CATALYST CONSULTING COLLABORATIVE

Major Stress Points for Owner Managed Businesses

When the going gets tough within a family business, communication that really needs to happen often deteriorates - family managers become concerned that communication that leads to disagreement and conflict will spill over into the family part of their lives. Emerging problems don't get talked about - either never or until it is too late to make good decisions. We believe the process of strategic management, used by successful companies, can integrate and direct the three elements of the Family Business System (and enable good intra-family communication). With an emphasis on insights, organizational development, and strategic vision, natural tensions between family, ownership, and the business won’t take center stage.

Critical decisions regarding governance, strategy, finance and organization are made relative to business health. A strategic planning approach can be incredibly effective in opening channels of communication across all three elements in a family business system, in creating support for a shared vision, and enabling the family business to gain alignment on otherwise conflicting objectives.There are critical times when the entire Family Business System comes under significant stress, most importantly when facing:

Generational transition in governance and business leadership
Complex infrastructure redesign involving organization, systems and processes due to business growth or competitive pressure,
Value management conflict arising from dividend demands or perceived/real wealth destruction
Business survival or turnaround crisis requiring significant and immediate actions

During these situations, each System element is experiencing conflict within and relative to the others. The complexity of improving business performance, changing ownership structure, financial recapitalization, transforming governance structure, introducing new generations into the System - all while maintaining the business family’s well-being and core values - is daunting . These times are characterized by significant pain and stress and, while there is general recognition that something must change, a pathway to creating that change is hard to find. Transformational change of this nature requires skillful and sensitive management to carefully balance the ability of the Family Business System to absorb the associated stress and still achieve its required goals.

It is our experience that these are times when expertise in each circle is required. And not only are multiple skill sets required, but an integrated process approach is paramount. Trusted business and family advisors may have specific relationships or skill sets which inhibit their ability to provide the entire System with adequate support. It is true that the introduction of a strategic management process, whether internally managed or with outside consultants, will initially increase the demand for managers’ time and probably introduce some unpleasant realities. But the investment in solutions for lasting outcomes is worth the effort.

Family Business System Tensions

Business
·   Strategic growth vs. cash flow
·   Organizational discipline vs. family access
·   Structured process vs. ad hoc decisions
Family
·    Leadership voids/dominance
·    Interpersonal relationships
·    Legacy/Vision
·    Development/Transitions
Ownership
·    Family/Non-family
·    Control/buy-outs/dilution
·    Wealth flows

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