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Professional Intervention in the Family Business By Don Schwerzler and David Jones Professional Intervention in the Family-Owned Business Running a successful family business is substantially more difficult than running a non-family business. There are many contributing factors.
Conflict between generations as to the strategic requirements of the business - what are the goals and how do we get there.
Financial information is rarely disseminated to even the top managers (family and non family members) thereby thwarting those managers who, in fact, may be skilled in strategic planning, budgeting, costing, pricing, etc.
A family business will generally have more severe problems in recruiting and retaining non family professional managers since upward mobility and advancement are restricted.
The dynamics for successfully managing a family business are blurred and often difficult to ascertain - is it a Family First Business or a Business First Family?
Because a family business tends to be more paternalistic in management style than a non family business, performance standards tend to be poorly described or non-existent for most segments of the business.
Because hard operations management information is scarce or not existent, outside advisors such as attorneys, financial planners, CPA's and other professional counselors rely on perceptions of reality steeped more in "how it has always been" rather than "how much better should it be".
This is a crucial deficiency because it disengages the professional resources from serving both the business and the family as well as they could if they were dealing with timely, accurate and factual operating information about the business.
The management dynamics of a family business are often more consensual than action or performance orientated. Thus, a family business is generally not able to react to problems and take the required remedial action as quickly as a non family business.
The ego of an entrepreneur is such that they feel capable of doing everything themselves. Because they feel they can do "better" than anyone else, it is difficult for them to let go - either to delegate to subordinates or asking for professional help even when they know that help is needed.
Professional fees are often difficult to cost justify or value. The major contributing factor, however, is that a family business tends to procrastinate on bringing in professional resources until the "ox is gored and already in the ditch".
The
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Wales (not Jimmy) welcomes first 'Wikipedia Town'<img src='http://assets.bizjournals.com/sanfrancisco/blog/Flag_of_Wales*100.jpg?v=1'>Monmouth, Wales is the world's first "Wikipedia Town."
Yes, you read that right -- Wales, in the United Kingdom, far from Wikipedia's roots in Florida or its home in San Francisco, and suspiciously similar to the name of the online site's founding genius, Jimmy "Jimbo" Wales.
This project, described in detail by Lori Phillips on the Wikimedia website, created "Monmouthpedia," a six month endeavor to put in a free wi-fi network and to slap 1,000 QR Codes all over town.
These codes can be scanned...<div class="feedflare">
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</div>Gifts launch endowment honoring retiring S.F. State president<img src='http://assets.bizjournals.com/sanfrancisco/corrigan_robert-NEW%20SQ*100.jpg?v=1'>San Francisco State University alumni George and Judy Marcus have donated $1 million to create an endowment honoring retiring President Robert Corrigan.
The Robert A. Corrigan Chair in American Studies highlights Corrigan's experience teaching American studies and starting one of the nation's first black studies program.
Corrigan is retiring this spring after 24 years in the job. Les Wong, currently president of Northern Michigan University, has been named as Corrigan's replacement.
The university...<div class="feedflare">
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</div>California unemployment drops a sliver, but number of jobs drops, too<img src='http://assets.bizjournals.com/sanfrancisco/news/California_state_flag*100.jpg?v=1'>California's unemployment rate dropped a tenth of a percent from March to April, falling to 10.9 percent. But the number of jobs in the Golden State also fell by 4,200.
Despite that drop, California's unemployment rate was considerably better in April than a year earlier, when it was 11.8 percent. And the number of jobs was also 175,600 higher than a year earlier.
The unemployment rate is a guess based on a survey of 5,500 households in the state.
California still had a higher rate than the U.S....<div class="feedflare">
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</div>Online funding bankrolls innovatorsEric Migicovsky expects to collect a whopping $10.18 million on May 18 ? money pledged online by people who want one of the cellphone-linked ?smartwatches? his Palo Alto startup Pebble Technology has invented.
The payout will more than double the fundraising record for Kickstarter , a 3-year-old web service that has become the best-known organizer for ?crowdfunding,? the suddenly super-hot way to raise cash from strangers for ventures ranging from arts projects to gadget creation.
It...<div class="feedflare">
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analogy of the Fram oil filter commercial "you can pay me now or pay me later" is aptly applied to a family business situation except the consequences can be substantially more expensive when the survival of the business is at stake.
The family business is less objective about profitability and other types of performance standards - more forgiving or tolerant of people and the work management systems of their business. With a family business being orientated to consensus, harmony and friendship (we are all part of the family here at XYZ Corporation), CHANGE is a difficult process.
Attitudinal platitudes such as "why fix it if it ain't broke" prevail over the difficulties perceived with change. This is evident not only in the internal management systems of a family business but also to professional resources. Just as members of the management team are impacted by "the Peter Principle" as the business grows, that same growth problem impacts on the professional resources such as banking, legal and accounting.
Unfortunately these changes follow generational succession rather than the more immediate needs of the business.
Approach as part of a process rather than as an event
Our experience in dealing with the very unique problems confronting a family business suggests that professional intervention should be approached as part of a PROCESS rather than as an EVENT. This maximizes the benefit and minimizes the trauma of change.
Furthermore, because the problems of a family business are generally multi-dimensional, professional intervention should best be introduced into the situation by taking a multi disciplined approach to avoid fragmentation and the waste of time and effort that generally occurs when a single dimensional approach is employed.
The first phase of the intervention process we normally recommend would include an OPERATIONAL ASSESSMENT of the business.
What opportunities are available in terms of profit optimization, cost containment or cost reduction?
What are operating parameters of the business and what changes in operational procedures or operational protocol might increase the ROI of the business?
What options are available for improving the health of the business, both internally as well as in the marketplace?
This OPERATIONAL ASSESSMENT provides the family business the facts and objectivity that are often obscured by the owner /managers being too close to the problems.
The second phase would include the involvement of a family business ocnsultant who is skilled in both business and family dynamics. These professionals are focused on opening up and developing all the possible channels of communication. These professionals should be able to facilitate a strategic plan for the business and a strategic plan for the family as well.
Addressing one system and ignoring others is wrought with problems that can cause a family business to self-destruct - especially when dealing with generational issues.
The third phase of the multi discipline approach focuses primarily on the tax consequences of succession. Without proper planning, succession (planned or unplanned) can become a financial catastrophe for both the business as well as for the family.
More often than not, some has taken place. Unfortunately, most of these efforts are focused only on one individual - the owner/ entrepreneur. As a result, the planning generally is incomplete or only sequential solutions are engaged.
The for succession should be approached from the perspective of minimizing the total tax consequences of succession. This concept allows for the development of a connected and well integrated approach, an approach that considers the goals and objectives of the family as well as the future needs of the business.
The "on-going" processes for maintaining a healthy family business would include strategies such as conducting annual or semi-annual FAMILY MEETINGS and establishing an outside BOARD OF ADVISORS.
It should be noted that one of the major benefits of this multi-disciplined team approach is the ability to involve "outside" professional intervention to the family business in a purposeful yet expedient manner. Although the segments of the process have been cited to help illuminate the process, the multi-disciplined team approach allows for each segment to be addressed simultaneously.
If this approach makes sense, give us a call so we can discuss the particulars of your situation and help you to formulate a plan of action and a timetable for beginning the succession planning process. The most difficult hurdle to overcome is procrastination hoping the problems will go away or will solve themselves. As Tom Watson, former head of IBM, reflected, lying dead in the water and doing nothing is comfortable because it is without risk, but it is an absolutely fatal way to manage a business".
Don Schwerzler and David Jones are Partners in the Family Business Institute - a special resource for family-owned and closely held businesses
(http://www.familybusinessexperts.com).
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Philly Beer Week media preview: Slideshow
<img src='http://assets.bizjournals.com/philadelphia/blog/peter-van-allen/1%20BEER%20WEEK%20LOGO*100.jpg?v=1'>It?s always seemed that one of the most ingenious ideas from Philly Beer Week was extending the ?week? to 10 days.
On Wednesday, Philly Beer Week 2012 Executive Director Don Russell hosted a media preview and beer garden at the Four Seasons Hotel in Philadelphia.
In its fifth year, Beer Week will span June 1-10 and include hundreds of events, including dinners, tours, pub crawls, tastings, meet-the-brewer nights and so on. (This year?s guide to Beer Week is 80 pages.)
PBW claims to be...<div class="feedflare">
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</div>Pa. Supreme Court Justice Orie Melvin charged, relieved of duties
Pennsylvania Supreme Court Justice Joan Orie Melvin has been ?relieved of any and all judicial and administrative responsibilities? after the Allegheny County District Attorney?s office charged her with nine criminal offenses, including four felonies, following a grand jury investigation into accusations she used her staff for campaign work.
Orie Melvin has been relieved of duties pending a further order from the state high court.
The charges in the complaint include three counts of theft...<div class="feedflare">
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</div>As others settle, PNC denying wrongdoing in overdraft fees case
<img src='http://assets.bizjournals.com/columbus/309-PNC-Bank-sign*100.jpg?v=1'>PNC Bank customers won court permission to proceed as a class in a lawsuit over what they say are excessive checking account overdraft fees.
The lawsuit, part of a multidistrict litigation involving more than 30 different banks, is pending before U.S. District Judge James Lawrence King in Miami.
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</div>Deadline to nominate best cheesesteak is Monday
<img src='http://assets.bizjournals.com/philadelphia/cheesesteakauthentic*100.jpg?v=1'>Let the hunger games begin.
As we approach the deadline to nominate your favorite Philly Cheesesteak venue, I realized that with all of the health conscious diets out there, many of you may need a spark of nostalgia to remind you what it?s like to order thinly sliced, 100 percent sirloin beef, straight from sizzling on a grill as it cooks to the perfect brown, ready to add your favorite cheese whether it be Whiz, American, or Provolone, to melt through the hot steamy goodness of the perfectly...<div class="feedflare">
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Financial planning is a process of managing your finances to help you make the most of your money to achieve your goals. You may be preparing for retirement or want to make sure you can cover the cost of educating your children. ...
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