THE
SUCCESSFUL FAMILY BUSINESS:
A Proactive Plan for Managing the Family and the Business
NOVEMBER 14, 2003
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By Edward D. Hess,
Distinguished Executive in Residence,
Executive Director - Center for Entrepreneurship and Corporate Growth, and
Adjunct Professor of Management, Goizueta Graduate School of Business
Emory University
Atlanta, Georgia
edward_hess@bus.emory.edu
The
following are testimonial's for Ed's new book: The Successful
Family Business: A Proactive Plan for Managing the Family and
the Business was published in November, 2005 by Praeger.
Click
here to visit the publisher's web site for more information and
to purchase the book.
Click
here to visit Amazon.com for more information and to purchase
the book.
REVIEWS/TESTIMONIALS:
Click
here to see the Customer Reviews from Amazon.com
"Anyone who is involved with a family business -- family
shareholders, family employees, other family members, independent
directors, and advisors to each of these groups -- would benefit
from this work. Ed Hess has digested a lifetime of real-world
experience into an issues-oriented and example-filled resource
that addresses the questions, issues, and tensions that family
business participants will find very familiar. As an attorney
who works with closely-held and family businesses every day, I
am pleased to have such a practical resource to recommend to my
clients".
-
Stuart C. Johnson
Partner, Corporate Group, Arnall Golden Gregory LLP
President, Association for Corporate Growth, Atlanta Chapter
"Through compelling real-life stories and practical lessons,
Ed Hess provides a solid look at family business life. If family
business leaders follow Ed’s advice and implement methodical
programs to achieve the ideals set forth in this book, they will
find the ultimate dream within reach: a successful business and
a happy, harmonious, and productive family".
-
Joseph H. Astrachan, Ph.D.
Director, Cox Family Enterprise Center
Wachovia Eminent Scholar Chair of Family Business
Editor, Family Business Review
Coles College of Business
Kennesaw State University
An engaging, action-oriented book for family businesses both
large and small. There's no substitute for the experience Ed Hess
brings to his subject. From my 20 years of working with family
businesses in the real estate industry, Ed Hess's observations,
"operating rules," and sensitivity to the issues involved
with operating and growing a family business should be welcomed
by a variety of family business leaders.
-
Jeffrey A. Scott
Managing Director
Real Estate Corporate FinancelWachovia Securities
For anyone who works in a family business, this book should
be kept at your fingertips and referred to often. The book is
written in a style that is straightforward and easy to comprehend,
but Ed Hess's common sense approach should not mask the great
wisdom that is contained within the pages. As a person who has
worked in a family business for the past 21 years, I find Ed Hess's
advice to be right on the mark -- I only wish I had the opportunity
to read the book years ago. For anyone considering a career with
a family business, whether as a family member or an outsider,
you simply must read this book to begin to gain an appreciation
for the very complex nature of family businesses.
-
Jack Spector
President, Hixon Properties Incorporated
San Antonio, TX
The
following are Customer Reviews listed on Amazon.com
A must
for a family business, August 18, 2006
Reviewer: S. P. Newell
I have not only studied this fine text, but I have bought copies
for four friends with family businesses. I am personally aware
of many of the pitfalls associated with a family business, but
reading this book increased the breadth of my awareness greatly.
And, most important, it provided great insight into how to deal
with these many issues. I believe strongly that being forewarned
is being forearmed, and this book provides invaluable warnings
and solutions regarding family business challenges. I personally
believe it is a must read for all members, direct and indirect,
of family businesses.
A. Whitaker,
August 1, 2006
Reviewer: A.B. Whitaker
As a Financial Services professional focused on advising Ultra-High
Net Worth individuals and families during and after significant
liquidity events, I have been witness to the issues that arise
prior to, during, and after the sale of a family business. Ed
Hess has thoroughly explored the realities that families must
face when creating a succession plan. Hess also thoroughly discusses
the typical exit options that exist for business owners as well
as the qualitative considerations that families should explore
before selling a business. I highly recommend this book and plan
to use it as a reference tool on an on-going basis.
The Successful
Family Business: A Proactive Plan for Managing the Family and
the Business , July 29, 2006
Reviewer: Michael D. Easterly
Acquainted with Prof. Hess, I was looking forward to reading
the book, as it is on a subject with which I was not fully familiar.
I was not dissappointed. Straightforward, well organized and with
great case studies, I believe I now better understand this specialized
area of business. I recomment this book for anyone working in
or advising a family business, and am lending my copy to a good
friend with a considerable family business interest.
Family Planning, February 21, 2006
Reviewer: J. Douglas "Retired Senior Executive"
This book represents a complete summary of relevant, major
issues facing any family business. Each of these issues will be
actively managed or at least contemplated in the life of any family
business and the long term success and viability of the organization
is dependent on how or if the issue is resolved. Ed Hess provides
thought provoking guidance on how to deal with each problem encountered.
He points out the relationship and dependency of many of the issues
to each other and the need for timeliness in addressing the subjects.
This book is a must read for CEO's and Directors of growing family
businesses.
I. WHAT IS THIS BOOK ABOUT?
Creating and managing any private business is challenging; an
estimated 70% fail within five years. When that business employs
family members or has family shareholders, an added layer of complexity
comes into play - family emotions.
To successfully manage a family business, you need to manage
not only the business but also the family. Unfortunately, the
most common business management strategies, styles, and processes
do not lend themselves well to managing the emotionally-charged
family issues.
This book focuses on the different management styles and processes
needed to successfully manage a family business. This book sets
forth an attitude approach, a perspectives analytical template,
and a disciplined process for family business leaders ("FBL")
to manage the evolving family dynamics of a family business. Secondly,
most family businesses face similar problems as they age and this
book sets forth practical advice (50 Family Business Operating
Rules) based on 25 years of consulting, teaching, and research.
The book is both a roadmap and a resource for family business
leaders, employees, shareholders, and spouses.
The key themes of this book are:
1) Every family business will face issues created by the conflict
between the financial needs of individual family members and the
financial needs of the business;
2) Every family business will face issues created by the conflict
between family members employed in the business and those not
so employed;
3) Family issues are best managed proactively and preemptively;
4) The process of managing family issues is as important as the
result - how they are managed is key; and
5) A family business should institutionalize an agreed-upon approach
of how family business issues will be raised, debated, and resolved.
This book gives the reader multiple real world examples and four
in depth case studies to be used as learning tools. The book is
written in practical, how-to language and is direct and opinionated,
based upon the author's 25+ years representing family businesses
as a lawyer, investment banker, consultant, and lastly as a teacher.
The key differentiators of this book are:
1) This book sets forth a step-by-step approach to creating a
family business management process - how to get the right mindset
or attitude; a perspectives analytical framework; and how to set
up processes to manage family business issues;
2) This book teaches family members to accept and deal with the
normal evolution and lifecycle of family business issues that
will arise as businesses and families age;
3) This book talks practically about family issues of power, greed,
ambition, rivalries, in-laws, the generational issues of retirement,
succession, and the common feelings of inequity and unfairness
arising not only between different generations but also within
generations between family members employed in the business and
those not so employed;
4) Through real-life examples, different solutions are brought
to life for consideration; and
5) This book sets forth new theories: the SANDBOX THEORY; a new
perspective on rivalries and succession, and the GOLDEN GOOSE
PRINCIPLE - a new perspective on the inherent conflict between
the business and individual family members.
This book sets forth over 50 family business rules that apply
to commonly reoccurring family business issues:
• Family Employment
• Family Compensation
• Family Promotions
• Family HR policies
• Family Perks
• Family benefits
• Boards of Directors
• Dividends
• Stock restrictions
• In-law participation
• Prenuptial agreements
• Stock ownership restrictions
• Succession issues
• Equitable treatment of non-employed shareholders
• Sibling rivalries
• Stock buy-back plans
• Outside directors
• Outside CEOs
• Gifting of stock
The book has a richness and captivating no-nonsense style and
also focuses on how decisions in one area will have predictable
consequences in other areas.
II. WHY ME?
The purpose of this book is to reduce the probability of the
business destroying the family and the potential of the family
destroying the business. The goal is to be the #1 selling family
advise book.
I am the Distinguished Executive in Residence, Adjunct Professor
of Organization and Management and Executive Director of the Center
for Entrepreneurship and Corporate Growth at Goizueta Business
School at Emory University. I teach Entrepreneurship, Values-Based
Leadership and Growth Courses.
Prior to joining Emory, I spent 31 years as a lawyer, investment
banker and consultant to primarily private family businesses.
I am a graduate of the University of Virginia School of Law; have
a LL.M. (Taxation) from New York University; have been a partner
at two investment banking firms, a partner of the Robert M. Bass
Group, Fr. Worth, Texas; and a senior founding partner of Andersen
Corporate Finance. This book is the culmination of over 25 years
experience advising family businesses.
III. THE AUDIENCE
Family businesses account for over 90% of all businesses in the
U.S. and employ over 60% of all employees. According to the U.S.
census, there are over 5,500,000 businesses in the US. with less
than 100 employees - many of which are family businesses. According
to the IRS, there are over 12 million non-home based private businesses.
Family businesses are big business. Millions of people face the
challenges of creating a lasting legacy - something meaningful
that they will pass on to the next generation.
The buyers of this book are:
1) Family business leaders;
2) Family members employed at a family-owned business;
3) Family members who are shareholders of a family-owned business;
4) Spouses of those who fall into categories 1-3 above;
5) Children of those who fall into categories 1-3 above;
6) Undergraduate business students studying family businesses;
7) Graduate business students studying family businesses; and
8) Family business professionals - accountants, insurance agents,
lawyers, etc.
IV. THE COMPETITION - HOW IS THIS BOOK DIFFERENT?
There are a large number of books in the family business space
- but there is no leading book and there is no leading reference
book or handbook written in a practical, advisory manner for the
average family member.
The best books are:
Succeeding Generations by Ivan Lansberg (HBS Press, 1999)
Generation to Generation by Gersick et al (HBS Press, 1997)
Keeping The Family Business Healthy by John Ward (Jossey Bass,
1987)
Individual Topic Pamphlets (50 pp) by Family Enterprise Publishers
The key differentiators of this book are:
1) This book sets forth a step-by-step approach to creating a
family business management process - how to get the right mindset
or attitude; a perspectives analytical framework; and how to set
up processes to manage family business issues;
2) This book teaches family members to accept and deal with the
normal evolution and lifecycle of family business issues that
will arise as businesses and families age;
3) This book talks practically about family issues of power, greed,
ambition, rivalries, in-laws, the generational issues of retirement,
succession, and the common feelings of inequity and unfairness
arising not only between different generations but also within
generations between family members employed in the business and
those not so employed;
4) Through real-life examples, different solutions are brought
to life for consideration;
5) This book sets forth new theories: the SANDBOX THEORY; a new
perspective on rivalries and succession, and the GOLDEN GOOSE
PRINCIPLE - a new perspective on the inherent conflict between
the business and individual family members; and
6) This book discusses all of the issues commonly faced by family
businesses - not just succession; it is a complete, one-source
reference book.
V. DETAILED TABLE OF CONTENTS
INTRODUCTION
- 5 reoccurring themes
- Why is this book important?
- Why me?
- 4 major changes in your approach to family business issues
- Mindset
- Perspective
- Process
- Values
CHAPTER 1 - YOUR MINDSET AND YOUR PERSPECTIVE
- Reactive vs. Proactive
- Your business will change
- Your family will change
- Change is a given
- Money is the focus
- 3 different perspectives
- Different management styles and procedures are needed
for family issues
- Negative family management styles
- Positive family management styles
- Golden Goose Principle
CHAPTER 2 - TWO COMMON MISTAKES OF FAMILY BUSINESS LEADERS
- Avoidance
- Failure to face reality
- Reactive or proactive
- Examples
CHAPTER 3 - A PROACTIVE FAMILY MANAGEMENT PROCESS
- Objectives of a Process
- Key Components
- Why a Process Is Important
- The HOW is as important as the result
CHAPTER 4 - HOW DO YOU START YOUR PROCESS?
- The purpose of a process
- The 5 big issues all family businesses face
- First Step: Create a Family Values Statement
- Second Step: Create a Family Code of Conduct
- Third Step: Family Annual Meetings
- Execution Steps: How To Do It?
CHAPTER 5 - A FAMILY VALUES STATEMENT
- Purpose
- Golden Goose Principle
- Examples
- Bass Brothers Comment
- Bob Bufford Comment
- A Family Values Statement Example
- Mark Norris Comment
CHAPTER 6 - A FAMILY CODE OF CONDUCT
- Purpose
- Benefits
- Example of a Family Code of Conduct
- 17 Points
CHAPTER 7 - THE PRITZKER FAMILY
- A Case Study
CHAPTER 8 - ANNUAL FAMILY MEETINGS
- Objectives
- 4 Reasons why they are good
- Example of A Family Meeting Agenda
CHAPTER 9 - REVIEW OF KEY POINTS IN CHAPTERS 1-8
- 21 Points
CHAPTER 10 - EMPLOYING, COMPENSATING, AND MANAGING FAMILY
EMPLOYEES
- Will family members be employed?
- How many?
- At what level?
- Prior work experience required?
- On what basis?
- Impact on other employees
- Impact on non-employed family members
- You need consistent and fairly applied HR policies
- 4 key points
- 2 conflicts
- A basic choice - arm's length rules vs. favoritism
- 7 operating rules
- Compensation - How should family members be paid? Should
all be paid equally? Family pay vs. employee pay - an issue of
equity; and three operating rules
- Performance Review
• Who should review the performance of family employees?
• Promotion policies, firing policies for family members.
• 3 perspectives
• 3 Operating Rules
CHAPTER 11 - WHAT BENEFITS SHOULD FAMILY MEMBERS RECEIVE?
- Corporate Perks
• Vehicles
• Insurance
• Accounting
• Buy at Cost
• What can the business afford?
• Family Operating Rules
- Dividends/Investments
• A big issue
• Business needs
• Individual needs
• 3 factors to consider
• Operating Rules
• Family Office Issue
• Investments
- Prenuptial Agreement
• 3 Operating Rules
- Family Loans
- Company Purchase of Goods or Services From Family Members
• Operating Rule
CHAPTER 12- FAMILY RETIREMENT POLICIES
- Mandatory retirement?
- Integral part of succession planning
- 5-10 year process
- Conclusions
- Stock Retirement
- Relationship of retirement, succession, estate planning
and stock control planning
- The money pie
- 3 Operating Rules
CHAPTER 13 - FINANCIAL INFORMATION: DISCLOSURE AND IMPROPRIETIES
- Financial disclosure operating rule
- What do you do if a family member steals money from the
business?
- 4-Prong Answer
CHAPTER 14 - BOARDS OF DIRECTORS
- Should you have independent directors?
- Generational representation?
- Purpose of the Board
- 3 Reasons to use independent directors
- Board structure
- Operating Rule
CHAPTER 15 - FAMILY CHARITABLE CONTRIBUTIONS
- Who decides?
- Relationship to family charities
- Use of charitable contributions to involve the family
CHAPTER 16 - SIBLING OR COUSIN RIVALRIES
- Why do rivalries occur?
- 4 operating rules
- How to mitigate rivalries
- The Sandbox Theory
- 4 Family Business examples
CHAPTER 17 - SIBLING RIVALRIES: A CASE STUDY
- The Bingham Family
CHAPTER 18 - SUCCESSION PLANNING
- 4 Common scenarios
- The people part
- A 5-10 year planning process
- De-personalize succession planning
- Succession planning is like life insurance
- 7 operating rules
- What if the family leader refuses to discuss succession?
- 4 answers
- What if you have competing siblings or cousins? - 4 operating
rules
- What if there is no good family successor?
- Transfer of stock ownership
CHAPTER 19 - AN OUTSIDE CEO
- When do you need an outside CEO?
- Qualifications?
- Compensation?
- Stock Ownership?
- 5 Common occurrences
- Is it just a timing issue?
- Sale of the business vs. bringing in an outside CEO
- The traits of the right outsider
- If possible, hire someone you already know.
- How do I find an outside CEO?
- Should a non-family member CEO own stock?
- Should the non-family member CEO be Chairman of the Board?
- What if you make a mistake?
CHAPTER 20 - AN OUTSIDE CEO CASE STUDY
- Edens and Avant
CHAPTER 21 - A SUCCESSFUL FAMILY SUCCESSION CASE STUDY
- The Beach Company
CHAPTER 22 - FAMILY BUSINESS LEADERSHIP DEVELOPMENT
CHAPTER 23 - STOCK LIQUDITY
CHAPTER 24 - THE SANDBOX THEORY
CHAPTER 25 - OTHER FAMILY BUSINESS ISSUES:
- Managing Execution
- Why Successful Companies Often Fail
- Going Public to Get Rich - Reality Therapy
- The Challenge of Growth
- Why Should Anyone Follow You?
- What Do Leaders Actually Do?
CHAPTER 26 - FAMILY SHAREHOLDERS NOT WORKING IN THE BUSINESS
CONCLUSION - THE GOLDEN GOOSE
BIBLIOGRAPHY
* * * * * * * *
VI. SAMPLE CHAPTER
For my writing style, attached are two commentaries.
VII. RESUME
VIII. BOOK STATUS
The third draft of the book is in typing. It is 80% completed
and will be approximately 250 pages in length. It will be completed
by January 31, 2004.
IX. AUTHOR SUPPORT
The author is the Executive Director of a major Center at a top
20 graduate business school where he also teaches graduate and
undergraduate business courses. In addition, the author publishes
(according to the publisher, a "very successful") monthly
column in Catalyst - B2B, a leading Southeastern business magazine
with over 60,000 subscribers.
Moreover, the author markets his writings to over 400 major Southeastern/MidAtlantic
companies three times a year, and the author usually gives four
- six speeches a year at either national, regional, or local events.
All of the above platforms generate exposure and opportunities
to sell the book. The author plans to use any advance from the
book to hire a marketing firm to arrange media interviews and
to advertise seminars based on the book's content.
X. TESTIMONIALS
The author will provide appropriate testimonials from leading
academia, family business owners, and family business advisors
Attachments:
1) Managing the Family Business
2) Why Should Anyone Follow You?
THE FAMILY BUSINESS:
THE GOLDEN GOOSE, THE PROCESS, AND THE SANDBOX
Return to top
By Edward D. Hess,
Distinguished Executive in Residence,
Executive Director - Center for Entrepreneurship and Corporate
Growth, and
Adjunct Professor of Management, Goizueta Graduate School of Business
Emory University
Atlanta, Georgia
edward_hess@bus.emory.edu
Eighty percent or more of all businesses in the U.S. are family
controlled. Over 50% of the work force works for a family business.
Family involvement in a business adds an additional layer of complexity
to the customary challenges facing business builders. There are
books and articles which deal with the common family business
issues of nepotism, succession, and equitable treatment of family
members not in the business. Today, I want to share with you three
lessons I have learned over the years in working with many family
businesses:
1) Rule #1 - Do not kill the Golden Goose;
2) An entrepreneurial management style will not work with family
issues; and
3) Everyone needs their own sandbox.
I. DO NOT KILL THE GOLDEN GOOSE!
Building a successful family business is hard. Successfully passing
it along to future generations is even harder. In fact, 70% of
all family businesses do not successfully make the transition
to the second generation.
Difficult emotional issues arise in all family businesses: issues
involving employment of family members, compensation of family
members, equity amongst siblings, the cash needs of family owners
not employed in the business, in-law issues, succession choices,
and as importantly, the effect of all of the above on non-family
employees and managers. Family issues are like waves in the ocean.
They keep coming and coming and coming. As family members age,
their perspective, needs, and views of the business change. These
changes interact with changes in the business to produce a nice
unique gumbo of issues for every family business. Issues, which
if ignored, can kill prematurely the golden goose.
A family business which produces enough profits to support many
members of a family is a unique treasure and blessing to be appreciated
by all. All family members need to understand what they have and
how fragile it may be - not only do you have the risk of business
factors but you also have the risk of family factors which can
kill the golden goose. Family members need to be made aware and
sensitive to how they, yes, they can destroy the business as easily
as the competition unless they learn to communicate and work through
family issues.
Every family member that "feeds at the family business trough"
has the duty and responsibility to understand the uniqueness and
goodness of what exists and further has the responsibility not
to hurt the business or cause serious strife out of personal self-interest.
The good of the whole outweighs the greed, selfishness, or ego
of the one. Pure and simple, paraphrasing General Douglas McArthur
- duty, honor, and family. Family leaders have the obligation
to educate family members about the realities and risks to the
business from outside the family and from within the family. The
family has to agree on certain inviolate values which all can
ascribe to. These overriding values will help family members deal
with business issues and family issues as they arise. Families
need to meet and discuss values and goals, and reach understandings
about those values and goals for both the business and the family.
II. A DIFFERENT MANAGEMENT STYLE IS NEEDED FOR FAMILY ISSUES
Managing family issues is different than managing business issues.
Non-family member employees are easier to talk to, persuade, and
direct than family members. You can be more objective about non-family
members and issues. The common entrepreneurial management styles
and process of quick decisions and taking charge does not work
well with family issues.
The emotional aspects of family impacts decision making, impacts
communication directness and honesty, and the carryover of family
issues to the home - and in some cases, to the bedroom - make
it impossible to leave family business issues at the proverbial
office. The emotional complexity comes not only from the participants'
emotional baggage but also involves spouses, parents, and siblings.
Every family has issues. Every individual has family emotional
"baggage". Accept those realities and manage them.
An autocratic, quick decision making, handle-it-once-and-for-all
entrepreneurial mentality does not work well with family issues.
A different style and process is needed to lessen the risk of
family issues destroying the business. And this different management
style is hard for entrepreneurs to adopt successfully. It is contrary
to their demeanor and way of operating. It is a style of openness,
communication, listening, being empathetic, and having a forum
or process of allowing all of the family emotions to be vented,
heard, and discussed with resulting compromises again, again,
and again. Family leaders need patience, listening skills, and
dispute resolution skills. Or, they need to bring in a facilitator.
Listening, giving people the opportunity to be heard, and having
a process whereby family members are educated about the realities
of business is critical to managing the family. The process is
as important as the results. Reaching the quick bottom line results
does not work well in this arena. People have to go through their
own process of dealing with their respective needs and wants relative
to the family and the business. It is constantly evolving and
never ending.
Family councils, family constitutions, and frequent family meetings
do and can work to mitigate against the risk of killing the golden
goose if and only if you have a process that is values driven
and the family understands its duties and responsibilities toward
the whole not just me, me, me. To do this takes time, emotional
effort, listening, compromise and leadership. Remember - you ignore
family issues at your peril; they do not go away. You have to
manage family issues differently and with a different style and
mental framework than business issues.
III. EVERYONE NEEDS THEIR OWN SANDBOX
Many family businesses dissolve or split up because "everyone
needs their own sandbox." Siblings or cousins want to show
themselves and others they can make it on their own or they want
control of what and how their money is spent. And so, you need
to plan how to address this need for individual sandboxes. There
are different ways that I have seen work:
A. Business Structure - Structure the business so that different
siblings (assuming qualifications and training - remember the
golden goose) have "their own sandbox" within the business
whether that be a function, a location, or a product that they
are responsible for. Give people the opportunity to be independent
with specific non-shared responsibilities. Give them the burden
of responsibility and leadership.
B. A Separate Investment Vehicle - Another alternative is to give
certain family members their own sandbox in the form of a family
investment or a venture capital vehicle separate from the business.
C. Separate Toys - Another alternative is to give each family
member a meaningful amount of assets over which they have sole
investment or spending control.
D. Invest in Them - Lastly, the business can invest in a new business
of a family member either directly or indirectly through the purchase
of services or products. I have seen this work well with in-law
issues.
All four of these alternatives attempt to deal with individuals'
need for autonomy and their need to prove to themselves and to
others that they are worthy and good. In some cases, it is not
the direct family member driving the needs or stirring the pot;
it is the daughter-in-law or son-in-law. As stated above, an education
process is a necessity for new family members - family values
and the common good must trump individual greed and ego.
You family business is your own unique multi-variant set of issues.
Recognize that you have to spend time managing family issues,
too. Good luck with your gumbo and remember rule #1 - Do not let
family issues kill the golden goose.
ENTREPRENEURIAL LEADERSHIP:
WHY SHOULD ANYONE FOLLOW YOU?
Return to top
By Edward D. Hess,
Distinguished Executive in Residence,
Executive Director - Center for Entrepreneurship and Corporate
Growth, and
Adjunct Professor of Management, Goizueta Graduate School of Business
Emory University
Atlanta, Georgia
edward_hess@bus.emory.edu
My MBA students spent the Spring studying leadership. Their journey
took them from Jack Welch to Sam Walton to Howard Shultz to The
Ritz Carlton Corporation to Chick-fil-a Company to Presidents
Nixon, Ford, Reagan, and Clinton and to General Harold Moore and
the U.S. Army. Along the way, we talked about Greek philosophers,
Hitler, Gandhi, and Machiavelli. We studied two movies - "We
Were Soldiers" and "Changing Lanes" and debated
at length whether the ends justify the means or whether how you
play the game is more important. For those interested, a detailed
syllabus for Business 665 is on my website (www.EDHLTD.com). It
was a fascinating trip for us.
We focused on several questions:
1) Why should anyone (employees or customers) follow you?
2) What are the roles of personality, charisma, timing, context,
situation, and adversity in leadership development?
3) Why do some companies achieve consistent execution excellence?
4) What really motivates employees?
5) How can MBAs understand and lead hourly employees?
6) What is the relative importance of strategy, structure, people,
and process in building a great business?
7) Why is execution so hard?
8) How do you make repetitive, boring jobs fun and meaningful
for employees?
9) What is the relationship between an entrepreneur's personal
values and the business culture?
I believe that principled or values-based leadership is the most
important element in building a world-class sustainable business.
Unless suppliers, customers, employees, and lenders trust and
believe in you, you will fail. Leadership is a daily job - it
is hard, fun, meaningful, and challenging.
What is leadership? There are over 200 definitions of leadership.
Some people cannot define it but know it when they see it. Let
us start with what leadership is not. We considered Leadership
is not about perks, money, power, adulation and ego fulfillment.
We concluded that:
1) Leadership is a Trust Relationship.
If operational excellence is your goal, if consistent high quality
customer satisfaction is important, if employee loyalty and enthusiasm
are important, employees have to trust you and believe in your
goals. Trust is earned - not bought. Part of trust is respect.
Trust is respect for your values - that you will act in the best
interests of your followers and not solely in your self-interest.
Trust is earned drop by drop but lost by the bucketful. The essence
of a leadership relationship is trust between the leader and the
followers and vice versa.
2) Leadership is Honest, Two-Way Communications.
The execution of leadership on a daily basis is through honest,
direct two-way communications with employees and customers. Employees
want to know what the objectives are; how what they are doing
contributes to those objectives; how the business is doing; how
they are doing; how they can improve. To be effective, communications
need to be direct, concise, two-way and repetitive.
To be a good leader, you must be a good listener and understand
people and their emotions and motivations. Two-way communication
gives employees respect and sends the message that he or she is
a valued member of the team.
3) Leadership is Teaching and Learning.
Fundamentally, to build a sustainable business you have to teach
your employees and your managers what is important, what are acceptable
standards, why what they are doing is meaningful, and how each
person can develop to be all they can be.
Leaders lead by teaching, critiquing, and setting standards of
conduct and performance. Leaders help people improve and learn.
At the same time, leaders learn from their followers. They encourage
different opinions and suggestions in order to instill a sense
of ownership in the end result and to get the best results.
4) Leadership is Helping People Be All They Can Be.
A paycheck alone will not, in most cases, achieve operational
excellence. Employees are human beings, too. Human beings thrive
on recognition, thank yous, and pats on the back, if earned. Emotional
rewards are as important as tangible rewards. As importantly,
people want to be part of something bigger than themselves and
something meaningful. They want their job to be important in some
way. People want to belong to and be part of something that is
viewed by others as good and meaningful.
It is a leader's job to create that meaning and to treat his
followers with dignity and respect, to make them feel like they
have a stake in building something special, and to help them advance
and prosper.
5) Leadership is Courageous Acting.
Leaders act. Leaders never ask their followers to do anything
they would not be willing to do themselves.
Leaders have the courage to make the tough decisions. Leaders
confront reality. Leaders respect differences of opinion and debate.
Leaders learn, adapt, adjust and most importantly, they make the
tough decisions and act in the best interests of the whole enterprise
- not just in their self-interest.
6) Leadership is Harmony Between What You Do and What You
Say.
Gandhi stated, "Happiness is when what you think, what you
say, and what you do are in harmony."
Or stated another way, leaders walk the talk. Leaders are loyal
to their values and standards. Leaders understand that employees
watch their actions, their moods, and how they treat others, in
order to help determine a leader's consistency, reliability, and
trustworthiness.
Hypocrisy, inconsistency, and dishonesty will kill your corporate
culture and decrease your chances of operational excellence.
7) Leadership is "Washing the Dishes Often".
Leaders are not seduced by the perks of leadership. Good leaders
do not forget they are only as good as their followers and they
are there to serve their followers. Good leaders are humble, and
understand the role of luck, education, opportunity, and birth
in their success. Leadership is an attitude - an attitude of serving
others. Good leaders never, never forget to honor and respect
the menial, repetitive tasks done by others.
Good leaders eat with the troops. Good leaders wash the dishes.
What do I mean by that?
When Dan Cathy, President of Chick-fil-a, came to talk to my
class he shared with them his rule at operating at both the 80,000
foot level and at the 5 foot level and told them how at a new
store opening recently in Florida, he washed dishes for two hours
the night of the opening. That is a humble leader. Think of the
message he sent to his employees. That is leadership.
* * * * * * * * * * * * * * * * * * * * * *
Like many things in business, the concept of leadership is not
difficult to understand. What is difficult is the execution -
execution day-in and day-out.
Leaders must focus on their followers - not themselves. A leader's
focus is not I or me but we. What have you done today to show
respect for your followers? What have you done today to help them
learn, be better, and grow? What have you done today to help them
do their job better?
Leaders understand the most important five words in a customer
or employee relationship are "HOW MAY I HELP YOU?"
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