The ultimate competitive advantage for family businesses: Doing arguments well.

Relationships require work. This is as true for families as it is for businesses and is doubly true for family businesses. In Canada, the most recent Rogers family business drama has captivated the nation even more than the turmoil surrounding the Stronach family business empire. Eleven million Canadians are Rogers customers after all. Of course, Canada is hardly alone when it comes to family business quarrels. Earlier this year, the Economist chronicled “explosive” family feuds in Germany’s powerhouse companies (surprisingly calling them surprising), and the New York Times highlighted some of the relational struggles of American family firms. Family businesses are also a key feature of the Japanese economy, possibly even holding the record for longevity - the Takenaka construction company, for example, goes back to the year 1610.

Over the past 25+ years, I have been involved with family businesses in different parts of the world, industries, and generational stages and in varied, often overlapping, capacities, including  executive, advisor, consultant, board member and partner. I also had the pleasure to speak at and learn from the Centre for Family Business, one of Canada’s largest membership-based family business associations. Based on experience and direct observation, I remain convinced that despite all the headlines, family businesses are uniquely positioned to contribute and succeed based on a strong sense of purpose and taking a long-term view. All the more reason to figure out how to get along well. The best point to start, in my opinion, is to ask some questions. Here are some of my favorite ones: 

Is relationship success one of your KPIs?

Peter Drucker famously taught that you cannot manage what you cannot measure. With the advent of the data economy, Drucker’s insight has led to an ever more sophisticated set of key performance indicators (KPIs). Sales, profits, and other criteria can now be measured in real time and with a high degree of industry specialization, ranging from revenues per available room (RevPAR) in the hotel industry, to churn rates and monthly recurring revenues (MRR) in the software industry (especially the “as a service” kind). Such “hard” measures are critical indeed. They obscure the fact, however, that “soft” measures, such as “how are we getting along” may be as, or even more, important to the success of a firm. According to Drucker, culture does eat strategy for breakfast. The best measure of relationship quality (which I learned from Robert Mnookin at the Harvard PON) is “how well are we at working through our differences.” The point here is this: differences are to be expected and even desired and we must *know how good we are at working through them. Is conflict healthy, does it lead to better decision making and does it strengthen relationships? Or are we allowing ourselves to indulge in destructive dysfunction? As always, it is best to introduce a measure when it is not needed (much like establishing a line of credit when you do not need the money) and this one should start long before there is trouble on the horizon. So, make it a measure (a simple rating from 1 to 10 will do to start) and - consistently - think about how you can improve.

Are you constantly learning and teaching how to get along?

The above NYT article introduces the concept of a chief learning officer (CLO) for family companies, and it is an intriguing idea indeed. Sure, there are a plethora of books and courses on conflict management (most of them, in my opinion, promising more than they can keep) but generic material is often not quite as useful. This is especially so when only some of the players have been exposed to it. If I have learned one thing from my ten year experience as a national instructor on “difficult conversations in the boardroom” at the University of Toronto/ICD Directors Education Program it is that application, not insight, is by far the bigger challenge. To be sure, there certainly are some profound and not immediately obvious concepts to be highlighted, but making the principles work in the specific context of the firm and its people is where the learning rubber hits the road. Especially with experienced business people and family members, the challenge is not new insight but new behavior. This is something we must learn and spend time teaching in our context - especially in a multi-generational context. In that sense, every management/board/family meeting becomes a learning and teaching opportunity. What worked well, what didn’t, and how can we do better over time?

Do you have a trusted advisor who is trusted by all?

Reporters of the Rogers saga highlight John Tory and his long association with the Rogers family and family business. Indeed, John Tory provided some outstanding examples on how to work effectively with a powerful founder (Ted Rogers) which I was glad to share in my book Influencing Powerful People. Now mayor of the City of Toronto, local news outlets and the BBC report that Mr. Tory has been called in - yet again - as “family therapist.” While they asked questions as to the compatibility with his responsibilities as mayor of a major North American metropolises (pointing out the city may need a therapist of its own) the role itself is a huge value add for sure. People - no matter how senior they are - have a deeply ingrained need to be understood and this is exactly what a good advisor does before anything else. He or she understands people and then - and only then - offers up advice. Sometimes they do not even do that. As I have experienced many times, allowing someone to share their frustrations with someone “who gets it” can be just as “therapeutic” and becomes the starting point for clearer reflection. Truly understanding both sides (with the understanding gained over time) is also the needed foundation for effective mediation should the need arise. In fact, the New York Times recommends family businesses hire a new type of executive: the Chief Referee. In my experience not every conflict can be mediated, far from it. But if the stakes are high and relationships are poor a trusted advisor can certainly increase the chances of success. He or she can also offer a cold hard assessment that a situation is in fact beyond relational repair.

Do you know who you are and what you want?

“Who are you and what do you want?'' was a point-blank question put to me in a memorable one-on-one meeting with the vice dean of a leading North American business school. No small talk, no beating around the bush, just one question. And an excellent question at that. Whenever I talk to a person who is dissatisfied with their career, struggles with the quality of the culture in their firm, or is frustrated with people who make their professional life miserable, it is the question I ask. And while the sense of dissatisfaction itself is often strongly held, the answer to what they want is almost always much less clear. Sure, letting off some steam in a safe environment can be all that is needed, but it is better to ask important questions sooner than later. Gaining clarity of purpose and what you want out of a career (or even life for that matter) helps to start steering things in that direction. Very often, by the way, the answer is respect and appreciation, and what a reminder that respecting people is one of the best ways to retain them in your business. In a family company, the answer may be that some family members do not want to be part of the family business (probably much more acceptable in the United States than in other parts of the world). Articulating what you want to a trusted advisor (first) may help in a number of ways. That person can provide a reality check (not all aspirations are realistic), help you to test and adjust, and they can use that knowledge judiciously when the situation calls for it. Sharing your ambitions more clearly (with the right people, at the right time and in the right way) also avoids the “you should have told me this before” complaint when someone leaves the business unexpectedly. Of course, such conversations require trust which connects us back to question #1. Soft things are often harder than hard things.

Are you daring to ask the big questions (before it is too late)?

Any business has some big questions that presently get ignored. They can relate to changing market dynamics, underperforming business units, people who no longer fit, and, of course, succession planning (first and foremost for the CEO). Addressing such questions is as important as it is unpopular. For example, I was involved in one situation where the CEO perceived asking the succession question as an attempt “to get rid of him.” Another make or break question I have seen is dealing with a competitive landscape change - a firm with massive success had moved up the growth “S curve” and needed to jump on the next big thing. The danger was that it did indeed jump on a next curve but without understanding its maturity level - the new business was new to the firm but not quite as new to the market. The upshot is this: amid operational fires, irate customers, and the crisis du jour (everything from a data breach to a product recall) it can be very hard to worry about the big question; reasons to postpone it abound. But you will do so at your peril. You must find the time and the fortitude to ask the questions that must be asked - if you do it sooner you have the luxury of sober reflection without do or die pressure in that moment.

The bottom line

So, what is the bottom line? All families argue and many argue hard. Therefore, making arguments go away cannot and must not be the goal. Instead, the family business must turn the hard work of “doing arguments well” into an advantage - call it competitive edge, core competency or whatever you like. If we can use family business arguments to achieve better outcomes and build stronger relationships, we will be miles ahead of those competitors who don’t or who can’t. So, focus on relationship success as a KPA and leave it to others to provide their dysfunction as fodder for news headlines and public spectacle.

This blog is designed to inform readers and stimulate discussion. It is shared with the understanding that it does not constitute legal, accounting, securities, or other professional advice to be relied upon. If such advice is needed, the services of a competent professional person should be sought. As we are critically thinking human beings, the views expressed in the blog are always subject to change, revision, and rethinking at any time. The author(s) and Jenoir® International are not to be held responsible for misuse, reuse, recycled and cited and/or uncited copies of content within this blog by others.