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The Family Business Framework · The Twenty One Clear Podcast

• 0:06
  Adam Hatcher: Hey there.
• 0:06
  Welcome to another episode of the 21 Clear Podcast where we talk about
• 0:11
  anything to help you chaos, proof your family business so you can build a great
• 0:16
  company with a strong family around it.
• 0:20
  I am your host, Adam Hatcher, drawing on a lifetime in and around
• 0:24
  my own family's company, including 13 years scaling it from a regional
• 0:29
  business to coast to coast.
• 0:31
  And today I want to answer a question that a number of listeners have posed to me.
• 0:38
  What I've been asked is, can I lay out the framework?
• 0:43
  That this podcast, the newsletter, even the post we put up on LinkedIn, what
• 0:47
  is the framework that we're following?
• 0:50
  And really this family business framework is the backbone and the structure
• 0:55
  of the book that I'm finishing, uh, tentatively titled Chaos Proof, how
• 1:00
  to Chaos Proof Your Family Business.
• 1:04
  I wanna take about 15 minutes and lay this out for you.
• 1:09
  Because it's gonna help us in our episodes going forward.
• 1:13
  As I looked back over the first three episodes, I realized that
• 1:17
  the first episode, we really just introduced this idea of a
• 1:20
  family business inside a company.
• 1:22
  The second I pivoted and we talked about when you own a company with your
• 1:27
  family and you get to set ownership goals with executive coach Shane Arthur,
• 1:32
  we explored how you do that in a way that you don't look back with regret.
• 1:37
  In the third episode from last month, I got to interview Sarah Davis, the
• 1:43
  Director of the Family Enterprise Center at Kennesaw State University, and we
• 1:47
  talked about the rise of family offices, particularly how you're starting to see
• 1:52
  family offices and that conversation start earlier in the lifecycle of
• 1:57
  a family business than it used to.
• 2:00
  But for you, if you're thinking about your own family business.
• 2:05
  How do you put all these ideas into a framework and then start to make progress?
• 2:11
  So that's the idea I've wrestled with for a year in writing a book, and
• 2:16
  I wanna share that with you because then our podcast, our newsletters
• 2:19
  from here, you'll be able to see how they bolt in to part of this chaos
• 2:24
  proof family business framework.
• 2:27
  About a year or a year and a half ago, I got really interested with a question.
• 2:34
  When you work together with your family, you want two things, and
• 2:38
  I realize this even reflecting on my own time in a family company.
• 2:42
  And those two things are first, uh, a great company and it that doesn't
• 2:47
  necessarily mean a big company.
• 2:49
  A great company can be accomplishing the goals that you want it to
• 2:52
  have and reaching full value for whatever size the business is.
• 2:57
  So you wanna build a great company and have a.
• 3:02
  A strong or a healthy family around it.
• 3:04
  That's what everyone who works with their family, what we want,
• 3:08
  great company, strong family.
• 3:10
  Well, then what fascinated me was.
• 3:13
  Why doesn't that happen?
• 3:15
  And in fact, why does the opposite happen so often?
• 3:19
  But then when I loved in my own time in my family's company is I get
• 3:24
  introduced and even got to meet a number of incredible business minds.
• 3:28
  Pat Lencioni, Jeff Smart, Jim Collins, and I realized that each of these
• 3:34
  people took these big questions.
• 3:38
  How do you become good to great?
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  How do you never make a mistake in interviewing?
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  How do you.
• 3:44
  Uh, give your company an advantage through organizational health.
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  They took these big questions and then created a framework
• 3:51
  where you could go tackle them.
• 3:53
  And so as I stared at these daunting two questions with a family business, why
• 3:57
  do so, why so infrequently is there both a great company with a strong family?
• 4:03
  And then what can you do to give yourself a better chance
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  of achieving that dual goal?
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  I thought there's got to be a framework for us too.
• 4:15
  That's the family business framework.
• 4:18
  Before we get to it, if you missed the first episode, I want to give you
• 4:22
  a quick fundamental concept before we get down to the four part framework.
• 4:30
  I want you to imagine a box of.
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  It's been interesting for me over the last year to explain this concept
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  to a number of family, business, academics and family business members.
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  And it usually takes, I'm gonna be honest, two times, but on the second
• 4:46
  time, uh, it, it, it connects.
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  All right?
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  So I want you to imagine a box and that's your company.
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  Just a rectangle, two dimensional, that's your company.
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  And then I want you to put a rectangle inside of it, and
• 5:00
  that's the family business.
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  The family business is its own entity inside your organization.
• 5:13
  If you want me to differentiate that, think about hiring.
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  If you're hiring anyone into a company, you need to be careful
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  and you need a hiring scorecard.
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  You need objective pass base interviews, assessments that
• 5:25
  are tailored to the position.
• 5:27
  You need to do a good job with that, but more than likely, the way that
• 5:33
  hiring process is run will not have ripple effects into the heart of the
• 5:38
  company when you hire a family member.
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  Or you don't hire a family member, it's completely different.
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  That's the difference between a family business and a company.
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  I, I thought about this in the context of Chick-fil-A.
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  Uh, the Kathy family has done an amazing job as best, uh.
• 6:03
  As best it appears with the family business work they do.
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  They do a lot.
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  And if the Kathy's sold Chick-fil-A, all of us would still be able to go around
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  the corner wherever we like to go.
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  And you'd be able to buy chicken sandwiches.
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  But what would be gone, it's that inner family business work.
• 6:24
  Yeah.
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  Everything that they do in and amongst themselves, whether that's related to
• 6:28
  how they work with each other in the business, how they make decisions,
• 6:31
  how wealth is managed, how uh, the company makes statements, how they
• 6:36
  give away to nonprofits or fund things, all of that is what would be gone
• 6:41
  out from the center of Chick-fil-A.
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  That's the difference between the company and the family business.
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  And when I realized that.
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  That all of us who work with family have this inner family business.
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  I remembered a lesson that my dad taught me very early in my
• 6:59
  time in our family's company.
• 7:01
  He said, Adam,
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  companies are doing one of two things.
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  They are growing or they are shrinking.
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  That's it.
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  And if you're not growing, that's just, that's a harbinger of a,
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  you're going to be shrinking.
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  And so likewise with families.
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  You're either as a family business, that inner family business, the way you
• 7:27
  interact with each other, the way you hire each other, the way you work together,
• 7:31
  uh, the way you coexist in and around the company that's either getting better
• 7:36
  or healthier, or it's sliding worse, and it will eventually tip into chaos.
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  And when a family business gets into chaos.
• 7:49
  Remember that the family business sits right in the heart of the company and when
• 7:55
  there's chaos in the family business, it inevitably reverberates into the business.
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  Now you may be thinking, hang on, I.
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  Are you telling me that there is a way to never have tension and work with family?
• 8:12
  Uh, no.
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  13 years working with my cousin, my brother, my dad, uh, my grandfather
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  doing about 20 years worth of different types of family business work as well.
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  Uh, that inner family business work, you will always have tension and here's why.
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  When you work together with family, you are mixing the unconditional
• 8:37
  nature of family with the conditional nature of business.
• 8:43
  If you go back to my wedding photo, there is always a spot for my father-in-law.
• 8:49
  I shared this in the first episode of the podcast.
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  There's always a spot for my father-in-law with whom I have a great relationship.
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  but even over time, if that relationship were difficult, or even if I lost
• 9:03
  him, he's still, he's in his eighties, lives in Virginia Beach, but if I lost
• 9:06
  him, it doesn't change that spot in.
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  My wedding photo is unconditionally for my father-in-law.
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  Business is very different.
• 9:16
  Business is conditioned on competitors and market forces and decisions, and
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  when you work together with family, you are mixing those two things and there is
• 9:25
  inevitably a tension and ignoring it will not make it go away is what I realized.
• 9:32
  That's why seeing the family business as its own entity is so important because
• 9:38
  there is tension that's there, and you're either going to work on it and
• 9:42
  manage it, or you're gonna ignore it.
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  And then one day an inflection point's gonna come that you are not ready for.
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  Someone could die, someone wants to be hired, someone wants to get out.
• 9:53
  Uh, a disruption happens in the business that impacts the
• 9:56
  family and you're not ready.
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  And.
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  That's when chaos gets exposed.
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  So how do you prepare yourself for that?
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  That's the chaos proof family business framework.
• 10:10
  So now that we've got this family business inside the company and we're okay with
• 10:15
  there being tension in the family business because we've mixed the conditional
• 10:20
  and unconditional, what can you do?
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  Imagine with me a hub and spokes.
• 10:29
  There's a hub in the center and then off of it, there are four
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  spokes coming out at the center of this hub and spokes is trust.
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  The As we go around to the different spokes, uh, for example, the
• 10:45
  first spoke is gonna be how do you chaos proof hiring family members.
• 10:53
  We're gonna make a series of decisions about how to do that
• 10:58
  clearly collaboratively, perhaps, and how to do that well, but.
• 11:05
  Any smart decision that's made around how you hire family is ultimately held
• 11:11
  together, glued together by the trust or the lack thereof between the family
• 11:17
  employees, the family owners, and the other family members around the.
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  Family company, even the, the smartest decisions that you may make will
• 11:30
  eventually come to nothing or be nothing more than words on paper if you do not
• 11:36
  build trust between the family members.
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  And that trust can look like showing each other mutual respect.
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  Uh, that can look like not triangulating or gossiping about each other.
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  Oh, heavens inside the company or outside of it as well.
• 11:52
  Uh.
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  Not airing family drama inside the company.
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  That's, those are some of the practical steps that you have to take to
• 12:00
  proactively build trust amongst the family, employees, family owners, and
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  then the family members who are around.
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  Even if they don't work in our own, the family company, the
• 12:11
  center of our framework is trust.
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  So then let's go out to the four spokes.
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  The first spoke.
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  How do you chaos proof.
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  Hiring family members or not hiring them.
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  You have or need to have a unique approach to how you are
• 12:33
  going to hire family members.
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  I remember talking with someone who had lost their family business because
• 12:41
  he and his brother had gotten into an argument about whether or not.
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  The brother's son was qualified to work in the company.
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  They didn't have a way they managed conflict in the business.
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  They didn't have anything written down, hiring criteria that any family
• 12:57
  member has to meet before joining.
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  And the argument exploded and within a matter of months, if evaporated,
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  what was 20 years of working together.
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  And they're not a unique story.
• 13:10
  I was at.
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  Uh, my maternal grandfather passed last year and I was at his funeral, uh, the
• 13:18
  reception after his funeral and got to talking with a friend of his who'd been in
• 13:22
  a civic group with him who bemoaned to me.
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  Once he realized that I had worked in a family company, had bemoaned to
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  me that his son was great, had spent about 25 years in the company and.
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  Was positioned to take over and succeed him and take the business forward.
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  But the bemoaning was the grandson that the son was bringing along.
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  This man I was talking to just believed would wreck the business one day.
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  And so I asked him, have you ever written down criteria for
• 13:56
  family members that want to join?
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  And he said, no.
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  And I said, well, let me tell you.
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  Every, uh, family business person, I know none of us like to make lists.
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  We certainly don't like to be governed by these lists, but it's way better
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  to have an argument about some bullet points that go in a letter than about
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  the intelligence of your grandson.
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  That is ca how you intentionally, clearly and purposefully chaos
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  proof the hiring of family.
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  So then the second spoke.
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  In our hub and spoke model is how do you chaos proof working together.
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  So hiring the family.
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  Hiring family is one thing, okay?
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  But now you, now you're together.
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  What do you do?
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  How do you make decisions and be clear about how you're going to collaborate
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  with each other, how you're gonna operate, how you interact, for those of you who
• 14:50
  work together in the business, and one thing that will inevitably come up.
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  If you work together with family, there are gonna be some different rules.
• 15:01
  It always happens, and it could be as simple as when you
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  do a family business meeting.
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  None of the family employees who come to the meeting have to take
• 15:09
  a day of personal time off to come to the family business meeting.
• 15:13
  Any other employee in the company would have to take a day off to go to a family
• 15:19
  employee meeting if they own something, you know, outside of your company.
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  When you work together, there's a series of decisions that you need to make to
• 15:29
  chaos, proof, working together, even being very clear about how you do variances
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  to the norms in the rest of the company.
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  So that's the first two spokes, how you hire family, chaos
• 15:42
  proofing, how you work together.
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  And then the third and with trust is our sinner.
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  How do you chaos proof coexisting in and around the company.
• 15:57
  John Davis is out of MIT, formerly out of Harvard, and decades ago he and a
• 16:04
  few other academics created the three circle model for family businesses.
• 16:09
  And in it, imagine a Venn diagram where you have family.
• 16:13
  Ownership and employment.
• 16:16
  And so if you don't work in the company or own it, you sit up there
• 16:20
  in just the family circle without being in one of those overlaps.
• 16:25
  But if you're a family member and an owner, now you sit and have a
• 16:29
  distinct set of responsibilities and concerns sitting in that overlap,
• 16:35
  and you see everything one way.
• 16:37
  But then what about someone who's a family employee but not an owner?
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  But then what about the family owners and employees?
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  And then you can see that there are lots of different combinations
• 16:49
  in this Venn diagram that changes people's perspectives.
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  And someone may or may not be an owner in the business.
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  They may, may or may not work in the company.
• 17:00
  And even if they work in the company, they may be in a more senior position
• 17:04
  or more entry-level position.
• 17:06
  But regardless of where someone sits, where any family member sits in this big
• 17:11
  diagram, they exist around this company and thus they co-exist with each other.
• 17:20
  And that is where the family business work gets done.
• 17:24
  When you, when you're gonna make decisions about how you hire family members, well,
• 17:28
  you don't have that conversation with your executive team or with your board.
• 17:33
  Where does that conversation happen?
• 17:35
  It's in whatever processes, whatever governance you set up
• 17:39
  and how you coexist together.
• 17:41
  Be that family business communications, family business meetings, those
• 17:44
  could be quarterly, annual.
• 17:47
  That's how you coexist together.
• 17:50
  And what's interesting to me is.
• 17:54
  I have seen chaos fire itself right into the heart of a family business and into a
• 18:00
  company from people who don't work there.
• 18:03
  And if you think for a minute, you probably can too.
• 18:06
  Either family members who are concerned about what's going on in the company
• 18:09
  and take a step to do something.
• 18:11
  'cause they don't have a way that they can have their voice heard.
• 18:15
  Or owners, family owners who.
• 18:17
  They have never had their authority or lack thereof,
• 18:21
  clearly defined and agreed to.
• 18:23
  That's that coexisting.
• 18:24
  And so they start to exert control and authority, where
• 18:28
  arguably they don't have it.
• 18:30
  How you coexist, if you ignore it, will eventually set the stage for chaos.
• 18:37
  And so with trust in the middle.
• 18:40
  We make a series of decisions, how we hire family, how we
• 18:43
  work together, how we coexist.
• 18:46
  And then the last one is, how do you chaos proof leaving a family company?
• 18:53
  Because the only way you can have a family business is by hiring family members.
• 18:59
  All of us, if we have a family company, have hired family.
• 19:06
  But also 100% of family employees have left their family
• 19:13
  company one way or the other.
• 19:17
  And so when people leave, and what's interesting to me is this is the
• 19:21
  one that's so easy to ignore and you can leave several different ways.
• 19:26
  Two of them are leaving by succession at the end of your career or.
• 19:30
  Leaving mid-career and both of these, certainly the last one is
• 19:35
  difficult for families to talk about.
• 19:37
  The one in the middle that leaving mid-career, that can be a sneaky one
• 19:44
  that causes pressure, causes chaos, but also has an opportunity if you
• 19:50
  lean into it and if you make clear, consistent, and proactive decisions
• 19:55
  can take a lot of pressure off.
• 19:58
  That's the family business framework trust in the middle.
• 20:03
  How do you build trust with your family?
• 20:04
  And then how do you make key decisions around how you hire,
• 20:08
  work together, coexist and leave.
• 20:13
  And we do this not for the sake of creating governance, but
• 20:17
  because we know that we ha it.
• 20:19
  It doesn't happen by accident.
• 20:21
  You don't drift into a family company and have it go well by accident.
• 20:26
  You don't drift into succession, you don't drift into working
• 20:31
  together, and it just goes well.
• 20:33
  You have to work at it and you can make progress in each of the
• 20:37
  five areas of that framework.
• 20:40
  The dream then for all of us is to have a healthy family business that sets the
• 20:46
  stage for a great company around it, and hopefully one day allows the family
• 20:51
  to have conversations about legacy.
• 20:53
  Whether that legacy is the company wealth, reputation, whatever it may
• 20:58
  be, the stronger the company and the healthier the family business
• 21:02
  inside of it, the bigger, the longer that conversation is about legacy.
• 21:08
  That's why it's important that we see the family business as its own
• 21:11
  entity, and then we work on the framework to improve the health of it.
• 21:16
  That's what we're gonna do with these podcasts as they go forward.
• 21:21
  If you want more information, the website's 21 clear.com.
• 21:24
  I've linked it in the show notes.
• 21:26
  Uh, you can go back if you missed any of the earlier episodes of
• 21:29
  the podcast, you can grab those.
• 21:31
  I would ask you, helps me a lot, if you will.
• 21:35
  On whatever app you use, it's for a lot of people, it's Spotify and
• 21:39
  Apple, if you will either subscribe or follow the podcast and then
• 21:43
  they'll come to you automatically.
• 21:44
  I've also started a monthly newsletter and have linked
• 21:48
  that in the show notes as well.
• 21:49
  If you wanna go subscribe to that, that will help us and
• 21:52
  we've got some different content.
• 21:54
  That'll go with this.
• 21:56
  Uh, I'm excited on August 4th.
• 21:59
  Kennesaw State is gonna be allowing me to talk about one of the spokes
• 22:03
  on the wheel or the hub here.
• 22:05
  And we're gonna be talking about how you, chaos proof, hiring family, and
• 22:09
  actually walk through some practical steps, examples and exercises to
• 22:12
  help, uh, if you're able to join.
• 22:14
  I hope it's great.
• 22:15
  It'll also be our podcast for the month of August.
• 22:18
  We're gonna bring part of that there and talk about one of these spokes.
• 22:23
  I appreciate you letting me lay this out.
• 22:25
  Thanks to the listeners who asked me to lay out a framework so that
• 22:28
  as we release future episodes, they can see where to put 'em.
• 22:32
  My hope for you is that.
• 22:33
  Every time you touch, uh, our website, our newsletter, this podcast, any of the
• 22:39
  resources, the webinars that we do, that you get that rare 15, 20, 25 minutes to
• 22:46
  focus on your internal family business.
• 22:50
  I look forward to talking with you in the next episode, and as my
• 22:54
  grandfather would say, thank you so very, very much for listening.