Family Business – Paying Family Members

For most people, taking up employment is a rite of passage as they grow from adolescence to adulthood. Moving directly into a job from school, or taking time out to go to college – or travel perhaps – before embarking on a career, is a well-trodden path that all but the few embrace. It’s a challenging time of life for anyone.

In terms of remuneration, most of us recognise that there is a market rate for the job we decide to go for. Plus or minus a few percentage points, it’s likely that what we achieve – unless there are some unusual factors – is what we expect.

In family businesses, there are other issues to consider, because for anyone deciding to work in the family business, there will be a range of emotions and expectations to get in balance with the real world of business itself.

Deciding on how to pay these new family business members will be a sensitive activity to agree between existing family members already in employment; non-family members working in the business and – just as importantly – those stakeholders in the business who are not involved in the day to day running of it, yet have an interest in the financial outcomes both now – and into the future.

The debate can go back and forth. A family member joining the business with a serious expectation of ‘One day this will all be yours‘ might have lower expectations for the pay they will receive in the short term. This could be a valid reason for underpayment for any family member, who will have more potential return over future years to consider.

On the other hand, it is quite easy to see how family members might sometimes be paid more than they might expect – after all, the business does belong to the family, so why should some of the value not be shared out through salary and other employment based remuneration, such as bonuses.

And in the real world, a family member might well be best served by somehow receiving what an objective observer might suggest would be the market rate for the job. There is much value in this ideal. If an individual were to be treated differently than anyone else, how would that serve them as a developing individual?

By ensuring that processes are in place to support an objective view of remuneration for all employees and where a family member sits within that, might well be the most appropriate way forward.

There are specialists in family business who can help with this objectivity, both because they are outsiders whose only goal is success for the business and future generations and because they can also share experiences other family businesses have gone through to make family member remuneration work.

The key to success in this sensitive area is to create a new generation who respect the values of the family business in respect to fairness and transparency, thus anchoring a strong foundation for the future.

Business Community Relations 101 – Getting the Most Out of Your Chamber of Commerce Membership

Since the major part of a small business typically comes from business to business services, it is essential to maintain a positive standing with the local business community. It is of value to you to join as many business type organizations as possible in your town. You should attend meetings when possible and introduce your clients to each other.

Most towns and all cities have chambers of commerce. The chamber offers many things to small businesses especially new ones and start-ups. Chambers provide a voice for the business community, a bridge between government – small business – corporations – volunteers – religious organizations – schools – clubs – homeowners associations – corporations – general public – etc. It’s a monumental job, always changing. It takes money, lots of it. It takes coordination and a knack for small town politics. It takes members who will volunteer, who care and are dedicated. Of course that’s where you come in. Chambers of Commerce hold various events such as:

· Mixers

· Table Top Exhibits/Expos

· Seminars

· Luncheons

· Committee Meetings

· Installation Dinners

· Benefits

· Educational Exchanges

· Home Based Business Groups

· Networking Breakfast Meetings

· Membership Drives

If you attend some of these events, you will make new friends, contacts and customers. Anyone can join the chamber. It usual costs $100-450. But you only get out what you put in. Many small business owners may see it as a waste of money. In actuality it is relatively inexpensive depending how you chose to use your membership. It can be long lasting advertising in the form of:

· Promotion

· P.R.

· Networking

· Free Media Coverage

· And Fun

Joining Committees

If you truly want to become involved, we suggest you join various Chamber of Commerce committees. Committees need your input. You probably talk to one hundred business owners and residential customers per week. Five hundred per month. They know you, they trust you and they generally speak their mind to you. When these associates, business customers and business people talk to politicians, it’s a more tactful type conversation. When they talk to Chamber of Commerce staff, they tend to also choose their words more carefully. When they talk to you, it’s more point blank, to the point, blunt and the reality of the way they really feel. You’ll never get a sugar coated answer to a small business dilemma from an actual owner. They’ll tell you how they feel. Whether they are happy or mad as hell about an issue. You also are the eyes and ears of the community with it’s residences.

When you come to these committees you bring knowledge. You will soon find your ideas, observations and personal opinion are paramount. You are the most valuable tool a chamber committee could ever hope to have. You need to ask yourself “Do you have the extra time?” If you don’t, don’t volunteer. There is nothing worse than a committee member who volunteers and then doesn’t pull through when he or she is needed. If you have the time you be repaid in new business contacts and customers and the feeling of knowing you made the difference.

How do you join a committee? Talk to the president of the chamber. Tell them you want to volunteer. Find out which chamber committees have openings. Many times there is no limit to the number of people, so try to pick one with a large group of members. You will be able to do more networking and big groups tend to divide sub-committee work loads more evenly. Join a committee that interests you. Don’t join one you don’t care about. Just like in college, you always got better grades in the classes you enjoyed, didn’t you? Make sure the people in the group really want to get something done and it’s not just a who’s who social gathering. That kind of group eventually fails to accomplish even the most basic of mission statements. You are a winner, so you should be in a winning group.

Make sure once you have gone to a couple of meetings, the turnover is low and that no one person’s ego stands out in the group, especially if it’s the chairman. If this happens, go to one more meeting and dismiss yourself. “Business is so good, I don’t have any time left.” Then volunteer to with flyer distribution by leaving information on your counter or delivering this vital information to your customers and business clients. Tell everyone you are more than happy to be of assistance. Then give everyone in the group your card. You can still help without battling personalities. Remember everyone there is volunteering and it is better to be a friend than an enemy.

Board Of Directors

Being on the board of directors of a Chamber of Commerce is extremely important. It’s an easy job and very prestigious. It’s also great for business. You will receive notice when board seats come up for election. Usually chambers ask their members through direct mail if anyone would like to run for a board seat. Fill out the form with a brief resume. Make sure not to go over the maximum word count. Try to shave off ten percent if possible because people tend to read the short ones more. Don’t exaggerate your accomplishments. If you need help with this, call one of the current board members you know who is not re-running for the same position. Find out from the chamber what day they will be mailing the ballots and call everyone in the chamber two days before. It’s important not only to win, but to win by a margin. It gives you clout with the chamber members and staff. When you win, make sure to attend as many meetings as possible. Usually meetings are only one time per month.

Grand Openings

When you are privy to information about a new business opening or a grand opening ribbon cutting event, you should visit the business:

· To sign them up as new customers

· To offer to give free products or service coupons for grand opening goers

· To help them meet potential buyers, namely all your customers

· To say hi and let them know you are all in the same boat and wish them many years of success

Internet Programs

Always try to get your company listed in the Chambers on-line directory. There may be an additional charges for this, but it is worth it.

Distribution Of Monthly Newsletters

Most Chambers of Commerce publish a monthly newsletter of what’s going on around town and with various business members. The more hot little hands these newsletters get into, the better it is for the advertisers and the better for you as a member. It’s also great for chamber membership, the more people who join the Chamber the more people in the club to buy from you and help all the businesses in the community. If you have a mobile type business and volunteer to deliver a chamber newsletter to every business in your area, you will surely be a chamber favorite. If you are a retail or location based business, have them on your counter for customers and associates. Your customers will also be glad to receive a copy and and your business customers will eventually join the chamber if they haven’t already. You will be helping businesses everywhere in town by doing this. This will be recognized. It will also help you when the chamber does a story on you to put in the newsletter. Of course, that month we will print extra copies and direct mail them to every licensed business in your town and all of our franchisees. Try to refer fellow businesses to the chamber each month.

Membership Drives

Whenever the chamber has a membership drive, you should volunteer to help. You have fax data bases and distribution power “plus” you know personally many business owners in town. Chamber membership is the life line of their existence. The more you, we help them, the more they help you. It is okay to join many chambers or at least all the ones where you want customers.

Logo On Vehicle

Offer to put a magnetic sign on your work vehicles with the local Chamber of Commerce logo. This helps the chamber and legitimizes your business. If this is not possible, put your Chamber of Commerce member plague on your dash board. If you have a location business, be sure to display your plaque where it can be seen by all visitors

Meeting With Chamber

You should be on a first name basis with the Chamber of Commerce president. You probably already are. He or she needs your feedback. They need to know what’s going on at the street level and no one knows better than you. You will be the eyes and ears for the chamber. You should set aside one hour per month to discuss concerns you’ve heard on the street and possible solutions you’ve worked out. Try to make it a regular meeting such as the first Tuesday of the month at 8:00 am. This meeting can be with the Chamber manager or even a Board Member you can relate with. If you belong to a committee bring your information and observations there.

Network With Other Groups

You should network with your service club whether it be Elks, Lions, Optimists, Kiwanis, Rotary, Soroptimists, whatever. Bring those concerns with you. Help the chamber co-sponsor events with your club and other clubs, making one big happy united family town thanks to you. You can also volunteer to help on the Boys and Girls Club, United Way or other associated non-profit, which helps people. By adding your Chamber Membership to a non-profit commitment, you will make a difference and super-charge your business.

Attending Meetings

You should attend meetings sponsored by your Chamber of Commerce. As many as you can. Enough that you don’t need to wear a name tag because everyone already knows you. You still should wear a name tag. However write on it:

· A New Friend

· Customer Service

· Me

· Label

· Name Tag

· Just Me

· I love meeting new people

· Put name on upside down

Sounds funny but it’s a great ice breaker. It works every time. After all, there is bound to be a new face popping up every once in a while. Many of these new members may feel intimidated and you can help them and really make a new friend and business associate creating team work, co-marketing efforts and sharing of customer lists with non-competing businesses.

Trade Shows

Table top mixers and trade shows are very important. Smaller shows – such as city fair, county fair, Chamber of Commerce Business Fair, etc. – you can do for relatively low cost. Pretty good statistics. Trade fairs and shows are good.

One of the major advantages of exhibiting in a show is the tremendous impact that you can deliver and direct to a preconditioned group of prospects. Through your exhibit, these prospects can see how they can benefit from your services and/or products. Exhibiting in various types of shows offers you both short and long range benefits.

As with any of your sales promotion programs, the success of your show participation depends largely on proper planning. Before you enter a show, analyze all the factors involved and determine if the show will attract prospects who will require your services. Your final decision should be based upon the estimate of value you will receive for the money, time and effort put forth.

To get information on the shows scheduled for your area, contact your local Chamber of Commerce. If you are considering entering an annual show, ask for a list of regular exhibitors from past years. Then check with these exhibitors for their opinions as to the value of the show.

Referrals – Word Of Mouth

No matter what you do at a Chamber of Commerce meeting, remember to bring cards. Chamber mixers draw about fifty people or more, grand openings twenty, committee meetings ten. Always say when handing out cards, “If you do not need our service/products please take this card and give it to someone who might be interested. Thanks.” This will make the person happy that you are not pressuring them and they will be glad to pass it on.

Letters To The Editor

You should rifle off at least one letter a month to the local paper praising a small business, the Chamber of Commerce or how happy you are to have a business here. If you have a reason to praise more than one person, type the letter and have a co-worker sign it.

Conclusion:

Your success in your business is up to you, we live in the greatest country in the world. You are allowed to unlimited success, but with that incredible gift you are also allowed to fail. The ball is in your court, your chamber membership can be one of your greatest assets, but you only get out what you put in. Stay involved, do not ever give up and use your chamber to help you win.

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”.