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