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Tell Him We're Not Interested!

Sep 16, 2008
From time to time I am asked by business advisors, senior level managers, and successors in privately held or family owned companies, if I have any special insights that will magically get the owners of their company to lighten up.

Why aren't they willing to delegate some of their authority, upgrade their technology to take advantage of cutting edge strategies the younger generation and their advocates are all fired up about, and give everyone a little slack - so they feel empowered to make decisions on their own once in a while?

Recently the son-in-law of a business owner told me he was really excited about a database driven addition to the company's web site. All those time consuming frequently asked questions about their warranty procedures would be online and answered automatically. Customers would be able to schedule warranty service via an online form, their sales people would be able to periodically contact their most loyal customers with notices of private sales - and much much more.

He got together with the database engineer and the web designer and together they created a compelling PowerPoint presentation for dad. He said dad listened attentively to the presentation, asking relevant thoughtful questions.

Looking back, the son-in-law said that he should not have scheduled the presentation for 10:00 Wednesday morning because the instant it was over, at ten minutes before noon, dad stood up, reached for his sport coat and was heading out the door to his weekly Rotary Club luncheon. Reacting to the questioning look from his son-in-law, he motioned for him to come out into the corridor, where dad turned to him and said, "Tell him we're not interested." And that was that.

Over the years I have seen many ideas presented by successors and their advisors scuttled by the senior generation (the people with the checkbook) with the same response or maybe it's the "wait a while" excuse supported by dads cronies (who are also resisting the inevitable), and often includes others inside the business who feel threatened by the younger generation.

Why are these forward-thinking ideas being rejected? Half a lifetime spent working with family businesses has taught me about the fears, concerns, and motivations of the typical family business owner.

Let's look at things from dad's point of view. Let's face it, from his perspective, things are often going just fine the way the are. Probably 90% of the companies that were started when his business was launched have failed, disappeared, and are long forgotten.

The business is successful now because he kept his own council, stayed away from advisors who have never run a business themselves and who make money telling people like him how to run theirs. The business is successful because he has avoided the advice of others who really had no idea what they were talking about. And he is successful because he was committed to his mission to grow the company in spite of the odds and in spite of the folks looking to distract him from his objectives with their clever ideas.

A business owner told me that "my neighbors think everything I touch turns to gold" because they never learn about all the ideas I have tried that failed.

Successors and their advisor friends want to run the business thinking they can do it better than dad. What they are really saying is that they can take what dad has created over a 20, 30, 40 year period and leverage it into something that will really impress their friends. If they lose it all, well they're sorry - but not as sorry as their dad. He loses face in the community and the industry plus he may lose his home and his retirement income.

Betting the business on junior's big ideas - promoted by his peers and his advisor pals, could mean that dad ends up living in his son's basement apartment. That's not likely to inspire dad to get on board with an expansion of the plant.

Creating a successful company is not a straight line proposition. Dad has had to cut corners, try things that did not work, keep a smile on his face when he's afraid that if the check from a slow-pay customer doesn't arrive soon he can't meet payroll, and he can't tell anyone about it. If others find out how tough things are they might lose faith in him and the business. That loss of faith is just one more thing - maybe the final straw.

After years of juggling things get better. Dad really is on easy street. Since he has made it look so simple all along, outsiders have no idea how hard it was. And then the successors come along and want "introduce advanced improved management strategies" that change the ways things are being done.

The members of the next generation waltz in with their newly minted MBA under their arm and want to be in charge. They know from the books they're been reading and from listening to professors who have never built a company from scratch - that dad's company could be much more profitable.

They bring in the advisors who support the changes - people who are getting paid when they convince dad to spend money on these brilliant ideas. Often these are the same advisors (or their children) that dad avoided so successfully for so many years.

A tactic I have recommended several times when the successors want more room to make decisions - to be a more important part of the team, is to ask them to sign over their house, cars, and other assets as collateral. If the decisions work out they will share the benefits and if not they bear some of the very real responsibility.

I am not suggesting some informal agreement. I mean to literally have them pledge their assets to at least the same percentage as their dad - legally, contractually.

When people share the risks and the rewards they are more likely to communicate honestly with one other and look at the pros and cons of decisions very carefully. Maybe if your dad saw that you were as committed as he is, you'd get further with your ideas.

Fear of failure goes beyond the money. Often it is looking bad to their contemporaries and competitors-- that causes them to hold back. One business owner said, "I've spent 45 years in this business and am on the Board of the national association. I'm thought of as a successful guy because I am a successful guy. I am not going to let go of things which, if they aren't handled right, can make me look bad."

Business owners have always faced challenges, today's new technologies are not the first new technologies they've seen. Successful business owners know that some mistakes the business can and has absorbed. But that some mistakes will absorb the business.

Premature delegation offers too much risk to the business owners self-esteem. Delegating because the advisors say it's the thing to do, turning the reins over to others to keep them happy hoping for the best really isn't a very smart idea.

And if the ideas of the successors are right on the money - then what? The business owner knows that he will be asked to go to the bank for more capital to fund the successful ideas for growth. That puts him in even more financial jeopardy and ties up even more of his assets in the business - at a time when would like to be getting money out for a change.

When successors and their advisors ask me how they can get the old man to delegate more, give them more say in the way things are being done - allow them to implement 21st century strategies, etc. I tell them that frankly I am amazed when the senior generation is willing to do anything at all.

Successors and their advocates inside the family and out seem impatient to me and to dad.

Let's consider this in the context of the military. Dad is the commanding officer and the successors start out as the lowest ranking officer possible.

In the military it takes years of on-the-job training, specialized schooling, and collaboration with colleagues up and down the chain of command in order for these young officers to move up through the ranks. Each step along the way is measured with responsibility, authority, and accountability added with each one.

Over time the decisions made at the top and those made by the rising young officer are more and more coordinated because each person is learning to trust the judgements and motives of the other.

What's the bottom line solution for you the senior generation owner or the successor? Start today to develop the path, begin the collaboration based on mutual commitments both personally and financially to one another and realize that this is a process not an event.

Estate planning documents, life insurance, etc. are quite necessary because they guarantee the future you are seeking and should be drafted with that in mind. However estate planning documents are not a substitute for the years of co-developed strategies for the common future of the company.

If you have been unable to communicate in the past, why is that? What are you afraid of? If you have been unwilling to address uncomfortable issues together, why? Do you seriously believe you can wish them away, that time will make them get better? If you are so paralyzed by the past and so intrenched by your positions, then your company will be one of the successful ones that fail. It's up to you.

If you think you need a non-biased third party to help you bridge these discussions and help you get the process started - someone with no ax to grind, no financial stake in the input they provide, and no advice to protect, engage the services of an experienced coach you both trust and respect.
About the Author
Wayne Messick reports on how Main St. businesses are poised to succeed in the 21st Century on his blog
www.WayneMessick.com His updated peer-to-peer collaboration report can be found at
www.SelfDirecterPeerGroups.com
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