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We Can be a Model Too

February 15, 2013 - Ernest Hohmeyer
We tend to think sometimes that the other side is always greener.

Some days we have great confidence and on others we feel we inept.

What Are THEY doing?

This causes us to really look elsewhere for answers. “What’s that community doing that we are not?” Or, “Is their parking lot full?”

How we feel is usually attached to the thermometer of sales or customer satisfaction. Cold or hot?

And then to top all of this off, we may have this critic that drives us crazy.

We have more conversations with that critic than probably are family. And this critic seems to come at the most in-opportune time – like when you are trying to take a quick cat nap or a relaxing ski.

It really ticks you off but you can’t do anything about it because that critic - is the little voice in your head.

Depending on how you’re doing with the “sales and customer thermometer” your critic can be very cold or nice and warm. The problem is that just like our weather, it can change in an instant. In fact, I have often wondered if the weather is not directly related to a lot of this.

The 3 Stooges Yes, this little voice in my head is like a 3 Stooges show. When a customer is happy, I feel the hugs and confidence from them.

A slow sales morning, out comes the Stooge hammer pounding on my head.

In this crazy economy these moments of hugs and hammers seem to come faster and faster. Some days I feel like Moe being squeezed and smacked like a fish on a dock flopping all around: “Man we did great today – I really have a great thing going here!” Hug from your critic.

“Gosh, my numbers are down, do I know anything?” Smack.

“That customer was happy; I really am fulfilling a need!” Hug.

“They weren’t happy with that answer.” Smack.

Yes, like my Carnival idea of winter scuba diving, I may be a fish out of water.

But hang on, despite all of this there may be folks looking at us as a model.

We as a Model?

The Harvard Business Review (HBR) recently ran an article “What You Can Learn from Family-run Companies.”

“Focus on resilience, not short-term performance,” writes co-authors Nicolas Kachaner, George Stalk, and Alain Bloch in this HBR article.

“Mom-and-Pop” businesses represent a “powerful role that family-controlled enterprises play in the world economy.”

And we ought not to think that “family controlled enterprises” means small. I was reminded by this article that large corporations like Samsung and Porsche also fall into this category.

The authors focused on a survey they performed on “publicly traded, family controlled businesses.” While the focus was on larger companies what is interesting here is they took a sample of non-family owned companies and compared them.

The Long Haul

The “simple conclusion [they] reached is that family businesses focus on resilience more than performance. They forgo the excess returns available during good times in order to increase their odds of survival during bad times.”

Further, “familial obligations he or she feels will lead to very different strategic choices.” They “often invest with a 10-or 20-year horizon, concentrating on what they can do now to benefit the next generation.” Finally, family managed businesses “tend to manage their downside more than their upside, in contrast with most CEO’s who try to make their mark through out-performance.”

“At a time when executives of every company are encouraged to manage for the long term” the authors write, “we believe that well-run family businesses can serve as role models.”

Well, take that Larry who is pounding on my head!

To further re-enforce their point, the authors in their research were able to note that several non-family operated businesses that followed this “model of resilience” had similar results. They may have been “below their peers during upturns but leading the pack in times of crisis.”

Hopefully, your critic is now giving you hugs and you don’t feel like jumping on a Carnival float being dragged out to sea!

A Different Sea

Kachaner, Stalk, and Bloch point to seven differences on how family-run firms “manage for resiliency.” Interesting ones for our “Mom and Pops” include:

“Frugal in Good Times and Bad.”

“They Keep the Bar High for Capital Expenditures” Family-owned businesses keep a tight rein on spending according to the authors. Because of this projects face greater scrutiny which may slow their growth during good times but “in times of crisis their exposure will be limited because they’ve avoided borderline projects…”

“They Carry Little Debt” The authors have an interesting point here about debt: “In modern corporate finance a judicious amount of debt is considered a good thing because financial leverage maximizes value creation. Family- controlled firms, however, associate debt with fragility and risk.”

“Many Show a Surprising Level of Diversification” “…46% of family businesses were highly diversified,” according to the author’s study.

“They Retain Talent Better than their Competitors do” The article suggests that “leaders of family companies extol the benefits of longer employee tenures: higher trust, familiarity with coworker’s behaviors and decision making, a stronger culture.”

Marketing Ourselves as a Model?

In our Adirondack region, we often hear the debate about the need to provide incentives like tax breaks “to be competitive” and will the company exist or stay after they are finished.

The authors point out family businesses “generally don’t rely on financial incentives…they focus on a culture of commitment and purpose…”

Well, perhaps we should give ourselves more credit than our critical minds may allow.

They talk about model communities for sustainability. As a region based on small businesses perhaps we should market ourselves as a partner to new businesses interested in coming here because we have a “culture of commitment and purpose.”

We are here to stay and can be an asset to new businesses.

Perhaps this is one fact we have not marketed enough.

 
 

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