Month: April 2015

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Should You Give Your Kids Your Business? 2 Factors to Consider

In 1985, Guy Laliberté was a fire-eating, accordion-playing stilt walker on the streets of Quebec. Thirty years later, he is still walking tall but now with a lot of more money. Estimated to be worth around $2.6 billion, the founder of Cirque du Soleil recently announced he sold a majority interest in the company to private equity firm TPG Capital for an undisclosed but estimated price of around $1.5 billion.

One of the reasons he cited for selling a majority in the business is that he didn’t want to pass it along to his five children. They range in age from 7 to 18.

“They have their dreams and as a father I have made the commitment to support them as they chase them,” he said in an article on CBSnews.com. “I don’t really believe in the idea of the second generation of entrepreneurs. From the outset, I didn’t want to put the pressure of running the circus on their shoulders.”

I can’t say I agree with him, as I do believe in second-generation entrepreneurs. In certain circumstances. In my career as the turnaround authority, I have seen many situations where a company would have fared better if the founder had not passed along his company to the second generation.

While the founders of a company have often been fueled by passion and the thrill of growing a business from just an idea, that passion is often not shared by the second generation. And sometimes they just haven’t developed the drive and work ethic to keep a successful business growing.

There are so many factors to consider when contemplating handing down your business to your children. The same is true with any succession plan, but the situation with family businesses can be complicated by assumptions and expectations of the founders.

Most family business owners assume their company will still be in family control in five years – 88 percent, according to the Family Business Institute. But only about 30 percent of family businesses make it to the second generation. That number drops to 12 percent for the third generation. By the fourth? Only about 3 percent make it this far.

There are two questions I suggest you ask yourself as a starting point when you are considering turning over your business to the second generation, now or in the future.

  1. Do your children have any interest or desire to work in the business?

You’d be surprised how often this simple question is never asked. I’ve seen business owners just assume that their children love their business as much as they do and of course, they want to take it over. But a discussion with those children tells a different story.

It sometimes comes as a complete surprise that our children don’t share our passions. And how can they not be thrilled to have a company that you worked so hard for be handed to them?

Yet that is often the case. While it may mystify you and break your heart, if your children don’t share your passion or show much interest in your business, your company will suffer for it and it’s best to pass it along or sell it to someone who cares.

One note on when you ask this question, however. In Guy’s case, his children are too young to know their life’s passion. And often kids go to college with no concept of wanting to join mom or dad’s company. A few years in the real world can often change their mind. Or they may find a place in your company that they can care deeply about.

  1. Do your children have the necessary qualities to grow your business?

It’s tough to be objective about our own children. But taking a good look at their strengths, weaknesses and potential is essential when making this assessment.

Does you son have the leadership ability to run the company? Or does your daughter have the skill set to be in senior management?

If they don’t have the education or skills yet to take over, do they have the potential to learn what they need to know?

There are many more factors to consider in planning the succession of your business to family. For more on succession planning, please see my blog Don’t Miss the Exit: Make a Succession Plan.

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Lessons from a Winning Masters Caddie

I think our couch is older than Jordan Spieth. But what a thrill to see this poised and talented 21-year-old win The Masters Sunday. Then I liked him even more when I read a Wall Street Journal article about his caddie, “Why Masters Champion Jordan Spieth Hired a Former Schoolteacher as His Caddie.”

Not long ago his caddy, Michael Greller, was teaching square roots to pre-teens as a 6th-grade math teacher. He had done a little caddying on the side and liked being able to use real-world examples of math for his students. He and Jordan met when Jordan needed a caddie for the 2011 U.S. Junior Amateur. Michael knew the course and was recommended to Jordan by a friend.

When Jordan turned pro in late 2012, there was no shortage of more experience caddies who wanted to work with him. But he wanted a caddie who could travel with him all year, no matter how well he was doing. So Michael left the classroom for good and became Jordan’s caddie. Just a little over two years later, Jordan put on the famous green jacket as the winner of the 2015 Masters.

What struck me about the article was this observation from the author, Brian Costa. “When Spieth double-bogeyed the 17th hole Saturday, Greller didn’t say much as they walked to the 18th tee box. He mostly just listened.”

As Michael said, “You don’t want to overanalyze or make it harder than it is. I just try to be a calming influence on him.”

I thought about that in the context of my work as the Turnaround Authority. I deal with a lot of people who are under a great deal of stress. When a financial institution or a company hires me, the situation is a dire one. People may be on the verge of losing large sums of money, defaulting on their loans or ever losing their entire business.

A lot of what I do in the beginning is listen. And listen some more. I need to gain a clear understanding of what is really happening in the company and how it got to where it is.

And I definitely don’t want to make it harder than it is, as Michael said. A large part of my job is to break down extremely complicated situations so they are manageable and can be dealt with in an efficient and productive way.

Michael understands that part of his function is to be a calming influence. That’s one of the things my clients have often said about me, and actually, I believe to be a crucial part of my job. I need to calm people down because nothing is going to be accomplished when people are in a highly emotional state.

With his quote, he cited two of the most critical skills involved in being a successful turnaround guy. To paraphrase the famous phrase with variations being found everywhere, “Keep Calm and Listen.”

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Would Your Employees Fire You?

In a recent episode of the TV show “Mad Men” one of the account execs, Ken, was fired by the ad agency’s new owner, McCann Erickson, and ordered to turn over his accounts to Pete, another account exec.

The next day Ken returns to the agency to inform them he has a new job. As the new head of advertising for Dow, one of the agency’s largest clients. Ken is now his former agency’s client.

Pete and Roger immediately assume he will fire their agency because he was poorly treated. But he says no. He’ll actually be seeing more of them but he will be a “very hard client to please.”

Steve Carell as Michael Scott in "The Office."-- NBC Photo: Mitchell Haaseth

Steve Carell as Michael Scott in “The Office.”– NBC Photo: Mitchell Haaseth

Ken opted not to fire his former boss, but instead stick around and make him jump through hoops for him as the client. If one of your employees had the chance, do you think you would be fired, or made miserable in your present position?

It seems a majority of employees would actually rather fire their boss than get a raise. That was one of the questions asked for a survey conducted and reported in an article on Forbes.com, “Majority of Americans Would Rather Fire Their Boss Than Get a Raise.”

Psychologist and best-selling author Michelle McQuaid conducted the survey or more than 1,000 workers from different generations, locations and professions. It seems 65 percent of the people polled would be happier if they could fire their boss than if they got a raise.

Many felt the extra money isn’t worth the anxiety, stress and low morale caused by working for a bad boss. And let’s talk about the effect on productivity. According to McQuaid, people who view their bosses negatively took 15 more sick days and slowed down their work.

“The current situation in the workplace is taking an incredible personal toll on employees—and for organizations it is costing $360 billion a year in lost productivity.”

The survey showed that 60 percent of employees said they would do a better job if they got along better with their boss, with 58 percent saying they would be more successful.

If you’re concerned about how you measure up as a boss and what your employees would say about you, you may want to take this quiz: How to Know If You’re a Bad Boss.

It’s a list of 15 questions and some may be revealing to you. Here are a few examples:

If I had to switch places for a week with one of my employees, I would:

  • Enjoy the job.
  • Probably not enjoy the job but could be pleasantly surprised.
  • Slit my throat.

When there’s a crisis in the company…

  • I share the news with my employees as soon as I’m certain there really is a problem.
  • I don’t want to cause a panic, so I keep my employees in the dark as long as possible.
  • Once the electricity’s been turned off and it’s actually dark, I still think it’s none of their business how I run my business.

As the Turnaround Authority, I’ve talked with thousands of people at dozens of companies and asked how they felt about the company and about their boss during my initial assessment of the situation at the company. Sad to say, but the results of this survey don’t surprise me much.

Bad bosses cost your company money in lost productivity, turnover and low morale. Start at the top and make sure you aren’t one of them.

Although with a continued high percentage of bad bosses, I’ll never run out of clients as the Turnaround Authority.

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5 Key Findings from State of the American Manager Report

Gallup released its latest State of the American Manager Report this week.* The renowned research and consulting company did its homework. The report is based on four decades of research and a study of 2.5 million manager-led teams in 195 countries. These folks analyzed the engagement of 27 million employees. So I tend to believe the results. And they are not pretty.

Although as the Turnaround Authority, I do get more consulting assignments related to the failings of managers as pointed out in this report. But that doesn’t make me happy about the state of management in our country.

Today I’ll share the most important findings of the report, and in future blogs, will delve deeper into some of these findings.

  • Manager talent is rare, and organizations have a hard time finding it

Wow. Research showed that the majority of managers are not suited to their role; 82 percent don’t have the high talent required. That talent naturally exists in just 1 in 10 people, but two in 10 can be trained to be successful managers.

The study listed five talents of great managers. They motivate their employees, make unbiased decisions for the good of the team and the company, create a culture of accountability, build trusting relationships and assert themselves to overcome obstacles.

  • Talent is the most powerful predictor of performance

If you hire a talented manager, you can expect a 48 percent increase in profitability. That’s huge.

These managers are more engaged, function as brand ambassadors for the company and focus more on employees’ strengths than weaknesses.

  • Managers have the greatest impact on engagement

I don’t know how research companies figure out such things, but Gallup research found that managers who are not engaged in their jobs or who are actively disengaged, cost the U.S. economy $319 billion to $398 billion annually. Or roughly the GNP of our entire country in 1953.

And the percentages of managers who are not engaged are high: 51 percent are not engaged, 14 percent are actively disengaged for a total of 65 percent.

Equally disturbing is the finding that at some point in their career, one in two employees have left their job to get away from their manager.

    •   Female managers have an engagement advantage

It’s true guys, according to Gallup. Female managers are more likely to be engaged than male managers, at 41 percent versus 35.

For the highest percentage of engaged employees, look for females working for a female manager. They will have a 35 percent engagement rate. Male employees working for male managers had the lowest rate, at just 25 percent.

  • Specific behaviors can help managers increase employee engagement

I suppose this is a glimmer of good news. At this point in reviewing the report, I felt I needed it.

Two-thirds of employees who strongly agree that their manager helps them set work priorities and goals are engaged. And more than half of employees who strongly agree that their manager is open and approachable are engaged.

I do agree that managers can adapt certain behaviors that can engage employees in their companies. For tips of keeping your employees engaged, see my previous column, “Top Tips for Keeping Employees Engaged.”

Stay tuned in the coming weeks as I talk more about what the findings of the report are and what you can do about it in your company.

* Click here to download a PDF of the report.