How to decide which child will be the successor to your family-owned business

Last month, we began a series on the four phases of succession planning for family-owned businesses. We explored the initiation phase – that period when it begins to become apparent whether a child or other family member will eventually fill your shoes as head of the organization.

This time around we’ll take a look at the selection process, perhaps the most difficult step of the entire course of transition, especially if it comes down to choosing among a number of children. And there’s an additional challenge if none of the children is or will be ready to take the helm…or if there’s a better choice outside the family.

Chalk it up to “just the way it is” but if the next generation leader is one of several children, the selection may be construed by siblings as “oh, sure, he was always your favorite.” This perception can be disastrous to the entire family unit and as such, some business owners avoid the issue, adopting the attitude of “let them figure it out when I’m gone.”

And then there are those who favor the “eldest takes all” approach. In some cases, however, the oldest may not be the best qualified, so placing restrictions – be it age or gender – on succession is rarely the best idea.

To keep things fair, family-business owners may want to embrace a successor selection model developed for corporate executive succession. In this model, the family business leaders can develop company objectives and goals for the future head of the company – essentially a job description that spells out specific results, skills, education, experience, and possibly even personality traits.

For example, if a business has set its sights on significant growth in the next five years, the potential successor would be required to have a thorough understanding of business operations, business development, valuations and financial statements, in addition to the ability to negotiate and good relationships with banking and lending institutions.

There are many benefits to designing such a job description. First, it removes the emotional aspect from the selection process; second it provides the business with a set of future objectives; and lastly, the company founder can rest easier knowing goals are in place that will ensure a growing, healthy business.

Next month we’ll delve into the successor training/education process – yet another delicate matter that is often best left to someone other than the owner.

About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

The reshaping of feminine leadership in a mixed gender environment

Continuing on the theme dedicated to Team Building, team Effectiveness and GroupThink we are highlighting a thought-provoking research conducted by the Bristol Business School at the University of West England that focused on the different leadership roles of men and women within teams. Specifically, the research question was ‘To what extent is leadership as a sense-making process impacted by gender? Using a pragmatic approach involving the use of induction, discovery of patterns, deduction and testing of theories and hypotheses, Grisoni and Beeby compared the interactions and results of teams comprised either by men alone, women alone or mixed genders.

The research indicated that the essential conservatism originally associated with male professionals permeated all three teams indicating that men and women adopted teamworking strategies for sense-making that contained many similarities. The authors used “meetings” as part of their study because the modern business trend is to utilize team-based leadership that involves more meetings with increasingly growing numbers of women in senior positions.

The essence of the study can be distilled to the following: 
The gendered nature of meetings could be a barrier to the expression of feminine forms of leadership which typically entail ‘managing’, ‘facilitating’, and ‘influencing’ and would instead shape their leadership toward a more mixed gender scheme of ‘developing’, ‘nurturing’ and ‘managing’ attributes.

Questions to ponder:

• Have you experienced a difference in single gender meetings vs. mixed gender meetings? 
• Do you find that feminine leadership is reshaped by the mixed gender business environment?
• How is male leadership affected by the increased number of senior female leaders? 
• Are the male professionals morphing their leadership styles as well? 
• Is this a desirable outcome for the teams in your organization?

Grisoni, Louise, and Mick Beeby. "Leadership, Gender and Sense-making." Gender, Work & Organization 14.3 (2007): 191-209.

Workplace Confessions

As part of our series of articles by exceptional HR professionals, today we present an article by guest author, George Krafcisin.

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Leaders become more effective when they appear to be in control*.  But success or failure for an organization is often beyond the leader’s control. It’s easy for management to blame bad performance on commodity prices, the weather, or stubborn customers who inexplicably refuse to buy the company’s inferior products.

One research study tracked the share price performance for two situations. The first group studied was companies where performance problems were explained by management as due to internal problems that they planned to fix – in other words, they accepted the blame. The other group consisted of companies where management blamed performance problems on external, uncontrollable factors. The surprising result: the first group, where management accepted the blame, had consistently higher share price performance in the next year. It appears that honestly accepting blame is good policy for leaders.

But there’s more to accepting blame than just saying, “I’m sorry.” I looked to my own extensive list of personal management mistakes and recalled a small example from my corporate officer past.  A fellow manager took me aside one day and said, “You might want to talk to John. He’s a bit upset because you’re overdue on his evaluation and raise, and he’s afraid to confront you about it.” (Hmmm . . . sounds like at least two mistakes on my part!)

I checked my files, and sure enough, I had forgotten the evaluation, maybe because I was consumed with other “important” matters, maybe because I hated doing evaluations. Whatever the reason, it was definitely my fault.

I did talk with John, and for a change, I did a smart thing: I admitted my error, and I didn’t try to minimize or dismiss it. I assured him it was a case of sloppy management on my part, and not related to his performance or what I thought of him. Then I immediately moved to correct the mistake, abasing myself before my boss and the HR bureaucracy to get John a retroactive raise. Then I told John and my boss I was setting up a tickler file system with evaluation due dates for the whole staff so I wouldn’t make the same mistake again.

I’ve used that lesson a number of times in my career, accepting blame when it would have been very easy to dump it on someone else. I believe doing that consistently established some personal credibility. People knew that when I said something happened because of some outside factor, I was telling the truth, because they had heard me accept blame when it really was my fault.

So when you have to explain why things went wrong, think hard about what part of the problem was your fault.  Then do more than say, “I’m sorry.” Go on to tell what you’re going to do to correct the current problem, and what you’re going to do to prevent it from happening again. Then do it. It will pay off in the long run, even if it hurts short term. 

*“‘The Half-Truths of Leadership” by Jeffery Pfeffer and Robert I. Sutton, Harvard Business School Working Knowledge (http://hbswk.hbs.edu). This article is no longer on the site but I can make an electronic copy available. 

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About our guest Author:

George Krafcisin is the President, coach and trainer of Mosaic Management, Inc. Mr. Krafcisin has over thirty years of experience as an executive and manager, which he applies to his coaching and training services.  He holds degrees from the University of Chicago and Northwestern University and has held a number of positions in teaching and training.  He is the author of a text on quality management and many articles on technical and management topics. He currently offers coaching for business executives, strategic planning and leadership training for businesses.

Social Interactions at work and Psychological Health: The Role of Leader – Member Exchange and Work Group Integration

July 2008 in the Journal of Applied Social Psychology.

Why should HR take an interest in the social interactions taking place at work?

The study found that stressors at work can be managed effectively by Social Resources in the work place. The availability of these social resources is determined by the quality of the relationships between an individual and their immediate superiors as well as co-workers.There are 2 main social relationships that exist at work. The first is the individual with his or her superior and the second is the individual with his or her co-workers.The first is called Leader Member Exchange (LMX)
The second is called Work Group Integration (WGI): This is the “perceived approval from coworkers and inclusion in their activities which can be a source of social support and assistance.

High WGI results in the following:

• a feeling of emotional support
• a sense of belonging
• a sense that others will help if needed
• a recognition of self-worth and value
• a high degree of stability in one's life situation

The extent to which a leader provides a psychologically secure environment, the resources necessary for workers to complete tasks and the authority for workers to make decisions, regulates how likely subordinates are to think of a situation as being under control and non-threatening. If a leader fails to foster a strong LMX, the result will be a feeling of isolation and a perceived lack of control in the subordinates.

The study proved the following:

• Low LMX = High stress, low organizational commitment, low job satisfaction
• High LMX = Low stress, high organizational commitment, high job satisfaction
• Low WGI = High stress, low organizational commitment, low job satisfaction
• High WGI = Low stress, high organizational commitment, high job satisfaction

Many companies fail to properly account for the social relationships that form in the workplace as well as to account for the fact that these social relationships directly affect the performance and the psychological health of their employees which ultimately affects the performance of the company as a whole.

Does your company take social relationships at work into account?
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Article:
Rousseau ET AL. Social Interactions at Work and Psychological Health: The Role of Leader Member Exchange and Work Group Integration. Journal of Applied Social Psychology. July 2008, Vol. 38., Issue 7, p.1755-1777.

Trait-Based Leadership VS. Situation-Based Leadership (Part 3 of 3)

The problem that such a conception of leadership comes up against is that the five “traits” outlined above are vague enough to be mapped onto almost any historical “Leader” while at the same time too vague to be taken into a board room. It is one thing to say that a leader must pursue their purpose with passion and quite another thing to somehow convince a room full of people that it is in their best interest, as well as in the company’s best interest, to pursue one man’s purpose with passion. However, it may seem a bit presumptuous to simply claim that the five “traits” that we have just mentioned are, in fact, not necessary for a good leader, for, as history has shown us, most every great “leader” that comes to mind has exemplified a few, if not all of these “traits”. How then to we reconcile these opposing claims: that leadership is situation based and that leadership is trait based.

Well, what it seems to really come down to is that in order to be a successful leader, one must somehow synthesize these competing views of leadership. That is, a good leader must survey a situation and come to an understanding of the unique situational factors that form it. Once one has assessed the situational factors that determine any given context, it becomes possible to employ the “traits” necessary to earn the trust and commitment of the individuals involved in a particular situation. In other words, being able to accurately identify the situational factors present in any given context gives a leader insight into how best to approach a problem. So, for example, when a situation involves a group of people, being able to seamlessly integrate oneself into the group’s identity is of absolute importance. Once, this is accomplished, it is far easier to get the commitment of the group and so to exercise any number of “traits”, be it pursuing the group’s purpose with passion or practicing solid values. Nevertheless, whatever the situation may be, a person with a set stock of “leadership traits” will not be the least bit affective if he or she does not correctly identify the situational factors that undergird every situation.

Bottom line: if you can correctly identify the situational factors in any situation, then learning what the correct action to take in such a situation is no different that learning a new skill. That’s not to say that a little charisma and self-discipline won’t prove useful either.

Trait-Based Leadership VS. Situation-Based Leadership (Part 2 of 3)

In a paper titled “The New Psychology of Leadership”, authors Stephen Reicher, Alexander Haslam, and Michael Platow, attempt to explain why what we commonly think of as effective leadership is, in fact, the result of something more akin to a situation-based theory of leadership.

In the 1960’s and 1970’s scholars began to embrace the idea that, what we have referred to as the “Born Leader” is nothing more than a myth. Rather, “scholars began to favor ‘contingency models,’ which focus on the context in which leaders operate.” (Reicher 2) In their paper, Stephen Reicher, Alexander Haslam and Michael Platow, explain that, since the research of Henri Tajfel and John C. Turner in the 1970’s, which subsequently led to Tajfel’s coining of the term “social identity”, leadership theories have begun to focus more on the “Leader’s” ability to induce followers to see themselves as part of a group, to embrace a kind of social identity that is akin not only to the other group members conception of self but also to the business’s identity as a whole. In other words, “[s]ocial identities make group behavior possible: they enable us to reach consensus on what matters to us, to coordinate our actions with others and to strive for shared goals.” (Reicher 3)

Given that group behavior hinges on social identities, the task of a good leader is to identify with that social identity, “rather than assuming absolute authority”, and our leader does this by coming to “understand the values and opinions of [his or her] followers” which, in turn, enables “a productive dialogue with [subordinates] about what the group embodies and stands for and thus how it should act.” (Reicher 1) In this sense, it seems as though it is not necessary for a good leader to possess a fixed set of traits given that “the most desirable traits depend on the nature of the group being led.” (Reicher 2) In other words, what is necessary for an individual to be a strong leader is dependant entirely on the situation.

While “The New Psychology of Leadership” focuses specifically on a leader’s ability to become “one of the gang” it does emphasize the necessity for a very definite shift from “Charisma to Consensus”, from a stock set of “Leadership traits” to a sensitivity for the situational factors necessary for the formation of a strong group identity.

Yet there are many that still believe that leadership is defined by how well an individual demonstrates any number of “traits”. For example, last year, in his short op-ed piece in U.S. News and World Report, Bill George claimed that there are, in fact, five “traits” that identify an “authentic leader”. Those “traits”, according to George, are as follows:

• Pursuing their purpose with passion.
• Practicing solid values.
• Leading with their heart as well as their head.
• Establishing connected relationships.
• Demonstrating self-discipline.

Bill George goes on to clarify that “[t]o be effective leaders of people, authentic leaders must first discover the purpose of their leadership. If they don’t, they are at the mercy of their egos and narcissistic impulses… The values of authentic leaders are shaped by their personal beliefs and developed through introspection, consultation with others, and years of experience.” (George 1)

To Be Continued...

Trait-Based Leadership VS. Situation-Based Leadership (Part 1 of 3)

In reaction to "Understanding the Nature of Talent", I have decided to embark on a 3 part adventure.

There must, of course, be a difference between trait-based leadership and situation-based leadership. While the difference between the two may seem, at once, strikingly obvious, a recognition as to which “type” of leadership is the most appropriate and, ultimately, most beneficial for the development of “business” is, in the same moment, less than clear.

History offers us innumerable examples of both trait-based leadership and situation-based leadership. During the industrial revolution, as hoards of former farmers flocked to the cities, we see, really for the first time in our country’s history, an overwhelming demand for strong leadership across nearly every industry. The need for professional “team leaders” was, of course, augmented by high demand for the fast, efficient, as well as quality controlled, production of nearly everything imaginable for the growth of a nation, including war materials. As soldiers returned from the Second World War, it became clear that there was, in fact, a substantial difference between the leadership practices that were employed by the Pattons, Grants and Washingtons (the pseudo-mythical conception of the Born Leader) and the Henry Fords and Rockefellers who had spurred success not so much by infiltrating the hearts and minds of those under them, but by recognizing the significance of various aspects of their own contemporary matrix and capitalizing on them.

Whether the successes of the Henry Fords and the Rockefellers were enough to demystify our view of leadership and transform it from a trait-based to a situation-based conception remains to be seen. Even today, the myth of the Born Leader, is used to explain the successes of our nation’s greatest Presidents, corporate titans and the like. Nevertheless, there seems, in recent years, to have been the beginnings of a “shift” toward the conception of a leader as someone in possession of a number of skills, learned skills, and so, the conception of leadership as something that can be developed in anyone willing to learn.

To Be Continued...