Greg McCann has been surrounded by family businesses his whole life. His dad was a serial entrepreneur, and Greg followed suit. By 11 years old, young Greg was selling donuts door to door.
In his 20s, he worked for two of his family's companies. By 30, he decided to become a professor at Stetson University in DeLand, but that didn't keep him away from family businesses. Just eight years later, he asked to start the Family Enterprise Center at Stetson.
A year into founding the department, families started to reach out for consulting work. Now 15 years old, McCann's six-person company, McCann & Associates, advises businesses around the U.S. and presents at conferences on family business.
Considering the whole family as a client, McCann and his colleagues interview every family member and management one-on-one to fully understand the challenges. He describes his role as “one part mediator, 10% therapist, and 50% business strategist.”
McCann spoke with the Business Observer about the most common issues he encounters in his day-to-day work. The following is an edited transcript of the interview:
You're a big proponent of addressing the unique challenges of family businesses - why?
With a broad definition, about 90% of the businesses in this country can be considered family businesses. About a third of the Fortune 500, or about 78% of the new jobs that will get us out of this recession, are coming from family-owned businesses. About half the workforce in this country works for family-owned businesses. And qualitatively, they tend to be longer-term in their thinking, they tend to be more connected to their communities, they tend to be more philanthropic, they tend to be a little slower to lay people off, and they tend to be more values-based in their decision making. The average leader of a family business tends to serve 24 years. The average leader of a large public company in this country serves roughly two years, so you can see where there's often a big, big difference between those two models.
What are examples of family business success metrics, and why do you think they are successful?
I would say trust, communication, and values. What makes family businesses difficult is the family stuff. Your sister can probably push your buttons far more effectively than someone else. But the other side of that coin — and this doesn't get talked about enough — the commitment to family is what keeps people in a room to work out a decision, because I want your kids to play with my kids, because we want mom and dad to be happy on their death bed that we're getting along. There's a commitment there that would never, never show up in people that weren't family. And that's why my firm, and I think a lot of people in this field, feel like it is truly a strategic advantage.
What's the most common issue you are approached with?
I think almost all of them come about from what we call managing the overlap. In other words, if I have three daughters, how do I manage them? Do I hire all of them because I love them? Or do they have to be qualified? Do I follow my estate planner's advice and transfer stock to them because it's tax effective, or do you have to be qualified to own stock in a company? Do you have to have training on governance? So all of them tend to say 'how do you involve the family in a way that make sense?' In the early generations that often means professionalizing what we do.
What do you mean by professionalizing a family business?
With management, they're always wondering—'If I'm non-family can I get promoted? Can I own stock? Are you going to promote your son who flunked out of college and can't find a job? Is he going to be my boss someday?'
So if someone wasn't a family member, what would they have to do to be promoted to president of the company? Well they probably would have to have experience. They would probably have to even have the board of directors form a hiring committee. You sort of professionalize it so it isn't 'who does dad like the best or mom like the best?' Because then the management can see, 'Oh yeah, well they brought in a firm. The HR people were involved, and we saw a job description, we saw a five-year training plan for junior.' Families tend to have a blind spot, especially in the earlier generations where they think if they don't tell the stakeholders or the employees, everything will be OK, or, that these people don't know what's going on. They always know what's going on, and they usually speculate the worst. So if dad's 75 and hasn't picked a successor, everybody is nervous.
Where does it get sticky with family businesses?
A colleague of mine says family businesses are more than just business. Try firing your mother-in-law and going to Thanksgiving dinner. And they're more than just family. You have to have accountability. You have to have budgets and plans, depending on the size of the business.
Why do you recommend a family council?
You can start to have bodies like the family council, like the board of directors, that help do what you used to be able to do over the dinner table. A family council could include everyone, or you can get to the level where you say we're going to elect family representatives, and they will educate the family, and they will be a voice of the family to the business.
You say you don't like the term 'succession,' why is that?
I think most people, when you say 'succession,' what they think is every 25 years or so, mom or dad passes the torch. So that means you can wait and ignore it and avoid it. If you think about transitioning, you're always in transitions, so it's a more proactive and ongoing practice. I think families can get very stuck in 'We're busy' and 'This is a big sales season, once we get done with this...' and all of a sudden the years roll by and a reactive approach to these transitions almost never works as well as it should.
Why do you think opening communication is so important?
I think [it's important] to take a risk and check out assumptions. Somebody will say, 'Dad told me this will all be mine,' and you'll say, 'When did he tell you that?' and the person will say, 'When I was 12 and we were playing golf.' And the person's now 40. So, helping people have the direct respectful, honest communication. 'Did you pick my sister because I married the wrong person? Did I not get ownership because I switched religions?' We tend to make assumptions in human relationships, but it's particularly in families that always go to the negative. So finding a place, bringing in a facilitator or just developing it within the family, where you can have these challenging, difficult conversations is what builds the trust.
What is professional trust?
So one version of it is 'Well she's running the company and she's my sister and I love her. She's a good person. I don't need to look at any of the financials.' Well that's fine from a personal level, but if you're an owner or you're on the board, professional trust is: 'We want to see the numbers. We want to look at what other companies in our industry are doing. We want to see how you did against budget.' As so a lot of families will say, 'Oh no, that looks like I don't love and trust her.' Doesn't mean you don't trust her, it means in your role as an owner, you have to ask these kind of questions.
Where do you recommend businesses start?
I have a client from Florida that said they pick one or two things a year on their family business list. Like, starting a family council, drafting a family employment policy, making sure the estate planning agrees with the succession planning. And so over the years they've done a great deal of work and there's never been a crisis. A family can easily get overwhelmed if they look at a book or go to a conference and say, 'Oh my God we need all this.' I think every family tends to approach it differently, at their own pace, and have different needs.
McCann's Top Three Family Business Issues
1. Educating the family and starting the dialogue
“My firm and the program at Stetson were big believers that the deep discussion has to happen first. So if you create a company, who do you want to work there? It may be the difficult discussion that one of your kids, though you love them greatly, isn't yet qualified to work there.”
“Depending on the size of the business, have we professionalized the business or is it all about the founder? If I'm the key personality in business, if I leave all those relationships with suppliers and customers go down the drain, then maybe I haven't created something sustainable.”
3. Ownership and governance
“Say I'm this entrepreneurial founder, but I have the three daughters. The business has grown. We have more employees. We have more owners. Well I just can't turn on a dime any more; I may have to have a board. I may have to have people vote on things. There has to be accountability.”
Firm. McCann & Associates Industry. Family business consulting Key. Trust and communication are paramount in keeping family dynamics healthy.