| I hope everyone had a great Thanksgiving and | | | | importance that employees are recognized as the |
| looking forward to an even better Christmas. I | | | | true reason for success. Family issues must not |
| personally am now getting into the Christmas spirit | | | | penetrate the business environment. Holding family |
| after spending all day Saturday and most of Sunday | | | | business meetings, off site, on a regular basis is highly |
| putting up the lights outside and helping decorate the | | | | recommended.These meetings should be used to air |
| tree. As this year comes to an end and we celebrate | | | | feelings, check boundaries and clarify roles and |
| the holiday season, most of us have a lot to be | | | | responsibilities as they are being played out. The |
| thankful for. I know I count my blessings everyday | | | | President must keep his finger on the pulse of the |
| and look for opportunities to reach out to others | | | | company culture and environment. Family members |
| that may need help, support or encouragement. Have | | | | must be challenged as issues arise that are |
| a wonderful holiday season and a prosperous New | | | | detrimental to the long term success of the |
| Year. Reach out to someone.If you missed Issues #1 | | | | company. Some companies create a "Code of |
| & 2, e-mail: for copies of these issues.This month's | | | | Conduct" just for this reason. Regular confidential |
| issue contains:- The Housing Bubble --- Is It Finally | | | | employee surveys are also a useful tool in this regard. |
| Ready to Burst?"- First in a series on "The Challenges | | | | (E-mail for a complimentary copy of "A Guide to |
| Facing Family Owned Businesses"--- How can you | | | | Leadership Succession in the Family Business")It's |
| turn over your business to your children without | | | | your company, it's your legacy and when all the cards |
| creating chaos?- Kids and Guns- 15 Revealing | | | | are played it is still ultimately your decision. Listen to |
| Questions To Ask A New Sales Candidate- Client | | | | your employees, listen to your executive team, get |
| Corner --- "My Kids Can't Cut It"The Housing Bubble | | | | some outside advice and then ----- trust your |
| --- Is It Finally Ready to Burst? ---- Economists have | | | | instincts as a professional business person. |
| been predicting the burst of the bubble for the past | | | | Remember, you can always sell the business or bring |
| five years. Every year they have been wrong. 2005 | | | | in an outsider as |
| was supposed to be the year when things really | | | | ___________Kids and Guns ------ I'm probably |
| started to slow down. Low and behold, 2005 was | | | | going to get a lot of negative feedback about this |
| another banner year. Those in the building supply | | | | but so be it. Just prior to sitting down for |
| business are sitting around smiling as they count the | | | | Thanksgiving dinner I was reading the local |
| profits. I am not an economist, thank God, but | | | | newspaper and came across an article titled, "How |
| maybe, just maybe the economists are going to | | | | young is too young to hunt?" The newspaper had a |
| finally be right as some signs are beginning to show | | | | picture of a young boy, 6 years old holding a .223 |
| that may indicate a slow down in the housing boom. | | | | caliber rifle with a scope. He was all dressed up in |
| And of course, the auto industries problems, | | | | camouflage gear. The article talked about this young |
| specifically General Motors with their recent layoffs | | | | boy killing his first deer when he was five years old |
| and plant closure announcements just adds strength | | | | with one shot from his .223 caliber rifle. The boy |
| to this conjecture. What's the old saying? "So goes | | | | himself was excited as he talked to the reporter."I |
| General Motors, so goes the economy."Sales of | | | | shot it right behind the front shoulder. Dropped it |
| existing homes fell almost 3% in October and the | | | | right in its tracks," the boy said. This boy of six |
| decline could have been higher except for the | | | | stands 4 feet tall and weighs 50 pounds. He's a good |
| demand created by the surge of Hurricanes, | | | | student that earned an award for responsibility in |
| especially Katrina. The level of unsold homes in | | | | kindergarten that year. KINDERGARTEN!But he'd |
| October was at its highest peak in nineteen years. | | | | rather be hunting. "I like it," he said. "Shooting a gun |
| Some of this may be attributed to the fact that | | | | and shooting at the animals and killing them."The |
| prices have risen at a pace not seen in twenty five | | | | article went on to talk about an eight year old girl |
| years. A chief real estate economist stated; "The | | | | that made headlines last month by shooting the first |
| housing boom has likely passed its peak. (We have | | | | black bear of the season. This was in Maryland and |
| heard this before) The boom is winding down. I | | | | there is no minimum age limit for hunting. You have |
| expect continued softening in housing." (David Lereah, | | | | to be sixteen or eighteen in most states to drive a |
| chief economist for Realtors.)Economists also predict | | | | car but you can shoot a .223 caliber rifle with a scope |
| that the buildup of unsold homes across the nation | | | | at 5 years old. Now, I have to say that although I |
| would dampen the surge in prices that saw 69 cities | | | | am not a hunter, I am not opposed to hunting. I am |
| report double digit price increases this summer | | | | also not opposed to guns. I own one myself. After |
| compared with third quarter 2004. Another prediction | | | | all, it's legal to carry a concealed weapon in Florida |
| is an additional ½ point increase in interest rates | | | | (It's a matter of state pride that we return fire in a |
| by June of 2006 which could create a slow down in | | | | drive by!) But, I do shudder when I think about a five |
| price increases to about 5% next year.In reference | | | | or six year old in the woods with a .223 caliber |
| to new construction, it also has shown signs that the | | | | weapon, even if they are with their Father who may |
| bubble may be ready to burst. Housing construction | | | | be an expert hunter. A .223 caliber rifle can kill |
| and new building permits were down sharply in | | | | someone or something a mile away. Beyond that, |
| October. The Commerce Department reports that | | | | how do we determine that the maturity level and the |
| construction of new homes and apartments fell by | | | | responsibility level of a six year old are such that |
| almost 6%, which was the biggest decline in seven | | | | what is learned about weapons in the woods stays in |
| months. Applications for new building permits fell | | | | the woods when that child begins to mature?Yes, |
| almost 7%, which is the biggest decline in six years. | | | | the federal government spent a lot of money on a |
| Nariman Behravesh, another expert chief economist | | | | study that said, "Guns do not turn children into |
| stated, "We are likely to see a steady downward | | | | criminals." This study concluded the best way to |
| trend in housing activity over the next few months. | | | | reduce firearm related violence is to buy them a gun |
| Mortgage rates are at the highest level seen in more | | | | and teach them how to use it responsibly. Give me a |
| than two years." National Association of Home | | | | Break!Let's not forget, guns are unregulated |
| Builders said a new survey showed builder optimism | | | | consumer products. In Texas guns are said to kill six |
| fell in November, the largest amount since the | | | | children and teenagers every week of every school |
| September 11th terrorist's attacks.So, is the bubble | | | | year. I personally believe that guns and kids are a |
| ready to burst? Many economists seem to thinks so. | | | | volatile combination. Between 1996 and 2000, 1,541 |
| However, the statistics cited have been cited in the | | | | children died in Texas from gun violence and for |
| past. The predictions of a bubble burst have been | | | | every child that died, four others went to the |
| reported in the past. On the other hand, some | | | | emergency room for gun related injury. Six out of |
| economists disagree at least partially. David Seiders, | | | | ten child suicides are completed using guns. And this is |
| chief economist for home builders stated that he | | | | just in Texas.To close my RANT and OUTRAGE |
| believed that sales of both new and existing homes, | | | | about a five year old with a .223 caliber rifle, I want |
| while still setting records for a fifth consecutive year | | | | to site a project called the "Lion & Lamb Links". This |
| in 2005, will only see a small 5% decline in 2006. This | | | | was a study that asked the question, "What do you |
| would represent a very soft landing (5% is not much | | | | think your pre-schooler would do if he or she found a |
| considering the growth we have experienced over | | | | real gun---- after repeatedly warned NOT to touch a |
| the past five years). Do they really know? Who | | | | gun." The results of this project are shocking.First a |
| knows? Maybe that's why Roosevelt said he would | | | | police officer was brought into a class of 60 children. |
| only deal with "One Armed Economists." So they | | | | His message was clear and precise. "Don't touch guns |
| couldn't say, "On the other hand"...Be cautious in 2006. | | | | --- they are deadly and dangerous. If you see a gun, |
| Don't panic but don't bet the farm. Initiate a | | | | leave the area. Tell an adult." The children were asked |
| contingency planning process. If you don't need the | | | | to repeat his words and they could answer his |
| plan in 2006, so what, sooner or later the economists | | | | questions. They were later left alone with disarmed |
| might get it right and that contingency plan that you | | | | guns and the majority of the children picked them up |
| have tucked away will become | | | | and shot everything in sight. This was reported by |
| ___________First In A Series On Family Owned | | | | Hardy in a NY Times editorial.The second study with |
| Businesses------ In 2006 we will try to cover many of | | | | a different group of children lasted five days. The |
| the issues and challenges in "The Howl" that face | | | | children were instructed on how to make good |
| privately held family owned businesses. | | | | choices, how to resist peer pressure and how to |
| Every family owned business faces difficult | | | | distinguish toys from dangerous objects, guns. The |
| challenges. Readers are encouraged to e-mail with | | | | results were the same. When left alone the children |
| comments, questions and topics for discussion related | | | | began playing with the guns just as group one did. |
| to the challenges faced by family owned | | | | Most of the six year olds could tell the difference |
| businesses.How can you turn the business over to | | | | between the toy guns and the real guns but they |
| your children without creating chaos--- This is | | | | played with them anyway.Ask yourself, would your |
| probably the toughest question any business owner | | | | kid play with a gun, even if you trained him in the |
| that has family working in the business will ever face. | | | | woods to hunt? Does your six year old have the |
| However, the answer is simple. The answer is..... It | | | | maturity to handle the knowledge about something |
| depends. It depends on how well you (the owner) | | | | as deadly as a gun?I apologize in advance to my gun |
| have prepared yourself and your child for this | | | | distributor friends. But I've got to say, I would be |
| transition. Have you planned this out? Has your | | | | awful nervous hunting in the woods knowing there |
| successor been trained, developed and prepared for | | | | were 5, 6, 7 & 8 year olds in those woods with |
| the transition? This is pretty easy if you only have | | | | loaded rifles. In fact, you won't catch me near the |
| one child in the business and he/she just happens to | | | | woods during hunting |
| be the next Jack Welch of wholesale distribution. This | | | | _______________________________15 |
| child has worked outside the business for someone | | | | Revealing Questions To Ask A New Sales Candidate1. |
| else for a minimum of five years. They have | | | | Tell me about why you want to succeed at sales.2. |
| completed their MBA and they worked their way up | | | | Where does your sales passion come from?3. What |
| in your organization starting in operations or customer | | | | is the last sales book you read?4. Tell me about the |
| service. They don't walk around with their silver | | | | last book you've read on creativity.5. Tell me about |
| spoon visible and they don't wear their family title on | | | | the biggest sale you ever made.6. What was the |
| their sleeve. "Piece of Cake!"Let's face Reality--- That | | | | biggest reason you got it?7. Tell me about the |
| scenario, although it certainly does exist, is the | | | | biggest sale you lost.8. What do you say when a |
| exception and not the rule. In most cases privately | | | | prospect says, "I want to think it over"?9. What do |
| held businesses generally have several family | | | | you say when a prospect says, "I'm satisfied with |
| members working in the business. When the | | | | my present supplier"?10. What do you say when a |
| president has more than one child in the business, | | | | prospect says, "Your price is too high"?11. How often |
| things start to get more complicated. Before we dive | | | | do you listen to or read personal development |
| into that challenge, "How do we select the next | | | | information?12. When did you attend your last |
| President?" let's review a few statistics.- Family | | | | seminar?13. How do you improve your presentation |
| business is the driving force behind the US economy | | | | skills?14. What is your most creative approach to |
| providing over 50% of our employment- 59% of | | | | follow-up?15. Give me your 30-second personal |
| family owned businesses have only 1 or 2 owners- | | | | commercial. Your elevator speech.These are just a |
| 25% of family owned businesses surveyed in 2004 | | | | few examples to get you started in the |
| stated they would seek non family member CEO's | | | | ___________Client CornerRickI just turned 70 |
| for succession- Key areas that family owned | | | | years old. I am ready to turn over the reigns of my |
| businesses seek advice and counsel on include:--- | | | | company to one of my three sons. I own a |
| Strategic Planning--- Organizational Design--- | | | | ____parts distributor with revenues that should |
| Operational Effectiveness--- Leadership | | | | exceed $48 million by year end 2005. All three have |
| Development--- Succession Issues--- Compensation--- | | | | worked in the business for the past 15 years. I don't |
| Sales Effectiveness--- Risk ManagementNow, how do | | | | want to sell and I really want one of my sons to |
| you decide on who should be the next President? If | | | | carry on the family legacy. My problem --- I don't |
| you are not one of the lucky few described in the | | | | know which son to hand the Presidency to. I hired a |
| opening scenario and you have multiple family | | | | consultant to do an assessment to help me make a |
| members working in the business, your stress level is | | | | decision. The consultants, after doing a battery of |
| already at a high point. First, many if not all family | | | | tests and interviews determined that my current |
| members working in the business have feelings of | | | | Vice President of sales is the only internal candidate |
| entitlement to some degree. This is generally true of | | | | that is qualified to take over as President. This |
| at least one if not all of the president's kids. Choosing | | | | gentleman has been with me for 25 years, he's a |
| the next president becomes even more difficult if | | | | great guy, and I have no doubt that he can do the |
| the children have used their name as a title instead of | | | | job but he is not one of my sons. To complicate |
| the actual title of the job function they performed | | | | matters even more, the son that I was leaning |
| and the position they hold in the company (This is | | | | towards handing the Presidency to got the worst |
| often unintentional and some kids don't even realize | | | | rating of anybody on the 360 degree review. In fact, |
| it). This difficulty increases exponentially if none of | | | | the consultant privately advised me that I should |
| the kids have demonstrated a high level of | | | | consider getting this son out of the business before |
| competence, respect for all employees, leadership | | | | my transition into retirement. They also advised that |
| skills that pattern the servant style and at least some | | | | one of my two remaining sons may be able to step |
| promise of potential to fill the president's | | | | it up and take over the reins in three to five years. |
| shoes.Although the majority of parents would prefer | | | | He is 45 years old now. I can't wait that long to |
| that their children take over the business and carry | | | | retire. What do you recommend?George ------ Mid |
| on the family legacy, this is not always the best | | | | WestDear George:You are facing quite a dilemma. |
| option available. I know it is difficult for any parent to | | | | Obviously, the easy answer is to sell the business. |
| admit that their child may not possess the skill sets | | | | However, I take it from the passion in your memo |
| necessary to take over as President of the | | | | that you will not consider that option. At 45 years old |
| company. However, that situation actually does exist | | | | your son should be ready to take over as president |
| in many family businesses.What are the options if | | | | now. If he is not ready now, chances are not great |
| Junior isn't ready? --- The first two questions to ask | | | | that he will be ready in 3 to 5 years. You haven't |
| yourself are: "Will Junior ever be ready?" "Does Junior | | | | done a very good job as his coach and mentor. That |
| have the ability to learn how to become | | | | being said, if you are adamant about one of your |
| President?"As difficult as it is to accept, your answers | | | | sons taking over the business you might want to |
| to these questions alone are not good enough. If you | | | | consider this scenario. Appoint your VP of sales as |
| have a Board of Directors, you should solicit their | | | | your successor with the understanding that one of |
| input and recommendations. Hire a Human Resource | | | | his primary responsibilities is to develop your son to |
| Consultant to do an assessment of not only Junior | | | | take over the company in three years. Make sure |
| but other executives in your organization that may | | | | that you are generous to this VP in constructing a |
| be qualified for the Presidency. Conduct 360 degree | | | | contract that makes him well if something happens |
| reviews to get input from peers and subordinates. | | | | to you and your sons decide to throw him off the |
| Precisely define the Presidents role and responsibilities | | | | bus. If your son doesn't develop enough to really run |
| and match these requirements to Junior's skill sets. If | | | | the company in three years, you might consider |
| you don't have a board, create one before the | | | | leaving your former VP of sales in the role of |
| transition. Include the following action items as part of | | | | President and appoint your son CEO. He could be the |
| the transition plan:- Create a development transition | | | | outside face for the company, carryon the family |
| training program for the new President (This should | | | | name but have your President run the business on a |
| be designed as an internship)- Clearly define the | | | | day to day basis. This assumes that your son is |
| former Presidents role after the transition. Will he | | | | willing to play that role and supports the President in |
| remain and come into the office? Will he become | | | | his day to day role. It is not the ideal solution but it is |
| Chairman of the Board? What responsibilities will the | | | | an option that can be considered. However, be very |
| former President retain?- Manage the expectations of | | | | cautious in determining what your sons are willing to |
| other family members. Do not allow family tension to | | | | accept and how they will react. A family legacy |
| create tension in the business. This could lead to | | | | means nothing if the business goes down the tubes |
| employees taking sides.- Use your attorney to cover | | | | due to internal strife caused by intolerable family |
| all legal issues- Create a real Board of DirectorsThe | | | | issues. This is a short answer that requires a lot more |
| Family business can be complex--- The family | | | | discussion.Good Luck and let me know how things |
| business structure can be complex and confusing. | | | | progress.Rick E-mail for prior issues of The Howl. Dr. |
| This is especially true when numerous family | | | | Rick Johnson () is the founder of CEO Strategist LLC. |
| members work in the business. The business is | | | | an experienced based firm specializing in leadership |
| composed of interdependent relationships between | | | | and the creation of competitive advantage. Rick |
| functions and people that depend on the ability to | | | | received an MBA from Keller Graduate School in |
| work toward common objectives. A family owned | | | | Chicago, Illinois and a Bachelor's degree in Operations |
| business with multiple family members has twice as | | | | Management from Capital University, Columbus Ohio. |
| many opportunities for mistakes, resentments and | | | | Rick completed his dissertation on Strategic |
| complacency. Teamwork is essential and effective | | | | Leadership and received his Ph.D. |
| communication is critical. It is of paramount | | | | |