Values & Ethics

On Thursday, July 19, 2018, the family leaders of Vermeer Corporation shifted gears from marking the 70th anniversary of the business to managing a crisis after a tornado struck the company’s Pella, Iowa, headquarters.

Vermeer makes construction, earth-moving and agricultural equipment, known in the industry as “yellow iron.” More than 400 dealers and customers from 13 countries were visiting the Vermeer campus for the company’s customer conference. Activities to commemorate the milestone were among the agenda items for the event.

When the tornado struck, at about 4 p.m., Mary Andringa, a second-generation member of the Vermeer family who serves as chair of the board, was in the company’s Global Pavilion, an event space. She and her niece Allison Van Wyngarden were leading a breakout session for customers about governance and succession in family businesses.

Mary’s son Jason Andringa, Vermeer president and CEO, had been hosting tours in the Vermeer Founders’ House, located across from the campus. The home of company founder Gary Vermeer and his wife, Matilda — where Mary and her siblings were raised — had been acquired by the company and formally dedicated as a museum three days earlier. When the storm warnings began, Jason took shelter in the corporate office space.

Elsewhere on the campus, known as the “Vermeer Mile,” team members were at work — designing, producing and supporting Vermeer’s yellow iron equipment. More than 2,700 Vermeer team members are based in Pella.

The tornado measured EF-3 on the Enhanced Fujita scale (136 to 165 mph). The damage to the Vermeer Mile was significant. Vermeer Plants 5 and 6, as well as the waste management facility, were a total loss. Plants 4 and 7 sustained less severe damage. Vehicles in the company parking lots were tossed about and piled up like unwanted toys.

Safety first
“Upon being notified of severe weather, we worked to quickly activate our emergency response system,” Jason said in an emotional statement to the media later that day. “The emergency alarms in all buildings sounded, and team members, dealers and customers were directed to tornado shelters in all facilities on the Vermeer campus.”

Mary remembers receiving a text alert toward the end of the session she and her niece were presenting. “I said, ‘OK, it looks like we may all have to go to shelters.’ ” Almost immediately after that, a “very annoying” alarm sounded loudly and repeatedly. At that point, “there was no question” that everyone would have to take shelter, Mary says.

“We had plenty of warning & time to make it to the numerous tornado shelters,” a visiting customer commented on the company’s Facebook page. The customer expressed thanks “for the precise direction & attention given to the serious nature of the storm.”

In the shelter, Mary found herself fielding questions about tornadoes from international customers, sometimes with the help of interpreters. “They said, ‘Is it like a hurricane? Is it like a typhoon?’ ” she recalls. At first, Vermeer staff tried to reassure customers that there was a slim chance the campus would be hit. Pastries were brought into the shelter, and coffee was available. “We were socializing,” Mary recalls, “and then the lights went out.

“Shortly after the lights went out, we knew the tornado was really going to be close.” Suddenly they had a sensation of being “pulled out of the room.” People held onto each other for stability.

In the building where Mary was sheltered, some windows and doors were broken, but there was no major damage. “And then we started getting texts from people that the roofs were off on a couple plants, and that a lot of glass was broken,” she says.

They were still in the dark when the alarm stopped, signaling that they could leave the shelter. As the group congregated on the grassy area around the pavilion, they saw that emergency vehicles were already on campus. They also saw the devastation wrought by the tornado.

“A lot of people just stepped up and started organizing,” Mary says. Plans were made to help customers leave campus and to provide transportation for those whose cars had been tossed about and smashed.

Because first responders had cordoned off heavily damaged areas, employees who had been working in those buildings were unable to retrieve their possessions — including cell phones and keys — from their lockers. A nearby church offered to house displaced individuals. “We had some of our leadership people go over there with about 50 people who didn’t have cars, didn’t have keys,” Mary says. “Within a couple hours, they had all found a way home, or someplace.”

A core team, including Jason and key people from HR, operations, communications, and environmental health and safety, assembled to create a plan to contact all employees. “In some cases, we asked police to go to homes to make sure people were OK,” Mary says. Homeland Security dogs searched the campus to ensure no one had been trapped or killed.

During the tornado, 130 children from the Yellow Iron Academy — a child care and early-learning center operated by a third party on the Vermeer campus — headed to a shelter along with their teachers. All the pupils, 60% of whom are the children of Vermeer employees, were safe.

Preparation pays off
Vermeer turned to the media to disseminate safety messages in the immediate aftermath of the tornado and to declare the company’s plans to rebuild and return stronger than ever.

Vermeer management began recovery efforts immediately. Company leaders quickly assumed crisis-management roles. The Vermeer response was in keeping with the philosophy and practices of lean manufacturing (a systematic method for working intelligently and eliminating waste) and continuous improvement, Mary says. “In a lean event, you understand the reality of the situation, and then you designate teams with leaders to go check on things to find out what the issues are, and that’s just what happened,” she explains. Vermeer adopted lean manufacturing under Mary’s leadership in 1998.

Despite the destruction wrought by the tornado on the Vermeer Mile, only “a small handful” of injuries were reported, according to Lt. Shane Cox, public information officer for the Pella Police Department. Seven people were transported to Pella Regional Health Center. All had minor injuries and were soon released. Several other people with minor wounds were treated at the scene by EMS personnel.

The lack of serious injuries was likely attributable to “the quick acting of Vermeer as far as [activating] their emergency response [and quickly] getting team members to shelters within the buildings,” Cox told reporters.

“I’m certainly glad that we have put the effort that we have into being prepared for something like this,” Jason said during his media appearance.

Vermeer had previously conducted tabletop exercises simulating a tornado event and the need to conduct crisis communications. When the actual tornado struck, Mary says, “They just started putting these plans in place.”

Most of the core team worked until 1 a.m. on Friday, July 20, then went home to sleep and returned at 7 a.m.

Vermeer closed for business that Friday, so a team could assess the facilities with the aim of resuming production to the greatest extent possible the following Monday. Vermeer chaplains were placed on call to support team members.

Getting back to work
By Friday afternoon, the team had sketched out a plan for moving operations to alternative locations. People were dispatched to scout out off-campus space.

By Saturday, July 21, recovery plans were well under way. Wrecked vehicles had been separated, moved and identified with a number and location so their owners could find and claim them and begin working with insurance companies.

“I have never been more proud of the Vermeer team than I have been over the past 48 hours,” Jason posted on the company’s Facebook page. “We plan for scenarios and practice drills, but nothing truly prepares us for the unknown. The way our team handled the situation, followed procedures and cared for one another is precisely what Vermeer team members pride themselves in — doing more. The amount of progress we have already made is astounding.”

On Sunday, July 22, local shareholders were invited to visit the campus. “We had a little church service, and then we had a little tour, so they could see everything, in almost its worst state,” Mary said.

Shareholders and members of the board of directors received updates on the recovery, along with videos and a map indicating the “red zone” — the damaged area where entry was restricted to those who had received safety training and were wearing safety equipment. Information was sent daily for two weeks via the Vermeer family’s Trusted Family secure online portal.

The company, which dubbed its rebuilding effort “Vermeer Strong,” resumed operations as promised on July 23. In the first week, 77% of the team was working in permanent or temporary positions. Those whose job functions were out of commission were called in to help with the cleanup after receiving safety training. Mary credits the Vermeer HR team with identifying displaced employees’ skillsets and determining how they could be redeployed in support of the recovery efforts.

Within a week, Plants 1, 2 and 3 were back online, shipping was under way in the Parts Center, and central receiving operations had begun to move from the totaled Plant 7 to the Global Pavilion. The company says its Parts Center delivered more parts in July than it had in June.

By Week 2, 95% of the team was back to work. Plant 4 and some of Plant 7 were back up and running.
“For two weeks, it was what we called a mile-long kaizen,” says Mary, using the Japanese term for continuous improvement or change for the better. Although many leaders and team members were working outside their usual functional areas, they identified what needed to be done and executed the tasks, she says.

At first, the core leadership group met twice a day to assess how their projects were progressing and what additional help was needed. “That helped us to be able to call more people back,” Mary says.

In Week 3, 99% of the Vermeer team was back at work, and construction had begun on the front offices in Plants 6 and 7. In Week 4, more operations resumed in Plant 7.

“Our team has been rapidly shifting and moving production lines in smart, creative ways to deliver yellow iron to our customers and get our team back to work,” Jason said in a video message on Aug. 3.

“There is no quick fix to make the [campus] look like what it used to, but we are optimistic about the opportunities for growth in the rebuilding process. While this year served as a milestone, 70 years in business, it will be remembered for more. This is the year the Vermeer team came together, grew in ways we never imagined, and rose to the challenge to meet our customers’ needs.”

On Monday, Aug. 20, 100% of the Vermeer team was back at work. According to the company, sales volume in August 2018 was higher than it had been in August 2017.

Mary says the company’s “4Ps” philosophy — People, Product, Profit and Principles — was in evidence throughout the tornado recovery. The 4Ps, representing the core values passed down from Gary Vermeer and his brother Harry, were coined as a result of a goal-setting exercise Mary and her brothers conducted in the 1980s. The second-generation members realized they needed a memorable way to communicate the company culture.

When the tornado struck, Mary says, “The absolute first focus for everybody was our people — are our people safe? Then, how do we communicate effectively, so they know what’s going on? It was that strong focus on people, not thinking about, ‘What is this going to mean to our top line or bottom line?’ That was absolute, without anybody saying it. And that came from this 4P philosophy, that we’re going to try to manage by principles, which means we’re going to take care of our people.

“And then on product, within 24 hours we had our key leaders going through every single product line and figuring out, how would we be able to get production up and running? Because we knew, for our customers and our dealers, that was a very, very important thing. And for us it is, too, because it’s part of our culture.”

Rebuilding and expansion plans
The company plans to build new facilities to replace the destroyed Plants 5 and 6. A new engineering facility is also in the planning stages. Vermeer engineers are now working in temporary quarters outside the Vermeer Mile; their former work area is being used for production. Their new site will be called Shop 48 in honor of the year 1948, when Gary Vermeer founded the company. “Shop” is a nod to where Gary tinkered with his first inventions and the Vermeer spirit of innovation got its start.

Also in the planning stages is a documentary on the tornado and the recovery effort.

“It was a privilege to see people helping each other in a time of need after going through a very critical incident,” Marion County Sheriff Jason Sandholt wrote in a Facebook message. “These team members were truly concerned about each other, and I saw the same care and compassion for the employees when I met with Jason, Mary and many others in the Vermeer leadership team.”

“We’ve dealt with lots of challenges in seven decades of doing business. This is a new, major one,” Jason said on the day of the storm. “As we have survived and thrived after every challenge we’ve had thus far, we plan to do so again.”  

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.                                                                     

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Management literature has developed a slew of three-letter acronyms to refer to considering societal benefits as part of the assessment of business results. There’s CSR (corporate social responsibility), TBL (the “triple bottom line,” referring to social, environmental and financial performance) and the latest label of choice for public companies, ESG (environmental, social and governance concerns).

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Cascading force for good

These concepts are old hat in the family business world. Business families have been contributing generously to good causes for centuries. Closely held companies, free of the public markets’ pressure to increase profits each quarter, are especially well positioned to pursue non-financial goals in parallel with their revenue-producing activities. Many business families want to honor their ancestors by making an investment that perpetuates the founders’ values.

A survey of representatives from large family firms in 21 countries, conducted in early 2016 by EY and the Center for Family Business at the University of St. Gallen (Switzerland), found that about two-thirds of respondents organize their philanthropy through a family-specific vehicle, such as a family foundation, trust or family office. But half of those surveyed said they also participate in philanthropy through the family business.

In this issue, we offer tips on doing good in a way that both achieves the family’s societal goals and promotes family harmony. In order for a philanthropic program to succeed, the family must approach it intentionally — just as they approach their business ventures. This involves measuring the effectiveness of the charitable contributions. In EY’s global family business study, 60% of respondents (on average) expressed a desire to enhance the evaluation of their philanthropic projects.

In philanthropy, as in business, excellence won’t be achieved if people don’t take their jobs seriously or lack the skills to execute on a strategic plan. A family foundation should not be used as a means to dole out paychecks to unskilled relatives or as an attempt to remedy an entitlement mindset.

Unfortunately, many families find that giving money away can generate as much intrafamily conflict as earning money does. This is especially true in large, far-flung families whose members have differing political or religious beliefs.

It’s natural for long-surviving family foundations’ giving or investment patterns to evolve when a new generation takes the helm. The Annenberg Foundation, for example, moved its headquarters from Radnor, Pa. (a Philadelphia suburb) to Los Angeles after the death of its longtime board chair, Leonore Annenberg. Annenberg’s stepdaughter and grandchildren, living in Los Angeles and Paris, wanted to shift their giving to the L.A. area and away from Philadelphia cultural institutions.

One of the most radical shifts has occurred at the Rockefeller Family Fund. Patriarch John D. Rockefeller founded Standard Oil, a forerunner company to ExxonMobil. In 2016, the fund announced that it would divest from fossil fuel companies. What’s more, David Kaiser, a fifth-generation Rockefeller family member, and Lee Wasserman, director of the Rockefeller Family Fund, wrote an article in the New York Review of Books decrying what they referred to as “morally reprehensible conduct” by ExxonMobil.

Decade after decade, families continue to practice philanthropy as a group, rather than have individual family members pursue favorite causes separately. Good governance will smooth the way to good works.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Tag: Beyond the Bottom Line

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When J. Mark Baiada turned 70 in 2016, he had more to celebrate than just a big birthday. Bayada Home Health Care, the business he had founded in 1975, was generating more than $1 billion in annual revenues. The Moorestown, N.J., company had become the U.S.’s 10th-largest home health agency, with 310 offices in 22 states and 23,000 employees serving 150,000 patients.

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Two months before Mark Baiada’s milestone birthday, he announced a plan to restructure his family-owned company into a non-profit organization. Mark would become chairman of the charitable entity. His son, David, would serve as CEO of the business.

The goal of the change in status is stewardship of the legacy, Mark and David Baiada say.

“This is converting personal wealth for the benefit of home healthcare,” Mark says. He notes as the owner of a billion-dollar company, he’s saved plenty for his retirement. “I don’t need an airplane,” he says.

The goal is that Bayada will still be operating in 100 years, maintaining the company’s high standards via a governance board and ensuring that the company will not be sold if the third or fourth generation lacks the same passion that Mark and his children have for the business.

“I wouldn’t really think of this as philanthropy,” David says. “This is about the conversion of ownership.”

“We want to lock down continuity and the long-term vision,” Mark says. The goals are threefold: “to serve millions worldwide, leave a lasting legacy and be the world’s most passionate and trusted team.”

The original plan was to transfer 80% of the business ownership to the non-profit and distribute the remaining 20% among family and employees. “But then some people might wonder, ‘What’s the angle?’ So we decided to go straight non-profit,” Mark says.

The process started more than 10 years ago when family and company officials sat down with a consultant to write “The Bayada Way,” a document outlining the company’s mission, vision, beliefs and values.

As Mark approached retirement, he thought about the best way to perpetuate “The Bayada Way.”

“I looked to the lasting legacy — the best chance of the company lasting 100 years,” he recalls. “I could give it to the kids; I could sell it. Once you [sell it], you will lose control. If it goes public, then you’re under the scrutiny of Wall Street.”

Mark’s daughters Kelli Marans (chief compliance officer) and Janice Lovequist (headquarters manager) also work at Bayada. Another daughter, Jackie Kirchhoff, previously worked there but has taken time off to raise her family. A fourth daughter, Christin Gregory, works outside the family business. Mark’s wife, Ann, retired from the company but still works on some Bayada initiatives. There are 11 grandchildren.

So while the family has a deep bench of potential successors, and Mark says his children are doing a great job at the company, he is looking farther into the future, focusing on that century mark. He says he’s concerned some future generation might end up in a disagreement, become greedy or perhaps simply be unable to run the business successfully.

“My first thought was, ‘Wow this is a complicated undertaking, and the implications of our decisions carry a lot of weight and are irreversible,’” David says. “At the same time, the challenge and the nobleness of the intent are energizing and inspirational.”

But, David adds, it was natural to consider the implications of the transition on the family’s wealth. Family members talked it through, and now everyone is on the same page. “Candidly, in the beginning, [going non-profit] was an effort that had no predetermined outcome or solution,” David says. “This was a blank slate.”

It was truly a blank slate in that very few private companies have transitioned to become non-profit. Bayada tested the concept in Hawaii, where the company has been operating as a non-profit under section 501(c)(3) of the Internal Revenue Code for two years. The family is now ready to make the change nationwide. The transformation is expected to be finalized in April. The name of the non-profit entity will simply be Bayada.

The process has not been easy, the Baiadas say. Taxes will be owed on company receivables transferred to the non-profit entity, which affects cash flow. Then there’s the paperwork. Then more regulations to meet.

“I thought it would be, ‘You’re giving away your business, isn’t that nice?’ But it’s not. It’s a lot of work,” Mark says with a laugh.

The Baiadas have also been vigilant to ensure that clients and employees are in no way affected by the transition, and they’ve kept the stakeholders up to date every step of the way. They say employee satisfaction has gone up since the announcement.

“I think people are proud to be part of an institution that puts mission over money, doubling down on serving more people in more places at a high standard for a very long time,” David says.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Tag: Beyond the Bottom Line

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In just one generation, Cascade Engineering has achieved considerable business success, while also striving to make a positive impact on society and the environment. Fred P. Keller, who founded the company with six employees in Grand Rapids, Mich., in 1973, says the business now generates about $350 million in annual revenues, up from $250 million in 2011. The enterprise, primarily engaged in designing, engineering and injection molding of large plastic parts, employs some 1,600 people and serves customers worldwide.

The Cascade family of companies encompasses nine business units focused on a diverse array of markets and products: agricultural, material handling, office furniture, automotive, waste and recycling, polymer compounding, truck and bus, and RFID (radio-frequency identification) asset management.

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While Cascade’s growth has been impressive, that’s not the only way the company measures its progress. Cascade has created a culture that focuses on the “triple bottom line” (TBL), an accounting framework that looks at social and environmental results as well as financial results. It refers to its triple bottom line as “People, Planet, Profit.”

Cascade has proclaimed itself an “anti-racism organization.” Its welfare-to-career program helps employees transition off government assistance. The company also has committed to hiring returning citizens (people returning to the workforce after release from prison).

Cascade assesses the “planet” portion of its bottom line in multiple ways, including use of recycled materials, progress toward zero waste-to-landfill in each of its facilities and reduction in greenhouse gas emissions. It recycles water throughout its manufacturing processes and calculates the number of dollars it earns in sales per kilowatt hour of energy consumed. (Cascade reports that in fiscal 2016, it made $3.43 per kWh.)

Cascade is transparent about its progress toward these goals. Graphs depicting yearly progress on a variety of metrics are available on the company’s website, as are downloadable annual TBL reports. Cascade published its first TBL report in 2004.

The company has gone even further in asserting its commitment to social responsibility. Cascade is a certified B Corporation, meaning that it meets high standards in social and environmental performance and transparency, and its governing documents state its commitment to all stakeholders (not just shareholders). A non-profit organization called B Lab grants B Corporation certification. (See below for more information on B Corporations and benefit corporations, a related legal status.) Cascade is one of the largest certified B Corporations and one of the few manufacturing companies to hold the certification, a status it first achieved in 2011.

Companies pay an annual fee for B Corporation certification, which varies according to annual sales. (Cascade’s annual fee is $30,000.) B Corporations must apply for recertification every two years. Cascade estimates that six to eight staffers spent a total of 400 to 600 hours completing the complex, 152-question certification assessment, which also requires supporting data.

In 2014, Fred Keller turned over the CEO title to a non-family member, Mark Miller; Keller, 73, remains Cascade’s chairman. Among numerous other professional and philanthropic activities, Keller has been a visiting lecturer at the Samuel Curtis Johnson Graduate School of Management at Cornell University since 2002. His course, which has had various titles over the years, is now called “Changing the Game: Purpose and Profit.”

Fred’s daughter Christina Keller, 36, is president of the Cascade Engineering Campus Business Team, responsible for four of the company’s businesses located in West Michigan. Previously, she was president of the company’s largest business unit, CK Technologies, in Montpelier, Ohio. Fred’s eldest daughter, Lorissa Keller MacAllister, 45, serves on Cascade’s board.

Fred, a widower, owns Cascade along with his three daughters (Christina Keller, Lorissa Mac­Allister and Susan Whitman, who is otherwise not actively involved in the company).

Fred’s entrepreneurial spirit and family values were inherited from his parents. His father, Fred M. Keller, started out as a laborer and served as a master mechanic in World War II. After buying and then selling a die-casting business, he acquired Paragon Die & Engineering, an indebted manufacturer of aluminum die cast tools, for $1 in 1962. Fred P. Keller began Cascade as a division of his father’s business; the company incorporated as a separate entity in April 1973.

Paragon, also based in Grand Rapids, still exists today. Fred P. Keller serves on Paragon’s board; his nephew Dave Muir is Paragon’s president.

The senior Keller and his wife, Bernedine Johnson Keller, lived frugally, valued people and loved the outdoors, according to their son. Fred M. Keller once was a preacher in Michigan’s Straits of Macinac region. The Kellers donated generously to many Grand Rapids institutions. They started the Keller Foundation, which supports programs and services for children and families.

Family Business Magazine recently spoke to Fred P. and Christina Keller about Cascade’s certified B Corporation status and the company’s commitment to the TBL framework. An edited transcript of the conversation follows.

Family Business: How would you describe Cascade Engineering’s TBL philosophy — “People, Planet Profit”?

Christina Keller: We don’t take a hierarchical approach to people; everybody has value. It’s not good enough to say, “Hey, you’re valued” — we need to go as far as [ensuring] that people feel valued in our organization. We have welfare-to-career, returning citizens and veteran programs, [helping] people who sometimes don’t feel valued and bringing them into the culture.

The planet has always been a part of our upbringing; we always did things outside. And now that translates into the innovation around the planet — recycled materials, zero waste-to-landfill, etc. — in the facility.

And then on the profit side: How can we be the most effective that we can be? How can we figure out how to solve problems?

FB: Cascade has declared itself to be an anti-racism organization — not only a workplace where racist acts and comments are not tolerated, but also an environment where employees feel safe discussing issues related to race. Could you explain what this entails?

Fred Keller: The dedication to anti-racism is something that we’ve been doing for six or seven years. The [Grand Rapids] community started a program called the Institute for Healing Racism, and I was one of the first to go through that. It was aligned so well with my beliefs, and also gave me tools to think about how to deal with [the issue]. My intention at the time was to make sure that we were not a place where racism would be tolerated. We were very clear about that. We had rules about it. We also required our supervisors to go through the Institute for Healing Racism program.

Every person in the organization is required to attend what we call Diversity Theater, where we bring in actors who act out themes that actually happen in our organization and then ask the participants to design what they could do differently. So there’s an awareness building around inappropriate behavior.

We use a dialogue process, where we have small groups of folks talk about very tough issues. Racism is one of the topics. You learn how to trust each other as you go through that process.

We brought in a traveling version of the Jim Crow Museum, artifacts that are being sold or traded in this country that reflect on the Jim Crow era. Virtually everyone went through that display, and we had dialogue sessions afterwards.

The result of all that is that we are seeing a very high sense of trust amongst people of color in the organization. And we measure that through attitude surveys. It’s really a gratifying thing to know that the culture of this organization can feel so inclusive, and that people feel safe here. That’s a very important part for me, that we deal with tough issues — we don’t just try to be off in our own enclave. That we try to be a place, as Christina was saying, where people know they’re valued.

FB: What motivated you to seek B Corporation certification for Cascade?

FK: I have been teaching a course at Cornell since 2002 on sustainable business. [When the course was first launched,] it was kind of radical thinking to be teaching something other than maximizing profit for the shareholders. I was the only antidote to Milton Friedman at the time at Cornell.

When I learned about B Corp, I got to meet the three founders [of B Lab, the certifying organization], Jay [Coen Gilbert], Bart [Houlahan] and Andrew [Kassoy], and they’ve become good friends. I just wanted to support the movement, more than anything else.

CK: When I look at the decision to become a B Corporation, as we were saying, the values have always been there.So the idea of joining a larger-scale group is really more out of trying to push the movement forward, and push it in a new way, and attract or come together with others that have similar values. [It’s not as if] we put the B on and started doing anything differently. This was kind of an additional certification to help us look at how we can get better and connect with a greater community.

FK: The justification was that we’d be able to have a baseline to work from, and use that as a checklist to get even better.

CK: We’re very metric-driven, you might say, and it’s always hard to find a social and environmental metric that you can use. One benefit of the B Corp metrics is that you can see how you rate. Somebody’s put some thought behind metrics, and we can work at improving those metrics over time.

FK: Foundationally, [regarding] the societal and environmental issues that [B Lab] challenges you on, we had many of those things in place already. It was primarily understanding the questions that they were asking, to make sure we received the appropriate credit, because it’s all based on a point-scoring system.

FB: How does the TBL concept differ from corporate social responsibility (CSR) or environmental, social and governance (ESG) criteria in public companies?

FK: The way I describe it in my class is that there are what I call “Rings of Impact.” [Editor’s Note: “Rings of Impact” is a registered trademark.] At the center — mainstream, basically — are “Profit Maximizers.” That would be Ring 1.

Ring 2, “CSR and Giving Back,” are folks who do corporate social responsibility work. Often, and I lament that it’s maybe too often, that is thinly veiled profit maximization. They’re really trying to burnish their image, so that people will buy more of their goods.

Ring 3 is a group that I call “Doing Good and Doing Well.” A lot of private companies, a lot of family-owned businesses, fall in that category.

And then there’s a fourth ring of impact: “Social and Environmental Problem Solvers,” the people who are actually designing their businesses to solve a social or environmental problem. That’s a growing entrepreneurial field, and I think it’s one that’s very encouraging.

What is a certified B Corporation?

•  Certified B Corporation status is not a legal status.

•  B Lab, a non-profit organization, is the B Corporation certifying agency. B Lab was founded in 2006 by Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy. Coen Gilbert and Houlahan were previously co-founder and president, respectively, of AND1, a basketball footwear and apparel company; Kassoy was a private equity investor.

•  There are currently 2,334 certified B Corporations in more than 50 countries, representing 140 industries.

•  Certified B Corporation status is available to every business regardless of corporate structure, state or country.

•  To achieve certification, a company must receive a minimum score on B Lab’s B Impact Assessment. Additional documentation is required to verify the information. B Lab staff will also conduct an assessment-review telephone call, and the company may be subject to a background check.

•  Certification requires directors and officers to consider the impact of their decisions on all stakeholders. Depending on the company’s legal structure and state of incorporation, it may need to amend its governing documents to protect directors and officers.

•  Recertification is required every two years.

•  Certified B Corporations must publish a report of their social and environmental performance, assessed against a third-party standard.

•  Annual certification fees vary according to company revenues and range from $500 to $50,000+.

For more information, see bcorporation.net.

                                                                               

What is a benefit corporation?

•  Benefit corporation status is a legal status.

•  Thirty-three U.S. states and the District of Columbia have passed laws authorizing benefit corporation status, and six additional states are currently considering legislation.

•  Benefit corporation status is currently available for corporations only, although a few states offer benefit LLC options.

•  Directors and officers of a benefit corporation are required to consider the impact of their decisions not only on shareholders but also on society and the environment. In addition to overseeing the company’s financial performance, they must assess the company’s social and environmental performance. Benefit corporation status protects them from legal liability in doing so (even if the business is a public company or pursuing a sale).

•  Transparency provisions of benefit corporation legislation require these companies to create annual reports of their social and environmental performance. Reporting requirements vary from state to state.

•  B Lab certification is not required to obtain benefit corporation status. B Lab plays no role in benefit corporation oversight, although it advocates for legislation passage and offers a reporting tool to meet transparency requirements.

•  State filing fees range from $70 to $200.

For more information, see benefitcorp.net.

My little mantra is: Find something good to do, and then figure out how to make it good business. It’s the motivation that is the key, as opposed to someone who is saying, “I’ll do CSR work, as long as it improves my bottom line.”

With regard to ESG, [adding] in corporate governance, I think, is a little bit of an interesting twist. But environmental and social measurements are key to that. I happen to have a Ph.D. teaching assistant this year who is doing her work in the area of ESG measurement. And it is a confounding field, because there are not many who are able to do it well. They primarily do ESG work in publicly traded companies, so they’re trying to relate it to how well they do from a stock performance standpoint.

CK: We have said that intention does matter, especially because as things get hard, if you think that it’s a tradeoff — that charity or CSR is at the detriment to the bottom line, and that it’s something that you have to be carrying along — you might abandon that.

Whereas if the intention is to be an employer of choice — that sustainability and the environment serve innovation, and it’s a cornerstone of what you’re doing — you do it because it’s the right thing to do. You’re more likely to keep that value and to translate that value across generations, regardless of whether the market is favorable on it or not favorable on it. So intention matters, and it’s not a tradeoff. It’s really a reinforcing concept with the triple bottom line — they all reinforce each other.

FB: Of course, your company must be financially successful in order to make this work.

CK: Of course. It’s not a tradeoff.

FK: “People, Planet, Profit” is the right order to remember those things, though. Profit is not the objective. The objective is to make a positive impact. And of course, we need to have profits in order to make a positive impact.

FB: Cascade operates in an industry that is generally opposed to regulation, and you’re based in an area that’s largely Republican. Yet by undergoing B Corporation certification for Cascade, you chose to subject your company to rigorous environmental and social standards. How do you navigate the contradictions?

FK: I don’t see them as contradictions. It hasn’t been difficult, really. You could call this area a Jerry Ford Republican area. We believe in rationale and reason. I certainly am respected for my views. They [Grand Rapids business leaders] understand the value that this corporation brings to the community. And there is not a conflict with other folks who may be even more conservative than I am. We could have good dialogue around it.

I think that’s part of the problem: People who have different views go to their own echo chamber and don’t want to talk to folks who don’t think the same way that they do. I would say that this region has much more openness to that kind of dialogue.

CK: I think a lot of the people in our situation are middle-of-the-road, and not the extreme of either side. If the regulation is non-value-add, then we shouldn’t just have blanket regulations. And if businesses could step up and be more socially responsible, we wouldn’t need as much regulation. There’s a lot of, I think, shades of gray in a world that’s trying to make things very black and white. 

FB: Why do you think B Corporation certification has been slow to catch on, particularly among family companies?

FK: Well, they’ve designed [the certification process] to be rigorous. And I think it’s the rigor that slows people down more than anything else. It takes a fair amount of dedication to want to be certified.

We are quite fortunate, being just a G1-G2 business. When you get to the third and fourth generation, my guess is that shareholders can have a disparate opinion about whether or not B Corporation status is important.

It may not seem obvious to people, but running a company that has triple-bottom-line thinking, first of all, is a lot more fun to do, you’re much more proud of it. When the culture is really there, you don’t have to worry about things; you know that the business is going to survive long-term. People really come to work wanting to engage in this fascinating business that we’re in. When you trust each other and you’re working together with the right values, things happen in a very positive way. It makes the business much more robust and more resilient.

FB: Interestingly, Michigan, the state where Cascade is incorporated, has not passed benefit corporation legislation.

FK: You can be a certified B Corp, [but] we don’t have the benefit corporation status in Michigan, which is the legal form that we can register under. We’re still a C corp; we are not a benefit corp. But we are a B Corp. [Laughing]

CK: We thought it was more important at this point to be registered in Michigan and support our state [than to incorporate in another state as a benefit corporation].

FB: Do you think Cascade’s growth is attributable to the TBL philosophy and the values that you hold?

FK: I see them as kind of intertwined. I don’t think you can be so Newtonian as to say that the cause of our growth has been because we are a B Corp, or because we have the values we have. We don’t have a growth objective, we have an objective of being a healthy organization, and guess what, a result of that is the growth. The health of the organization is determined by the people in it, by the culture in it, and if you’ve got the right culture and the right folks, they want to make things happen. They want to make things grow.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Tag: Beyond the Bottom Line

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At its core, a mission statement is a compass. It directs and aligns people toward true north. A mission statement crafted by the family can be referenced for guidance when decisions must be made, conflicts resolved or questions answered as family members journey toward success.

However, if the mission statement is not aligned with the family's beliefs, it will not resonate with family members, nor will it double as a compass should there come a time when the path or the journey grows unclear. In other words, the mission statement must be based on a family's shared values.

So what are values? How do you define them?

Values are inherent in us. As we go through life, we are being driven by a set of values that influences our choices and decisions. Anytime a discussion prompts a question of what is more important, values enter the picture.

Values confer meaning; they are the motivation behind behaviors. Although many people may find it hard to list specific values, they intuitively recognize the significance once their own values are clearly defined.

Values underlie all life choices. They motivate the search for and development of skills, and the creation and pursuit of a vision.

People use values to establish relationships with others. Values help tie individuals to a group, a team, a family, an organization, an institution and society in general. Values lie at the heart of all human relationships.

Communicating the family values

When family members become aware of their own values and those they share with their relatives, the family begins to realize higher levels of cohesion, unity and communication.

The power of this is in the numbers.

Research shows that most wealth transfer failures are caused by the breakdown of communication and trust within the family unit (R.O. Williams and V. Preisser, Preparing Heirs: Five Steps to a Successful Transitions of Family Wealth and Values, Robert D. Reed Publishers, 2003).

We have seen how improving communication skills helps bring a family closer together even if they are experiencing unresolved conflict. And we've seen how better communication can help prevent future conflict among family members. The fact is that open, honest and healthy communication between family members creates trust—and trust goes a long way toward preventing conflict. We have also observed that family cohesiveness is greatly improved in families that openly and explicitly discuss their shared values.

"Family cohesiveness" is a term that refers to a family's common bonds and desire to work and play together. It is important that family members continually build and strengthen familial bonds so that money and legal structures are not the only ties that bind them together.

The process of determining the family values might begin with a survey of the family, to identify each family member's personal values as well as the values that all family members share.

The survey results can serve as a guide for facilitated family discussions during which everyone shares experiences of living his or her values and gains an understanding of what other family members value. This allows the family to bond around their shared values and find alignment that will support and expedite their work together. The process clarifies what is important to each family member (personal values) and what is important to the family as a whole (shared values).

Individual family members gain a deeper self-awareness, while familial bonds strengthen. The process also helps clarify individual and family belief systems. Identifying values helps family members understand what energizes them, what drives their behaviors and motivates them to action.

This work becomes even more crucial in families where opposing views—such as differing political stances or religious beliefs—create tension.

Family members have different opinions and perspectives based on their life experiences. Some members may be on opposite sides of the political spectrum; others may not share the same religious beliefs or may feel differently about adhering to religious practices. But families who are joined through shared ownership of assets must work to celebrate their individual differences and values, as well as to identify the values they have in common.

This can be very difficult for families with unresolved conflict. Family members who are not talking run the risk of forever fighting over money, sometimes with the help of the courts. There must be a strong commitment and a wish to steward the family legacy by aligning the family around a common vision and allowing the shared values and mission statement to act as a guide.

It is hard work. But for any family that wishes to gather successfully around their family enterprise and plan strategically for the future of that enterprise, it is the most important work.

A family mission statement

In our experience, simply having family members sit down to discuss their shared values results in improved family cohesiveness. The next step is to create a values-based family mission statement, which offers guidelines in making family decisions.

"To successfully preserve its wealth, a family must form a social compact among its members reflecting its shared values, and each successive generation must reaffirm and readopt that social compact," James E. (Jay) Hughes Jr. wrote in Family Wealth: Keeping It in the Family (Bloomberg Press, 2004).

A mission statement conveys the family's purpose. "A family mission statement is a combined, unified expression from all family members of what your family is all about and the principles you choose to govern your family life," Hughes explained in Family Wealth.

The emotional and physical health of each individual family member must be nurtured in order for the family to remain a cohesive group. Families must make it a priority to "stress each family member's individual pursuit of happiness," noted Charles W. Collier in Wealth in Families (Harvard University, 2002).

Families who place greater importance on the family's money than on family members' well-being will inevitably fracture. We believe that a family's financial capital should sit in service to the continued development of the human and intellectual capital of the family.

Once family members gather to explore their values and engage in the process of developing a mission statement, they begin to see the need to implement family governance. The rich and thoughtful discussion about who they are as a family and what they want their wealth to do for them is essential to the process. Active and enthusiastic participation is key to a family's ability to achieve its goals.

Consider the example of the Genson family, whose second generation was preparing to join the family foundation.

The values and mission process in action

Patty and Lou Genson, entrepreneurs who created the wealth, had four children. Three of the children were married; there were seven grandchildren, ranging in age from 8 to 22.

Historically, the Gensons had been very philanthropic. The family foundation had been led by the founders, Patty and Lou. The four members of the second generation were all excited to be involved in the family foundation but were unclear how to begin.

All six members of G1 and G2, along with the two adult members of G3, participated in discussions with advisers. They were very serious about their foundation and identifying its mission. In their discussions, they drilled down to make certain they were capturing not only the values that were important to each of them, but also the values they shared as a family. While there were differing interests across the family, each member felt strongly about supporting early elementary education and research on Alzheimer's disease, which had affected their family in the past.

Once the family's shared values were determined, it was relatively easy to draft a Genson Family Foundation Mission Statement. Over the course of two meetings and one phone call, they all agreed to a final draft and memorialized the statement with a framed, signed copy. The copy was hung in Patty and Lou's kitchen, the symbolic center of the family home.

As time went on, the members of G1 and G2 who served on the foundation board referred to the mission statement when making any philanthropic decisions. At its annual retreat, the entire family—including the seven grandchildren—referenced the mission statement when each generation selected a place to donate money in memory of one of their loved ones. Time was spent talking about the family's values and the specifics of the mission statement. Each generation used these reference points to determine what special gift might properly align with the family's values and mission. Members of both G2 and G3 were enormously successful at collectively identifying where they wanted to make their donations. It was a very positive and rewarding experience for all involved.

A compass to guide the family

Families who adopt these strategies for identifying shared values and then use those values to create a mission statement will end up with more than just a piece of paper. They will have a compass that guides them to their goals. It will be meaningful to each member of the family because each member participated in its creation.

Daisy Medici is managing director of governance and education at GenSpring Family Offices (www.genspring.com).

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Many family businesses are lauded by customers and communities because of their visible embrace of and accountability for values. The public knows the family stands for something because they know the family as people, not as an abstract corporation. These values affirm the family's commitment to quality of products, service to customers, respect for employees and giving back to the community, virtues that lead to greater respect for the company, in a world where business has been called out for putting profits above people. By publicly stating a value, the family affirms that in addition to running a profitable business, other goals have equal standing.

These values can sometimes be placed above the profit motive. A famous example is the Massachusetts company Malden Mills, whose owner continued paying its workers after a fire destroyed its plant. (Malden Mills later filed for bankruptcy; in 2007 it was sold and changed its name.) A company is admired when the owners invest extra in quality, service or loyalty. This may make good business sense, but publicly espousing the value puts the owners on record as saying they will act this way even if sometimes it costs them. A family enterprise does not always look toward short-term profits; it can take a long-term perspective as a steward for generations to come.

Recently there has been controversy about how company values are expressed and implemented. I want to explain how differences of opinion about values can arise in order to create some clarity about the issues in this debate, which have sometimes been lost in the emotional exchange of positions.

Many types of values

There are many types of values, concerning personal behavior, customers, products, environmental impact and philanthropy. A company can, for example, sell only products that express values about environmental responsibility or safety, or refuse to sell products that the owners feel are not safe or healthy, like alcohol, cigarettes or guns, or offensive magazines or movies. Customers can get these elsewhere.

The company can also express values about employee behavior. Some companies hire with clearly defined behavioral expectations, and have dress codes and even morning prayers. Companies "hire for values" that they respect and admire and that help the company fulfill its values-based mission. In the early 20th century, some companies went even further in expectations of employee behavior. Henry Ford sent company "social workers" to visit the houses of employees to see if they were living a moral family life. He paid his employees really well, but they were expected to share his religious and moral values.

Such uniformity of values can sometimes raise questions within a pluralistic community, where customers and community members might hold other values. In a small company where the family members are in the front, serving customers, what practices can they enforce? Can they refuse to provide service or sell their wares to a person whose views they do not share, citing their religious beliefs? Are they condoning what they believe is sinful behavior by offering a product or service to someone whose behavior does not match theirs? Is it wrong to serve someone who is believed to not share the company values?

When the founder or founding family is present, this is deeply personal. When the business expands—to cover several sites and serve a larger market—at what point do these policies become problematic because of the size of the market? Has the business entered a different realm, and should individual family members consider adapting their values to fit a more pluralistic community?

A family can certainly choose not to sell a magazine or movie that expresses social or political views that they oppose. They may lose some customers, but their values are more important. But can business owners use their values to enforce standards on customer or employee behavior that challenge community laws and standards? They can, but there are limits to what they can do, and there are costs involved.

The community depends on its businesses to provide goods and services. A company has a social contract with the community. When must the owners' individual choice include social negotiation with employees, customers or the community? When a company is owned by a family who are not actively present, the business must respect the values of the family owners but also must adapt to the community. For example, a company's owners may not be comfortable hiring young people whose appearance and work style is different from theirs. But their employees or customers may make it clear that refusing to adapt might affect the success of the business. If there is just one store and the family owners are present, this may not happen, but when there are many outlets, the company management and employees must consider adapting their values to fit a wider community.

Civic culture

The U.S. has a civic culture premised on pluralism. The country is a blend of religious, ethnic, social and political groups who hold diverse values. While everyone has a right to his or her views, the views of others must be respected. For example, if business owners restrict their employee pool to those of a certain appearance or religious values, they may sacrifice their ability to serve the community. Several studies show that when a company is itself open to different opinions, it is more successful in performing and adapting to change. The choice to adapt should not mean abandoning deeply held values, but it may lead to working with employees and community members to find ways to apply personal values while also respecting community differences.

At some point the family owners must differentiate between types of values. A family may have its own deeply personal values concerning faith and personal behavior, but may develop a somewhat different set for the business. Business values may incorporate some of the owners' beliefs, but it may be imprudent for a larger business, with facilities in many communities, to enforce all the owners' personal beliefs.

As a family business grows and different generations emerge, the family itself may find its values diverging. Some new (or prospective) owners, often in the next generation, want to see their legacy values practiced differently, or many even hold different values. For example, consider the case of a family who owned a natural resources company. The next-generation family members had strong values around sustainability and wanted those values applied to the company operations. This would be costly and might interfere with the short-term profits. They had to lobby the family, and some non-family owners, before their values were adapted.

Within the family, values can be more personal. They may express them fully independently from the business, but also publicly. A family can visibly support its legacy values through philanthropy, private giving, serving in community or church organizations, or through a family foundation. When should a family shift from doing it as a company to privately? One example is when support for an issue leads to loss of business or public dissension. Should a family belief lead to a controversial public position? What if other shareholders, even within the family, do not share these views? I believe this happens when a small family company has expanded and entered a broader community, and the owning family finds their personal views are not held by all others, and that this affects their community standing and business effectiveness. Maybe some companies can survive by marketing only to people who share all of their beliefs, but in a diverse community, a family enterprise takes a risk not by holding a value, but by how publicly they express it.

When the family owners express different values from others in the community, they can be seen as courageous by those who agree with them, and even by some others who admire them for standing up for what they believe. But the family is also inserting their company into an issue that has to do with citizenship and society, not with their business. Taking a stand that puts the family in conflict with some parts of the community may endanger the business for future generations.

Setting boundaries

Many family business advisers suggest that over generations, family owners create a clearer boundary between family and business practices. Instead of considering the business as an extension of the family, proactive owners create clear policies to govern the family's relationship to the business. As they become a business-first family, good business practices may not be fully aligned with the family's personal interests. Family members cannot all work in the business, and leadership may flow outside the family.

It may be that another element of this boundary creation is that the family must begin to separate some of its personal beliefs from the business, while expressing other values more directly about commerce, within the business. To thrive over generations, this differentiation may be good business and also allow the family to personally express some of its social and moral values in other areas.

As a family shifts from family-first to business-first, the business continues to respect the values of its family owners, but also to incorporate the views of its other stakeholders—employees, customers, suppliers and community members. The family encounters a broader diversity of opinion, recognizing that not everyone shares the same views, and that if the business is to achieve their growth objectives, perhaps they must become less divisive and more inclusive in their values.

Dennis T. Jaffe, Ph.D., is a family business researcher, educator and consultant who has championed the values-based perspective. He is author of the forthcoming research paper "Releasing the Potential of the Rising Generation," available from Wise Counsel Research, and the book Cross Cultures: How Global Families Negotiate Change Across Generations, co-authored with James Grubman (www.dennisjaffe.com).

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Faith can bring a family together in powerful ways. The communal rituals and meals, the traditions that continue year after year, the hymns and verses that grab the heart, the comfort of prayer in times of sorrow, the subdued giggles over little ones' misbehavior in the pews—these are just some of examples of how religion strengthens family bonds.

For this issue of Family Business, I spoke to family leaders about their efforts to unite their families and resolve inherited conflicts. Some of these individuals told me that the family's shared faith has helped them work through difficult issues.

Will religion be as effective as a bonding agent in the future? Consider these statistics from the Pew Research Center's Religious Landscape Study, a survey of more than 35,000 Americans published last May:

  • The percentage of Americans who describe themselves as atheist, agnostic or "nothing in particular" rose more than six points between 2007 and 2014, from 16.1% to 22.8%.
  • The proportion of Americans who say that religion is very important in their lives dropped from 56% in 2007 to 53% in 2014.
  • Two-thirds (67%) of those born between 1928 and 1945 said religion is very important in their lives, compared with only 38% of those born between 1990 and 1996. "As older, more religiously observant generations die out, they are being replaced by far less religious young adults," the Pew researchers wrote.

These changes, the investigators noted, are occurring in all regions of the country. The Pew study also found that the United States is becoming more pluralistic as well as less religious:

  • The share of American adults who identify as Christians dropped from 78.4% in 2007 to 70.6% in 2014.
  • The proportion of Americans who identify with non-Christian faiths increased from 4.7% in 2007 to 5.9% in 2014.
  • Nearly four in ten Americans (39%) who have gotten married since 2010 say they are in religiously mixed marriages.

The Duda family, featured on our cover, proclaim their Christian faith on the website of their business, A. Duda & Sons Inc. Stacy Mello, chairman of the Duda family council, told reporter Margaret Steen that the family is open, but not political, about their beliefs. "We quietly go about being a faith-based company and using these principles in how we operate our business and how we treat people," Mello said.

Most business families in the U.S. have customers, employees and suppliers who don't share the family's faith. The chances are increasing that they will also have family members of different faiths, or that some family members will abandon religion altogether.

In the "Advisers Forum" section of this issue, Dennis Jaffe suggests issues that a family of faith might consider amid the realities of a changing society. "The choice to adapt should not mean abandoning deeply held values," Jaffe writes. However, he adds, it may lead to a search for "ways to apply personal values while also respecting community differences." These considerations will become more pressing in the future.

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact  bwenger@familybusinessmagazine.com.

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Anyone in a multigenerational family business has profound responsibilities centering on the concepts of "birthright" and "duty." Let's break it down.

I define "birthright" as an individual's right to identify and assume his or her own values. Our actions are based on our values—what we believe is important. Through our actions we share our personal legacy, whether we are conscious of that or not. This "birthright" and opportunity come laden with responsibility—to yourself and to others—to be intentional about your personal legacy.

Living in accordance with one's values is also a duty. As has been said: "The unexamined life is not worth living." Understanding the significant formative events that have led to one's decisions and actions is essential. There is a saying, "We are born for meaning and live for self-expression." To fully express our personal legacy, we must assume the duty to develop an understanding of our deepest meaning or purpose.

More gently expressed, I think of the duty to examine one's life as an invitation—all you need do is courageously open the door and walk in. Ideally the family business issues an invitation for you to announce "your place in the family of things." Your values will guide you as you accept the offering.

After exploring values on a personal level, the next step is to determine how those values are integrated and implemented in a multigenerational family business. Your family business is not "a nameless, faceless corporation"; rather, it has present and vested shareholders—other family members. A multigenerational family business is a good example of something that can be greater than the sum of its parts. But this takes effort. Each person contributes to a common good that sustains the family business over generations.

Lately, we can point to an increase in multiple generations owning and working together, therefore creating more complexity. Longer life spans allow people to work much later in life. Since primogeniture is less often the default position in terms of leadership and ownership transfer, more complex options present themselves. Geographic dispersion of family members adds complexity in terms of communication and connection, as well as opportunities for business expansion in new locations. With the 21st century's changing definitions of family, and as young adult children choose paths that may be unfamiliar to prior generations, both consternation and excitement can follow.

The family effect

When working with family businesses, we refer to the "family effect," that is, family members' level of satisfaction, confidence, dedication and commitment to the business. The family effect is grounded in your values and becomes your source of inimitable power. It is the "secret sauce" that appeals to stakeholders (family, owners, employees, the community, customers and suppliers).

The question becomes: How do we leverage the family effect and transfer our values across generations? I often ask "for the sake of what?," abbreviated as FSoW. Why are we in this business together? Answering these foundational questions reveals our values and the meaning behind our actions. In your family business, it matters both what gets done and why it gets done.

Asking FSoW integrates meaning and action. Our values arise from our experience, traditions and beliefs. Values form and become our philosophical culture: why we do what we do. Values also form our functional culture: how we work and what we choose to do. When family businesses identify and share their values, they ground themselves in their intended philosophical and functional culture. The process begins with the examination of deep questions:

1. Why are we here?

2. Why is this business better because we own it?

3. Why are we better off as a family because of the business?

Answering these questions influences everyone's interactions and actions. This work, which requires deeply connecting to one's heart and soul, is exceptionally rewarding. Investing oneself in increasing awareness leads to alignment of values and desired outcomes.

Deep examination of these three questions involves four steps: soul-searching (often guided), reflection (listening internally, as opposed to "thinking"), listening (externally to others) and—finally—taking action.

This work can be done on an intrapersonal level by oneself, and interpersonally with others. On an intrapersonal level, FSoW looks like this: Why do I get up every day? Why am I here? How can I best contribute to the greater good? What is my journey about? Understanding the "why" highlights your values. Discovering what interferes with integration of your values and actions can be as important as identifying the values themselves.

On an interpersonal level, FSoW looks like this: What does this relationship mean to me? How do I positively contribute to it? What do I get from it?

A sorting process often occurs during times of transition, of which a family business presents many: succession, mergers, growth, contraction, reinvention, innovation. Our individual lives also present transitions: career change, college graduation, divorce, relocation and redefined family roles, among others.

Family values and personal values

Such elements present a universal challenge, but they are exacerbated in family businesses. One's family culture and values contribute to one's personal values. There can be a "pushing out" pressure to become your own person independent of the family and its business (stronger in some families). Alternatively, there can be a "pulling in" pressure to conform and adopt the values of the family and the business (stronger in other families).

Values help determine which force has greater or lesser impact, and what challenge the family business faces. If the pressure is pushing out, the task is to answer: How will we nurture and take care of one another? How will we connect? If pulling in, the task becomes: How do we create space for each person's unique contributions? How do we value differing perspectives?

Identifying values presents a common lens through which to view a shared future as a family business. As mentioned before, it is not just about what gets done, but why and how things get done. When there is ambiguity, disintegration ensues: literally, dis-integration between one's values and actions; and figuratively, disintegration or dilution of the values and, therefore, meaning. When values are challenged, both internally and in relationship with others, conflict arises. Family businesses are fertile ground for conflict, but after trust is established, identifying shared values helps moderate this situation.

There are three myths about values that I'd like to dispel and discuss.

Myth # 1: We transfer values by our actions; therefore, we don't need to articulate them.

To align and integrate values with behaviors, we must know who we are, say who we are, demonstrate who we are, reflect and get feedback. Articulation leads to intentionality and awareness, as opposed to a plodding journey of one foot in front of the other. When we articulate our values, we can leverage them as a motivating force, a resource during conflict resolution and a foundation for accountability.

Values can be leveraged as a motivating force only if there is alignment with actions. One family business (a window manufacturer) that had a "no layoff" policy was severely challenged during the recent economic downturn, which had a devastating impact on the housing industry. Because one of the company's stated values was to retain employees, the owners did not let anyone go. Instead, they kept the employees busy with other work, reduced hours and collectively made other sacrifices (including no distributions/dividends to shareholders). Their actions aligned with their values, and they continue to have a committed workforce. When the going gets tough in family businesses, we can lean into our values as a source of strength for the long haul.

When values are being challenged, conflict often follows. In a family business, for example, age differences and diverse life-stages can play a big role in what values take priority. Those in their late 60s might value safety, security and freedom, while those in their late 40s might value and want to demonstrate mastery, deepen their identity as a leader and assert their power. Both can have what they need when they work on finding ways to live their shared values.

Myth # 2: Values are not static, but solid.

Values may be solid, but the people who set them change. Consider the difference between jobs that offer "fulfillment" and those that provide financial security. Traditionally, senior generations leaned more toward security while current generations chose fulfillment and making positive impacts. Some research indicates that basic values do not change much after 20-25 years of age, unless the individual undergoes a profound experience or crisis. But in the 21st century, many of life's most profound experiences occur after age 25. Contemporary external impacts worth considering include globalization, economic influences, media, information accessibility and the rapid rate of change. Internal impacts to be aware of include much greater and widely varying individual experiences, and one's level of exploration and examination.

Myth # 3: It is OK or normal to live by one set of values at work and a different set in one's personal life.

Lip service to core values without true commitment to acting in accordance with those values leads to a loss of credibility. As a case in point, the level of trust in "corporate America" has plummeted. How does this create fertile ground for family businesses guided by shared core values?

It should be noted that values taken to the extreme can create problems. This is but one of many paradoxes family businesses face. For example, a desire for peace could lead to avoidance of conflict; we do a disservice to the family business if we ignore the role that conflict—properly managed—plays in generating new ideas. Family businesses must seek to create opportunities for family employment but avoid cultivating a sense of entitlement. Families must develop a sense of loyalty to the family without cultivating a distrust of outsiders.

Using your values to manage these paradoxes and to strengthen your family business requires courage. Note that the word "courage" comes from the Latin word for "heart." Families in business are uniquely positioned to check in with their hearts and develop values that are authentic to them. They can ask: (1) What is our reason for being here? (2) Why is this business better because we own it? (3) Why are we better off as a family because of the business? And then they can apply those answers to fulfill their duty and protect their birthright: their family business values.

Ann Kinkade is the founder of Lucid Legacy, a family enterprise consulting firm in Madison, Wis.; she works seasonally from Naples, Fla. (www.lucidlegacy.com).

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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I always return from our biannual Transitions Conferences buoyed by the valuable lessons that are imparted by our speakers, who are members of successful, multi-generational families. This past March, our Transitions East 2015 conference in Tampa, Fla., had more than 260 attendees. The theme of the conference was "Family Values and the Valuable Family Business," and we kicked it off with a panel presentation entitled "Establishing and Living the Values of the Family."

One panelist described how his clearly defined family business values helped him steer his company through a crisis. Another advised, based on his experience, that it's necessary to completely understand, fully commit to and widely communicate your values to the family as well as the employees. And one family member said his company undertook a "team member engagement survey" to determine whether certain core values—identified as integrity, respect, teamwork and continuous improvement—were well understood and consistently practiced.

The conference's opening keynote speaker—Charlie Luck, president and CEO of The Luck Companies—pointed out that family values and business values are closely related but do not need to be exactly aligned. For example, faith, citizenship and stewardship might reflect family values, but not necessarily business values. Luck instituted throughout his company a values-based leadership program that emphasized ways to "ignite human potential" through inspiring optimism and belief in others, earning the respect and trust of others, and taking personal responsibility for the success of all stakeholders. Although it took time to adjust the mission and vision statements, business success for The Luck Companies followed.

Among the values identified by the speakers were honesty, integrity, strong work ethic, "putting co-workers, customers and managers first," and establishing a reputation for excellence. All good values, but how do you "bake" them into the company? One speaker said it is imperative to document these values and to create an accompanying mission or vision statement. In his case, the statement was reviewed by all generations of the family as well as all managers at the company. Through this effort, and through their actions, a culture of values grew.

I discussed our own family values with my 94-year-old father-in-law, Milt, the patriarch of our family. For him, "value lies in creating something that will be valuable forever, such as relationships with family, co-workers and customers. The true value is giving back to society by establishing a strong and successful business." Moreover, Milt described a "unity of purpose: respecting each other as equals while making a difference in the lives of others."

Milt added: "It is a joy to be able to work with your family in a positive way. Family businesses have a core set of values with a common purpose—and it doesn't involve searching for profits; success will come."

A very similar philosophy was shared by our closing keynote speaker, Richard Smucker, CEO of The J.M. Smucker Company. Smucker emphasized his family's belief in "purpose before profits." He described his family's efforts to preserve the company culture, namely "making memorable moments and memorable meals."

"How we do things is as important as what we do," asserted Smucker. And communicating those values is key. That was a most appropriate way to close a Transitions conference that was centered on family values.

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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In this issue's Toolbox column, I review a book entitled The Voice of the Rising Generation: Family Wealth and Wisdom, by James J. Hughes Jr., Susan E. Massenzio and Keith Whitaker. The authors, who are advisers to high-net-worth families, point out that many people who grew up in business families feel stifled by their ancestors' success. Too many of these heirs, feeling stuck in the shadow of an illustrious business founder, attempt to relieve the pressure by unhealthy means, including overspending and substance abuse.

How do parents prevent this from happening to their kids? One preventive measure involves having frequent, open and wide-ranging conversations about values, work, entrepreneurship, legacy and wealth. Starting the discussions early helps the younger generation develop a healthy attitude toward money, experts say. An article in this issue by Jeff Savlov, a family business/family wealth adviser trained as a therapist and psychoanalyst, explains that even elementary-school kids are able to participate in meaningful conversations on these topics.

And by the time they reach middle school, your children have insights to share that may inspire you to rethink your approach to work and home life. The Openers section in this edition features an interview with Scenic Root, a perceptive young lady who at age 13 is an old hand at having frank conversations about the advantages and disadvantages of growing up with wealth. Scenic—a fifth-generation descendant of C.J. Root, whose company created the original Coca-Cola bottle—has been talking about business and family challenges with her father, Preston, since she was a small child.

Scenic said during our interview that the best gift that family members can give to each other is not a material possession, but time spent together. "You're never going to get that time back if you waste it all," she told me.

In recent study by Merrill Lynch's Private Banking & Investment Group, 39% of respondents asserted that it's never too early to begin talking to children about responsible financial behavior, and 11% said these discussions should begin when the kids are ages ten to 13. Yet only 14% of these study participants said they actually raised the issue when their children were nine or younger. Twenty-seven percent said they waited until the kids were ages 18 to 24, and 21% said they procrastinated until their children were 25, or even older (see FB, July/August 2014).

Whether you broach these subjects with your kids or you don't, they are watching family members' relationship to money, to the business and to the family legacy, and their future habits will be based in large part on these observations. Opening a dialogue with them is likely to be a revelatory experience.

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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