The Family Business Framework

What I've been asked is, can I lay out the framework? That this podcast, the newsletter, even the post we put up on LinkedIn, what is the framework that we're following? And really this family business framework is the backbone and the structure of the book that I'm finishing, uh, tentatively titled Chaos Proof, how to Chaos Proof Your Family Business. I wanna take about 15 minutes and lay this out for you. Because it's gonna help us in our episodes going forward.

As I looked back over the first three episodes, I realized that the first episode, we really just introduced this idea of a family business inside a company. The second I pivoted and we talked about when you own a company with your family and you get to set ownership goals with executive coach Shane Arthur, we explored how you do that in a way that you don't look back with regret.

In the third episode from last month, I got to interview Sarah Davis, the Director of the Family Enterprise Center at Kennesaw State University, and we talked about the rise of family offices, particularly how you're starting to see family offices and that conversation start earlier in the lifecycle of a family business than it used to. But for you, if you're thinking about your own family business. How do you put all these ideas into a framework and then start to make progress?

So that's the idea I've wrestled with for a year in writing a book, and I wanna share that with you because then our podcast, our newsletters from here, you'll be able to see how they bolt in to part of this chaos proof family business framework. About a year or a year and a half ago, I got really interested with a question. When you work together with your family, you want two things, and I realize this even reflecting on my own time in a family company.

And those two things are first, uh, a great company and it that doesn't necessarily mean a big company. A great company can be accomplishing the goals that you want it to have and reaching full value for whatever size the business is. So you wanna build a great company and have a. A strong or a healthy family around it. That's what everyone who works with their family, what we want, great company, strong family. Well, then what fascinated me was. Why doesn't that happen?

And in fact, why does the opposite happen so often? But then when I loved in my own time in my family's company is I get introduced and even got to meet a number of incredible business minds. Pat Lencioni, Jeff Smart, Jim Collins, and I realized that each of these people took these big questions. How do you become good to great? How do you never make a mistake in interviewing? How do you. Uh, give your company an advantage through organizational health.

They took these big questions and then created a framework where you could go tackle them. And so as I stared at these daunting two questions with a family business, why do so, why so infrequently is there both a great company with a strong family? And then what can you do to give yourself a better chance of achieving that dual goal?

I thought there's got to be a framework for us too. That's the family business framework. Before we get to it, if you missed the first episode, I want to give you a quick fundamental concept before we get down to the four part framework. I want you to imagine a box of. It's been interesting for me over the last year to explain this concept to a number of family, business, academics and family business members.

And it usually takes, I'm gonna be honest, two times, but on the second time, uh, it, it, it connects. All right? So I want you to imagine a box and that's your company. Just a rectangle, two dimensional, that's your company. And then I want you to put a rectangle inside of it, and that's the family business. The family business is its own entity inside your organization. If you want me to differentiate that, think about hiring.

If you're hiring anyone into a company, you need to be careful and you need a hiring scorecard. You need objective pass base interviews, assessments that are tailored to the position. You need to do a good job with that, but more than likely, the way that hiring process is run will not have ripple effects into the heart of the company when you hire a family member. Or you don't hire a family member, it's completely different. That's the difference between a family business and a company.

I, I thought about this in the context of Chick-fil-A. Uh, the Kathy family has done an amazing job as best, uh. As best it appears with the family business work they do. They do a lot. And if the Kathy's sold Chick-fil-A, all of us would still be able to go around the corner wherever we like to go. And you'd be able to buy chicken sandwiches. But what would be gone, it's that inner family business work.

Yeah. Everything that they do in and amongst themselves, whether that's related to how they work with each other in the business, how they make decisions, how wealth is managed, how uh, the company makes statements, how they give away to nonprofits or fund things, all of that is what would be gone out from the center of Chick-fil-A. That's the difference between the company and the family business. And when I realized that. That all of us who work with family have this inner family business.

I remembered a lesson that my dad taught me very early in my time in our family's company. He said, Adam, companies are doing one of two things. They are growing or they are shrinking. That's it. And if you're not growing, that's just, that's a harbinger of a, you're going to be shrinking. And so likewise with families.

You're either as a family business, that inner family business, the way you interact with each other, the way you hire each other, the way you work together, uh, the way you coexist in and around the company that's either getting better or healthier, or it's sliding worse, and it will eventually tip into chaos. And when a family business gets into chaos.

Remember that the family business sits right in the heart of the company and when there's chaos in the family business, it inevitably reverberates into the business. Now you may be thinking, hang on, I. Are you telling me that there is a way to never have tension and work with family? Uh, no. 13 years working with my cousin, my brother, my dad, uh, my grandfather doing about 20 years worth of different types of family business work as well.

Uh, that inner family business work, you will always have tension and here's why. When you work together with family, you are mixing the unconditional nature of family with the conditional nature of business. If you go back to my wedding photo, there is always a spot for my father-in-law. I shared this in the first episode of the podcast. There's always a spot for my father-in-law with whom I have a great relationship.

but even over time, if that relationship were difficult, or even if I lost him, he's still, he's in his eighties, lives in Virginia Beach, but if I lost him, it doesn't change that spot in. My wedding photo is unconditionally for my father-in-law. Business is very different. Business is conditioned on competitors and market forces and decisions, and when you work together with family, you are mixing those two things and there is inevitably a tension and ignoring it will not make

it go away is what I realized. That's why seeing the family business as its own entity is so important because there is tension that's there, and you're either going to work on it and manage it, or you're gonna ignore it. And then one day an inflection point's gonna come that you are not ready for. Someone could die, someone wants to be hired, someone wants to get out. Uh, a disruption happens in the business that impacts the family and you're not ready. And. That's when chaos gets exposed.

So how do you prepare yourself for that? That's the chaos proof family business framework. So now that we've got this family business inside the company and we're okay with there being tension in the family business because we've mixed the conditional and unconditional, what can you do? Imagine with me a hub and spokes. There's a hub in the center and then off of it, there are four spokes coming out at the center of this hub and spokes is trust.

The As we go around to the different spokes, uh, for example, the first spoke is gonna be how do you chaos proof hiring family members. We're gonna make a series of decisions about how to do that clearly collaboratively, perhaps, and how to do that well, but. Any smart decision that's made around how you hire family is ultimately held together, glued together by the trust or the lack thereof between the family employees, the family owners, and the other family members around the.

Family company, even the, the smartest decisions that you may make will eventually come to nothing or be nothing more than words on paper if you do not build trust between the family members. And that trust can look like showing each other mutual respect. Uh, that can look like not triangulating or gossiping about each other. Oh, heavens inside the company or outside of it as well. Uh. Not airing family drama inside the company.

That's, those are some of the practical steps that you have to take to proactively build trust amongst the family, employees, family owners, and then the family members who are around. Even if they don't work in our own, the family company, the center of our framework is trust. So then let's go out

to the four spokes. The first spoke. How do you chaos proof. Hiring family members or not hiring them. You have or need to have a unique approach to how you are going to hire family members. I remember talking with someone who had lost their family business because he and his brother had gotten into an argument about whether or not. The brother's son was qualified to work in the company. They didn't have a way they managed conflict in the business.

They didn't have anything written down, hiring criteria that any family member has to meet before joining. And the argument exploded and within a matter of months, if evaporated, what was 20 years of working together. And they're not a unique story. I was at. Uh, my maternal grandfather passed last year and I was at his funeral, uh, the reception after his funeral and got to talking with a friend of his who'd been in a civic group with him who bemoaned to me.

Once he realized that I had worked in a family company, had bemoaned to me that his son was great, had spent about 25 years in the company and. Was positioned to take over and succeed him and take the business forward. But the bemoaning was the grandson that the son was bringing along. This man I was talking to just believed would wreck the business one day. And so I asked him, have you ever written down criteria for family members that want to join?

And he said, no. And I said, well, let me tell you. Every, uh, family business person, I know none of us like to make lists. We certainly don't like to be governed by these lists, but it's way better to have an argument about some bullet points that go in a letter than about the intelligence of your grandson. That is ca how you intentionally, clearly and purposefully chaos proof the hiring of family. So then the second spoke. In our hub and spoke model is how do you chaos proof working together.

So hiring the family. Hiring family is one thing, okay? But now you, now you're together. What do you do? How do you make decisions and be clear about how you're going to collaborate with each other, how you're gonna operate, how you interact, for those of you who work together in the business, and one thing that will inevitably come up. If you work together with family, there are gonna be some different rules.

It always happens, and it could be as simple as when you do a family business meeting. None of the family employees who come to the meeting have to take a day

of personal time off to come to the family business meeting. Any other employee in the company would have to take a day off to go to a family employee meeting if they own something, you know, outside of your company. When you work together, there's a series of decisions that you need to make to chaos, proof, working together, even being very clear about how you do variances to the norms in the rest of the company.

So that's the first two spokes, how you hire family, chaos proofing, how you work together. And then the third and with trust is our sinner. How do you chaos proof coexisting in and around the company. John Davis is out of MIT, formerly out of Harvard, and decades ago he and a few other academics created the three circle model for family businesses. And in it, imagine a Venn diagram where you have family. Ownership and employment.

And so if you don't work in the company or own it, you sit up there in just the family circle without being in one of those overlaps. But if you're a family member and an owner, now you sit and have a distinct set of responsibilities and concerns sitting in that overlap, and you see everything one way. But then what about someone who's a family employee but not an owner? But then what about the family owners and employees?

And then you can see that there are lots of different combinations in this Venn diagram that changes people's perspectives. And someone may or may not be an owner in the business. They may, may or may not work in the company. And even if they work in the company, they may be in a more senior position or more entry-level position. But regardless of where someone sits, where any family member sits in this big diagram, they exist around this company and thus they co-exist with each other.

And that is where the family business work gets done. When you, when you're gonna make decisions about how you hire family members, well, you don't have that conversation with your executive team or with your board. Where does that conversation happen? It's in whatever processes, whatever governance you set up and how you coexist together. Be that family business communications, family business meetings, those could be quarterly, annual. That's how you coexist together.

And what's interesting to me is. I have seen chaos fire itself right into the heart of a family business and into a company from people who don't work there. And if you think for a minute, you

probably can too. Either family members who are concerned about what's going on in the company and take a step to do something. 'cause they don't have a way that they can have their voice heard. Or owners, family owners who. They have never had their authority or lack thereof, clearly defined and agreed to. That's that coexisting. And so they start to exert control and authority, where arguably they don't have it. How you coexist, if you ignore it, will eventually set the stage for chaos.

And so with trust in the middle. We make a series of decisions, how we hire family, how we work together, how we coexist. And then the last one is, how do you chaos proof leaving a family company? Because the only way you can have a family business is by hiring family members. All of us, if we have a family company, have hired family. But also 100% of family employees have left their family company one way or the other.

And so when people leave, and what's interesting to me is this is the one that's so easy to ignore and you can leave several different ways. Two of them are leaving by succession at the end of your career or. Leaving mid-career and both of these, certainly the last one is difficult for families to talk about.

The one in the middle that leaving mid-career, that can be a sneaky one that causes pressure, causes chaos, but also has an opportunity if you lean into it and if you make clear, consistent, and proactive decisions can take a lot of pressure off. That's the family business framework trust in the middle. How do you build trust with your family? And then how do you make key decisions around how you hire, work together, coexist and leave.

And we do this not for the sake of creating governance, but because we know that we ha it. It doesn't happen by accident. You don't drift into a family company and have it go well by accident. You don't drift into succession, you don't drift into working together, and it just goes well. You have to work at it and you can make progress in each of the five areas of that framework.

The dream then for all of us is to have a healthy family business that sets the stage for a great company around it, and hopefully one day allows the family to have conversations about legacy. Whether that legacy is the company wealth, reputation, whatever it may be, the stronger the company and the healthier the family business inside of it, the bigger, the longer that conversation is about legacy.

That's why it's important that we see the family business as its own entity, and then we work on the framework to improve the health of it. That's what we're gonna do with these podcasts as they go forward. If you want more information, the website's 21 clear.com. I've linked it in the show notes. Uh, you can go back if you missed any of the earlier episodes of the podcast, you can grab those. I would ask you, helps me a lot, if you will.

On whatever app you use, it's for a lot of people, it's Spotify and Apple, if you will either subscribe or follow the podcast and then they'll come to you automatically. I've also started a monthly newsletter and have linked that in the show notes as well. If you wanna go subscribe to that, that will help us and we've got some different content. That'll go with this. Uh, I'm excited on August 4th.

Kennesaw State is gonna be allowing me to talk about one of the spokes on the wheel or the hub here. And we're gonna be talking about how you, chaos proof, hiring family, and actually walk through some practical steps, examples and exercises to help, uh, if you're able to join. I hope it's great. It'll also be our podcast for the month of August. We're gonna bring part of that there and talk about one of these spokes. I appreciate you letting me lay this out.

Thanks to the listeners who asked me to lay out a framework so that as we release future episodes, they can see where to put 'em. My hope for you is that. Every time you touch, uh, our website, our newsletter, this podcast, any of the resources, the webinars that we do, that you get that rare 15, 20, 25 minutes to focus on your internal family business. I look forward to talking with you in the next episode, and as my grandfather would say, thank you so very, very much for listening.