Part of the America’s Entrepreneurs Special Report
Most family business consultants talk about the nitty-gritty finances of running an enterprise successfully. But to Tom Hubler, a St. Paul, Minn.-based pioneer in family business consulting, it’s all about “soul.”
A former therapist, Hubler is a founding member and fellow of the Family Firm Institute in Boston, which is now international, with over 10,000 members. For more than a decade, he has taught family business management at the University of St. Thomas in St. Paul. Hubler, 77, recently published The Soul of Family Business: A Practical Guide to Family Business Success and A Loving Family and I met with him at a St. Paul coffee shop in St. Paul to discuss it. Highlights:
Chris Farrell: Why did you write the book?
Tom Hubler: I’ve got a lot of what I would call good ideas that are unconventional in regard to family businesses. My goal was to get this material out and into the mainstream of family business literature. That’s the professional answer….
But when you realize that you’re closer to the back end [of life] than the front, you begin to wonder about whether your life has meant something… That’s another sort of subterranean reason to write the book.
For family business owners, legacy is important, isn’t it? The book starts out with the power of love, which isn’t a normal starting place when talking about entrepreneurship.
When I first started doing work with family businesses 35 years ago, one of the first things I learned was the bottom line is critical. The thought occurred to me: Why don’t we have a bottom line on the family side? It’s taken a while for me to evolve into this, but the bottom line is love.
I often ask people what they think is the number one obstacle with family business. People usually say its taxes and money and all that. For me, the number one obstacle is the lack of expression of appreciation, recognition and love. That’s what that’s drives things in family businesses.
The younger generation loves their parents but takes them for granted and doesn’t tell them they love them. That’s exactly what the kids are looking for also. The kids make these commitments to the family businesses and their parents take them for granted. They don’t tell them: ‘I really appreciate your doing this, and I love you.’ Those are the kinds of things we all want to hear…
There needs to be a reciprocal commitment to each other’s success. That’s another definition for love.
In the early days of family business consulting, there was a lot of dispute about is it a business first or a family first? I think it’s ‘both and…’
So, the idea here is you need to build the emotional equity of your family while you’re simultaneously building the equity of the company.
What happens is that most family businesses focus their energy, time and money on the business. They overlook the importance of family equity.
The manifestation of that for me is captured in the family’s values. I ask the families: ‘What are the values you want to perpetuate in your business?’ They come up with a list and get it all organized and literally write a statement. Hopefully, that statement is an inspiration for them for what they want to achieve in their family lives and in their business.
Do the adult children want to come into the family business these days?
The kids are coming in. Thirty-five to forty years ago, family businesses were not a first choice in terms of careers. In the old days — if thirty-five years ago is the old days — if you didn’t make it someplace else, you would go back into the family business. Now it’s a career of choice.
What do you think accounts for that change?
Family businesses are much more successful. They’re much more prominent.
Family businesses are the backbone of our economy, but they never got any kind of recognition. Business schools are starting to shift slowly in their curriculum. They are not only for the Fortune 500 anymore; they now include family business and what you need to be doing to be successful. It’s a change of attitude.
Are there best practices for thinking about succession in a family business?
Why is it said that 70 percent of family businesses fail to make from the first to the second generation? It has to do with the overlap between the family and the business system. A little bit of overlap is what makes them so successful. When you’ve got too much overlap, that’s what creates problems.
That’s when you can’t take a vacation?
That’s right. I say to clients: ‘To create balance between your family and your business, you need structure and formality.’ They’ll say to me: ‘We don’t need all that structure. We love each other.’ I say it’s because you love each other that you need structure and formality.
Some of the structure and formality is you need to have a board of advisers, either legal members of the board or advisory members…
You need to have an educational program and a development program for the next generation to train and help them develop their leadership skills.
Related to that is what I call a family participation plan. What are the ground rules for what’s going to happen when you work in the business? What do you have to do to get in? What do you have to do when you get there? What’s the compensation system? What’s the decision-making system?
Do these ideas work with everything from the two-person enterprise — say, a mother and daughter going into business together — to the multi-million company?
The principles are the same. It’s the zeroes that are different. You see the same dynamics with little-bitty family businesses and the big ones.
If we went back thirty-five years ago, this conversation would be typically fathers and sons, right?
Now it’s fathers and daughters.
Mothers and daughters.
Yes yes yes yes!
There has been a real shift?
It’s a dramatic shift, even in traditionally male-dominated industries. It’s working out just terrific. It’s not universal, but we’re getting there. It’s better.
What’s your view about leaving a legacy?
There are two parts to legacy. There is the financial part of it, which I call ‘wealth preservation’ planning. The second part I call ‘wealth preparation’ planning. It has to do with stewardship and being able to figure out what are your family values around money and how do you want to do good in the world. How do you want to lead a purposeful life?
The key to success in life is living a purposeful life and wrapping your life around your purpose…
I have developed the concept I call the last challenge of entrepreneurship.
I believe entrepreneurs don’t have to leave the company. They have to figure out what gives them heart and meaning. They have to change their job description and become the architect and the designer with their adult children and their advisers of the new ownership system, which includes the board of directors and governance; the new management and leadership system and the training, development and installation of the next generation of leaders.
Then, since entrepreneurs are driven by their dreams, they need to come up with a new dream in relation to work, family, active leisure time, service and philanthropy.
Someone comes to you, say they’re sixty years old, and they’re thinking of going into business with their adult children. What would you ask them?
What’s your business plan? What’s your business? What’s the plan for being a family business? What are the ground rules for the family participation? All that needs to be worked out on the front end, but it never is. It should be.
Did you think thirty-five years ago the common belief was that, over time, family businesses would shrink in importance?
Now looking ahead, what do you think?
Family businesses are thriving. They continue to grow. I have clients who say: ‘I want this business to go beyond me. What I’ve done here is important and I want to see it continue for multiple generations.’ There are explicit about that.
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- How to Run a Family Business Successfully
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- Family Businesses Hand the Reins to the Next Generation
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