Driving Change Plans in Family-Owned Businesses

Posted by Katie Steelman on Tue, May 10, 2016

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At Launch Team, we are often brought in at a point of change in second stage technology companies; these companies have grown to a certain size and created a brand in some markets but are ready for the next stage of growth. This change is often triggered by new leadership, and in many cases, the next generation of leadership. They bring their own ideas to the business, such as new product launch, new marketing strategy, and interest in entering new markets.

Supporting their company change plan, not just in strategy but also in company culture, is critical to success. To that end, we spoke with Dr. Jim Kestenbaum, president and corporate psychologist at The Solutions Group, which specializes in leadership development and succession planning. Jim and Launch Team President Michele Nichols shared some tips for creating change in multi-generation businesses.

 

What are some of the common challenges in working with family-owned businesses?

Jim: Succession planning is particularly challenging, because exiting CEOs tend to think of it as an end, like facing their own mortality. A common success story would be a CEO who went back to the lab, happily innovating and continuing to work in the business he had built. CEOs certainly have more options than being "put out to pasture." Many start new companies, create an incubator within the company, or move into a role in acquisitions—wherever their talents lie.

The most important requirement in a leadership transition is that the former CEO is willing to give up operating control.

Michele: We begin working with many tech companies at the point of change—new leadership, new direction. Declaring a new path that’s respectful of their legacy business but excited about the new strategy is difficult. It demands alignment in leadership and in the team. The organization must be united in a common purpose. In company positioning, creating a new brand promise, we centralize on the customer. What does the customer value? What do they need? How can we serve them best? Through market research and customer interviews, we can help both the former and new CEO, customer service, sales, and operations get excited about the changes needed to deliver on their new brand promise.

 

How long does real change take? Is there a typical arch?

Jim: I like to call it “bloody year three.” If leadership teams can pop out of that, change will stick. Someone must talk about what kind of culture they want, and the CEO must be all in.

At year five, you’ll see a dramatically different company. Most business people are familiar with the Zappos story, but this is quite achievable for smaller companies. Look at G&C Foods. Their culture has helped build a company that’s financially successful, and a joy to lead and work in.

Michele: That makes sense. We typically see the financial returns on a change in strategy beginning at 18 months, but change is hard on people and it takes a while to internalize.

Though not a family business, Launch Team is a 30-year-old company that went through an employee buyout nine years ago. We certainly weren’t faced with family dinner with the founders, but we shared a tremendous respect for everything they had built. To shift focus to inbound marketing for technology companies, we needed to break a lot of habits and processes that had served us to date. It was several years before the team really embraced a shift in culture.

 

How do CEOs best implement change?

Jim: Avoid one-and-done when it comes to strategic change plans. Pick the strategy, and then pick the leadership. Don’t run from conflict. Management consulting isn’t therapy, but if there are unresolved feelings that are blocking progress, you’ve got to get in a room and work them out. If not, you’ll see symptoms like cancelled meetings, avoiding the underlying issue.

Michele: Relentless customer focus can align a team and create commitment to the work it will take to execute a new strategy.

 

How does psychology play a role in employee and customer behavior?

Jim: We are often brought in to use a scientific approach to identifying leaders that are a good fit for the organization and strategy. A successor assessment process is used to determine:

  • Problem solving ability
  • Motivation—do they have the the right drive?
  • Interpersonal and team—how do they interact? Do they have the emotional intelligence to lead a team?
  • Leadership management—credibility in the role

Michele: We look primarily at motivations when creating customer personas, a research-based profile of target customers. These can be powerful in ensuring that all marketing outreach is on-message and customer-focused.

 

To learn more about creating change in company culture and strategy, check out The Solutions Group, or our post: Successful Change Leadership, Without the Collateral Damage.

 

Topics: Business Insights, Change and Innovation