Does Your Company Suffer From a Cultural Parasite?

Almost every privately held company will encounter the growth of a cultural parasite, one that is difficult to recognize and challenging to treat organically. This cultural parasite is slow-growing but very powerful, and it can retard success when it metastasizes.

Most family-operated companies succession planning involves their children. An understandable trait is that the parent built the company and wants to pass it to a son or daughter. But the failure rate among companies with second-generation ownership is well documented. Often this is be-cause the second generation lacks the same passion for the business. But sometimes a sibling develops their passion-set, but because their experience is limited to just that enterprise, their decision making is hamstrung.

Here is a story of a business owner who recognized this threat and how he chose to deal with it.

We’ll call the owner Fred and his daughter Sally. Fred founded the company and enjoyed the ups and downs every business does. But over 15 years, revenue grew nicely. Sally worked in various office and sales-support roles over her college summer breaks. While the other employees appreciated the help, she was the owner’s daughter whose job was safe and secure regardless of her contributions. Safe to say, Sally was tolerated but not necessarily respected.

Everyone assumed Sally would join the firm in a more senior capacity upon graduation from college. After all, she was the eldest family sibling and groomed every summer to accept a permanent role in the company. But Fred recognized the cultural parasite and had a plan to remedy its growth.

His plan? Sally had to get a job outside of her father’s company.

She did precisely that. Sally worked her way up the ladder at three other companies (one of them a competitor of Fred’s). Of course, she made the typical mistakes, but she paid attention and learned the ropes. She enjoyed consistent advancements and ultimately came to work for her father’s company as Senior Vice President. Sally eventually became President. So when Fred retires, the succession plan is already in place.

What did Fred Recognize about the Culture Parasite?

Small to medium-sized companies fall victim to homogeneousness. They tend to keep employees for years, and they often become comfortable in the old ways. They begin to fear risk-taking and generally get stale. New ideas and innovation may take place, but it’s happening differently and faster throughout the industry.

Bringing in new employees can assist this process and degrade the parasitic growth, but the old guard often overrides or intimidates their new ideas. Plus, training new people takes time and adds cost. And it requires attrition to create the budget for the new hire.

How Your Company Can Get the Innovation

Your company can benefit from an outside perspective, bringing innovation, process improvement, more significant revenue, and not just from one or two companies but from many different companies across different industries. If you thought thinking outside the box was a cliche, you are wrong. But if you would like to learn about best practices from outside your company’s way of doing things, the solution is within your reach.

Bring in a Consultant for Succession Planning

Your succeeding family member(s) must understand your business’s policies, governance, wealth management, and all the key pillars that make your business what it is. Larger companies have tons of resources and personnel to ease into the transition. However, small to medium-sized companies do not, which is why an experienced consultant is so invaluable. This consultant should be knowledgeable in business analytics, process improvement, team building, business strategy and modeling, operations, and all aspects of decision making.

The Succession Plan Should Generally Consist of Five Parts:

1. Planning Strategy – Develop and execute a thoughtful plan for short and long-term goals for both the new and old owners. Be sure to include all family members in this process. Developing a plan and just announcing it will only bring discontent or resentment from others. Bringing the family early into the planning will get you the same goal and better support and goodwill through the family.

2. Operational Considerations – Your day-to-day operations may not be changing at all. However, they will change sooner or later. Therefore, your successor must know the current processes, anticipate future challenges, and know who to go to when they do occur.

3. Entry and Exit – It isn’t unusual for part of your team to leave with you when the time comes. These can be loyal workers who stuck around to the very end and planned on retiring years ago. You must also:

• Identify those who are leaving
• When they are planning to leave
• Who might be promotable from within the company

This is also the part where the hiring process gets taught to your successor.

4. Leadership Training – Your successor must be ready to lead your business. They may have been in leadership in the past. Even Sally had leading positions among Fred’s competitors. How-ever, Sally needs leadership training for your unique business. In addition, your staff may also need to undergo training or coaching to ensure they have the skills and resources they need to continue to succeed during the transition.

5. Use Outside Consultants As Needed – You may also need other professionals outside the business, those with expertise in process improvement, team building, the laws, accounting, wealth management, and others. Their knowledge and objectivity are invaluable as you execute your exit while continuing to juggle the new demands of your business. In addition, this outside team can help ensure that all relevant issues receive a thorough examination.

Be realistic with your business consultant, even if it is painful to criticize your successor. Before a conclusion on your final successor or successors is reached, use the consultant’s help to determine whether they are the right person to take over the business management. Your consultant may help you ultimately determine if selling your business to an outside party is the best option.

Conclusion on Cultural Parasites

Do not delay your succession planning. The cost of taking no action is too high to ignore, given that your business probably factors into your retirement. A good exit strategy with a clear succession will ensure your workers, clients, and family are well taken care of.

Contact our office today for a professional, preliminary consultation. We’d like to be one of your growth and succession partners.

Building a highly productive team is difficult. Fortunately, KM Consulting can provide tools and expertise to help privately held companies. Here is the first step.