In the world of contracting today, the family-run business is just as prevalent as ever. It’s not unusual to see family members working together to try and make money every day. However, as you’ll see, that family focus can sometimes lead to family failure.
At a recent Executive Perspective, I met with a family that ran a business—and they needed help. In this company, the father, mother, brother, sister, and son-in-law all were working to make ends meet. They were struggling to survive and were desperately seeking some help to get moving in the right direction.
We sat down around a small table and started talking. As they told me about their situation, they started listing off all the traditional problems (excuses) that companies face. You know the ones: “Competition is fierce.” “The economy is tough.” “Consumers are only concerned about price.” They threw out every excuse you would expect to hear from a struggling business owner.
After they got all of their problems out on the table, I began to ask some diagnostic questions about their business in an effort to help. What I discovered was that they may be facing some minor external problems, but the majority of their problems are internal.
External problems are those outside of your company and outside of your control. These would include some of the things they listed like the competition and the economy.
However, internal problems are those items that you can control inside your company. These are the problems that you can take action on today. It’s easy to point fingers at the external problems, but the internal ones are often hard to accept responsibility for because they admit personal failures.
By asking the right questions, I unearthed some of their internal problems, and shed some light on what they needed to do to improve their situation.
For example, their service-department labor percentage was too high compared to their revenue. Their overhead expenses were way too high. Their pricing was too low. Their office-to-field employee ratio was too high.
As we went through each internal problem they faced, I asked whom was responsible for that area of the business. The answer I received was always the same, “We just look at what needs to get done, and we all go to work on getting it done.”
There was no polite way to say it, but the family-management committee they had put in place was failing and it was destroying their company. No one was responsible, and as a result, nothing ever got done. Every person has to be responsible for a specific job function and has to be held accountable to specific results of that function.
In any contracting company, there are four key leadership roles and depending on the size of your organization, there may be additional leadership roles that spin off of these segments.
The four main roles are General Manager, Sales and Marketing Manager, Administrative Manager, and Operations Manager.
Of course, in a small company, you may find that you wear more than one of these hats, but in this family, no one wore any of the hats. They didn’t have defined job functions, which means they didn’t have a clear objective. Every person on their family-management committee was busy being busy, but they were never responsible for anything. They were constantly in firefighting mode because no one was working to prevent fires.
In that meeting, we clearly developed whom was going to hold these key roles when they returned to their company and what their responsibilities would be.
The Operations Manager would be responsible for hiring, training, and maintaining the field personnel and achieving the desired field ratios.
The Administrative Manager would be responsible for the financial details of the business, taxes, HR issues, and making sure the company is compliant with all laws.
The Sales and Marketing Manager would be responsible for generating service calls and sales leads to achieve the budget.
The General Manager would be responsible for holding the management team responsible to achieve their desired results and achieve a profit.
Now, with a manager in place for each key position, it is their responsibility to achieve necessary results. Now, if someone doesn’t achieve their results, this family will need to take action by increasing the training or replacing that family member in that position.
By the end of our visit, this family saw the truth. Family committees usually lead to family failures.