The panel was moderated by Alex Elezaj, COO at Whitlam Label Company. Panelists included Brian Gale, president and majority owner of ID Images; Tara Halpin, current president and fourth generation owner of Steinhauser; Tracy Tenpenny, vice president of sales and marketing at Tailored Label Products; and Elezaj.
The session was divided into to three topics: The 3 Rules for Success, Finding and Keeping the Best People, and Organizing the Family Business. Elezaj opened the session by citing a Harvard Business Review study, which observed 25, 453 companies over 44 years in an effort to identify the three rules for making companies “truly great.”
Harvard researchers narrowed their results and found that the three basic rules are:
• Better Before Cheaper – This rule is a reminder that successful business need to compete on differentiators other than price. Companies can offer great brand, style functionality, convenience and other nonprice benefits. These are sometimes more of a deciding factor for potential customers than the actual cost.
• Revenue Before Cost – Companies must not only create value, but also capture it in the form of profits. Rarely is cost leadership a driver of superior profitability. Company leaders need to ask themselves where their time and investments are being utilized.
• There are no other rules. – The most important of the three, Elezaj said that companies should change whatever they have to in order to follow the first two rules. These rules are “the foundational concepts upon which greatness can be built for many years,” he said. Often, companies look at the bottom line – and only the bottom line – when income is in decline. “Many executives are tempted to make the company results look better by slashing assets and investment to reduce costs,” Elezaj said. What's important to remember, he said, is that great companies typically accept higher costs as the price of excellence. Investing significant resources over long periods of time into nonprice values generate higher values across the board.
Finding and keeping talent
By and large, the days of hearing people say “I’ve been with my company for 25 years” are over. The average tenure at one position is between four and five years. Whether it’s because of job dissatisfaction or the promise of more money somewhere else, employers are having a difficult time retaining their talent. In order to change that, panelists said, managers need to consider several things, including: defining what it means to be an employee at your company; understanding the risk of hiring “stars;” growing your talent as if your business depends on it (which it does); acknowledging the potential of “B players;” and generational governance.
Defining what it means to work at your company is the HR equivalent of keeping up with the Joneses, Elezaj said. Competing with competitors in terms of compensation and healthcare benefits is enough to get strong job candidates to the door, but it may not be enough to keep them at your company. To foster “deeply committed” employees, Elezaj said, managers need the following:
• A comprehensive understanding of the types of people who will be productive in your organization over the long term. What kinds of skills should they have? What should be their attitudes toward work?
• A well-defined, well-communicated signature experience that conveys for potential hires and reinforces for employees the attributes and values of the organization.
• A coherent employee experience - none of your company’s environmental elements should misrepresent what it’s really like to work there.
Elezaj and Halpin, of Steinhauser, told a rapt audience about their company’s interview processes as examples of thoughtful, careful hiring practices.
“Our interview process is lengthy,” Halpin said. “We have potential candidates meet at at least five people at the company besides me and my brother. Most of our questions are behavioral-based. After doing it for a while, you can really get a good idea if this person can fit into your culture or not. We then have a two-week on boarding process where they work in every department of the company every day – for either a full or half day – after they’ve been hired. We’ve tried to sidestep that but it was a disaster so we’ve reinstituted that. We hired three people yesterday, actually, and I’m hoping its all going smoothly.”
Elezaj said that his company employs a similar hiring process, and that it was enormously helpful for him personally as he was hired from outside the printing industry. “The process is two weeks and it really helps people to better understand the company and its culture, to establish relationships early on, to see the bigger picture and to get firsthand knowledge,” he said.
Tenpenny, of Tailored Label Products, emphasized the importance of not only training the right employees, but of letting them know that they are valued. “We’ve been fortunate enough to win a Best Place to Work award six years in a row, so its actually easier for us now to hire good people,” he said. “As managers, we don’t dictate direction. We’re there to support them and guide them, but it goes so much farther when we have teams coming together and generating ideas.
“I think all of you could become a Best Place to Work, but you have to invest in it. You may have an employee, for example, whose spouse is sick and they need better healthcare. They may not want to leave, but have to for other reasons. If there’s a message I would give to you, it’s that you should really, truly value your employees and make that place somewhere that they really want to be.”
Elezaj echoed the sentiment by adding, “If you need to give someone a raise five times in one year, give him or her a raise five times in one year. Why let them wait a year? Don’t get caught in the cycle of having talented people that you want to keep, but only addressing that on an annual basis.”
Learning from family businesses
There are important takeaways that larger businesses can learn from smaller, family-owned businesses. For example, family-owned businesses are more likely to be frugal during good times as well as bad. They keep the bar high for capital expenditures and carry little, if any, debt. They acquire fewer and smaller companies, show “a surprising level” of diversification, and retain talent better than their competitors.
That being said, the traps that can destroy a family business are unique to the emotional and somewhat domestic culture of these businesses. The top traps, according to panelists, are complacency, fear of growth, and silos. By sending the message to family employees that “there is always a place for you here,” managers are lowering standards. To avoid this, always insist on proper training and screening of employees – family or not.
The fear of growth among family business is real, with many managers wondering, “Will we grow too fast to support everyone?” In order to mitigate this fear, managers should plan for family entry while also planning to scale for necessary growth. Bringing people on board won’t sink the ship, provided there is careful planning in place.
The final trap in family businesses is that family members can remain in silos according to their bloodline. In no other business environment will relationships have such a tremendous impact on company culture; the results of a divided workforce can be damning. By appointing nonfamily members as mentors and other employees, these silos and alliances can be avoided and progress can be made – smoothly.