| I hope everyone had a great Thanksgiving and | | | | Teamwork is essential and effective |
| looking forward to an even better Christmas. | | | | communication is critical. It is of paramount |
| I personally am now getting into the | | | | importance that employees are recognized as |
| Christmas spirit after spending all day | | | | the true reason for success. Family issues |
| Saturday and most of Sunday putting up the | | | | must not penetrate the business environment. |
| lights outside and helping decorate the tree. | | | | Holding family business meetings, off site, |
| As this year comes to an end and we | | | | on a regular basis is highly |
| celebrate the holiday season, most of us have | | | | recommended.These meetings should be used to |
| a lot to be thankful for. I know I count my | | | | air feelings, check boundaries and clarify |
| blessings everyday and look for opportunities | | | | roles and responsibilities as they are being |
| to reach out to others that may need help, | | | | played out. The President must keep his |
| support or encouragement. Have a wonderful | | | | finger on the pulse of the company culture |
| holiday season and a prosperous New Year. | | | | and environment. Family members must be |
| Reach out to someone.If you missed Issues #1 | | | | challenged as issues arise that are |
| & 2, e-mail: for copies of these | | | | detrimental to the long term success of the |
| issues.This month's issue contains:- The | | | | company. Some companies create a "Code of |
| Housing Bubble --- Is It Finally Ready to | | | | Conduct" just for this reason. Regular |
| Burst?"- First in a series on "The Challenges | | | | confidential employee surveys are also a |
| Facing Family Owned Businesses"--- How can | | | | useful tool in this regard. (E-mail for a |
| you turn over your business to your children | | | | complimentary copy of "A Guide to Leadership |
| without creating | | | | Succession in the Family Business")It's your |
| chaos?- Kids and Guns- 15 Revealing Questions | | | | company, it's your legacy and when all the |
| To Ask A New Sales Candidate- Client Corner | | | | cards are played it is still ultimately your |
| --- "My Kids Can't Cut It"The Housing Bubble | | | | decision. Listen to your employees, listen to |
| --- Is It Finally Ready to Burst? ---- | | | | your executive team, get some outside advice |
| Economists have been predicting the burst of | | | | and then ----- trust your instincts as a |
| the bubble for the past five years. Every | | | | professional business person. Remember, you |
| year they have been wrong. 2005 was supposed | | | | can always sell the business or bring in an |
| to be the year when things really started to | | | | outsider as |
| slow down. Low and behold, 2005 was another | | | | President.___________________________________ |
| banner year. Those in the building supply | | | | _______Kids and Guns ------ I'm probably |
| business are sitting around smiling as they | | | | going to get a lot of negative feedback about |
| count the profits. I am not an economist, | | | | this but so be it. Just prior to sitting down |
| thank God, but maybe, just maybe the | | | | for Thanksgiving dinner I was reading the |
| economists are going to finally be right as | | | | local newspaper and came across an article |
| some signs are beginning to show that may | | | | titled, "How young is too young to hunt?" The |
| indicate a slow down in the housing boom. And | | | | newspaper had a picture of a young boy, 6 |
| of course, the auto industries problems, | | | | years old holding a .223 caliber rifle with a |
| specifically General Motors with their recent | | | | scope. He was all dressed up in camouflage |
| layoffs and plant closure announcements just | | | | gear. The article talked about this young |
| adds strength to this conjecture. What's the | | | | boy killing his first deer when he was five |
| old saying? "So goes General Motors, so goes | | | | years old with one shot from his .223 caliber |
| the economy."Sales of existing homes fell | | | | rifle. The boy himself was excited as he |
| almost 3% in October and the decline could | | | | talked to the reporter."I shot it right |
| have been higher except for the demand | | | | behind the front shoulder. Dropped it right |
| created by the surge of Hurricanes, | | | | in its tracks," the boy said. This boy of six |
| especially Katrina. The level of unsold homes | | | | stands 4 feet tall and weighs 50 pounds. He's |
| in October was at its highest peak in | | | | a good student that earned an award for |
| nineteen years. Some of this may be | | | | responsibility in kindergarten that year. |
| attributed to the fact that prices have risen | | | | KINDERGARTEN!But he'd rather be hunting. "I |
| at a pace not seen in twenty five years. A | | | | like it," he said. "Shooting a gun and |
| chief real estate economist stated; "The | | | | shooting at the animals and killing them."The |
| housing boom has likely passed its peak. (We | | | | article went on to talk about an eight year |
| have heard this before) The boom is winding | | | | old girl that made headlines last month by |
| down. I expect continued softening in | | | | shooting the first black bear of the season. |
| housing." (David Lereah, chief economist for | | | | This was in Maryland and there is no minimum |
| Realtors.)Economists also predict that the | | | | age limit for hunting. You have to be sixteen |
| buildup of unsold homes across the nation | | | | or eighteen in most states to drive a car but |
| would dampen the surge in prices that saw 69 | | | | you can shoot a .223 caliber rifle with a |
| cities report double digit price increases | | | | scope at 5 years old. Now, I have to say that |
| this summer compared with third quarter 2004. | | | | although I am not a hunter, I am not opposed |
| Another prediction is an additional ½ | | | | to hunting. I am also not opposed to guns. I |
| point increase in interest rates by June of | | | | own one myself. After all, it's legal to |
| 2006 which could create a slow down in price | | | | carry a concealed weapon in Florida (It's a |
| increases to about 5% next year.In reference | | | | matter of state pride that we return fire in |
| to new construction, it also has shown signs | | | | a drive by!) But, I do shudder when I think |
| that the bubble may be ready to burst. | | | | about a five or six year old in the woods |
| Housing construction and new building permits | | | | with a .223 caliber weapon, even if they are |
| were down sharply in October. The Commerce | | | | with their Father who may be an expert |
| Department reports that construction of new | | | | hunter. A .223 caliber rifle can kill someone |
| homes and apartments fell by almost 6%, which | | | | or something a mile away. Beyond that, how do |
| was the biggest decline in seven months. | | | | we determine that the maturity level and the |
| Applications for new building permits fell | | | | responsibility level of a six year old are |
| almost 7%, which is the biggest decline in | | | | such that what is learned about weapons in |
| six years. Nariman Behravesh, another expert | | | | the woods stays in the woods when that child |
| chief economist stated, "We are likely to see | | | | begins to mature?Yes, the federal government |
| a steady downward trend in housing activity | | | | spent a lot of money on a study that said, |
| over the next few months. Mortgage rates are | | | | "Guns do not turn children into criminals." |
| at the highest level seen in more than two | | | | This study concluded the best way to reduce |
| years." National Association of Home | | | | firearm related violence is to buy them a gun |
| Builders said a new survey showed builder | | | | and teach them how to use it responsibly. |
| optimism fell in November, the largest amount | | | | Give me a Break!Let's not forget, guns are |
| since the September 11th terrorist's | | | | unregulated consumer products. In Texas guns |
| attacks.So, is the bubble ready to burst? | | | | are said to kill six children and teenagers |
| Many economists seem to thinks so. However, | | | | every week of every school year. I personally |
| the statistics cited have been cited in the | | | | believe that guns and kids are a volatile |
| past. The predictions of a bubble burst have | | | | combination. Between 1996 and 2000, 1,541 |
| been reported in the past. On the other hand, | | | | children died in Texas from gun violence and |
| some economists disagree at least partially. | | | | for every child that died, four others went |
| David Seiders, chief economist for home | | | | to the emergency room for gun related injury. |
| builders stated that he believed that sales | | | | Six out of ten child suicides are completed |
| of both new and existing homes, while still | | | | using guns. And this is just in Texas.To |
| setting records for a fifth consecutive year | | | | close my RANT and OUTRAGE about a five year |
| in 2005, will only see a small 5% decline in | | | | old with a .223 caliber rifle, I want to site |
| 2006. This would represent a very soft | | | | a project called the "Lion & Lamb Links". |
| landing (5% is not much considering the | | | | This was a study that asked the question, |
| growth we have experienced over the past five | | | | "What do you think your pre-schooler would do |
| years). Do they really know? Who knows? | | | | if he or she found a real gun---- after |
| Maybe that's why Roosevelt said he would only | | | | repeatedly warned NOT to touch a gun." The |
| deal with "One Armed Economists." So they | | | | results of this project are shocking.First a |
| couldn't say, "On the other hand"...Be | | | | police officer was brought into a class of 60 |
| cautious in 2006. Don't panic but don't bet | | | | children. His message was clear and precise. |
| the farm. Initiate a contingency planning | | | | "Don't touch guns --- they are deadly and |
| process. If you don't need the plan in 2006, | | | | dangerous. If you see a gun, leave the area. |
| so what, sooner or later the economists might | | | | Tell an adult." The children were asked to |
| get it right and that contingency plan that | | | | repeat his words and they could answer his |
| you have tucked away will become | | | | questions. They were later left alone with |
| invaluable.__________________________________ | | | | disarmed guns and the majority of the |
| ________First In A Series On Family Owned | | | | children picked them up and shot everything |
| Businesses------ In 2006 we will try to cover | | | | in sight. This was reported by Hardy in a NY |
| many of the issues and challenges in "The | | | | Times editorial.The second study with a |
| Howl" that face privately held family owned | | | | different group of children lasted five days. |
| businesses. | | | | The children were instructed on how to make |
| | | | good choices, how to resist peer pressure and |
| Every family owned business faces difficult | | | | how to distinguish toys from dangerous |
| challenges. Readers are encouraged to e-mail | | | | objects, guns. The results were the same. |
| with comments, questions and topics for | | | | When left alone the children began playing |
| discussion related to the challenges faced by | | | | with the guns just as group one did. Most of |
| family owned businesses.How can you turn the | | | | the six year olds could tell the difference |
| business over to your children without | | | | between the toy guns and the real guns but |
| creating chaos--- This is probably the | | | | they played with them anyway.Ask yourself, |
| toughest question any business owner that has | | | | would your kid play with a gun, even if you |
| family working in the business will ever | | | | trained him in the woods to hunt? Does your |
| face. However, the answer is simple. The | | | | six year old have the maturity to handle the |
| answer is..... It depends. It depends on how | | | | knowledge about something as deadly as a |
| well you (the owner) have prepared yourself | | | | gun?I apologize in advance to my gun |
| and your child for this transition. Have you | | | | distributor friends. But I've got to say, I |
| planned this out? Has your successor been | | | | would be awful nervous hunting in the woods |
| trained, developed and prepared for the | | | | knowing there were 5, 6, 7 & 8 year olds in |
| transition? This is pretty easy if you only | | | | those woods with loaded rifles. In fact, you |
| have one child in the business and he/she | | | | won't catch me near the woods during hunting |
| just happens to be the next Jack Welch of | | | | season.______________________________________ |
| wholesale distribution. This child has worked | | | | _________________________15 Revealing |
| outside the business for someone else for a | | | | Questions To Ask A New Sales Candidate1. Tell |
| minimum of five years. They have completed | | | | me about why you want to succeed at |
| their MBA and they worked their way up in | | | | sales.2. Where does your sales passion come |
| your organization starting in operations or | | | | from?3. What is the last sales book you |
| customer service. They don't walk around with | | | | read?4. Tell me about the last book you've |
| their silver spoon visible and they don't | | | | read on creativity.5. Tell me about the |
| wear their family title on their sleeve. | | | | biggest sale you ever made.6. What was the |
| "Piece of Cake!"Let's face Reality--- That | | | | biggest reason you got it?7. Tell me about |
| scenario, although it certainly does exist, | | | | the biggest sale you lost.8. What do you say |
| is the exception and not the rule. In most | | | | when a prospect says, "I want to think it |
| cases privately held businesses generally | | | | over"?9. What do you say when a prospect |
| have several family members working in the | | | | says, "I'm satisfied with my present |
| business. When the president has more than | | | | supplier"?10. What do you say when a prospect |
| one child in the business, things start to | | | | says, "Your price is too high"?11. How often |
| get more complicated. Before we dive into | | | | do you listen to or read personal development |
| that challenge, "How do we select the next | | | | information?12. When did you attend your last |
| President?" let's review a few | | | | seminar?13. How do you improve your |
| statistics.- Family business is the driving | | | | presentation skills?14. What is your most |
| force behind the US economy providing over | | | | creative approach to follow-up?15. Give me |
| 50% of our employment- 59% of family owned | | | | your 30-second personal commercial. Your |
| businesses have only 1 or 2 owners- 25% of | | | | elevator speech.These are just a few examples |
| family owned businesses surveyed in 2004 | | | | to get you started in the |
| stated they would seek non family member | | | | interview.___________________________________ |
| CEO's for succession- Key areas that family | | | | _______Client CornerRickI just turned 70 |
| owned businesses seek advice and counsel on | | | | years old. I am ready to turn over the reigns |
| include:--- Strategic Planning--- | | | | of my company to one of my three sons. I own |
| Organizational Design--- Operational | | | | a ____parts distributor with revenues that |
| Effectiveness--- Leadership Development--- | | | | should exceed $48 million by year end 2005. |
| Succession Issues--- Compensation--- Sales | | | | All three have worked in the business for the |
| Effectiveness--- Risk ManagementNow, how do | | | | past 15 years. I don't want to sell and I |
| you decide on who should be the next | | | | really want one of my sons to carry on the |
| President? If you are not one of the lucky | | | | family legacy. My problem --- I don't know |
| few described in the opening scenario and you | | | | which son to hand the Presidency to. I hired |
| have multiple family members working in the | | | | a consultant to do an assessment to help me |
| business, your stress level is already at a | | | | make a decision. The consultants, after doing |
| high point. First, many if not all family | | | | a battery of tests and interviews determined |
| members working in the business have feelings | | | | that my current Vice President of sales is |
| of entitlement to some degree. This is | | | | the only internal candidate that is qualified |
| generally true of at least one if not all of | | | | to take over as President. This gentleman has |
| the president's kids. Choosing the next | | | | been with me for 25 years, he's a great guy, |
| president becomes even more difficult if the | | | | and I have no doubt that he can do the job |
| children have used their name as a title | | | | but he is not one of my sons. To complicate |
| instead of the actual title of the job | | | | matters even more, the son that I was leaning |
| function they performed and the position they | | | | towards handing the Presidency to got the |
| hold in the company (This is often | | | | worst rating of anybody on the 360 degree |
| unintentional and some kids don't even | | | | review. In fact, the consultant privately |
| realize it). This difficulty increases | | | | advised me that I should consider getting |
| exponentially if none of the kids have | | | | this son out of the business before my |
| demonstrated a high level of competence, | | | | transition into retirement. They also advised |
| respect for all employees, leadership skills | | | | that one of my two remaining sons may be able |
| that pattern the servant style and at least | | | | to step it up and take over the reins in |
| some promise of potential to fill the | | | | three to five years. He is 45 years old now. |
| president's shoes.Although the majority of | | | | I can't wait that long to retire. What do you |
| parents would prefer that their children take | | | | recommend?George ------ Mid WestDear |
| over the business and carry on the family | | | | George:You are facing quite a dilemma. |
| legacy, this is not always the best option | | | | Obviously, the easy answer is to sell the |
| available. I know it is difficult for any | | | | business. However, I take it from the passion |
| parent to admit that their child may not | | | | in your memo that you will not consider that |
| possess the skill sets necessary to take over | | | | option. At 45 years old your son should be |
| as President of the company. However, that | | | | ready to take over as president now. If he is |
| situation actually does exist in many family | | | | not ready now, chances are not great that he |
| businesses.What are the options if Junior | | | | will be ready in 3 to 5 years. You haven't |
| isn't ready? --- The first two questions to | | | | done a very good job as his coach and mentor. |
| ask yourself are: "Will Junior ever be | | | | That being said, if you are adamant about one |
| ready?" "Does Junior have the ability to | | | | of your sons taking over the business you |
| learn how to become President?"As difficult | | | | might want to consider this scenario. |
| as it is to accept, your answers to these | | | | Appoint your VP of sales as your successor |
| questions alone are not good enough. If you | | | | with the understanding that one of his |
| have a Board of Directors, you should solicit | | | | primary responsibilities is to develop your |
| their input and recommendations. Hire a Human | | | | son to take over the company in three years. |
| Resource Consultant to do an assessment of | | | | Make sure that you are generous to this VP in |
| not only Junior but other executives in your | | | | constructing a contract that makes him well |
| organization that may be qualified for the | | | | if something happens to you and your sons |
| Presidency. Conduct 360 degree reviews to get | | | | decide to throw him off the bus. If your son |
| input from peers and subordinates. Precisely | | | | doesn't develop enough to really run the |
| define the Presidents role and | | | | company in three years, you might consider |
| responsibilities and match these requirements | | | | leaving your former VP of sales in the role |
| to Junior's skill sets. If you don't have a | | | | of President and appoint your son CEO. He |
| board, create one before the transition. | | | | could be the outside face for the company, |
| Include the following action items as part of | | | | carryon the family name but have your |
| the transition plan:- Create a development | | | | President run the business on a day to day |
| transition training program for the new | | | | basis. This assumes that your son is willing |
| President (This should be designed as an | | | | to play that role and supports the President |
| internship)- Clearly define the former | | | | in his day to day role. It is not the ideal |
| Presidents role after the transition. Will he | | | | solution but it is an option that can be |
| remain and come into the office? Will he | | | | considered. However, be very cautious in |
| become Chairman of the Board? What | | | | determining what your sons are willing to |
| responsibilities will the former President | | | | accept and how they will react. A family |
| retain?- Manage the expectations of other | | | | legacy means nothing if the business goes |
| family members. Do not allow family tension | | | | down the tubes due to internal strife caused |
| to create tension in the business. This could | | | | by intolerable family issues. This is a short |
| lead to employees taking sides.- Use your | | | | answer that requires a lot more |
| attorney to cover all legal issues- Create a | | | | discussion.Good Luck and let me know how |
| real Board of DirectorsThe Family business | | | | things progress.Rick E-mail for prior issues |
| can be complex--- The family business | | | | of The Howl. Dr. Rick Johnson () is the |
| structure can be complex and confusing. This | | | | founder of CEO Strategist LLC. an experienced |
| is especially true when numerous family | | | | based firm specializing in leadership and the |
| members work in the business. The business is | | | | creation of competitive advantage. Rick |
| composed of interdependent relationships | | | | received an MBA from Keller Graduate School |
| between functions and people that depend on | | | | in Chicago, Illinois and a Bachelor's degree |
| the ability to work toward common objectives. | | | | in Operations Management from Capital |
| A family owned business with multiple family | | | | University, Columbus Ohio. Rick completed |
| members has twice as many opportunities for | | | | his dissertation on Strategic Leadership and |
| mistakes, resentments and complacency. | | | | received his Ph.D. |