| I hope everyone had a great Thanksgiving and | | | | effective communication is critical. It is of |
| looking forward to an even better Christmas. I | | | | paramount importance that employees are |
| personally am now getting into the Christmas | | | | recognized as the true reason for success. Family |
| spirit after spending all day Saturday and most of | | | | issues must not penetrate the business |
| Sunday putting up the lights outside and helping | | | | environment. Holding family business meetings, off |
| decorate the tree. As this year comes to an end | | | | site, on a regular basis is highly |
| and we celebrate the holiday season, most of us | | | | recommended.These meetings should be used to |
| have a lot to be thankful for. I know I count my | | | | air feelings, check boundaries and clarify roles and |
| blessings everyday and look for opportunities to | | | | responsibilities as they are being played out. The |
| reach out to others that may need help, support | | | | President must keep his finger on the pulse of the |
| or encouragement. Have a wonderful holiday | | | | company culture and environment. Family |
| season and a prosperous New Year. Reach out to | | | | members must be challenged as issues arise that |
| someone.If you missed Issues #1 & 2, e-mail: for | | | | are detrimental to the long term success of the |
| copies of these issues.This month's issue contains:- | | | | company. Some companies create a "Code of |
| The Housing Bubble --- Is It Finally Ready to | | | | Conduct" just for this reason. Regular confidential |
| Burst?"- First in a series on "The Challenges Facing | | | | employee surveys are also a useful tool in this |
| Family Owned Businesses"--- How can you turn | | | | regard. (E-mail for a complimentary copy of "A |
| over your business to your children without | | | | Guide to Leadership Succession in the Family |
| creating chaos?- Kids and Guns- 15 Revealing | | | | Business")It's your company, it's your legacy and |
| Questions To Ask A New Sales Candidate- Client | | | | when all the cards are played it is still ultimately |
| Corner --- "My Kids Can't Cut It"The Housing | | | | your decision. Listen to your employees, listen to |
| Bubble --- Is It Finally Ready to Burst? ---- | | | | your executive team, get some outside advice |
| Economists have been predicting the burst of the | | | | and then ----- trust your instincts as a professional |
| bubble for the past five years. Every year they | | | | business person. Remember, you can always sell |
| have been wrong. 2005 was supposed to be the | | | | the business or bring in an outsider as |
| year when things really started to slow down. | | | | _______________Kids and Guns ------ I'm |
| Low and behold, 2005 was another banner year. | | | | probably going to get a lot of negative feedback |
| Those in the building supply business are sitting | | | | about this but so be it. Just prior to sitting down |
| around smiling as they count the profits. I am not | | | | for Thanksgiving dinner I was reading the local |
| an economist, thank God, but maybe, just maybe | | | | newspaper and came across an article titled, "How |
| the economists are going to finally be right as | | | | young is too young to hunt?" The newspaper had |
| some signs are beginning to show that may | | | | a picture of a young boy, 6 years old holding a |
| indicate a slow down in the housing boom. And of | | | | .223 caliber rifle with a scope. He was all dressed |
| course, the auto industries problems, specifically | | | | up in camouflage gear. The article talked about |
| General Motors with their recent layoffs and plant | | | | this young boy killing his first deer when he was |
| closure announcements just adds strength to this | | | | five years old with one shot from his .223 caliber |
| conjecture. What's the old saying? "So goes | | | | rifle. The boy himself was excited as he talked to |
| General Motors, so goes the economy."Sales of | | | | the reporter."I shot it right behind the front |
| existing homes fell almost 3% in October and the | | | | shoulder. Dropped it right in its tracks," the boy |
| decline could have been higher except for the | | | | said. This boy of six stands 4 feet tall and weighs |
| demand created by the surge of Hurricanes, | | | | 50 pounds. He's a good student that earned an |
| especially Katrina. The level of unsold homes in | | | | award for responsibility in kindergarten that year. |
| October was at its highest peak in nineteen years. | | | | KINDERGARTEN!But he'd rather be hunting. "I like |
| Some of this may be attributed to the fact that | | | | it," he said. "Shooting a gun and shooting at the |
| prices have risen at a pace not seen in twenty | | | | animals and killing them."The article went on to |
| five years. A chief real estate economist stated; | | | | talk about an eight year old girl that made |
| "The housing boom has likely passed its peak. (We | | | | headlines last month by shooting the first black |
| have heard this before) The boom is winding | | | | bear of the season. This was in Maryland and |
| down. I expect continued softening in housing." | | | | there is no minimum age limit for hunting. You |
| (David Lereah, chief economist for | | | | have to be sixteen or eighteen in most states to |
| Realtors.)Economists also predict that the buildup | | | | drive a car but you can shoot a .223 caliber rifle |
| of unsold homes across the nation would dampen | | | | with a scope at 5 years old. Now, I have to say |
| the surge in prices that saw 69 cities report | | | | that although I am not a hunter, I am not |
| double digit price increases this summer compared | | | | opposed to hunting. I am also not opposed to |
| with third quarter 2004. Another prediction is an | | | | guns. I own one myself. After all, it's legal to carry |
| additional ½ point increase in interest rates | | | | a concealed weapon in Florida (It's a matter of |
| by June of 2006 which could create a slow down | | | | state pride that we return fire in a drive by!) But, |
| in price increases to about 5% next year.In | | | | I do shudder when I think about a five or six |
| reference to new construction, it also has shown | | | | year old in the woods with a .223 caliber weapon, |
| signs that the bubble may be ready to burst. | | | | even if they are with their Father who may be an |
| Housing construction and new building permits | | | | expert hunter. A .223 caliber rifle can kill someone |
| were down sharply in October. The Commerce | | | | or something a mile away. Beyond that, how do |
| Department reports that construction of new | | | | we determine that the maturity level and the |
| homes and apartments fell by almost 6%, which | | | | responsibility level of a six year old are such that |
| was the biggest decline in seven months. | | | | what is learned about weapons in the woods |
| Applications for new building permits fell almost | | | | stays in the woods when that child begins to |
| 7%, which is the biggest decline in six years. | | | | mature?Yes, the federal government spent a lot |
| Nariman Behravesh, another expert chief | | | | of money on a study that said, "Guns do not turn |
| economist stated, "We are likely to see a steady | | | | children into criminals." This study concluded the |
| downward trend in housing activity over the next | | | | best way to reduce firearm related violence is to |
| few months. Mortgage rates are at the highest | | | | buy them a gun and teach them how to use it |
| level seen in more than two years." National | | | | responsibly. Give me a Break!Let's not forget, |
| Association of Home Builders said a new survey | | | | guns are unregulated consumer products. In |
| showed builder optimism fell in November, the | | | | Texas guns are said to kill six children and |
| largest amount since the September 11th | | | | teenagers every week of every school year. I |
| terrorist's attacks.So, is the bubble ready to | | | | personally believe that guns and kids are a volatile |
| burst? Many economists seem to thinks so. | | | | combination. Between 1996 and 2000, 1,541 |
| However, the statistics cited have been cited in | | | | children died in Texas from gun violence and for |
| the past. The predictions of a bubble burst have | | | | every child that died, four others went to the |
| been reported in the past. On the other hand, | | | | emergency room for gun related injury. Six out |
| some economists disagree at least partially. David | | | | of ten child suicides are completed using guns. And |
| Seiders, chief economist for home builders stated | | | | this is just in Texas.To close my RANT and |
| that he believed that sales of both new and | | | | OUTRAGE about a five year old with a .223 |
| existing homes, while still setting records for a | | | | caliber rifle, I want to site a project called the |
| fifth consecutive year in 2005, will only see a | | | | "Lion & Lamb Links". This was a study that asked |
| small 5% decline in 2006. This would represent a | | | | the question, "What do you think your |
| very soft landing (5% is not much considering the | | | | pre-schooler would do if he or she found a real |
| growth we have experienced over the past five | | | | gun---- after repeatedly warned NOT to touch a |
| years). Do they really know? Who knows? Maybe | | | | gun." The results of this project are shocking.First |
| that's why Roosevelt said he would only deal with | | | | a police officer was brought into a class of 60 |
| "One Armed Economists." So they couldn't say, | | | | children. His message was clear and precise. "Don't |
| "On the other hand"...Be cautious in 2006. Don't | | | | touch guns --- they are deadly and dangerous. If |
| panic but don't bet the farm. Initiate a contingency | | | | you see a gun, leave the area. Tell an adult." The |
| planning process. If you don't need the plan in | | | | children were asked to repeat his words and they |
| 2006, so what, sooner or later the economists | | | | could answer his questions. They were later left |
| might get it right and that contingency plan that | | | | alone with disarmed guns and the majority of the |
| you have tucked away will become | | | | children picked them up and shot everything in |
| _______________First In A Series On Family | | | | sight. This was reported by Hardy in a NY Times |
| Owned Businesses------ In 2006 we will try to | | | | editorial.The second study with a different group |
| cover many of the issues and challenges in "The | | | | of children lasted five days. The children were |
| Howl" that face privately held family owned | | | | instructed on how to make good choices, how to |
| businesses. | | | | resist peer pressure and how to distinguish toys |
| Every family owned business faces difficult | | | | from dangerous objects, guns. The results were |
| challenges. Readers are encouraged to e-mail with | | | | the same. When left alone the children began |
| comments, questions and topics for discussion | | | | playing with the guns just as group one did. Most |
| related to the challenges faced by family owned | | | | 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 |
| probably the toughest question any business | | | | your kid play with a gun, even if you trained him |
| owner that has family working in the business will | | | | in the woods to hunt? Does your six year old |
| ever face. However, the answer is simple. The | | | | have the maturity to handle the knowledge about |
| answer is..... It depends. It depends on how well | | | | something as deadly as a gun?I apologize in |
| you (the owner) have prepared yourself and your | | | | advance to my gun distributor friends. But I've |
| child for this transition. Have you planned this out? | | | | got to say, I would be awful nervous hunting in |
| Has your successor been trained, developed and | | | | the woods knowing there were 5, 6, 7 & 8 year |
| prepared for the transition? This is pretty easy if | | | | olds in those woods with loaded rifles. In fact, you |
| you only have one child in the business and he | | | | won't catch me near the woods during hunting |
| she just happens to be the next Jack Welch of | | | | __15 Revealing Questions To Ask A New Sales |
| wholesale distribution. This child has worked | | | | Candidate1. Tell me about why you want to |
| outside the business for someone else for a | | | | succeed at sales.2. Where does your sales passion |
| minimum of five years. They have completed | | | | come from?3. What is the last sales book you |
| their MBA and they worked their way up in your | | | | read?4. Tell me about the last book you've read |
| organization starting in operations or customer | | | | on creativity.5. Tell me about the biggest sale you |
| service. They don't walk around with their silver | | | | ever made.6. What was the biggest reason you |
| spoon visible and they don't wear their family title | | | | got it?7. Tell me about the biggest sale you lost.8. |
| on their sleeve. "Piece of Cake!"Let's face | | | | What do you say when a prospect says, "I want |
| Reality--- That scenario, although it certainly does | | | | to think it over"?9. What do you say when a |
| exist, is the exception and not the rule. In most | | | | prospect says, "I'm satisfied with my present |
| cases privately held businesses generally have | | | | supplier"?10. What do you say when a prospect |
| several family members working in the business. | | | | says, "Your price is too high"?11. How often do |
| When the president has more than one child in | | | | you listen to or read personal development |
| the business, things start to get more | | | | information?12. When did you attend your last |
| complicated. Before we dive into that challenge, | | | | seminar?13. How do you improve your |
| "How do we select the next President?" let's | | | | presentation skills?14. What is your most creative |
| review a few statistics.- Family business is the | | | | approach to follow-up?15. Give me your |
| driving force behind the US economy providing | | | | 30-second personal commercial. Your elevator |
| over 50% of our employment- 59% of family | | | | speech.These are just a few examples to get |
| owned businesses have only 1 or 2 owners- 25% | | | | you started in the |
| of family owned businesses surveyed in 2004 | | | | _______________Client CornerRickI just |
| stated they would seek non family member | | | | turned 70 years old. I am ready to turn over the |
| CEO's for succession- Key areas that family | | | | reigns of my company to one of my three sons. |
| owned businesses seek advice and counsel on | | | | I own a ____parts distributor with revenues that |
| include:--- Strategic Planning--- Organizational | | | | should exceed $48 million by year end 2005. All |
| Design--- Operational Effectiveness--- Leadership | | | | three have worked in the business for the past |
| Development--- Succession Issues--- | | | | 15 years. I don't want to sell and I really want one |
| Compensation--- Sales Effectiveness--- Risk | | | | of my sons to carry on the family legacy. My |
| ManagementNow, how do you decide on who | | | | problem --- I don't know which son to hand the |
| should be the next President? If you are not one | | | | Presidency to. I hired a consultant to do an |
| of the lucky few described in the opening scenario | | | | assessment to help me make a decision. The |
| and you have multiple family members working in | | | | consultants, after doing a battery of tests and |
| the business, your stress level is already at a high | | | | interviews determined that my current Vice |
| point. First, many if not all family members | | | | President of sales is the only internal candidate |
| working in the business have feelings of | | | | that is qualified to take over as President. This |
| entitlement to some degree. This is generally true | | | | gentleman has been with me for 25 years, he's a |
| of at least one if not all of the president's kids. | | | | great guy, and I have no doubt that he can do |
| Choosing the next president becomes even more | | | | the job but he is not one of my sons. To |
| difficult if the children have used their name as a | | | | complicate matters even more, the son that I |
| title instead of the actual title of the job function | | | | was leaning towards handing the Presidency to |
| they performed and the position they hold in the | | | | got the worst rating of anybody on the 360 |
| company (This is often unintentional and some | | | | degree review. In fact, the consultant privately |
| kids don't even realize it). This difficulty increases | | | | advised me that I should consider getting this son |
| exponentially if none of the kids have | | | | out of the business before my transition into |
| demonstrated a high level of competence, | | | | retirement. They also advised that one of my |
| respect for all employees, leadership skills that | | | | two remaining sons may be able to step it up and |
| pattern the servant style and at least some | | | | take over the reins in three to five years. He is |
| promise of potential to fill the president's | | | | 45 years old now. I can't wait that long to retire. |
| shoes.Although the majority of parents would | | | | What do you recommend?George ------ Mid |
| prefer that their children take over the business | | | | WestDear George:You are facing quite a dilemma. |
| and carry on the family legacy, this is not always | | | | Obviously, the easy answer is to sell the business. |
| the best option available. I know it is difficult for | | | | However, I take it from the passion in your |
| any parent to admit that their child may not | | | | memo that you will not consider that option. At |
| possess the skill sets necessary to take over as | | | | 45 years old your son should be ready to take |
| President of the company. However, that situation | | | | over as president now. If he is not ready now, |
| actually does exist in many family | | | | chances are not great that he will be ready in 3 |
| businesses.What are the options if Junior isn't | | | | to 5 years. You haven't done a very good job as |
| ready? --- The first two questions to ask yourself | | | | his coach and mentor. That being said, if you are |
| are: "Will Junior ever be ready?" "Does Junior have | | | | adamant about one of your sons taking over the |
| the ability to learn how to become President?"As | | | | business you might want to consider this scenario. |
| difficult as it is to accept, your answers to these | | | | Appoint your VP of sales as your successor with |
| questions alone are not good enough. If you have | | | | the understanding that one of his primary |
| a Board of Directors, you should solicit their input | | | | responsibilities is to develop your son to take over |
| and recommendations. Hire a Human Resource | | | | the company in three years. Make sure that you |
| Consultant to do an assessment of not only Junior | | | | are generous to this VP in constructing a contract |
| but other executives in your organization that | | | | that makes him well if something happens to you |
| may be qualified for the Presidency. Conduct 360 | | | | and your sons decide to throw him off the bus. If |
| degree reviews to get input from peers and | | | | your son doesn't develop enough to really run the |
| subordinates. Precisely define the Presidents role | | | | company in three years, you might consider |
| and responsibilities and match these requirements | | | | leaving your former VP of sales in the role of |
| to Junior's skill sets. If you don't have a board, | | | | President and appoint your son CEO. He could be |
| create one before the transition. Include the | | | | the outside face for the company, carryon the |
| following action items as part of the transition | | | | family name but have your President run the |
| plan:- Create a development transition training | | | | business on a day to day basis. This assumes that |
| program for the new President (This should be | | | | your son is willing to play that role and supports |
| designed as an internship)- Clearly define the | | | | the President in his day to day role. It is not the |
| former Presidents role after the transition. Will he | | | | ideal solution but it is an option that can be |
| remain and come into the office? Will he become | | | | considered. However, be very cautious in |
| Chairman of the Board? What responsibilities will | | | | determining what your sons are willing to accept |
| the former President retain?- Manage the | | | | and how they will react. A family legacy means |
| expectations of other family members. Do not | | | | nothing if the business goes down the tubes due |
| allow family tension to create tension in the | | | | to internal strife caused by intolerable family |
| business. This could lead to employees taking | | | | issues. This is a short answer that requires a lot |
| sides.- Use your attorney to cover all legal issues- | | | | more discussion.Good Luck and let me know how |
| Create a real Board of DirectorsThe Family | | | | things progress.Rick E-mail for prior issues of The |
| business can be complex--- The family business | | | | Howl. Dr. Rick Johnson () is the founder of CEO |
| structure can be complex and confusing. This is | | | | Strategist LLC. an experienced based firm |
| especially true when numerous family members | | | | specializing in leadership and the creation of |
| work in the business. The business is composed | | | | competitive advantage. Rick received an MBA |
| of interdependent relationships between functions | | | | from Keller Graduate School in Chicago, Illinois and |
| and people that depend on the ability to work | | | | a Bachelor's degree in Operations Management |
| toward common objectives. A family owned | | | | from Capital University, Columbus Ohio. Rick |
| business with multiple family members has twice | | | | completed his dissertation on Strategic Leadership |
| as many opportunities for mistakes, resentments | | | | and received his Ph.D. |
| and complacency. Teamwork is essential and | | | | |