Allen Bettis is principal of The Legacy Associates, a family business consulting firm based in Minneapolis.
Many business leaders are afraid of change and it takes a brave family member to initiate the conversation. But how do you ensure you get it right? Allen Bettis explains how to be a successful change initiator when waiting quietly is not an option
For next generation heirs of a family business, quietly waiting your turn to have a voice is not always the best option. But initiating uninvited conversation about the future, whether among generations or between the family and the board can be risky – especially if there is no family council structure in place. Well-intentioned efforts can be perceived negatively, creating defensiveness and tension – as recently illustrated among the Bancroft family, former owners of Dow Jones. For a young adult to successfully initiate the conversation, courage needs to be accompanied by knowledge and skill. Unfortunately, those who want to learn these skills may find that others who have been successful are reluctant to talk about how they did it. They prefer to focus on the positive developments that followed and give credit to others.
These conclusions were shared by a group of successful "change initiators" who participated in a Campden Conference presentation, Overcoming Resistance to Governance Change. The panelists were younger generation leaders who have been instrumental in organising representative family councils, promoting more informed family/board dialogue, or influencing development of the board. "Are there secrets to developing your influence as a younger person?" queried Todd Foje, president of Great Plains Communications, a 100-year-old telecom company. "Only in the sense that it's not something you usually talk about. If you are successful, rather than taking credit you want everyone to be able to say 'we did this ourselves.'"
"Our family shareholder group was getting larger and there were complicated issues in the future involving the stock," said Mary Daugherty, initiator of a family council for owners of a large distribution business. "I could see us heading for trouble. We needed an informed, representative group to study issues, promote communication and prepare a way for making family decisions."
But what do you do if an informed exchange of views is not part of the family business culture? Concepts such as a family council, active ownership, or developing a strategic asset board may be foreign to senior leaders who are comfortable with the current system of governance. "We were taught that our business needs quiet shareholders," said one panelist. "The suggestion that owners should be informed and heard could easily be confused with shareholder activism, which challenges authority. If that's how you're perceived, you may come off sounding brash, unappreciative, or disrespectful."
The best initiatives don't focus on criticism but on ways to contribute value and develop trust sufficient to influence conversations about the future. Patience is essential, but successful initiators are also persistent and strategic. "You have to start where you are, with the credibility you have and build from there," said one panel member. "You can't directly change a relationship you're not part of. For example, if you're not a director, you have no standing in the board/management relationship. But as a family member, you may develop some positive influence on the family relationship with the board."
A change initiative begins with a precipitating issue that carries urgency, such as a need to prepare shareholders for hard choices, or prepare the board to help management meet a new market challenge. A persuasion strategy is a series of steps that brings recognition and clarity to the issue, helping others understand the need for your proposal, enabling them to resolve uncertainties or discomfort so that they might become supporters. Our panelists identified these steps:
Do your homework
Sharpen your understanding of the new realities that call for a wider, informed discussion. Identify specific suggestions that might enable the family, board and management to be more effectively aligned in addressing these new realities. Find articles illustrating the issue and the specific suggestion you are advocating. For example, the creation of a family council or election of independent directors.
Check your ethical authenticity
Consider how much your initiative is motivated by concern for the common good, and how much by desire for personal advantage. Be prepared to acknowledge self-interest as well as larger benefits for others.
Reach out across the family
A sustainable initiative begins with a core group of the committed. Seek others who are likely to recognise the issue. Send articles and ask how they perceive the situation. "While I was one of the initiators of the family council idea, creating one needed the support of many," Daugherty commented. "We needed to help others foresee the importance of a council and what it would do for the business." Deborah Jacob, board chair for her family's manufacturing business agreed. "This approach means that the change process takes longer," she said. "Still, gaining buy-in is better than trying to force a change through outvoting the 'opposition'. It is almost always best to lead change by building consensus."
Bring senior leaders into the thinking
If a senior leader is likely to resist the idea, bring him or her into your thinking about the issue without asking for a decision. Ask how the idea may fit with his or her long-term vision. Listen to both the rational and emotional side of objections. "Beginning our council initiative in dialogue with Dad was important," said Julie Becklund, a leader of the family council for her third-generation banking family. "Like many founders of his generation, he could be tough … but he had a heart of gold. As an entrepreneur he was always looking ahead. There came a time when he could see how his lifetime was limited … and there was so much that could yet be accomplished. I think he wasn't certain we were up to it as a family. My generation heard his hesitation and accepted it as a challenge to learn."
In the early stages, having the initiative to be just talking with no specific proposals is less threatening. Having this talk authorised by the senior leader gives the initiative greater weight and gives others time to develop their views without concern of sounding disloyal. Offer to bring ideas back for the senior leader's consideration and guidance.
Utilise an independent facilitator
Early in the change process, when emotions tend to run higher, an experienced family business advisor can serve as a calming intermediary, enabling members to stay engaged and keeping conversations focused and productive. Mary Daugherty recalled: "One of my relatives said: 'Why don't we have you do this job? Then there would be no cost involved.' I wasn't sure if this was a compliment. I knew that we needed a facilitator who had helped other families through this process, and who understands both governance and families. I could help, but I couldn't do that job for my own tribe."
Propose small, strategic steps
Offer packets of information and incremental suggestions. Enabling others to absorb ideas and contribute suggestions will lead to a better proposal and stronger buy-in. One step might be to form an exploratory committee to bring recommendations back to senior leaders, shareholders or the board.
Have a follow up plan
The result of a successful persuasion strategy is a sense of shared accomplishment. Those involved want to know what comes next. Capturing the goodwill and creative contribution this momentum brings requires continued work. "Through our committee discussion and writing a council charter, we developed a camaraderie as cousins," said Daugherty. "We wanted to have a role in shaping our future."
"As you arrive together at a goal, such as adopting a new family council charter, earlier resistance has been transformed," Beckland added. "People have clearer roles and better ways to participate. They become stronger supporters of a shared vision and direction. But expectations are higher. You have to keep looking for creative ways to help them learn."
Keep a sense of humour and take the risk
One qualification for an initiator is willingness to accept initial disapproval while keeping a sense of humour. "I saw humour in discovering that I was the best person to lead our family council initiative," said Daugherty. "But what was at stake was important enough for me to risk it." It helps to recognise that what is perceived as disruptive today may one day become the new normal. "It's been years since we began the initiative for a council," Daugherty reflects. "There was a lot of resistance then. Now, I'm sure we would not still own our business without it, and 95% of our family would say the same."
Jacob concluded: "When you see new realities coming – whether in the family or the market – that should command attention and are not being addressed … then someone has to take the initiative, and that might be you."