Turning the Family Business into Business Family : 20 things that make Family Business going mad and how to avoid it to make your company

growth.

Daniel Doni Sundjojo

Individual Human Resources & Organizational Development Consultant

Abstract Most of the company, even in the world is the family business, at least in their beginning. Many company can make superb growth to conquer the market, be National pride, but more of company had been stagnant, downsized or the worst : going bankruptcy. Why many family business fail in order to seize their goal? Why many of family business doesn’t growth even they had hired professional or even consultant? The problem is the term of family business itself. Family Business term can mean family first, and then, let’s talk business. So many practices in family business paradigm going mad : unprofessional practices, lack of trust, management that doesn’t have objective because all of objective controlled by one superstar and so on. How we can avoid it and make our company sustainable : transform the “Family Business” paradigm into “ Business Family” paradigm, it mean, put business before family when we are in business. In this paper, I will give you 20 reason that make family business going mad, and how to avoid it to turn your family business into business family.

Key words: Family Bussiness, Bussiness Family 1. Introduction. The family business will be the beginning of each business. Most of giant company was beginning from small family business. But many more of family business has failed to seize their objective. They will be downsized, takeover by bigger company or the worst scenario is going bankruptcy. My initial case study had found fact : most of them think that family business is family first, business after that. So, many of family business with this condition will be sank in very demanding market environment. As they realized, they begin to change their paradigm into new powerful paradigm : Business Family. It’s mean : put business before family whenever we talk business. After that, their performance growth as their paradigm, culture and management practices had change. In this paper, I will share 20 things that make family business going mad, and how to avoid it to turn your family business into business family from practical perspective. I hope, it can help the family business, to make significant change

and seize significant growth, since the family business is the important fundamental of business that make significant impact in Indonesia’s economic growth, create many working opportunity to our citizen and can make revealed Indonesia as the Giant Nation in the world. 2. Research Questions If we want answer how to make family business has sustainable growth and seize their objective, we must dig into the problem of family business and how to solve it, so I declare my research questions in this paper are: • What makes family business going mad? • How to change family business into

business family? 3. Methodology In this research, I used multiple case study to find answer of research questions. Multiple case study means conduct single case study in different company and compiled them into one

multiple case study to conclude the research questions. Yin (1994, 45) had defined multiple case study as “a major insight to consider multiple cases as one would consider multiple experiments.” Multiple case study, like as single case study had emphasizes in multiple source of evidence to find information. In this paper, I use interview, data analysis and observation to identifying what makes family business going mad and how to change family business into business family. 4. Result and Discussion

In this section, I will describe 20 things that makes family business going mad and how to avoid it to turn your family business into business family

4.1.Reason #1 : Lack of Trust Most of family business owner had

problem with their trust. Most of them don’t trust everyone but themselves. So, all of decision making will be taken slower than expected since all of it must approved by the owner. Meanwhile, the owner also control all of process so they don’t have time to develop the company. The worst if the owner had mistakes by put their trust to the Devil, it mean the wrong side. The Devil will make company more pathetic than the owner can imagine. How to avoid it : Delegate the trust. You can delegate the trust and authorize by their level and expertise. Declare your rules of the game, target and your hope of their commitment. Sometimes, you can control them to make sure that they have paid your trust or not.

4.2Reason #2 : Learning is only in the bad time

This is the most devastating sin in your company : satisfy with your company performance, and forget to learn in order to improve your company performance. Many of family business only conduct the learning program or activities such as continuous improvement, training, benchmark, focus

group discussion, brainstorming and so on, only in the bad time. When productivity fall, company just begin their learning activity. It is completely wrong, and waste your time and money. How to avoid it : You must consider that once your company growth, the business environment will growth too, and the growth of business environment can double, triple or even million billion times than your company’s growth. So, never stop learning, the bigger of your growth, the business environment will be more demanding than you imagine. 4.3. Reason #3 : Professional is only the dream

When we look inside family business’ Human Resources Department. We can find that many of position, especially that had access to strategic, money, assets or so on dominated by family members. Is it false? Absolutely not, if they are professional and expert in their field. Professional means they have expertise, attitude, behavior, knowledge and value for company as well as their job. Many of family business have different standard and measurement to their family member and non family member. Even had mistakes, if they are family member, they will be saved. So this will be dissemination a bad culture of the company and make non family member employee that have expertise and value will resign from your company once they have opportunity. How to avoid it : Be Professional. You must treat your family member as same as your non family member whenever you talk about the business. All of the treatment, facility, opportunity will be equal. If you want entertain your family member, you can do it not in your family time, never ever in your business time. If you don’t want sack your family member even they have robbed you, open the social organization, not business organization. If you want your company business growth, you must create the professional culture that makes your company growth faster than you can imagine.

4.4. Reason #4 : Business Communication is going bad

When I conduct audit business communication in family business, I had found that business communication didn’t flow properly. Most of business communication is centralized among family member and non family member that have privileges as they have success to make owner put trust in them. Dissemination information doesn’t clear and right. So many case can rise because of misunderstanding among company member and further sources of problem is: Business Communication is going bad, and sometimes, It will be cost as expensive as your luxury property. How to avoid it: All information must be collected, manage and dissemination with the clear and right flow. The family member or whoever that have privileges to access the information, must be the window of business information for others with the clear and right manner. 4.5 Reason #5 : There are no vision, or the worst : vision is only the statement

Most of company has vision, but the questions is: Is it really a vision or only the statement? Many of family business owner put their vision as company’s vision, but never measure their expertise, company’s capability, business environment, consequences and the worst: sometimes, they never think about strategy, target and action plan to seize their vision. So the vision is only the statement that will be sank in the long term. How to avoid it: Create vision based on your expertise, company capability, business environment, consequences for defined the vision, accompany with strategy, target and action plan. After that, be commit to fulfilled it. 4.6. Reason #6 Lack of strategic and analysis skills

Many of family business owner emphasized on their intuition than strategic and analysis skills when running their company. The consequences is company can go to wrong direction since sometimes, the intuition can wrong or not clear. When the company have

data, a few of family business owners take advantage with analyze and use the result to strengthen their strategy or conduct strategy initiative to prevent the bad condition. If there’s mistakes about strategy, the family business owner feel there is mistakes on their intuition, faith or the worst, not realize it. How to avoid it : Strengthen your strategic and analyze skills, and take advantage by analyze your company, business environment in valid and reliable manner to create the strategy or decision based on it. After that, review and analyze all of your strategy, system and process continually, and create strategy initiative whenever necessary to improve your company. 4.7 Reason #7: Monitoring and evaluation in the wrong way

Many of family business didn’t conducted monitoring and evaluation properly. Many of them conduct monitoring and evaluation with wrong way, it means wrong in every aspect such as indicator, measurement, process, system and so on. Many of family business owner don’t have positive attitude to know the truth behind result of monitoring and evaluation process. Sometimes, they like to be lied as they prefer “good report” not “the right report.” The worst, they also appointed incompetence people to conduct it. So, the report doesn’t better than rubbish, and the worst, you still don’t know about your company’s true performance. How to avoid it: Do monitoring and evaluation with the right thing, not good thing. If you want conduct monitoring and evaluation, first at all you must prepare your mentality to hear the right thing, and not the good thing. Maybe you can sleepless after that, but that’s reality. The most important is not about how good your company looks like, but how the real condition of your company. If the report indicates your company is bad, mad or even going bankruptcy, it is not the end of the world. It is the warning signal. If you can fix all of problem and make improvement, your company will fly high. Once you agree with it, you can create the system, indicator, rules of the games about

how to conduct and what will be monitored and evaluated. Some pilot project can useful to make sure all of system, indicator, rules of the games are right and applicable. After you finished it, appointed the expert team to conduct it, and also to improve all of weakness that rise in the report. Finally, Conduct monitoring process of improvement and consistency in every process. Once your company achieve and excellent indicator, the new standard must be set, the new indicator must be set higher than before. 4.8. Reason #8 : System is more sporadic than integrated.

When we talk about the system, family business tend to set the system by sporadic way. When the problem rise, the owner assign the management team to design the system to fix it, like the firefighting. If the problem persist, the owner assign more expert team, sometimes from external, to do this job and so on until the problem can be solved. If the other problem - that different with the initial problem – rise, owner do the same way, create the other system to fix this problem and so on. After that, we can realize that the system – even in the same cluster- doesn’t integrated one to another. That is ridiculous, there are system, but we still must do it in manual way. Imagine if your computer can’t integrated all of the function, only can type but can’t save your data, what will you do? Absolutely, you must be upset. How to avoid it : When we talk about system, we must have holistic - chopper view in our mind. We must identify what we must accommodate all of the requirement in the future and how the system can help us to do it, in the simple and right way. After that, we must create blueprint of system as integrated system, create manual system, database management system and flow of the system. Some pilot project can useful to make system more applicable and complete. Finally, conduct the socialization and training to do this system, and last but never least : consistency. 4.9. Reason #9 : Superstar syndrome

Imagine the football team. How they can win competition is their performance depend solely on only one star? They will never ever win the high level competition. All of their enemy needs to win is simple : destroy the star. Many family business is operate by the superstar, not super team. Company depends on one superstar that can handle everything know everything, has initiative for everything. The other member is only followers. Every decision need superstar to take care of it. If the superstar go to seminar, even only one hour, the superstar still take care incoming call, make a phone or use their smart phone to handle business, to make sure all of process run properly. If your company like this, it will be mess. Once the superstar retired, resigned or the worst : dead, the company will finish. No superstar, no company, This is the simple rules. How to avoid it : Delegate and Coach to the right people. If you are superstar, you must delegate your authority and responsibility to the right people. You also must coach them whenever necessary. You must build the super team to replace you as superstar. Sometimes you will suffer with the superstar post power syndrome, but it is the process. There is not superstar in team if you want your company will be sustainable. If you can built super team, you will be the real superstar. 4.10. Reason #10 : Put the problem under the desk

Family Business tend put the problem under the desk since they tend to avoid the conflict between the family member. For non family member, they will be do it especially if the owner perceived as the high temper person. So the business is run as usual but the problem still exist and wait for its time to blow your company away. How to avoid it : Use positive attitude when the problem rise. Don’t looking for scapegoat for the problem. All of problem must treat and fix with the professional way. If all of organization member perceived it, so the problem that put under the desk can be minimized.

4.11. Reason #11 : Lack of Risk Management

Family Business tend to open or run company without risk management. They didn’t measure the risk and create the strategy to minimize it. So, after the company established, the competition is rise, the enemy exist from internal or external of company, and market environment became very demanding, that effect to risk of company that they never ever imagine before. Once family business owner involved in this situation, most of them will suffer traumatic and have no idea what must they do in the market, sooner or later, your company will be erased from market. How to avoid it : You must realize that every step has its own risk. And in business term, the risk is high. Don’t be businessman if you want avoid the risk. As the businessman, the risk always follow you, wherever you go. All of you must do is assess and minimize the risk by conduct the risk management. You can minimize the risk if you assess, anticipate and improve to minimize it whenever you decide to set up business, develop your product and services or expand your business. For each of it, there are the risk. You must assess the risk. After you know about the risk and it acceptable, you must create the strategy to minimize your risk and strategy initiative to anticipate the worst scenario. 4.12. Reason #12 : Don’t have special value

Many family business don’t have special value. Many of them operate with same attribute, value, pace with their competitor. The worst, they tend to duplicate or follow their competitor or success company as their figure. It will work, but not everlasting. If your company doesn’t have any special value for your customer, than your company can replace easily. How to avoid it : Be the Special Company. You can looking through your eyes : What is your company’s core value and expertise that you can promote it as the special value that difficult to be duplicated. You must improve all of your special value that makes your company different with your competitor as well as the change of your customer

behavior. The special value must be tailored by yourself and your team, not modified from other company, because someone who know about the taste of your company is yourself. If you can do it, you can have special value for your company and it mean the sustainable competitive advantage. 4.13. Reason #13 : Too late for Succession Planning

Many of family business have a figure, and most of them is the superstar in their company. The common mistakes for family business is always the same : Too late for succession planning, especially for the top management position. Most of family business owner late to prepare their successor, the impact is : the successor have lack of competence, experience, attitude and can make your company going bankruptcy faster than your prediction. How to avoid it : You must prepare your successor, at least 5 years before your retirement date. Maybe your successor –even your child – can’t match your expectation, but give them opportunity, authority and trust to act as leader in your company. The perfect way is forced them to work for other company, not your own company, at least for 2 years. After they can seize at least lower management level, you can hire them in your company. If you don’t want your child work for other company, you can assign them to work in your company as your employee. After 2 years, either your child work for you or the other company, you can train their leadership, sense of business, and other ingredients for the future business leader. You can design project assignment for them, and give a full authority to this project with the clear target, rules of the games and guidelines. You can act as their limited advisor, only give advices if necessary, but you can’t act as decision making anymore. If the project loss, you must treat it as the CEO trainee course investment, not loss for your company. Why? If they have full authority, they can make their own decision, not implement your decision. If they have failed, they can smell their failure and how much cost of their failure. After that,

ask them to analyze the problem behind the failure, and how to improve in order to redeem their failure. After success in one project, you can give them more big project or lead one your business division and so on. So you can see they become more experience, mature, initiative than before. And the most important, your employee will respect to them, and you can retired with happy face. 4.14. Reason #14 Change Management : ended to early

Change management had give phenomenon in business term. Many of company adapt the change management concept, sometimes they hire an expensive high profile consultant to conduct it, they invest an expensive system for the change management purpose, but after that, the result is nothing at all. Why? Because the process is never ended. Why? Because of your impatience or lack of self confidence of you to your company to implement it. I always heard reason : It’s difficult to do this, not my company’s class ; We had run this project for 6 months but don’t give impact to our organization and so on. That will be the end of the change management. How to do it : First : You can change your company by yourself, you even don’t need consultant to do it. You can discuss with your management team or change management committee to identify what is the problem in your company and how to improve it. So you can identify in which sector your priority to conduct change management and in which term : system, culture, process or even behavior. After that, you can design project to change it, and how to conduct monitoring and evaluation your project and the indicator when your change management process expected to completed. Once you have it, you can dissemination, share your vision of change management to your organizational member and ask them to commit and support until this project accomplished. All you need to do when the project running is one : patience. Why? You can change facility, tools, furniture in the easy why as long as you have money, but if you

want change culture, system, process, behavior it’s take time. If you can completed change management project, it will be your investment. If you stop change management too fast, you are wasting your money and time. You must realize it. 4.15 Reason #15 : Plan is not a business plan

Sometimes, family business doesn’t have business plan to run business. Sometimes, they only create plan based on past data or action and adjusted it by their mind. If the business plan is wrong, all of action plan, analysis, target will be rubbish. How to avoid it : Create business plan is not easy You must conduct business research before to identify what is your customer needs and want; your competitor move, government regulation, your development plan, your supply and demand analysis, risk analysis, financial and investment analysis, and many relevant analysis. After that, you must create grand strategy and your company’s development. If you are set up new business, you must learn about the business environment and assess the potential value at least for 5 years. After its stages have completed, you must create action plan that linked to strategy and business plan, and be committed for it. 4.16 Reason# 16 : Exit Strategy : Put the pride and honor first

All of business had its cycle. If your business had decreased over time, be careful, perhaps your time in this business is over, you must think about exit strategy and choose other business or conduct differentiation on your business. Many of family business owner don’t realize it. They put the pride and honor before the cash flow that cost on their bankruptcy. How to avoid it : If you were pioneer in this business, and you lose control because of the market environment increase with very demanding, radical and rapidly, you can learn and improve to take your control again, but if the market is stagnant, the competition increase very radically, and your company had eaten by competition, you must think about exit strategy. Don’t be shy to say enough, and

transform your capital into your new business to regain your pride. 4.17. Reason # 17 : Commitment? Whose Commitment? Strategy, system, process will be nothing if there isn’t commitment to implement it with the right manner. The big company can going bankruptcy only in few months if there isn’t commitment to seize their objective in the right way. If your company member doesn’t have commitment, watch out, maybe your company in the dangerous condition. How to avoid it : Commitment is the soul of company. How to manage the commitment? To do it, you must convinced them about the company value and how it link to them. You can’t take commitment by employee if they perceived that they are only employee, that’s it. If they feel that they are nothing and can be fired whenever you want, you can’t expect commitment from them. You must involved them as if they are your partner to seize the same objective, not as employee. You must treat them as well as you treat your family. You must have credible to gain their respect. If you can do this, you’ll gain their commitment. If there’s only you that have commitment in your company, your company will move forward one step closer to glory. If you can take commitment from 1000 employee in your company, your company will move forward 1000 step closer to glory. 4.18. Reason #18 : Management that doesn’t have objective In the family business ,especially if they have superstar, management doesn’t have objective. If you feel that your management team only wait for your instruction, idea and initiative, your company is in burnout situation. How to avoid it : If you recruit management team, you must believe in them. You had paid manager level, but in the reality, you only take result as if they are staff or operator since you must handle all of strategy, policy and process by yourself. Poor you! They will be overpaid since you paid them with the manager level or salary, but you gain value as well as staff level

from them. As owner, all you have to do is only set up strategy, target, rules of the games for them, and after that, monitoring and evaluation them, that’s it. If your company needs buy tissue and they must wait for your approval, why you must hire the Manager? 4.19 Reason#19 : Going Personal The other mistakes in family business is going personal. Many of decision, policy or even strategy created influenced by personal not professional. Sometimes, family business owner can offer crazy discount every time their competitor cut their price. This decision doesn’t created by research and analysis but based on rivalry between two owner, in their personal life. Sometimes, family business sack their best talent because of have problem with one of their family member, even in the business meeting and many unprofessional decision had made because of you can’t separate your personal life from your business culture. If your company had culture like this, prepare for landing of your ambition, since your company will be crashed faster than you can predicted. How to avoid it : If you talk about business , don’t be personal. You must based all of your strategy, policy and decision based on valid and reliable research, analysis and measurement. You must create right decision no good decision. Even the whole company is yours, but you must remember that the company and you not always have same mind, same soul and same personality, so never ever going personal even in your own company if you want your company fly high. 4.20. Reason#20 : Use same way even the world have changed

Many founder has same mistakes : run their company with the same way when they had build this company. The generation had changed, the business environment had change and the whole world had change, but you still use the old fashioned strategy, policy, system and process to run your company, as if you run your company many years ago when you established it. How you avoid it : You must realize, nothing can do with the same way, all

over years. Everything can change, sometimes with radical and rapid way. If you never learn about what had done in the world and improve your company to compete in very demanding business environment, your company will be over. If you can learn and improve your company faster than the change of very demanding business environment, you can take advantage it. You can promote the way you had improved your company in order to anticipate the change of business environment, and make money even in the crisis time, slow economics period and when the other had fall. 4.21. What next? Let’s action!

What must you do after all of previous section of this paper? What must you do to transform your “Family Business” paradigm into “Business Family” paradigm and take advantage from it? Let’s action. You have known your company, yourself, your expectation more than everyone in the world, even the best consultant in the world. So, the perfect way is you do it by yourself and your continuous improvement committee. If you don’t have any idea about what must you do, you can try to appoint them, but , you must involved in all of process by yourself. In the simple way, you can follow this stages :

• Assess yourself and your organization. What mistakes that you had done?

• What do you want to change? If you can’t change the whole of your organization in the same times, choose one sector to be improve. After that, you must create indicator in the initial condition.

• What condition that you want to be? How far the improvement that you want. You can create the indicator as you expected.

• Create the timetable covered the area that you want improve, person in charge to every process, initial and final indicator that you expected, deadline, target and how to monitoring and evaluation the process.

• Implement it with the commitment, persistent and consistent. The transformation is never easy, since you had to transform culture, process, attitude, behavior. It can be complicated. Maybe you can frustration, but if you can stand and accomplished it, you will be rewarded by the performance of your company. You will gain success for you and your company.

• Finally : Don’t ever satisfy with your achievement. Once you had succeed to improve in your company and take excellent result, you must improve your standard. You must re-enter to your zero condition, set up new standard and always improve. The improvement will never ever end.

5. Conclusion

The family business can improve to be giant company, conquer the market and became the National pride only if they have managed in the right way. Sometimes, many family business owner operate their company like their run their family. They tend use their heart, not their brain. Maybe the company can growth but not in the optimal pace and can’t be sustainable. Once competition rise, or economic slowdown, you will be lost. If you want your business growth in the maximum pace and create sustainable competitive advantage in very demanding business environment, you must change everything you need to compete the market. You must transform your “Family Business” paradigm into “Business Family” paradigm. Sometimes it can be hurt for you and family. Sometimes it will be complicated and make you frustrated, but believe it, you can do it, you will be rewarded by your profitable company that you deserved it.

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