Author Archives: codesigner

Good Management Transitions Don’t Happen Organically, They Only Happen if There Is A Planned Transition

By: Amy Wirtz

Today’s Top Producer Seminar session I want to report on is about how to cultivate the next generation for the transition of management and ownership. This was taught by Danny Klinefelter, of Texas A& M University and a leader in the T.P.A.P. program.

Is college the answer? Mr. Klinefelter believes in the benefits of sending your next generation to college. College gives our youth the opportunity to learn time management skills, social skills, engages critical thinking, and gives our youth a bigger world view. He suggests the next generation study agribusiness, accounting, rural entrepreneurial degree, and engineering or chemistry degree.

Mr. Klinefelter recommends parents be willing to pay for classes outside the student’s degree area to help the next generation be well rounded. He suggests the next generation of leadership develop knowledge in negotiations, interpersonal communications, accounting and the use of accounting software, and the basics of business formation.

Based upon his vast experience in helping shape agri-business education programs, he advises that your identified successor get work experience outside of your organization. This allows your successor to learn how to work from someone other than a family member, see different management styles, experience other corporate cultures and bring new information to your farm.

Experience outside of your organization for five years and the earning of one promotion during this time helps both the managing generation and the identified successor confirm and define the successor’s commitment to the farm. The returning successor will have an established self-confidence, lessen the cycle of entitlement that can exists in family businesses, and harvesting more ideas for improvement to the existing organization.

Danny’s Ten Hints for a Successful Management Transition:

  1. An assessment of the needs of business, not just for now, but for the future.
  2. An objective assessment of the strengths and weaknesses of the current CEO.
  3. An objective assessment of the strengths and weakness of the successor.
  4. Open, honest and mature communication.
  5. The creation of a management development plan that addresses experience, responsibility, training, and honest/objective evaluation and feedback.
  6. Planned experience, exposure and networking opportunities for the successor, not just outside the business, but also outside the industry.
  7. Development of a common vision for the business.
  8. An ongoing delegation of responsibility and authority, with a specific timeline.
  9. Involvement of the successor in the development of the business plan and the strategic decision-making process.
  10. Implementation of a plan for what the current CEO is going to do next.

Amy Wirtz Attending Top Producer Seminar Designed to Help Farm Families Prosper

By: Amy Wirtz

As many of you know, I have a special interest in the agricultural industry. I grew up in Fulton County Ohio and most of my classmates were farmers or people who made their living off of the agricultural industry. There is no more intricate family business than the family farm. The land is where they live and many are run by third and fourth generations.

I will be attending this great Top Producer Seminar in Chicago that focuses on the unique aspects of the agriculture industry. With dramatic changes in the commodities market, business owners need to be nimble and resourceful to manage through this down turn in the economy. This seminar offers many tactical sessions on tax reduction, production increases in addition to farmland values and rents.

I am especially looking forward to adding additional perspective and information to our solutions that assist my clients in the areas of Successor Development and Management Transition specifically as they relate to mergers, acquisitions, succession planning and business continuation in the agricultural industry.

Feel free to reach out if you have any questions or would like further information.

The Second of The Five Ds: Disability

By: Amy Wirtz

We covered the first D-Death in our last blog. The following four articles will address disability, disaster, divorce and disagreement and their effects on a businesses. This article addresses the risks of both the family and the business with the owner who suffers from a short term or long term Disability. A Certified Exit Planning Advisor educates business owners on how to prepare the unknown and real possibility of the disabled business owner.

Imagine getting up at 6:00 am and starting your daily routine. You get dressed, get in the car and start your commute. Things are going great for your company because you secured a new contract that will make your year! As you enter the highway, the last thing you remember is the semi laying on its horn. You wake up in the hospital ten days later. You cannot form a sentence and cannot move your right leg or arm. Now what?

How has your business managed without you during the last ten days? How will your business survive this event? Do key employees know your job enough to get by? Will customers feel safe? Do you have disability insurance for yourself or your business overhead? What do your loan documents say, if anything, about your disability?

Recently, a dear friend called to tell me that her 52 year-old brother, Bill, had a stroke. This was sad in and of itself, but Bill also owns a personal injury law firm that employs four of her family members.

When she called she was concerned about so many things. Was he going to be okay physically and mentally? How long would it take for him to recover? What would happen to his business? Who would handle his upcoming trial? How would the family be able to agree to all of the decisions that needed to be made if there was no appointed leader?

As a business consultant, I had additional questions. Did he have disability insurance, long-term care insurance, and business overhead coverage? Could anyone else sign checks? Who are his go-to advisors? Does he have an advisory board that can help manage the crisis? What relationships did clients have with the other lawyers in the firm and would they stay? What were the terms on the line of equity or loans? Did the siblings that worked in the business get along?

A must on any professional team is a good insurance advisor. I am not talking about an insurance sales person, but a good advisor. One of my clients pointed out to me that a person can become insurance poor by planning for all the potential disasters. However, a good insurance advisor will look at your current plans, assess your actual and perceived risks and help determine that your current plans are actually insuring your real risks at a reasonable cost.

Bill has a good prognosis for a complete recovery. He is currently on a long term physical therapy plan and is recapturing his life. He has returned to work on a part-time basis and is expected to return to resume full-time work. He and his business were fortunate to survive during his rehabilitation period.

When was the last time you thought about the possible outcomes for your business and family if you would suffer from a prolonged illness or become disabled? The purpose of exit planning is to walk you through these questions and brain storm protection outcomes. Contact your insurance advisor now; if you do not have an insurance advisor, contact my office and we can help you find one in your area.

Why Use the Team Approach When Doing Succession Planning?

By: Amy Wirtz

Creating a good succession plan is a large project. The most common reason the plan is never completed is because the business owner does not know where to start. She often does not know how to make the time to work on the business while working in the business so she never gets to the project. It is my experience the owner often starts to hyper ventilate at the thought trying to manage all of the people who have opinions on when, how and to whom the business should be transferred so she give up.

The Exit Planning Institute models a collaborative team approach to passing the business on to the next generation or putting your business on the market. Why? Well we believe that one person cannot and should not be the all-knowing advisor to the business owner. I am a lawyer and mediator, I should not be doing a formal valuation report of her business. That is the role of the valuation expert.

A team creates the synergy needed to deliver the best process possible during a business ownership transfer. I practice collaborative law and teach the collaborative team approach at the Exit Planning Institute in Chicago for the Certified Exit Planning Advisor program. I and am often asked what does collaborative mean. The definition of collaborate is “A cooperative Arrangement where two or more people, which may or may not have a previous relationship, work jointly towards a common goal.”

A typical team is comprised of the business owner, business and estate lawyer (sometimes the same person), an accountant and business valuation expert (maybe the same person), an insurance expert, a lender, and sometimes a broker. There are others that may need to be on your team based upon the business needs or family needs.

When a Certified Exit Planning Advisor is utilized by the business owner, she has a project manager to help her complete the process. The C.E.P.A. will make sure all individual team members know the goal of the owner, understands her interest and goals, and will get the project done in the expected time frame. Often the C.E.P.A. will break the project down into manageable steps that helps the owner understand and complete the plan. When the individual advisors have a project manager, it helps keep costs down for the business owner, because they are not being billed for duplicate services. The individual advisors share their wisdom with the other team members, which helps the members create a synergy that helps creates new and better results for the owner.

Who is the Chief Family Officer in Your Family Business?

By: Amy Wirtz

Have you ever heard this, “I am the owner and chief bottle washer of my business?” Every business has its own phases of management. Owners daily recognize themselves fulfilling the duties of a chief operations officer C.O.O., a chief financial officer C.F.O. and a chief executive officer C.E.O.  While we readily recognize these roles for people directly working in the business, family members must also recognize and undertake on roles within the family for the benefit of both the business and the family.

“Modern Family” aside, roles in the family normally are pretty settled.  However, a successful family business requires that someone pay attention to and manage the impact of the business on the family and that of the familial relationships on the business. This role, unique to a family business, is that of the Chief Family Officer. The issues and challenges of this role are discussed in detail in the book “Family, Inc.”, by Larry and Laura Colin. If you live and work in a family business I highly recommend reading this book.

The Chief Family Officer (hereinafter referred to as C.F.O.) is usually the spouse of the owner and is typically a woman, though that is changing in our country’s business arena. The Chief Family Officer manages the family relationships, which means dealing with issues in the business that impact or are impacted by family relationships.  This position is very significant in any successful family business. It is an extremely challenging position and must be done with grace, diplomacy, humor and firm and defined boundaries.

Growing up around a family business helped me understand the role of the Chief Family Officer. I watched my grandma do this my whole life. Our family business started as scrap yard and auto parts store in the early 1930’s. The “family” consisted of my great grandfather and his brothers.  Grandpa was of the belief that if you married into the family, you worked in the business no matter what your education or qualifications.  Our family business became a cousin’s consortium (meaning owned by four cousins as the second generation owners) and I can remember hearing stories of the power struggles that occasionally occurred over direction, position, and profits. As a matter of fact my grandfather, who is 91 years old, still tells me war stories of the conflicts that occurred over the business. More importantly, my Grandmother still has to negotiate between my Grandfather and my Uncle over the history of the business, identity issues and power struggles. She still smooth’s things out between them. That has been her role since she was married to my Grandfather 68 years ago.

As the Chief Family Officer, she helped host extended family dinners with over twenty people in attendance in order to keep the family together and family focused before, during and after the splits in their business and after board meetings. She told me that she would consistently hold “phone pow-wows” with her cousins to keep the peace and harmony on the family front.  While she never worked at the business, she created a “cocktail hour” at 5:00 pm where she just focused and listened to his business day Monday through Friday. This allowed her to keep her finger on the issues at work that impacted the family relationships and allowed her to help create solutions that were of course entirely all my Grandpa’s idea at the end of the day.

Do you or your spouse dread family holidays or Sunday dinners because of the bickering between family members? Do you find the head of the family business getting a “headache” right before dinner or right after? Does he/she exit stage right as soon as possible after the event? Is your birthday celebration ruined because the conversation is only about the next customer to court or the additional employee your daughter wants to hire and your husband thinks is a waste of money? Do you have siblings that will not be in the same room due to a misunderstanding at work? These areas of conflict are natural and occur constantly within a family that do not work together, but become more significant in different ways when the family is also running a business together.

Embracing the roles as Chief Family Officer you can help give a safe space to help relationships constructively blossom. Not only does that create happy and fun memories, that time allows the conflict take a rest. The trick is to provide enough family time while letting people have a break from one another.  You need to A.C.T. with tact and diplomacy in this role. Laura and Larry Collin describe A.C.T. in three steps.

First, you have to Accept the role and embrace the position. Know that you really do need to help manage the relationships without taking them over. You need to become the family go to person without abusing the position.

You can be and become that go to person if you Cultivate the family relationships. This may mean taking your daughter- in -law out just by herself to get to know her better and fill her in on the business history and roles. You will do more listening in this role than ever before.

Third, Take an interest in the business without meddling in the running of the business. Create a time that is focused on the spouse working in the business at least weekly and encourage this person to discuss the challenges with the business. This is not an invitation to take over, but to listen to what is causing him or her to stay up at night and to hear threats to the family relationships.

As Chief Family Officer you get to set the ground rules for the family social time. You can make it a work free zone. You can give them a baggage claim ticket and ask them to “check their baggage” at the door. The Chief Family Officer can set a timer for fifteen minutes and only allow shop talk for that amount of time. You can name a grandchild, son or daughter the role as the “cruise director” for the family time. He or she gets to set the agenda or plan the time. Try to create space for the family members who do not work in the business. Let him or her shine at a family event.  Consider having event time to help create memories. For example, maybe having dinner at your house where Dad is captain is not a good idea when there is shift of leadership roles at work. Try having a picnic at a park after your grandson’s baseball game.

The next blog will be about identifying when is it time to get help to reach your highest potential as the Chief Family Officer.

The Five D’s: Death, Disability, Disaster, Divorce, Disagreement

By: Amy Wirtz

No, this is not a bad report card. The Five D’s are threats a company may face that could force the sale of a company or greatly diminish the value of a company. A Certified Exit Planning Advisor educates business owners on how to prepare for these risks. Business owners may not be able to predict when or if any of these events will occur during their term of ownership in the business, but with proper planning, the business can be prepared to deal with these unfortunate five D’s. The following five articles will address these five life-changing events and their effects on your family business.

My grandfather, Irv, was brought into his father-in-law’s business after he returned from World War II and obtained his accounting degree. Irv had just married my nineteen-year-old grandmother, Ruth, who was finishing her college degree. When Irv was about to graduate and take the CPA exam, Frank, his father-in-law, asked Irv to come and work for the family business. Frank and his brothers owned and operated scrap yards throughout the area. Frank convinced Irv that he did not need to obtain a CPA license to run this company and that it would be a waste of his time and money. Irv accepted this offer and initially . . .

Irv worked for one of his wife’s uncles. That fizzled after three years due to conflicts between old habits of the uncle and the fresh education of my grandfather. He then went to work in a scrap yard with his father-in-law, Frank. Irv worked with Frank for less than two years when Frank dropped dead of a heart attack. There was no exit plan, no life insurance and no contingency plan for Irv or Frank’s brothers to follow. Irv had the support of Frank’s brothers because, but they were running different parts of the business. Irv stated that it was by the grace of God and pure luck that the business survived that first year let alone for decades and another generation.

This story illustrates why business owners MUST face their own mortality. We all know we will die, but rarely acknowledge the effect our death will have on our businesses and loved ones. Estate planners, accountants, business lawyers and employees constantly tell me that the owner will never address what will occur if he/she dies no matter how often they bring it up in conversations.

We all avoid the thought of death…it is counterproductive to a growing business plan. A business with no contingency plan, no life insurance, and little cross-training will die with the owner. So the real question is, do you want your business to die with you or do you want it to become a long-lasting legacy that will carry on you life’s work and/or a valuable asset that can be sold to sustain your heirs?

How many of you with estate documents have read them in the last year? Do you still have the will you wrote when your first child was born? Do you even know where to find these documents? Do you have life insurance policies? If yes, when was the last time they were reviewed with an industry expert? Do you even remember why you bought them?

When an owner dies, the business becomes immediately vulnerable to outside influences and infighting. With a well-designed contingency plan, the surviving owners, employees and heirs will have a well thought out map and plan to move the company forward with the help of trusted advisors. Organizations like Family and Business Success can help you measure your risks and design a contingency plan so your family and business can successfully continue on after the passing of the owner.

Is Conflict Bad in a Family and a Business?

By: Amy Wirtz

“The challenge within any relationship, professional or personal, is not to avoid conflict or even be free of conflict, but to be able to engage with conflict in honest, respectful and courteous way.” Rob Parsons, author and mediator.

Conflict is a natural part of life and when handled correctly can be productive for a business and a family. Consider the significance that Conflict is a noun and a verb. Conflict used as noun is “A serious disagreement or argument, typically protracted.” while conflict as a verb is “To be incompatible or at variance or clash”. See Oxford Dictionary. How can someone be alive and never experience conflict? That is simply unrealistic. Instead, we need to validate conflict as being appropriate and teach our youth and employees to not be ashamed of this state of being, but ultimately how to productively utilize conflict to solve problems. Here are 3 basic aspects to always keep in mind:

When Conflict Arises Within Relationships.

  • The impact of conflict depends how it is handled.
  • Management of conflict by avoidance is destructive.
  • It is up to you to take the initiative to seek a constructive result.

The Impact of Conflict Depends on How it is Handled.

I grew up in a family where the starting rule my father created was “Do it my way or hit the highway”. However, as I grew older we would have a “family meeting” when there was a repeating problem/conflict in the family governance we would then try to discuss why there were competing interest and how to solve it. Our family grew personally and as a group from this.

Management of Conflict by Avoidance is Destructve.

Today I observe a general sense that conflict is a negative thing. Parents seem to manage conflict by avoidance. This is not helping our children. Who is assigned what chores and why could be a place where we can teach our children how to handle competing interests. This is an essential life skill for them individually and also within the health of the family.

In our business organizations, we actually are suffering from a lack of conflict and a culture of conflict avoidance. Neil Denny in his book Conversational Riffs, cites a study done by Begbie Traynor, a turnaround company, that nine out ten managers hide bad news from their directors for fear of negative consequences to their own careers. The withheld information means that the board of directors or advisors were not being given the opportunity to face problems head on and create solutions that would help with a positive trajectory for the company.

It is Up to You to take the Initiative to Seek a Constructive Result.

I believe that if a relationship is worthy of your time and commitment, then you must productively engage in difficult conversations in order to solve conflicting interests or repeating “riffs” in the language of a relationship. By leaning into productive conflict we can do the following:

  • Keep relationships from deteriorating,
  • Engage in respectful and constructive conversations,
  • Create solutions out of tension,
  • Be proactive and intervene in work situations before they become crises,
  • Keep key employees, customers and vendors, and
  • Assure those you work with that they should not fear bringing up difficult issues with you and feel comfortable engaging in a challenging conversations that create solutions not confrontations.

You might find it helpful to compare arguing to musical riffs. You have probably experienced arguments having a consistent and predictable repeatable riffs within your relationships. Some are like the pop music songs with nonsense words and predictable music repeats.

How many times have you had the same argument over and over with your Dad, Mom, Manager or child? I know I have a consistent and predictable argument with my children every Saturday on chore day. It is because conflict and events repeat themselves.

The question is, “How do I change my response to the conflict so that a resolution can finally be accomplished?” Neil Denny teaches that we innately reply to conflict with these repeating “riffs”: 1) Attack, 2 ) Defense, and 3) Counter-Attack because we have not had the opportunity to learn new communication techniques. He encourages his readers to learn to invite and encourage debate or differences, learn to consider and listen different perspectives, and be open to find what you do agree upon and be able to truly accept that you can agree to disagree.

I am a trained mediator and collaborative lawyer with many hours of additional education hours above and beyond college and law school specifically on the issue of conflict resolution. My work all day every day is conflict resolution. Even with all these years of experience and hours of education, it is still difficult to apply the theory to every day personal relationships. But I have learned there are some basic steps for you to use in conflict management:

Basic Steps for You to Use In Conflict Management

  1. Take a deep breath and let it out slow before you respond. When people are in a tense situation we often stop breathing which has negative consequences for cognitive thinking. Often conflict erupts in a very reactionary and inappropriate way. Think of parenting a teenager and our initial reaction is to send them to their room for a cooling off period. This is a great way to make them slow down and breathe and rethink their choices and decisions.
  2. Stay away from personalization of the issue. A better way to say this is try to separate the people from the problem. This is from Getting to Yes by Fisher, Ury. Ask the investigatory questions: who, what, and why with genuine curiosity.
  3. Stay away from absolutes in your language choices. Telling an employee they never get a project done on time is usually not accurate and if it is, there are bigger issues at hand that need real examination on a managerial level. Absolute language inflames the receiver and takes away the person’s ability to control his or her behavior.
  4. A normal and ingrained response to personal attack is defensiveness. The alternate way I encourage you to do is acknowledge that the other person is upset and ask if you can revisit the issue after a five minute break or if you can schedule a meeting to discuss the issue at hand. Then suggest you each bring three ideas to the meeting to problem solve the issue to the meeting.Following these rules will enable you to take the initiative toward a constructive resolution. I think you will find it very rewarding.

When An Outside Board of Advisors Can Benefit Your Family Business

By: Amy Wirtz

I have been a business owner on and off since I was thirteen years old. It is not polite to ask how old I am. Being a single owner can be very challenging.

Who do you discuss, brainstorm, commiserate, plan or argue with? The person in the mirror? How do you hold yourself accountable? Unfortunately, it can’t be done with the face staring back at you in the mirror.

Granted there are, as the business grows, a number of people interested in the business. But their position necessarily shapes their vision. Employees will often refrain from telling you their true opinion for a variety of reason: due to fear of losing their standing in the company, laziness, personal relationship issues within the workplace, etc. Lawyers, accountants and advisors all form specialty areas and have their own interest in your decisions too. Your family members will have their interest in the decisions that are being made as well.

When you get to the point where you decide you need extra help what should you do? The tool you can create to meet these issues and strengthen your business is the outside board. This is how you get advice that is confidential, credible and reliable from other experienced business people. It is a proven tool.

Very few companies make it beyond the second generation. It is very significant that a study of 88 family businesses in their 3rd generation or later indicated that the single most important commonality of their success was that they all had active outside boards. Page 30 of “Creating Effective Boards for Private Enterprises” by John L. Ward.

When you create an outside board you should do so with specific expectations. Here are some typical expectations of such a board:

  • Boards help the owner design and implement management succession plans.
  • The board can be an insurance policy for a resource to the family members after one of the unexpected succession crises occur like Death or Disability.
  • The board can be an impetus for the owner to proceed in a timely manner with the ownership succession plan and help with the predictable “bumps” in the road.
  • The board can help with creating the life after plan for the owner too. (insert stat about dissatisfied business owners).
  • Confidentiality of the board creates as safe place for the owner to problem solve and be creative.
  • Boards help identify needed organizational changes to help make the company successful before, during and after the succession of ownership and leadership occur.
  • The board can also help prepare the next owner/CEO of the company and monitor the business issues that develop with transitions. The board can help plan for and identify the next leaders of the business and leverage the human capital in the business.
  • The board can help support the family council by helping the owner categorize issues as business issues or family issues.
  • The outside advisors help with compensation issues and structure to lessen the tension that is created owners who work in the business and those that are passive owners. The passive owners are looking at dividend returns and active owners in the business want compensation for the sweat equity in the company. This can create tension that can be lessened by objective outside advisors.

Having a board can model a new way to constructively discuss issues and resolve them in a more formal and manageable manner. It also shows the family that you have a commitment to run the business in a manner that is above board in compliance with state laws and in a manner that is in the best interest of the business and you are willing to be accountable to a board of outside influence. This shows the business is not all about your individual best interest.

There are two different kinds of Boards. The first kind of outside help is known as Board of Advisors. The second is known as a board of Directors. Both allow for the owner to hand select members who have navigated small and large changes in business. An outside board can be assembled strategically to bring a new intellectual experience and technical expertise to your company.