Daniel Smithson sighed and looked longingly at the travel brochures offering exciting packages to sunny island holidays, and also at his golf clubs gathering dust in the corner.
“This is what we should be doing, after all these hard years,” he said quietly to himself. As he gazed out the window he fell into reminiscing.
Today Smithson & Co is a small, successful privately owned company, making specialty laminated packaging containers mainly for the food industry. The company employs about 50 staff and has a turnover of about $15 million. With the growth of the takeaway and fast food industry the business is buoyant, but it also faces tough competition in supplying the large chains of food stores.
Daniel reflected on the early days, when, about 10 years ago, he and a fellow employee, Peter, left a large chemical company and set up a small business in laminating and plastic containers. It was a big financial risk, but they were able to capitalise on their many years of study and the technical and production experience that they had gained with a progressive company.
Daniel’s wife, Marie, trained as a food technologist, ran a small catering business while the children were young. They mortgaged the home, and eked out the family income.
A shock to all
Peter died suddenly of a heart attack. This was a tremendous shock to all. After considered thought and some emotion, Daniel bought out the business from his partner’s estate, and Marie joined the company full time.
Marie had a strong, outgoing personality. She threw herself with enthusiasm into the administration and customer contact functions and she gradually took responsibility for the marketing, accounts and administrative aspects of the business. She had good people skills, and handled customers and new accounts with aplomb and great success. Marie was thorough and astute, and managed her employees skilfully.
They ran the business jointly, with Daniel focusing on production and technical development and Marie on administration and marketing. They worked hard, and the business quickly became practically a seven-day-a-week affair.
No time, no time!
Authority was shared equally, and big decisions were often made at the dining table. The business grew to the point that Daniel felt the time had come to employ a general manager. But he had to convince Marie of the wisdom of the move. They were both exhausted, he argued, and too close to the business. He believed that they should step back from the day-to-day operations, and take on supervisory roles.
At first Marie was opposed to the idea, but Daniel convinced her that they would still have an influence on the direction of the company, through setting objectives, liaising with key clients, and steering the path for the future. The future was uncertain, but Daniel was sure a larger company would one day buy the business.
After a long advertising process, a general manager was found with the appropriate technical and marketing background. Daniel had every confidence in Henry to step into the role of general manager within six months. Suggestions were made to Henry that he might have an opportunity to buy equity in the business after a year or so. A generic job description with no performance indicators was agreed to as Henry gradually moved into the role. Daniel also made it plain to the employees that he was handing over authority to Henry.
Everything seemed to be progressing well. However, it was soon realised that Marie had no intention of handing over her job of marketing and liaison with key clients. She retained the supervision of her area and made communication with Henry difficult. She felt that the success of the business depended heavily on her contacts and she told Daniel that she did not have confidence in Henry to take on her job. She firmly stated that she was too important to the organisation. There was considerable friction between Henry and Marie, especially when the latter began to refuse to accept Henry’s decisions.
Despairingly, Daniel explained to Marie that she must hand over responsibility to Henry. But Marie stood up to Daniel, not only at work, but increasingly at home. She claimed it was equally her business and that she was needed.
After three months, Henry came to Daniel and said he could not run the business unless Marie stood aside and recognised his authority. Friction and countermanded orders were affecting staff morale. Marie was adamant: it was equally her business, and her relationships were the key to successful contracts.
Daniel gazed longingly at the sunny island in the travel brochure again.
What actions should Daniel take in the interests of the company (and of keeping his wife)? You have been called in as a consultant: around the table with Daniel, Marie, and Henry, what would you advise?
Proposed solution #1
Scott Wooden is assistant general manager for SE Network Access, one of South Australia’s largest internet service providers. Scott’s role incorporates day-to-day operational managing and human resources.
The key to any business is communication. Write it in big words and stick it to the wall. Without it, we are doomed to failure. Any outsider could have advised Daniel about how he could better have approached his transition plan to ensure a smoother ride.
However, the issue we have to deal with, having reached this point, is how to resolve it in the best interests of all parties.
Daniel must first ask himself whether he has the skills required to resolve the issues. Even if he answers “yes” confidently, he must consider how the key parties, his wife and the appointed manager, will react and whether they will feel that Daniel is able to take an impartial approach. My recommendation to Daniel is to seek the services of a professional to consult with the group and act as a facilitator.
A consultant must not pass judgment during this process
A necessary first step
A consultant would first arrange a meeting with Daniel to fill himself in on the background of the organisation. It would also be important, at this stage, to identify Daniel’s needs for himself and the business as well as any concerns he has about the organisation’s position and its planned future.
The next stage in the process would be to meet the remaining parties on an individual basis to build up a relationship and to repeat the process of identifying their key concerns. A consultant must not pass judgment during this process.
It is also important to talk with staff to find out how they feel. They are the company’s heart, and any decision will affect them deeply.
This process can be undertaken in several ways:
- Through a confidential survey, with no names mentioned and to be viewed only by the consultant (an overall report would be compiled for Daniel to allow him to get an idea of what his staff members were feeling).
- Direct individual discussion on the shop floor. This may not produce the best result, but gut feelings are important.
- Consultation with a designated committee. It is important to ensure that the mix of people on the committee is a cross-section of the workforce.
The next stage would be to arrange a session with Daniel, Marie and Henry. Whether to involve a staff representative would be an individual choice. Such a representative might attend any subsequent sessions once management had made some decisions about how the company was going to be structured.
It is important to format this discussion to ensure that none of the work done beforehand is wasted. The consultant’s role would be to facilitate discussion and ensure that the group remained focused on a common goal. It would be easy to make a recommendation based on the information obtained, but simply providing advice is not going to change anything unless the parties agree as a group on a form of change that they can all be happy with.
It would also help to set guidelines for the discussion. Some of the more important meeting rules should be:
- Deal with fact not emotion.
- Respect each other’s opinions.
- Listen completely to each person before responding.
- Allow equal opportunity for all to present their views.
People in the group will agree that they all have the same focus: that they are all acting in the best interests of the company, its staff and its customers. If the group gets bogged down and is struggling to resolve a particular issue, bringing them back to this common ground will remind them that they need to come up with an amicable solution.
No consultant can come in and just give advice. Decisions that will have a profound affect on a company must be made by the key stakeholders if they are to have any long-term effect. The consultant can only help them to achieve a common goal.
Proposed solution #2
James Simms is the director of Intangible Assets. Over the past 15 years, James has been consulting to small and medium businesses and coaching entrepreneurs, with extraordinary results. Through his extensive involvement and intense passion, James is able to create synergistic teams and business solutions that work so well they are able to accomplish the incredible.
Business owners all over the world face the problem of letting something they have built up go into the hands of others.
It is understandable that Marie would have problems letting go of control of the business. There is the risk that the business might take a downturn or even fail because of the change in management. Marie’s concerns are based on how the risks of this change are being managed, even though she may be too close to it to clearly define and communicate this.
Marie and Daniel must work together on the key performance indicators that show that their business is performing well. The company will have access to historical data, and it will be able to organise and utilise these indicators in such a way as to allow Marie and Daniel to monitor the business. This would enable them to pick up any potential slowdown during the change-over before it seriously affected the business.
Another risk that needs to be taken into account is that, in most small or medium businesses, usually there is only a single income stream: from production. If the business is to survive, this production income has to be protected at all times, leaving little room for experimentation.
It is also important to keep in mind that, in a family business, emotions can run high and sometimes mask what is happening in the business.
Any big changes in the managing and running of a company should be done gradually; they should never be rushed. It is best to allow up to two years for implementing changes of the type Daniel envisages.
Daniel and Marie would do well to discuss any goals in their private lives that have not been achieved because so much time has been devoted to the business. Once Marie has had the opportunity to think about what she really wants, she will be in a position to align herself with Daniel and they will once again be moving in the same direction. Daniel may need to realise that it is difficult to ask someone to give something up if they have not defined for themselves what will replace it.
Marie may not be able to envisage what her role as a director would entail. She could look at learning more about this role to discover what the alternatives are to what she is currently doing.
Daniel may need to detach himself from the business as part of a strategy of demonstrating to his wife that there is more to life than working an 80-hour week.
If Daniel truly believes in detaching from the business, he needs to demonstrate to Marie its success, from the point of view of his personal wellbeing and in the overall performance of his part of the business.
If Marie is to hand over her side of the business, it is up to her to take the initiative and bring in someone to whom she would be happy to hand over control, seeing that she said she did not think Henry capable of taking control. Marie will need to train that person and be accountable for their success or failure.
However, Marie can make this choice only when she is ready; and this needs to be discussed objectively with a disinterested party.
Any big changes in the managing and running of a company should be done gradually; they should never be rushed.
- Have Henry take over from Daniel and use this first step to build confidence in non-owner leadership in the company while Marie continues to manage her section of the business.
- With the extra time Daniel will have, he can focus on an investment strategy for the company that will start to createincome from sources apart from business production. This will give the owners stability, security and a long-term financial plan. It is important to note that it is the company’s money that will be invested.
- Marie is a director of the business. If she feels that she should stay and monitor the running of the company, then this needs to happen. It is more prudent for Henry to work with Marie than to defy her. He would do well to spend this hand-over time observing what Marie is doing and document what is working.
- If Daniel and Marie are planning to eventually sell the business, a potential buyer will want to know:
A. Can a manager successfully run this business without interference?
B. Can this business become part of a portfolio of existing businesses without disruption?
C. Is this business expandable in the market, through purchasing the opposition or through boosting marketing and sales?