships with staff, customers and suppliers.

So is it worth working for a family company? Is it better to work for a Non-Family Business? Is there any difference when the economy is good or is in a slump?

Nicolas Kachaner 2012 in the Harvard Business Review states,

“Results show that during good economic times, family-run companies don’t earn as much money as companies with a more dispersed ownership structure. But when the economy slumps, family firms far outshine their peers. And when we looked across business cycles from 1997 to 2009, we found that the average long-term financial performance was higher for family businesses than for non-family businesses in every country we examined”.

Senior Executives looking for longevity in the work place should look at the Family Business as this would take them through economies varying peaks and troughs. They will need to be aware that this will always be done in a cost effective way.

Business Consultants believe that they can tell easily if the company is Family or Non-Family Business. You just walk into the Head Office. A Non-family office has a very substantial corporate office with a “Wow Factor”. The Family business being more Frugal has very few “Bells and Whistles”. This Frugality is about the Family Business CEO looking to invest in the long term 20 year plan with the business passing down the generations. The Non-Family CEO is looking to make an instant mark and will try and outperform the person they have taken over from. There are many studies that show that Family Businesses did better in the recent Global recession for the above reason. The Family Business is frugal in the good times and the bad allowing them to weather the storms of economic crisis.

This is one of the factors that had been wrong in my client with three ‘C’ Level people in three years. His ‘C’ level people came in with a quick turnaround plan which they hoped would give a quick fix and outspending the last person in the hope that they would do something instantly. No twenty year plan for them as they had never been afforded this way of working in the past.

Do Family Businesses perform differently in other countries?

Justin Craig, PhD states,

“Interestingly, in many aspects family businesses as a sector do not vary much from country to country. There are obvious cultural differences but a business with family involvement is challenging in every country. It is also more rewarding than the ‘corporates’, let’s not forget that. Of course, there are older businesses in Europe, for example, than in Australia and New Zealand and the United States, and the mind-sets of companies in Europe will differ than in the later developed countries. But day to day the differences are not noticeable. Older businesses have more at stake and lots more to lose but they also have advantages. Family leaders still have to manage three independent and interdependent systems being the family, the business and the ownership group”.

Appointing the right Senior Executives is crucial to any company and is a costly acquisition. There are many reasons why hiring at this level goes wrong but getting it right can make a huge difference to your company.

To answer one of my questions, can a ‘C’ Level person work in any type of Business, Family or Non-Family?

Yes, but only if they are armed with the knowledge of the differences of the two. What they must also be sure of is the type of business that they are going to work in as sometimes this can be a cloudy issue, making it difficult for them to decide which one it is. Look at those mighty corporate companies of Porsche, Tata and Walmart to name a few.

Finding the right ‘C’ Level Executive is a lengthy process and shouldn’t be rushed, if you need to rush you are better to go down the Executive Leasing Route in the short term which will allow you to take a breath and get the right permanent person in place. Work with your inside team or your outside partners to establish a good process, so the firm can articulate the process to the Senior Executives. Everyone appreciates the fact that there is a well thought-out plan in place.

For me, I decided a long time ago not to build a Family Business. I wanted to give my children the best in life, but wanted them to make their own way in life too. My children might disagree but as one is studying to be a Barrister and one is settled in a corporate I will wait and see if I need to step in? I have however, always agreed with Billionaire Investor Warren Buffett who said, “He would give his kids just enough so that they could do anything, but not so much as they did nothing”.

AliveMax Review – Legitimate Business?

AliveMax is a MLM business opportunity, which is primarily focused on health and wellness spray products. The company was founded by Nauder Khazan, who is an experienced internet marketer and has been in online marketing business for many years. The primary focus of this company is to create income earning opportunities for its members through home based business. Members would be able to join the company for $50. The products, which the company sells are spray nutritional supplements and are available for anti-aging, vitality and multi-vitamin purposes.

AliveMax claims the compensation plan starts working for its members, right from the moment they join. The distributors are provided with various tools as part of the training program, which will help them maximize their earning potential. Here is a list of the earning incentives, which are available to members.

  • Welcome Bonus – The members are paid a one-time commission on the first 3 customers, who will fall below them in the team. The commission will be paid irrespective of who enrolled them. This would mean that the members will start earning commission the moment they have someone in the team. Retail
  • Bonus – Members and distributors will be able to purchase the products at wholesale prices and sell it to the customers at retail prices. The difference in prices will be their profit.
  • Fast Track Bonus – Every time a member enrolls a new distributor or a preferred customer, they would be entitled to 20 percent commission of the business volume of the first month’s order.
  • Bulk order bonus – Each time a distributor, which a member enrolled makes a bulk purchase the member would get 10 percent additional bonus. Apart from this as an Executive Diamond member, they will also get 10 percent on bulk order purchases, if any one from their team tree makes a bulk purchase.
  • Dual Team Building Cycle Bonus – Apart from the efforts of the members themselves in getting new distributors and customers, members and customers can also be placed in the team from members above. Based on the business volume, which is generated the members will be able to get different commission packages.
  • Matching bonus – As the members move up each level of the company, they are offered various bonus packages. The amount of money each individual would earn will depend on the performance of their team and as the team performance goes up, so will the compensation plan for the member.
  • Leadership Pools – Every quarter members who help build the company will be share profits in the leadership pool.

AliveMax is a legitimate MLM business opportunity and provides members potential to earn a substantial amount of income through the various incentives in the compensation plan. However as in any MLM business, it will require patience and perseverance to be successful and members should not look for overnight success.

Planning for Your Business Future

Life can be unpredictable and does not always turn out as we planned. Being prepared for a catastrophic event is vital to the sustainability of every business. It is important to prepare for the worst case scenario, thus allowing you to relax and plan for the best. To help you create a plan that addresses the needs of your business, Below is information on the key components that are crucial to have in place to ensure the long term stability of your company.

Consult a Professional
Consulting with a professional will guarantee that you will understand the options available to meet the unique needs of your business. Therefore we recommend that you consult with the following professionals: an attorney, an accountant, and an insurance agent.

Insurance
In the unfortunate event of a death or disability, maintaining the financial stability of the business members is essential to the continuation of the business past the loss. We recommend requiring all members to have disability insurance, life insurance, and health insurance policies that are payable to the member’s families. This will provide financial security for the business members and their loved ones.

Every business should carry a life insurance policy on its owners. This will provide the partners/members/shareholders with the financial ability to purchase the business in the unfortunate circumstance of a death.

Prepare an Exit Strategy
It is important to have a plan in place that will allow the daily operations to continue if you are no longer able to participate in your business. The continuation of the company affects not only the owner’s family, but it also affects the job security of the employees. To protect your company, it is important to discuss possible third party options for ownership. Often times there are family members or employees that could step into your role in an emergency. Prepare that individual for this worst case scenario by speaking to them before an unplanned catastrophic event occurs.

In a partnership or corporation it is important to plan for the scenario that a partner/member/shareholder would want to leave the business. It is important to clearly define how the other owner(s) will buy out the individual and how the buyout will be financed. “Establishing the valuation process up front will avoid conflict at the time of the buyout” states Fred Meier.

Emergency Document
It is important to develop a document that lists your company’s combinations, log in information, passwords, daily systems, and other key information that is required for the daily operation of your business to continue. Keep this document in a safe place and communicate with employees what is to be done on a temporary and permanent basis if an emergency were to occur.