FEATURE: Emotional Rescue

by Real Business - Thursday, 30th August 2007

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Dombey & Son, The Forsyte Saga, Dallas, Dynasty and Jeff Tracey and his five Thunderbird sons. Family-owned businesses are the stuff of drama. They are the stuff of headlines too: the Murdochs, Fords and Hiltons are as famous for their family rows as for their companies. But those screeching headlines can be misleading – because they suggest that family businesses are weird, exceptional, hybrid freaks.

In fact, family businesses, large and small, are the backbone of the economy. Two-thirds of all companies, public and private, describe themselves as family-owned, according to The Economist. Think WalMart, Sainsbury, Ikea, Fiat, Samsung, Benetton and Barbour. Far from being unusual, the family business has proved itself over the centuries. The world’s oldest family business, Kongo Gumi in Japan, was founded in AD 578. England’s oldest, John Brooke and Sons, is over 550 years old.

More strikingly, even those companies that are not family businesses are regularly described as though they were. I’ve lost count of the number of successful businesses I’ve profiled in which, sooner or later, the employees describe working there as being “like a family”. Put these two together and a startling picture emerges: families, business, success and survival all seem to be connected.

But family companies are legendary for their feuds and passions. How can it be that families and business go so well together? It isn’t despite the emotion – it’s because of it. At their best, family firms understand they must develop the people and processes for managing emotions. In other words: they must be emotionally intelligent.

“Emotional intelligence” is not a new idea, of course. It’s been a part of the management lexicon ever since Daniel Goleman published his ground-breaking book Working with Emotional Intelligence in 1998. But eight years later, business training still prizes technical knowhow – legal, financial and technological – while ignoring what may well be the essential skills.

In fact, Goleman argues that emotional intelligence is twice as important to business success as intellect and expertise. “Emotional competence is central to leadership... whose essence is getting others to do their job more effectively,” he says. “In studying hundreds of companies, it became clear to me that for success at the highest levels, emotional competence accounts for virtually the entire advantage.” To many, this seems counter-intuitive. Some dismiss it as soft. But we talked to a number of family business owners, and they all agreed that emotional intelligence has given them the advantage. So how did they develop that advantage – and how can you emulate them?

Make EI a goal
Families know that emotional intelligence is essential. After all, they’re stuck with each other. That means they have to get along.

“If you are going to make the business work, then the family has to work. And if the family relationships work, then the business works,” says Angela Maxwell. She and her brother work for their father, who founded the cappuccino machine maker Fracino. “You just can’t separate the relationships from the business – so the only way to make one succeed is to make them both succeed.” Likewise, a non-family business that looks to the long term, and refuses to consider giving up, has a better chance of making it.

Develop conflict resolution skills. “You can’t quit!” says Vicky Trumper. She recently joined her family’s 130-year-old firm, Neville Construction, after years working for the NHS. “Here, we all put our views forward and we tend to adopt the majority line. But if we can’t agree, then we have to park it and come back to it later. We have had our disagreements – fairly big ones – but there is an unwritten rule that we all, eventually, have to agree. Maybe that slows things down sometimes but it makes us work much harder to find solutions.”

Angela Maxwell agrees. “When we have our disagreements – and we do have them – we’ll discuss things first. Then, if I’m still not happy, I’ll try to write out the argument. That takes the personal out of it. But you really have to work hard to make sure the relationships still work.”

Developing empathy for each other’s needs is critical. And it can be taught. At e-learning company WebCT, president and CEO Carol Vallone requires every manager to argue the case for a different department’s budget. “That process eliminates turf battles and it teaches a powerful lesson about how each department depends on the other’s performance,” she says. “I’ve seen that process alone transform an uncommunicative, dysfunctional employee into a valued team leader.”

And even if you are family, it doesn’t mean you think the same way. Assume nothing, says Peter Leach, a specialist in family business at BDO Stoy Hayward. “Probably the biggest single problem in family business is that it is very, very hard to get clarity. Everyone thinks they understand each other – but they don’t!”

Take your parenting skills to work
The most successful family businesses feel like family – even to those employees who aren’t family. At Mobile Media, David Pounds runs operations and his wife, Karen Olsen, runs sales. Olsen and Pounds always know who among their 50 staff are getting divorced, whose spouse is ill, who’s having trouble at home. They’re this tuned in, not because they’re nosy, but because they don’t think their workforce can do great work with other things on their minds. As a result, their company has survived huge changes and a major merger.

FAMILY VALUES: THE BENEFITS

Stability
Families don’t quit. Neither do their firms. Staff appreciate this commitment and stay for the long haul.

Values
Beyond cash returns, there are shared beliefs about what the business stands for.

Nurturing
People feel cared for, so they care for you and your business in return, and are more understanding when difficult decisions are required.

Knowledge
The history of triumphs and disasters is nurtured as a way of reinforcing values.

Honesty
However painful, opinions get addressed.

“You do feel like a parent,” says Pounds. “You build up trust. If we go the extra mile for them, they will for us. We’re not just the suits that disappear for lunches. They trust us and they know they can talk about anything.”

Pounds and Olsen may feel like parents but they don’t regard their employees as children. Nor is their concern sentimental. They believe that, in their service business, customers can only be well looked after when the staff feel that they are too. The historic turnaround of Continental Airlines started with that premise – that if the workforce felt supported and nurtured, they would be able to make passengers feel the same way. It is to their “inside-out” strategy that the company attributes not just successive awards for customer satisfaction, but their financial renaissance too. “Yes we are here to make money,” says Karen Olsen. “But that isn’t what really drives people. What drives people is feeling that they matter, that they’re respected and people care about them. And that’s true whether they work for you or they’re the customer. It’s about doing your best for each other, not letting people down.”

Get a Chief Emotional Officer (or several)
Angela Maxwell recalls that resolving disagreements was often easier when her mother, or her aunt, was still alive. In many family businesses, emotional intelligence is focused on a single individual whose greatest talent, and value, lie in their mediating skills.

“You often find that someone in the family is the peacemaker, the person who goes around mending fences, making sure everyone’s okay,” says Juliette Johnson, senior manager of BDO Stoy Hayward’s Centre for Family Business. “It’s often the wife of one of the founders. We refer to her as the Chief Emotional Officer – because that’s the person that keeps everyone on an even keel.”

Vicky Trumper believes the role of Chief Emotional Officer in her company is probably shared among family members, rather than centred on just one. It certainly helps to try to develop emotional competence across the whole company; some companies even hire for it. Pohly & Partners, a custom publishing firm, designs its interviews specifically to assess for emotional intelligence in candidates. And they re-assess it in every performance review. “I know middle managers have gone out of fashion lately,” says founder Diana Pohly, “but I need people who build relationships across the company and across our client companies. Otherwise we’re siloed and we make mistakes.” Spending this much time on emotional intelligence has certainly paid off. The company has tripled its revenue in the last two years.

HOW TO DEVELOP EMOTIONAL INTELLIGENCE

Read the emotional climate - ie, be aware of what people think.
Evaluate new and existing employees for their emotional competence (see resources under �gWhere next?�h).
Learn to adapt quickly to new obstacles and challenges.
When under pressure, avoid panic, anger, alarm and blame.
Trust your employees and partners.
Refuse to let setbacks defeat you.
Try to put yourself in your employees�f shoes - and your customers�f, and your suppliers�f.
Tune into social, political and economic trends.
Be willing to accommodate the idiosyncrasies of employees.
Persuade staff, rather than command.
Build personal links between people and divisions, organisations.

Contain emotion, don’t bury it
Even bigger companies can – and do – thrive on the family structure. But at this level, personal relationships alone aren’t robust enough to handle conflict. The skills of a single chief emotional officer might need to be disseminated more broadly, formalised and institutionalised. Judith Derbyshire knows this first hand. As company secretary for Clarks, the shoe company, her company has 350 family owners, only four of whom work inside the business.

“Emotionally and financially, they are very tied to the business. They have a strong sense that, having inherited their stake in the business, they have a real responsibility. If you’ve built your business yourself, then you can do what you want with it. But if you inherit it, you’re an owner but you are also a caretaker and you feel very responsible for the company’s future.”

Managing 350 passionate, committed owners is not a trivial challenge. So Clark’s has had to design a process that could contain all the emotion the business evoked.

“In 1993, we created a Family Council. It’s not designed to manage the business – we have a professional management team for that. But it is designed to be a consultative body. It’s a forum where owners can vocalize their views. Before we had it, individual family members might collar the chairman or the managing director and drive him to distraction. Now there’s a process for them to express any worries they might have and they use it. They don’t constantly bother the executives and they don’t get things out of proportion.”

With three or four meetings a year, it’s striking that almost all the Council members and their alternates turn up for every meeting. And they make a real contribution.

“One member of the Council is very concerned about corporate social responsibility. It’s been helpful to the company that he has pushed that agenda along. Another is passionate about design and that helps to ensure that it’s high up on our agenda all the time. They love coming to the meetings because they really care.”

Get outside help
Outsiders can help a lot. There’s a growing industry of advisors who specialise in family business dynamics – lawyers, accountants, even psychotherapists. Family businesses are coming to see that developing their firm’s emotional intelligence requires some outside objectivity.

“With outside help, you can have a controlled explosion instead of an uncontrolled explosion,” says BDO Stoy Hayward’s Juliette Johnson. “Things may get harder before they get better, but you have to deal with it. And outsiders can help to keep the temperature down, to keep everyone civilised.” According to Peter Leach, between 1970 and 1990, those family firms that brought in outside managers outperformed the all-share index. Resisting nepotism and cronyism pays real dividends.

Families are among some of the most complex, dynamic, infuriating yet resilient organisations mankind has ever developed. Challenged by social and economic turbulence, still they endure. Chaotic? Yes! Emotional? Yes! But what else is business today? Witness how many entrepreneurs call their business “my baby”. Non-family businesses may be tempted to delegate all this messy stuff to HR. But the resilience of family companies demonstrates just how much strength emotions can impart – if you learn how to handle them.

Where next?
JP Morgan case studies in successful family-owned firms:
http://snipurl.com/fambiz1
Institute of Family Businesses:
www.ifb.org.uk
BDO Centre for Family Business:
http://snipurl.com/NX7N
The Consortium for Research into Emotional Intelligence in Organisations:
www.eiconsortium.org
Test your emotional intelligence:
http://ei.haygroup.com/resources/default_ieitest.htm