Helping family businesses achieve harmony and success

1. Helping family businesses achieveharmony and success Family Business Analysis • 2007 • Family Business • Survey For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

2. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Management Challenges • Satisfaction with the company’s management structure • Commonly cited Sources of Conflict • Succession • Perceived competence of family members working in the business • Compensation • Lack of communication within the family • Lack of family/non-family management communication 73% 24% 24% 20% 20% 13% For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

3. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Management Challenges • Satisfaction with the company’s management structure • 40% = hierarchy is informal • 19% = hierarchy is rigid • 41% = hierarchy falls between the two • Commonly cited Sources of Conflict • Succession • Perceived competence of family members working in the business • Compensation • Lack of communication within the family • Lack of family/non-family management communication 73% 24% 24% 20% 20% 13% For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

4. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Where you may stand • Conflict about… • Succession • Competence of family members & quality management • Communication • Compensation • Amongst firms… • That are either really informal or really rigid • Evidenced by… • Challenges & concerns related to recruiting and retaining qualified labor & non-family management (not to mention a retiring workforce) • Exacerbated by… • Lack of self-awareness, lack of willingness to deal with conflict, fear, or denial • Lack of knowledge/resources on how to approach issues • Lack of formal planning & policies • Strategic • Employment • Compensation • Succession • Communication For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

5. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Strategic Planning • Family firms with awritten strategic plan • Family businesses with written strategic plans tend to engage in other types of planning and best practices that are commonly viewed as essential to family business survival. 37% • Benefits • Defines the purpose of the organization and establishes realistic goals and objectives • Communicates those goals and objectives • Develops a sense of ownership of the plan. • Ensures the most effective use is made of the organization’s resources • Provides a base from which progress can be measured • Brings together everyone’s best and most reasoned efforts that have important value in building a consensus about where an organization is going. • Provides clearer focus of organization, producing more efficiency and effectiveness • Bridges staff and management • Builds strong teams in staff and management • Provides the glue that keeps management together • Produces great satisfaction among planners around a common vision • Increases productivity • Solves major problems American Family Business Survey, 2002 For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

6. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Family Employment (24% source of conflict) • Family firms that view quality management as a measure of business success • Family firms with a formal family employment policy • Governs how your family members and/or their spouses enter and exit from the family company’s employ. • Remove ambiguity that may occur with potential family members’ employment • Enable the company to benefit maximally from the talents of family members • Contribute to the long term success of both family members and the family company. • Mitigates nepotism • Increases respect for the successor or employed family members amongst non-family employees • Develops a common sense of purpose amongst all employees in their contributions to the firm • Establishes career paths, performance evaluations, job descriptions, etc… 52% 13% • Components • Company’s mission • General conditions of employment (i.e. performance, supervision, compensation, education, training/development) • Rules of Entry • Application Process • Internships • Succession (includes non- family succession) • Closing • Amendments, etc… For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

7. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Compensation Plans (20% source of conflict) • Family members perceived as extremely unsatisfied to only somewhat satisfied with their compensation • Compensation Overview: • Market based vs. Performance based vs. Need based • Business based vs. Family based • Current compensation vs. “one day this will all be yours” • Compensation Options: • Straight annual salary • Hourly wage • Bonus • Deferred compensation • Phantom stock • Stock Option Plans 83% • Benefits • Removes ambiguity • Motivates employees • “Weeds out” the mooches or free-loaders • Applicable company-wide • Establishes longer-term personal and professional goals for employees • Clarifies objectives of each job/role within the organization • Serves as a springboard by which to establish a means Performance Evaluations • Removes the “golden handcuff” syndrome For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

8. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Succession Plan (24% source of conflict) • Importance of maintainingfamily control • Insignificance of maintaining family control • Respondents with asuccession plan • Respondents withouta succession plan 62% 62% 13% 39% 61% For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

9. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Succession Plan (24% source of conflict) • Importance of maintainingfamily control • Insignificance of maintaining family control • Respondents with asuccession plan • Respondents withouta succession plan • Will develop a succession plan • Will not develop a succession plan • Unsure if will developa succession plan 62% 13% 39% 61% 36% 39% 26% For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

10. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Succession Plan (24% source of conflict) • Process – NOT an event • Minimum of 3 - 5 years to execute • Manages the “hard side” (assets, etc…) and embraces the “soft side” (legacy, management, leadership, etc…) • Succession Plans Address: • Retirement (financing & life after) • Buy/Sell Agreements • Valuation • Partnership Agreements • Non-Family Owners • Estate • Leadership Transition • Change Management • Strategic Plan • Strengths, Weaknesses, Opportunities, Threats • Advisory Boards • Entity Structure For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

11. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Communication (33% source of conflict) • Planning for Communication • Communication between family members (20%) and family/non-family management (13%) communication is a source of conflict for 33% of respondents • Negotiate level of goal agreement • Embrace constructive conflict • Las Vegas approach • What are three steps the ownership family must taketo ensure survival? • Communication • Decision Making • Succession • What are the three most significant issues facing your company? • Strategic Direction • Family Involvement • Communication • What are the three most serious threats to long-run survival? • Communication • Market Competition • Succession LEADS Research Study, 2000 For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

12. Helping family businesses achieveharmony and success University of Connecticut Family Business Program Communication (33% source of conflict) • Guidelines for Smooth Family Functioning • Communicate Expectations • View family harmony as an important part of the overall mission of the family in business. • Hold Family Meetings. • Never undermine another family member in front of others. • Keep your discussions about family patterns and behavior confidential. • Use good communication skills: listen as well as talk, reflect back what you hear, show respect, use “I” statements rather than “you” statements, ask “how questions rather than “why” questions. • Have a family code of conduct. • Address conflict in constructive ways. • Cultivate friends and interests outside the family to help provide a perspective on family issues. • Discuss family issues at a timely, helpful, and appropriate time. • Make your family more like a business in the way you treat each other. Treat family members like you would a valued employee or important customer or supplier. Adapted from Mary F. Whiteside For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 | business.uconn.edu/familybusiness

13. Helping family businesses achieveharmony and success University of Connecticut Family Business Program An initiative of the University of Connecticut Department of Management’s Center for Entrepreneurship & Innovation, the Family Business Program is a member-driven initiative that provides professional advice, education, and peer networks designed to add value to family-owned and entrepreneurial organizations. Our goal is to help family businesses develop strategies and policies that will serve to perpetuate family ownership while helping them make significant advances in functions related to strategy, increased complexity, organizational structure, management practices, and succession planning. Members are able to accomplish their organizational & familial objectives through a multi-faceted approach incorporating: “It has been a tremendous experience being involved with UConn’s Family Business Program. I’ve met top business leaders through their educational programs and I have learned so much. They have given me the tools to not only get along with family members, but to bring my business to the next level. If you want to keep your business alive and thriving through the generations, take advantage of this exceptional educational opportunity!” Cindy Palmer Dean Palmer’s Market • Family Business Speaker Series & Webinars • Peer Advisory Groups • Program for International Exploration Collaboration & Education (PIECE) • Connecticut Family Business of the Year Awards • Summer Entrepreneur Internship Program • Research & Creation of New Knowledge • Network of UConn School of Business Resources • Connecticut Center for Entrepreneurship & Innovation (CCEI) • Sponsors & Facilitators For Information, contact Priscilla Cale, Director | pcale@business.uconn.edu | 860.486.5628 business.uconn.edu/familybusiness