Tips for Succession Planning in a Family Business

business teamI wrote about the topic of succession planning a few months ago, but I continue to find the topic fascinating. Succession planning in any size business is critical, and when family dynamics enter the picture, the risks are greater. After all, the wrong decision can doom not only the business, but also Thanksgiving dinner.

So how should a family business go about determining the founder’s successor?

The first thing to do is to start early. Unless there is a single perfect candidate with ideal background, it will take a few years to ready someone for the CEO role. It’s important to be objective about who the best candidate is—it might not be the oldest son. It might be a younger daughter. It might be a cousin. It might even be someone outside the family.

While the existing CEO in a family business may make the ultimate decision, he or she should get input from others. That input should come from other leaders in the business, both family members and leaders outside the family. And family members who don’t work at the company but who rely on the business for their livelihoods should also be consulted. Input from key customers and other stakeholders is also important. Given the family dynamics involved, it might be important to use an outside consultant or advisor to gather the input.

Family dynamics will be critical in determining the right candidate. Are there sibling rivalries that will resurface? What education and other experiences do various candidates have? Has one person been given the inside track, which might have left gaps in other candidates’ backgrounds? Should those gaps be filled to give more candidates a decent shot at the leadership role?

It is best not to put all your eggs in one basket. Grooming just one candidate for the CEO position might leave you with no one. That is true in any business, but more likely to be true where the bias is to keep the role in the family, meaning there are fewer candidates to begin with. The expected successor may decide to join a monastery or to go live in the Caribbean. Or the successor might die or become disabled. Have a back-up plan.

org chartBy starting well in advance of the need for a successor, it is possible to develop two or three viable candidates and to rotate them through various roles to give them all an opportunity to build the experience and relationships they will need in the role.

And if one or more potential successors is not developing as expected, it is important to have an honest onversation sooner rather than later. It won’t be an easy conversation, but the family member can save face by exiting the company or opting for a sidelined position on his or her terms and timing. That way, he or she is not obviously passed over when the time for succession arrives.

Here are a few excellent articles on managing succession planning in family-owned businesses:

How to Save the Family Business, a 1994 article by Peter Drucker, reprintedi n the Wall Street Journal, September 30, 2015. 

7 ‘Empire’ Lessons On Family Business Succession, by Andrea King Collier, Forbes, April 27, 2015

Leadership Lessons from Great Family Businesses, Claudio Fernández-AráozSonny IqbalJörg Ritter, Harvard Business Review April 2015

How to improve the chances your family business will succeed in the next generation, by Steve Coleman, The Business Journals, Apr 1, 2015

When have you seen succession planning work well?

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Four Tips on Engaging Employees Through Storytelling

MP900439486In her white paper, Increase the Engagement and Effectiveness of Your Training Through the Power of Story, professional trainer and coach Pamela Slim says:

“No matter the substance of our topic, powerful stories can make training more engaging, relevant and even entertaining.”

According to Ms. Slim, stories can be used to build rapport, to simplify complex topics, and to increase audience engagement. After many years drafting corporate communications, I could not agree more. Stories are the essence of what makes us human.

Here are four tips for using stories to engage employees:

1. Know your audience

The first thing to think about when using stories to engage your audience is to identify who your audience is. The stories you use must be appropriate for the audience. They should not talk down to your audience, nor use language the people you are trying to reach don’t understand. And above all, respect your audience—do not use cliches or stereotypes.

If you know your audience, you can better determine which examples (stories) will speak to them, and present your lessons in words and images they will understand.

2. Engage their emotions and senses

Next, try to engage your audience’s emotions. Use powerful images and appeal to as many senses as possible. Sometimes even raw financial data can be presented as a story. For example, if sales are down because of weather, then describe the snowstorms or floods and their impact on traffic patterns on the area. Then discuss how sales have fallen.

Think about the best advertisements you have seen and their appeal to emotions:

  • the MasterCard stories ending in “for everything else, there’s MasterCard”
  • the old AT&T commercials “reach out and touch someone” that mention touch, when literal touch through the phone lines is impossible
  • any Hallmark Cards ad showing families or lovers and the receipt of a greeting card

Emotions bring us together in the workplace as much as they do in our non-work relationships. Celebrate your successes by talking about the long hours and mishaps that occurred along the way. Compare the end result to reaching the mountain top.

3. Teach clearly and directly

Think of the best sermons or inspirational speeches you have heard. There is a lesson, but the speaker first draws you in by telling you a story. It might be a personal story, or a news event, or a Bible story. The story uses familiar situations we all understand, and helps the audience relate to the speaker as a human being. Then we are receptive to the lesson.

Employee engagement is no different. We all want to be a part of something larger than ourselves. By telling us stories, corporate leaders can build rapport with others in their organization.

Also, stories can demonstrate change for the audience. If you’re reorganizing your workflow, follow a particular product through your system to show how the old methods created problems and how the desired state will avoid these issues.

4. Tell them the story, tell them what it means, and tell them what they need to do

This is my version of the old adage “tell them what you’re going to say, say it, and tell them what you said.” Repetition is important in oral storytelling. So whether it is a training session, a corporate speech, or a stand-up meeting, know what you need to say, tell a story to draw them in or illustrate the point, make the point, and then be specific in telling them what to do.

* * * * *

As I wrote my novel, Playing the Game, I had certain things I wanted to say about leadership, management, and work/life balance. I thought a fictional setting would be a good way to make my points and would be more entertaining for readers than another management treatise. So I illustrated issues around succession planning, employment law, workplace romance, and balancing work and family through a story about a business struggling to be profitable. I wanted to create a novel that was a good read, but also made the case for good people practices in an organization. I think it worked, and readers seem to agree.

When have you used stories to make a point?

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Favorite Firing: Always Assume an Employee Can State A Claim Against an Employer

This “favorite firing” story isn’t about some salacious or quirky set of facts. It involves whistleblowing under the Dodd-Frank Act—hardly a sexy topic. But the situation serves as a good reminder that there is always some reason that an employee can sue his or her employer. Thus, employers need to have good reasons for taking action against employees, and they need to stand ready to justify what they have done.

whistle-clip-art-176817The Facts: Daniel Berman was fired from his position as finance director of Neo@Ogilvy LLC (“Neo”) in April 2013, after working there for two-and-a-half years. He was responsible for Neo’s financial reporting and compliance functions. He claimed that he discovered various fraudulent accounting practices and that he had reported these violations to others within the company. He alleged that a senior officer got angry at his reports and that as a result he was fired. After his termination Mr. Berman reported his allegations to the parent company’s Audit Committee, and later provided information to the SEC, but prior to the termination he had only reported the potential fraud internally.

A few months later, Berman sued Neo, alleging that he had been discharged in violation of the whistleblower protection provisions of section 21F of Dodd–Frank and in breach of his employment contract. See Berman v. Neo@Olgivy LLC, et al (2d Cir. Sept. 10, 2015).

The legal question in the case became whether Mr. Berman was a whistleblower and could therefore state a cause of action against Neo and its parent company. Under Section 21F(h) of the Exchange Act, which was added in the Dodd–Frank Act, employers are prohibited from retaliating against employees for reporting violations of the Exchange Act. Subsection 21F(a)(6) defines “whistleblower” to mean “any individual who provides “information relating to a violation of the securities laws to the [SEC].”

However, subdivision (iii) of subsection 21F(h)(1)(A)(iii) does not limit protection to those who report wrongdoing to the SEC. This subdivision (iii) expands the protections of Dodd–Frank to include the whistleblower protection provisions of Sarbanes–Oxley, and those provisions, which contemplate an employee reporting violations internally, do not require reporting violations to the SEC.

Since Mr. Berman did not report any potential violations to the SEC until after his discharge, the court had to decide whether his internal reports could give rise to a cause of action against Neo.

Neo and its parent company filed a motion to dismiss, and the District Court granted that motion, dismissing the Dodd-Frank claims, because Mr. Berman had not reported any potential violations to the SEC until after his discharge. (His breach of contract claim was also dismissed.)

Mr. Berman appealed the dismissal of the Dodd-Frank claims. After an extensive analysis of the tension between the two sub-sections of the Exchange Act created in the Dodd-Frank Act, the Second Circuit reversed and reinstated these claims.

The Moral: The specifics of the Second Circuit’s analysis are less interesting than the end result—this employee’s cause of action against his employer survived. Of course, the facts in the case remain to be proven. Neo will have an opportunity to show that he was not fired because he raised the possibility of fraudulent accounting practices to others within the company. But in the meantime, Neo will have to devote significant legal expenses and management time to defending a lawsuit.

I would hope that Neo had not relied on competing definitions of “whistleblower” in making the decision to discharge Mr. Berman. I would hope there is more to the story than what was revealed in the parties’ briefs on a motion to dismiss. The moral is that employee lawsuits can usually survive a motion to dismiss, and employers need to have solid facts to support their termination of employees. And the case is a reminder that retaliation claims are difficult to overcome.

When have you been surprised by a claim that an employee brought against his or her employer?

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Five Skills Top Recruiters Must Have

Business HandshakeI don’t write about recruiting much, even though I managed a corporate staffing department for several years and worked with recruiters for several additional years. I don’t write about recruiting because I don’t like it and I don’t think I’m very good at it.

Nevertheless, I believe that recruiting is critical to a company’s success. In fact, I think that the people hired into an organization and the way that they are onboarded does as much to contribute to the profitability of a business as how much employees are paid or how their performance is managed.

But I don’t think I possess the some of the talents that good recruiters need. What are those talents?

1. Sales Ability and Persistence

A good recruiter must be able to sell top candidates on the merits of working for the employer and in the value of accepting the particular position for which the candidate is under consideration. Sometimes this is easy—after all, the candidate probably applied for the job in question. However, often, especially in executive searches, recruiters must convince top candidates to leave positions where they are doing well to take on the risk of a new role and probably a new company.

This is an area where I know I fall short. I do not like to sell. I am too introverted. If people are happy where they are, who am I to tell them they should move?

By contrast, one of the best recruiters I worked with had an outgoing, engaging personality and also had the ability to read people quickly. She vigorously pursued people she thought fit our needs, and she didn’t back down until convinced she couldn’t budge them.

2. Focus

The best recruiters keep a laser focus on what the job in question requires. They assess every candidate against these skills and competencies, and they don’t let themselves get talked into hiring based on the candidate’s charming personality.

Good recruiters also probe until they are satisfied with the candidates’ answers. Often, candidates can bluff their way through an initial response, and it is important for recruiters to push to be sure the candidates have sufficient depth to get beyond a cursory answer to a question.

It takes tenacity to continue to probe on every competency that is important for the role. That is difficult to do in today’s fast-paced environment, where an interview may only last thirty minutes. The best recruiters can balance speed with depth, maintaining control over the interview throughout the process. They can quickly determine which candidates are not qualified, so they can spend more time with those who are.

The recruiter I mentioned above was dogged in her questioning. She didn’t let an issue drop until she understood the candidate’s abilities. And she could pack a lot into a thirty-minute interview.

3. Open-mindedness

The other side of focus is open-mindedness. While quick judgments are important in recruiting, it is equally important that those judgments be based on competencies, and not on the expected profile of the ideal candidate. Thus, receptivity to candidates with diverse experiences and backgrounds is just as important as making a quick decision.

Good recruiters are good at outreach into minority communities and other groups where strong candidates might get overlooked. They spend their discretionary time developing relationships that might turn into good hiring leads.

Again, as a strong introvert, relationship-building is not my strength. I could see a good candidate that might not have a traditional background, but I didn’t spend time in outreach efforts.

4. Listening

By now it should be obvious that listening skills are critical during recruiting. The best recruiters listen to the candidates more than they talk. They don’t just run through a checklist of questions. They follow up on initial answers and push until they feel comfortable that they understand a candidate’s strengths and weaknesses in each critical competency and skill area.

Most recruiters who are any good can listen or develop the skills to listen. But it takes practice and it takes time.

5. Customer Service

Ideally, recruiters are good at serving their clients, who are the hiring managers. They understand the client’s business well enough to help identify critical skills and competencies.

They also act as if the person they are hiring will be working for them—they don’t hire someone who can’t get along in the organization or who would be a pain to work with.

And they are sensitive to costs, both during the recruiting process and in negotiating the employment offer with the successful candidate. Another excellent recruiter I worked with treated his corporate staffing department like it was his own business and managed his costs as well as his clients’ costs. He could relate well with executives across the company, because they knew he appreciated their problems and would work with them to meet their needs.

* * * * *

Where I fell short was primarily in sales skills and outreach. I wasn’t pushy enough to find the best candidates. I also tended to let candidates’ initial answers slide, rather than delve deeper into their answers.

Fortunately, I had recruiters who worked for me who excelled in these areas, as well as in the client service needed to find exactly the person the hiring manager needed for their assignments. Well, almost exactly—no candidate is ever perfect. At least I staffed my own department well, because I hired people who had the skills I lacked.

Are there any other skills that you think top recruiters should have?

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Happy Labor Day! Take Time to Celebrate and to Plan the summer months, it is often difficult to move ahead on projects. People are not in the office, and even with smartphones and other technological devices that keep us in touch, communications slow down. Most employees cannot operate at a frenetic pace forever, and the opportunity to breathe and relax is healthy for everyone. Labor Day is the last gasp of summer.

But for productivity to be what it needs to be, vacations must end and work must resume. There are less than four months left in the year. In many businesses, Labor Day marks the beginning of a final push toward accomplishing objectives set for the year.

This Labor Day, the last holiday of summer, take a moment to reflect on the successes you have had so far this year—both personal and work-related. Savor them. Be thankful. Celebrate with those you care about.

Monday night, take another moment to plan your Tuesday. What are the three things you MUST accomplish on Tuesday? Write them down.

And what are three more things you MUST accomplish by the end of the week? Write them down also.

Then, on Tuesday, hit the ground running. There are less than four months left in 2015.

Happy Labor Day!

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NLRB At It Again: Joint Employer Doctrine Changed By Administrative Fiat

I just wrote about the National Labor Relations Board (NLRB) a month ago, but the agency is making headlines again—this time for overturning a thirty year definition of “joint employers.”

The joint employer doctrine comes into play when one entity (the actual employer) employs workers to perform services for another entity (the so-called joint employer), and there is some reason to think the joint employer should have equal accountability with the actual employer. The second corporation might be a parent of the actual employer, the customer of a temporary staffing agency or service provider, or a franchisor.

For the past thirty years, the NLRB’s test for holding a corporation to be “joint employer” has been to require that entity to have “direct and immediate control” of the “essential terms and conditions” of the workers in question. “Essential terms and conditions” was defined to include hiring, firing, discipline, and termination.

Moreover, it was not enough for the second corporation simply to have the authority to act—that company had to actually exercise control. This “actual exercise of control” was a relatively bright line test, enabling parent companies, franchisors, businesses using staffing agencies, and other entities to avoid becoming responsible for people they knew very little about. If they didn’t exercise any control, they wouldn’t be a joint employer.

On August 27, 2015, in a 3-2 opinion issued along party lines, the NLRB adopted a new “economic realities” test. See Browning-Ferris Industries, Inc., 362 NLRB No. 186 (Aug. 27, 2015). This test creates new ambiguities on several points.

First, the definition of “essential terms and conditions” is broadened. The NLRB now defines these as “hiring, firing, discipline, supervision, direction, wages, hours, the number of workers to be supplied” and “controlling scheduling, seniority, overtime, assigning work and the manner and method of work performance.” In other words, any attempt to define how work is done on one’s premises can make an entity a joint employer in proceedings before the NLRB.

Second, the NLRB will now permit the “joint employer” doctrine to apply even where the second employer has not actually exercised immediate and direct control. Control through an intermediary is sufficient. Reserving the right to exercise control—even where that control is not actually exercised—can be sufficient. Even where the alleged joint employer reserves control over only a few of the terms and conditions, the NLRB might apply the doctrine.

For example, if a contractor provides janitorial services for a customer, that customer can become a joint employer simply by specifying the schedule when the services are to be performed. The NLRB’s language in the Browning-Ferris opinion is broad enough to support such an interpretation.

This means that all contracts between businesses and any parties providing services for that business potentially could give rise to joint employer status. If a standard for the quality of work the contractor provides is specified in the contract—and if it isn’t, why have a contract?—then the NLRB might swoop down to involve the business in the contractor’s labor problems.

The actual facts of the Browning-Ferris case did involve more involvement than the NLRB’s broad language supports. In that case, which involved a Browning-Ferris recycling facility with workers hired by a contractor, Browning-Ferris set out hiring criteria, reserved the right to terminate workers, set pay ceilings, and shift lengths. But the NLRB did not limit its ruling to cases with this much involvement by the alleged joint employer.

As a result of this decision, Browning-Ferris must now be involved in the negotiations if and when the contractor employees unionize. (The case involved a vote on unionization, and the ballots had not yet been counted.)

The ostensible purpose for the new test is to make businesses using contractors and staffing agencies more responsible for labor activities on their premises. But the potential application of the test is far broader. In “Labor Board Ruling Eases Way for Fast-Food Unions’ Efforts” by Noam Scheiber & Stephanie Stromaug (Aug. 27, 2015), The New York Times reports that

“Unions are expected to seek to apply the ruling beyond the circle of companies that rely on contractors and staffing agencies, extending it to companies with large numbers of franchisees — even, some argue, to money managers who own significant stakes in corporations.”

As a result of the Browning-Ferris ruling, companies cannot be sure the NLRB will not bring them into labor issues between a contractor and the contractor’s employees. Any business with non-employees performing services on its premises—or even off premises but clearly for the benefit of the business—now risks additional labor problems. These labor issues could include joint collective bargaining, strikes, and picketing. Moreover, the company might well become exposed to unfair labor practice charges for anything it does to enforce quality or other standards specified in its agreement with the contractor.

Money and management time are likely to be spent in dealing with the increased likelihood of NLRB and union involvement in what were previously private arrangements between businesses and their service providers.

As a first step, businesses need to consider all relationships with contractors that provide them with temporary workers or services on their premises. To minimize the risk of being found to be a joint employer, they should reduce the types of control they can exercise over workers under the contract—recognizing that they may be giving up some quality control, and balancing the legal risk with the desired outcome from the services.

Lest one think that this is primarily a concern for large corporations, many small businesses are not happy with the ruling either. The article, “2 Big Takeaways From the New Labor Ruling” by Jeremy Quittner, (Aug. 28, 2015), on, makes the point that small businesses use contractors also. These small businesses are now more likely to be drawn into union negotiations and to have difficulty changing or terminating contract terms.

Furthermore, small business franchisees might well see more interference from their franchisors, as the franchisors seek to minimize the risk of liability if they are brought into labor problems of the franchisees. What, then, are the advantages of franchising for either franchisor or franchisee?

Because this new test was adopted by a regulatory agency, Congress can reverse it. Business groups are already calling for Congress to reinstate the more limited definition of “joint employer.” But Congressional action would likely be met by a veto from President Obama.

Do you think the expanded joint employment doctrine will help or hurt businesses? What about employees?

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The Stories We Tell: Corporate Culture, Large and Small (Nike and Pocock)

On a recent trip to the Pacific Northwest, I was privileged to tour two corporate headquarters—Nike near Beaverton, Oregon, and Pocock Racing Shells in Everett, Washington. I love touring company facilities, so I looked forward to both tours. I like to see things being made, and I hoped to see these companies’ products and processes.

Although both Nike and Pocock make premier products in their fields, the company cultures I saw on these tours could not have been more different. I saw again—as I have seen at so many other companies—that corporate culture is created by the stories businesses tell.

The strongest cultures and brands develop when leaders send the same messages to employees, suppliers, customers, and the public. Consistency in message brings the right people together, both inside and outside the company, to deliver on the brand’s promise. Inconsistency in message sows confusion and strategic incoherence.

Nike 20150731_102922Nike’s headquarters is huge. It encompasses blocks of office buildings and includes soccer fields, a football field, indoor gymnasiums, and two child care centers. We were told that Nike has around 60,000 employees worldwide. I think about 6,000 of them are in the Portland, Oregon, area.

Nike doesn’t manufacture in the U.S., so we could not observe product lines. We were kept far away from any product design and development areas. We didn’t even see any employee offices. We were shown displays of old products, as well as as the state-of-the-art employee amenities. An employee soccer match was underway as we walked through at noon.

The headquarters complex is a paean to the company’s products and history, as well as to the champions who have endorsed Nike’s products. Most prominently, of course, is Michael Jordan, and some of his Air Jordans were under glass. Statues and plaques of famous athletes from all sports line every hallway and outside walk. (Some people on our tour became starstruck when Serena Williams rode past us in a golf cart.)

Nike was founded in 1964, and adopted the Nike name and swoosh trademark in 1971. It has, as we all know, grown into a worldwide conglomerate. Our guide told us about the early days of Nike, when Bill Bowerman developed the waffle bottom for the original shoes (allegedly after being inspired by his wife’s waffle maker).

Thus, despite its current size, the stories Nike tells still revolve around its humble beginnings. However, the tour guide also stressed Nike’s commitment to health, environmentalism, and charitable giving, in addition to improving sports equipment and apparel.

Nike also emphasized its relationship with the University of Oregon athletic program. One person on our tour had been to Eugene to see its athletic facilities and came away impressed with Nike’s contributions to the physical complex as well as with the products Nike provided the Ducks.


pocock logoIn contrast to Nike, the headquarters facility of Pocock Rowing Shells is a large metal shed, not far from the large complex in Everett, Washington, where Boeing manufactures airplanes. Although Pocock has been in operation in the United States since 1911, today it boasts only about twenty employees total. The company runs just one day shift of craftsmen making its synthetic rowing shells. Each boat is made one at a time from mold to finished product in that shed—no assembly line production for Pocock.

The small administrative area is on the second floor of the building, where there are a few offices holding dated furniture. Its inventory management system consists of a single whiteboard that shows the delivery schedule for each boat on order.

Knowing the reputation of the Pocock boats for quality, I was underwhelmed by what I saw. I had expected a much bigger facility, with far more boats being manufactured. Our guide indicated that Pocock intended to keep its small size and hand-crafted products.

Like Nike, Pocock’s public spaces feature athletes using its products. The difference is that there is only a single hallway, instead of a multi-acre property. Like Nike, Pocock maintains a close relationship with a college athletic program—in this case the University of Washington crew team.

At Pocock, too, the mythology around founder George Pocock and his son Stan (who died last year) were part of the story. Our guide pointed out George Pocock’s involvement with the University of Washington crew team that won the 1936 Olympics, as described in the current bestselling book, Boys in the Boat, by Daniel James Brown.

Unlike Nike, Pocock let us watch its products being made. We observed a rowing shell under construction for about half an hour. (I wasn’t allowed to take pictures.). We weren’t allowed on the manufacturing floor, but we could see several layers of material laid down during the space of those thirty minutes. Our guide was fairly open about the materials and processes used on the shell, though it is a proprietary process. This was the type of experience I wanted out of both tours, but only received at Pocock.

* * * * *

Both Nike and Pocock operate in the world of sports. There are similarities in their stories—both talk about excellence, from the foundation of their companies to the present. But Nike’s stories also emphasize its worldwide reach and size, while Pocock emphasizes family and craft. Each is successful in its arena, but their cultures are different.

Another Pacific Northwest company’s culture has been in the news recently—Amazon. Amazon’s culture is said to be hard-charging and performance-driven. I’m sure if I toured Amazon’s headquarters, I’d see something quite different than I saw at either Nike or Pocock.

I wonder if the stories Amazon tells about itself match the stories that have been reported.

What company culture has impressed you? How do the stories told foster that company’s success?


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