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Family Businesses That Have Thrived and Survived

During my long career as the Turnaround Authority, I’ve worked with many family businesses. The particular challenge of working with family members as opposed to just co-workers is that they are emotionally connected to each other, which has led to some rather, well, let’s say interesting interactions. Like the time a disgruntled son pulled a kitchen knife on his mom. Fortunately, family disputes don’t generally involve weapons. But the fact is it can be difficult to keep them running. Seventy percent either fail or are sold before the second generation and just 10 percent survive to the third. That’s a lot of companies when you consider that about 35 percent of Fortune 500 companies are family controlled. And family businesses account for 50 percent of the gross domestic product of the U.S. But many family-owned companies not only survive, they thrive.

Laird & Company owns the first liquor license distributed in the United States. The company remains family run.

Laird & Company owns the first liquor license distributed in the United States. The company remains family run.

We are familiar with many of the large, well-known family businesses that include Wal-Mart (Walton family), Mars (Mars family), News Corp. (Murdoch family) and Comcast (Roberts family). Here are a few interesting family businesses you most likely haven’t heard of, one from each of the past three centuries, that are still thriving. • Laird & Company owns the #1 liquor license distributed in the United States. Alexander Laird began producing Applejack in 1698 for his friends and neighbors. One of his descendants built the Colts Neck Inn in 1717 and sold Applejack, with the first commercial sale recorded in 1780. The company even survived Prohibition by producing brandy for medicinal purposes. Seems a lot of people were feeling poorly during those 14 years. • Rogers Funeral Home in Frankfort, Kentucky, has been helping people say goodbye to dearly departed loved ones since 1802. It is now owned by Mary Anna Rogers, whose daughter Doherty Rogers Reynolds and her husband Tim operate the home. They are the seventh generation of the Rogers family to own the business. • The Butt family still operates H.E.B. Grocery with 300 stores, primarily in Texas. Florence Butt opened the first C.C. Butt Grocery Store in Kerrville in 1906 with an investment of $60. Last year the company had $20 billion in revenue and was listed as #14 on Forbes list of America’s Largest Private Companies. I’d say that investment paid off. Death, alcohol and food. Maybe it helped that these businesses deal with products and services with a constant demand. So I was curious to see what the country’s oldest family-owned restaurant is, considering the high failure rate in that industry. The National Restaurant Association reports that 30 percent of new restaurants fail in the first year, with another 30 percent closing in the next two years. The distinction of the country’s oldest family-owned restaurant goes to Antoine’s Restaurant in the French Quarter of New Orleans. In 1840, Antoine Alciatore, a native of France, made his way to Louisiana where he felt at home among the French speakers there and began serving French-Creole cuisine. His son Jules ran the restaurant after his death and invented the famous Oysters Rockefeller. While the odds may seem against family businesses, many do survive into the third generation, and beyond. Of course, a business can increase its odds by hiring trusted advisors to help them navigate difficult times. In my next two posts, I’ll discuss how to find the best advisors for your business, and then how to make the most of their participation in your business.

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Tips on Handling That Unsolicited Offer

No doubt it’s flattering. You’ve worked hard building or running a business and now someone has expressed interest in buying it. You hadn’t considered selling but maybe now is a good time. But be careful how you respond. It’s easy to get caught up in the excitement and make costly mistakes. Here are a few tips on handling that unsolicited offer.

• Be careful about sharing information

If the potential buyer is really serious about buying your business, he won’t mind signing a non-disclosure agreement. Even then, be selective on any financial information you share. Your current financial statements were most likely prepared with the goal of minimizing the company’s tax liability and not to showcase its profitability. Make sure your financial statements are prepared to show maximum profitability.

You may also wish to hire an independent auditor with experience in your industry. Buyers may request independently audited records for the past two or three years.

• Hire a team to value and negotiate any potential sale

If you become serious about contemplating a sale, hire the best team you can to guide you through the process. In addition to any regular advisors you may have, you may also need a business broker, a financial planner, a lawyer, a financial advisor and an accountant.

Before you enter into any type of negotiations, you need to get an accurate, up-to-date valuation of your business. Selling a business may be the biggest financial transaction of your life. Don’t try to handle it on your own.

• Don’t be swayed by flattery

It’s intoxicating for someone to admire what you have created or have been running. Just beware of someone who heaps on too much praise — don’t be blinded by it and let your guard down, which may cause you to share too much information or value your company too low. As Adlai Stevenson said, “Flattery is all right if you don’t inhale.”

• Think about the potential future of your business

Dana Levy sold the email newsletter Daily Candy to Comcast for a reported $125 million, right before the market crashed. When ad sales didn’t materialize, Comcast began trying other avenues to raise revenue, changing her one-a-day email business model. In 2011 Comcast acquired a majority stake in NBCUniversal and shut down Daily Candy in March 2014. She and her employees immediately tried to buy it back but Comcast wasn’t interested.

“What they didn’t try was maintaining the brand integrity,” Dana said in a video interview on inc.com. “What Comcast acquired wasn’t necessarily a list. It was a brand, a brand that was adored.”

How would you feel if the acquiring entity of your business is unable or unwilling to continue your business as you envisioned it?

• Ask yourself, do you really want to sell?

It’s nice to have a potential buyer and maybe it is a good time for you to get out of the business and try something new. But this is a question only you can answer for yourself. Do you still enjoy and feel passionate about your company? Do you wish to stick around for a while and be instrumental in its future success?

Selling a business is in all respects, a big deal. Be sure to give it the consideration it, and you, deserve.

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Professions of Our Founding Fathers

As we approach 4th of July, which marks the 238th anniversary of the birth of our independence, I found myself pondering the professions of our Founding Fathers, in particular those who signed the Declaration of Independence, and what they would think of the world today.

There is little doubt in my mind that as representatives from the 13 colonies sat sweating in those heavy, uncomfortable clothes in the sweltering Philadelphia heat, struggling to craft what would become the Declaration of Independence, they could never imagine the business world of the 21st century.

It’s interesting to speculate what would have shocked them the most. Would it be the acension of women to positions of power? The huge number of large global companies? The size of the United States and its population growth from 2.5 million in 1776 to more than 320 million today would certainly present a surprise.

Of course, the advances in technology alone in the past 238 years would be enough to astound every one of the delegates. I like to imagine Thomas Jefferson and Benjamin Franklin, amateur inventors themselves, adapting quickly and rushing out to buy the newest Apple products and carefully selecting their Twitter handles.

All white males, those 56 delegates who gathered in 1776 to craft a document to tell Great Britain to take a hike and form a new country ranged in age from 26 (Edward Rutledge from South Carolina) to 70 (Benjamin Franklin from Pennsylvania.)

There were several lawyers, which was the most popular career at the time. Others were farmers, merchants, businessmen, writers and physicians. Some attended seminary, with a few ministers among them, while many were serving in public office.

Most were well-educated, although Benjamin Franklin had no formal education past the age of 10 and like several others, was self-taught. While many were from wealthy families, several of them lost their fortune during the Revolutionary War. Benjamin Rush from Pennsylvania was a professor and physician who published the first American textbook on chemistry.

A few didn’t fare so well as businessmen. Samuel Adams from Massachusetts was an unsuccessful brewer, who would be mighty surprised at the success of a beer named after him. Two signers, John Adams and Thomas Jefferson, later became president.

There’s no way of knowing what the Founding Fathers would be most blown away about the state of American business today. But one thing I believe would make them all smile. They each had a hand in creating the United States, which has the world’s largest national economy with a GDP of approximately $16.1 trillion. Now that’s something to celebrate.

Happy 4th of July!

 

 

 

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Lessons From the Marshmallow Challenge

In 1988 Robert Fulghum wrote the #1 New York Times best-selling “All I Really Need to Know I Learned in Kindergarten.” It contained such gems as “Play fair.” “Put things back where you found them.” “Clean up your own mess.” “Live a balanced life.”

The simple reminders of the book seemed to resonate with many people across the world. That book, plus his seven other non-fiction books, have sold more than 17 million copies in 103 countries.

I was reminded of that book recently when I watched a fascinating TED Talk by Peter Skillman, formerly the VP of Design at Palm. He talked about an experiment he conducts with marshmallows and spaghetti and the surprising results he learned from one group.

The Marshmallow Design Challenge is conducted with teams of four that each has 18 minutes to create the tallest freestanding structure possible with 20 pieces of spaghetti, a meter of tape, one piece of string and one marshmallow.

photo (4)He had been conducting the experiment for years with groups that included engineering students from top U.S. schools, telecom engineers from Taiwan, business school students and lawyers when he learned something that shocked him.

While architects and engineers consistently built the tallest, most stable structures, he found that kindergartners, on every objective measure, scored higher than every other group of adults.

The lowest performing? Business school students. Many of them got zeros on the experiment. Lawyers didn’t fare much better.

So the question is why did five years olds perform so much better and what can we learn from that? Peter found two key factors that differentiated the kindergarten teams.

• They don’t waste time seeking power. “Kindergarteners do not spend 15 minutes in a bunch of status transactions trying to figure out who is going to be CEO of Spaghetti Corporation. They just start building,” he said. “This gives them a better and immediate understanding of the structural properties of spaghetti.”

• They don’t sit around talking about the problem. They just start building to determine what works and what doesn’t. If something doesn’t work, they discard it and try another method, employing what Silicon Valley refers to as “Fail fast, fail often.”

Here are a few more lessons Peter says he has learned from conducting this experiment with almost 1,000 people.

  • Building develops your intuitions about how process and materials are connected.
  • You learn by doing, discovering problems you can’t predict in advance.
  • Simultaneous iteration allows you to see a lot of good ideas.
  • Being first to market isn’t always the best.
  • Multiple iterations usually beat a commitment to making your first idea work.
  • All projects have resource constraints; however, you can often get additional resources. But you’ll never get them if you don’t ask.
  • Exercises like this illustrate the value of deadlines.
  • Encourage wild ideas: What if I tied the structure to the ceiling?

Many corporations have used the Marshmallow Design Challenge with their teams, which takes less than an hour and costs just a few dollars to conduct.

Tom Wujec, a Fellow at Autodesk, is a big believer in it, and gave his own TED Talk on it. “I believe the marshmallow challenge is among the fastest and most powerful technique for improving a team’s capacity to generate fresh ideas, build rapport and incorporate prototyping, all of which lie at the heart of effective innovation.”

If you’d like to conduct your own Marshmallow Design Challenge, you can find the rules here. Chances are you’ll have fun and learn something to improve your business. And you can always make S’Mores after you’re done.

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Joining the Team at GlassRatner

I’ve been chuckling to myself about the rumors of my retirement that I discussed in a previous column, “No Desire to Retire.” I wanted to let you know that I’m embarking on an exciting new opportunity.

I’ll be joining the well-respected team at GlassRatner Advisory and Capital Group LLC as a principal effective July 1. GlassRatner is a nationally known financial advisory services firm. I was attracted to the integrity of the GlassRatner team members, its national platform and reputation, and the work the firm has done in providing solutions to complex business problems.

They seem to be excited to work with me, too. And they love “How Not to Hire a Guy Like Me,”which of course, is an effective way to win my loyalty.

It’s funny; this opportunity just presented itself a few weeks ago and we’re off to the races already. In my work as a turnaround authority, I’ve learned to recognize good opportunities for growth and success when I see them. I am excited and honored to be joining GlassRatner and believe we will both benefit from the partnership.

Another aspect of GlassRatner I found attractive is its reputation as a collegial firm and the way they function as a team. Look for some of those team members to be guest contributors to my blog. I’m sure you’ll enjoy getting to know them as much as I will.

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Tips for Dealing with Office Gossip

This is the second in a series on office gossip. In my last column, I wrote about how harmful office gossip can be to your business. This column focuses on how you can deal with it.

Office gossip can be harmful to your business and to the reputations of your managers and employees. It can cost you money in lost productivity and turnover when employees who don’t like the negative environment leave.

Here are a few tips on how to deal with it so your business can be a healthy, happy and productive place to work.

Set the standard

This is so important that I devoted a section of my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes” to it. As the head of a company, you must lead by example. It doesn’t matter whether you want your employees to emulate your behavior — they will.

Don’t talk about negative rumors about your competition or any of your vendors. If you hear others spreading rumors, request that they refrain from doing so.

Avoid the all-employee approach

Sending an email to all the employees or announcing at an all-company meeting demanding that office gossip stop will not work. The ones who are spreading the gossip will continue to do so, and those who are not engaging will wonder what they are missing, and may even start to gossip so they can catch up.

If you can determine the source of negative gossip, meet with those individuals one-on-one to explain the repercussions of their behavior and that further gossip will not be tolerated.

Create an environment of open communication and trust

This is my number 1 tip for stopping negative office gossip. If you create an open environment where employees trust the management and feel free to communicate with their supervisors, there is no reason to spread gossip.

You’ve probably heard the term “the mushroom treatment.” It’s when employees feel like they are kept in the dark, fed a lot of manure and when they are big enough, they are canned.

Although that term originated more than 40 years ago, many companies still operate this way. When I am brought in to run a company, one of the first things I do is talk to employees at all levels to get their opinions on what is happening and what needs to be done. More often than not, when a company is in dire straits, the employees are not getting the real story. They are being kept in the dark.

Guess what happens when employees know a company is struggling but no one is telling them the truth? They begin to manufacture their own perception of the truth from what little is being shared. That’s how the office gossip train is fueled. The less they know, the more they talk. And when your employees are engaged in a rousing game of “What Did You Hear Today?” guess what they are not doing? Their jobs.

When employees are left to play the guessing game, morale and productivity take a dive, putting your company in even more jeopardy.

Generally, when I take over a company, I am walking into a toxic environment of distrust. One of my most important jobs initially is to regain the trust of the employees, and I do that by making honest communication with them a top priority. It may take a while for senior management to regain their trust, but once we do, you’d be surprised what a difference it can make in turning around a company.

Employees gossip because they are kept in the dark and feel powerless. Telling them the truth, no matter how dire it is, can make them feel empowered.

As Will Rogers said, “Rumors travel faster, but it don’t stay put as long as truth.”

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How Office Gossip is Hurting Your Business

This is the first of a two-part series on office gossip. Today, I focus on the dangers of office gossip and my next column will share my top tips on how to deal with it.

I’ve talked about my nickname, Monty Hall, because I engage in “Let’s Make a Deal” on a daily basis in my career as a turnaround authority. Sometimes, I also feel like a contestant on the game show “To Tell the Truth.”

When I take over the management of a business and speak with employees at all levels of an organization, I sometimes hear wildly varied stories of situations in the company, which may or may not be true. It becomes my job to separate fact from fiction.

I often determine that a lot of what I’m hearing is not based on reality, but is actually office gossip. If you think that employees hanging around the proverbial water cooler is a harmless break in their day, you may be shocked to learn just how much that chatter is costing you.

BusinessInsider.com compiled a list of surprising ways that employees cost companies billions in the workplace. The article cites that “smartphones, time-wasting websites and gossip can cost U.S. companies an estimated $650 billion a year.”

In addition to the time wasted, office gossip is also dangerous to the health of your company in these ways:

• It reduces productivity

It’s common sense. If employees are spending their time spreading, listening to and trying to verify gossip, they are not focused on their jobs and are not working.

• It undermines morale

If employees hear rumors about trouble with the company, they may start to feel anxious about their jobs. Instead of focusing their attention on excelling at their jobs, they may instead start looking for another one.

• It creates a toxic work environment

Gossip can create cliques in the workplace and can be destructive to the teamwork necessary to complete projects, as employees take sides and begin to distrust each other. Employees who don’t want to work in that toxic environment may leave to find a more positive workplace.

• Reputations can be destroyed

Let’s say an unfounded rumor started that one of your employees has been missing deadlines on an important project. Managers may be reluctant to work with that employee in the future, damaging her reputation and limiting her career opportunities.

• It can cost you customers

It’s happened to me several times. I’m waiting for service at a store or have a meeting at an office and I hear the employees gossiping, apparently oblivious to the fact that I can hear every word. They complain about their long hours or that a fellow employee was taking off early that day. Gossiping employees can make dealing with your business an unpleasant task and people may be tempted to take their business elsewhere.

There is no doubt about it. Office gossip is detrimental to your company and to your employees. Read my next post for my top tips on how you can cut down on the gossip and its destructive effects.

 

 

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Dump, Delegate or Deal: Tips on Delegation

I read a quote recently by Daniel Doctoroff, CEO of Bloomberg L.P., who said, “I either delegate something, I dump it, or I deal with it.”

In my last column, I mentioned that the problem with many CEOs is that they end up dealing with tasks they should have dumped or delegated. Many never learned how crucial delegation is to the success of their business. The simple truth is that you can never grow a successful business unless you learn to delegate.

An article on Forbes.com references London business school professor John Hunt who says that only 30 percent of managers think they can delegate and of those, only one in three is considered a good delegator by his subordinates. I’ll do the math for you: only one out of 10 managers know how to delegate effectively.

Here are a few tips if your delegation skills could use some refining.

Be clear about what is necessary for the success of your business

In an article I read recently on FastCompany.com, “A Reformed Workaholic on How to Work Smarter,” author Kate Matsudaira wrote, “Take a long, hard look at your to-do list and your big-picture goals. Some of these items are critical and must be done by you, but most likely many aren’t. Ask yourself, ‘How does this grow my business?’ and be ruthless about cutting out anything that doesn’t fit.”

Don’t micromanage

Hire the right people and let them do their jobs. Being micromanaged fosters bad morale, resentment and employees feeling that they are not trusted. Employees want to feel like they “own” their work and feel trusted to get their jobs done.

Learn from the example of K.T. Keller, cited in the article “History’s 10 worst auto chiefs.” K.T. was president of Chrysler from 1935 to 1950 and put himself at the center of an organizational chart that resembled a wheel. All communication went through him and he involved himself in details of design, much to the detriment of the company. He thought cars should have roofs high enough so people could wear hats inside them, which led to unfashionable cars and declining sales.

Give employees the ability to make decisions

In addition to delegating work, also delegate responsibility for that work and the authority to make decisions regarding its completion. Your employees will feel empowered, trusted and more positive about the work environment. And guess what? They will also be more productive and the company won’t waste a lot of time sending decisions up the organizational chart that could be handled at a lower level.To get started, try these four steps from the article “Delegate now, before it’s too late.”

  1. Define and hand over the full responsibility to the identified candidate(s) as an experiment.
  2. Step back, do not interfere and observe the process for a few weeks.
  3. Iron out the kinks, pull back some tasks or give extra responsibility based on the observations of what went right or wrong during the period.
  4. Stabilize the process, get the documentation in place and set up reporting timetables and templates to get ongoing feedback on the delegated process.

Repeat as necessary, and watch your business grow.

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Communicate, Negotiate and Delegate in a Turnaround

This week I’ll be in Jekyll Island at the Turnaround Management Southeastern Conference, where I’ll be on a panel called Titans of the Turnaround. I chuckle about being called a Titan, as I was for an article written about my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.” I never played football for Tennessee.

But it has me thinking about the skills that I have found to be the most useful in my career in the turnaround business. These include the ability to communicate, negotiate and delegate.

Communicate

I’ve written several times about the need for communication, because it doesn’t matter how smart or visionary you are, if you can’t communicate to your employees you will not be a successful leader. As Lee Iacocca said, “You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.”

When I am hired as interim CEO or consultant at a company in trouble, I stress the need to senior management to communicate openly and honestly about the situation. I often have to work hard to open up lines of communications with employees at all levels, as they may have become accustomed to being kept in the dark.

Some employees work night shifts and may feel particularly left out of what’s going on. At one company, I hosted a midnight barbecue and chatted with the employees as I grilled hamburgers. In addition to enjoying my superb cooking skills, they left feeling listened to and informed.

As a “Titan” I also have to communicate effectively with everyone involved with the company, including lenders, vendors and customers.

Negotiate

I’ve written about my need to negotiate as the Turnaround Authority, which has earned me the nickname the Monty Hall of business. Every day is a game of  “Let’s Make a Deal” for me. You cannot be successful in the turnaround field without the ability to negotiate effectively with all interested parties.

In the negotiation process, I employ communication skills while always searching for creative solutions. Because I have not been involved in the company as it began to suffer financial difficulties, I can clearly see the situation, while the CEO has often become too emotional to determine and handle what needs to be done.

I worked with one company that had lost control of its brand and entered into licensing agreements with substandard manufacturers. It was embroiled in trademark issues and meanwhile had accumulated large debts.

I was able to renegotiate licensing agreements and default substantial licenses, getting the company back on track and focusing on its fantastic design department.

To read more about negotiation, please see my previous post, “A Key Ingredient to a Successful Negotiation.”

Delegate

I’ve seen it more times than I can remember in companies in crisis. A CEO who should be focusing his time and talent on getting his company back to financial health is instead working on tasks that could easily be handled by someone else. Usually it’s because he has not learned to properly delegate and let go of tasks that are not the best use of his time.

This inability to delegate is often one of the reasons the company has ended up in trouble in the first place. The CEO did not know how to let go of tasks or was micromanaging those that he had delegated.

All CEOs and business owners have to learn the art of delegation. That involves giving clear instruction on what needs to be done and when the deadline is. Another key is making sure you delegate the task to the right person.

The CEO needs to see himself as the catalyst to get the job done. He also needs to have the skills to communicate, negotiate and delegate.

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Never Skew the Facts to Sell the Deal

My work as the turnaround authority has given me a front-row seat to the behavior of CEOs that led them to crises. This experience provided plenty of fodder for my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

One of the mistakes CEOs make, which I covered in a white paper I wrote, is that they skew the facts to boards, creditors and constituents to “sell the deal.” Now, I often have to deal with unpleasant situations and work with companies in dire straits. But no matter how bad the situation, honesty really is the best policy. Changing the facts, or omitting crucial information to get your way is never the way to go.

Here are two stories to illustrate my point. Both these situations involved CEOs bending the facts so they could qualify for financing their companies couldn’t support.

The CEO of a hard drive manufacturer in California desperately wanted a line of credit from his bank for $60 million, so he stuffed the channel in order to make his company appear more credit worthy.

Stuffing the channel is when a manufacturer oversells product to put sales on the books, despite knowing that much of the merchandise will come back unsold. This inflates the books by overstating the top line, thereby improving the bottom line.

This strategy worked. He got the loan, but when the company repurchased the inventory on the channel within 60 days, it became out of compliance on the line of credit and the bank put the company in default.

That’s when I was brought in to salvage what I could and to hopefully restructure the company. The company survived, thanks to some hedge fund loans, but the CEO lost his job because he skewed the facts and misrepresented the true financial situation of the company.

Not bending the facts is so important that it deserves this second story. Before the technology was so ubiquitous, laser tag equipment had a very high value. A Texas-based company was seeking a large loan and claimed it had more inventory on its books than it did by adding the inventory in its Ireland-based location to the U.S. books. The auditors never verified the inventory and granted the company a far larger loan than it could handle.

When the company filed for Chapter 11, I went to the “plant” in Ireland and was not happy to discover it was just an empty lot. That inventory was just a figment of the president and CFO’s imagination and the company was now $75 million short in inventory.

I immediately went to the judge to convert the case to a Chapter 7 rather than try to bring the company through bankruptcy and be embarrassed by the fraud. The creditors ultimately sued the accounting firm and recovered millions of dollars from faulty accounting, once again highlighting the blunder of skewing facts.

Don’t manipulate data to give an unrealistic picture of your company, especially when it comes to qualifying for financing. There are reasons for the rules that prevent companies from getting loans they can’t handle, and yes, those rules do apply to you.