The 5 best attributes of successful family owned and owner managed businesses
Throughout my career, I have had the privilege of advising some very successful family owned and owner managed businesses. We will address them as FOMB for the article.
As we all know many FOMB’s rarely succeed after the second generation. Some of the reasons might be that family members are not motivated; there could be a sense of entitlement by family employees; skill sets are not professionally assessed; baggage from family disputes are often carried into the workplace; and compensation issues are just some of a list of factors that can negatively impact the long-term success of the business.
What I would like to address in this article are five behaviors and practices I have observed that successful FOMB’s adhere to in order to sustain their success and family culture for generations to come.
The five are as follows:
1) There is a very high regard placed on employees and vendors. Employees are regarded as family.
Significant turnover is unacceptable. Investments are made in professionally assessing the skill sets and motivations of their employees and vendors.
2) Every effort is made to design compensation models and buy in opportunities for their employees.
3) Likewise, vendors are also treated as family. Great effort has been invested in having a strong understanding of what each party’s values are and have them aligned so that there is a consistent quality culture that transcends to the customer. Much effort as possible is invested by the business to utilize the services of local vendors that share the same culture.
A good example of this is WAWA which has more than 30% of the company owned by their employees. Another is how Fresh Markets (now a publicly traded institution) built their reputation by offering unique and high-quality goods that were purchased locally.
4) The shareholders have no desire what-so-ever to become a publicly traded institution. Starting with the founders, there is extreme pride in the company and its products and services. They would find it heretical at the thought of any succession strategy that could possibly dilute the culture of the business. That said, there are times when growth might require such a step.
For instance, Chobani, founded by Hamdi Ulukaya, started as a family owned business in upstate New York. The success of the Greek Style yogurt demanded that they expand throughout the United States. As such, Chobani management chose to finance this expansion by becoming a publicly traded institution. To the contrary, Dell Computers, founded by Michael S. Dell was private and became public has recently decided to become private again because of the reasons mentioned above.
Another example is the micro-beer industry. The industry has matured. Many of these companies have become very successful. Some of these companies have decided to maintain their culture and remain private. Their expansion has been based on strategic partnerships with other micro brewers located in various parts of the country. One example is noted by Dogfish Head Brewery’s, CEO, Sam Caligione’s brilliant strategic partnership with the Sierra Nevada Brewery.
5) The company directly supports charitable endeavors that their employees and vendors buy into.
Many of the successful FOMB’s that I have met or read about have a very strong belief that they are there to serve and are very grateful for their success. They do not take it for granted. They devote much time and effort to give back programs that they have a love for.
Not all of these traits mentioned above are a guarantee of success. In my opinion, these practices are a great way to manage a business and your life as well. Building friendships with those that share the same values are what makes one’s life rich. It is not the money that drives this type of success!