Some good signs and some bad signs

Some people will tell you that a leader is characterized by an unwavering eyes-front posture. Chin up, face into the sun, focused on the horizon.

That may be true as far as it goes. But the leader of a family business also has to focus on what's going on around and even behind him or her. The horizon is where the next marketplace challenge or opportunity will come from. The next surprising little family business twist, however, will most likely pop up right there inside the chief's own tent.

This column's Department of Highly Relative Surveillance, a crack team of MBA students with their eyes on the ball and their ears to the keyhole, has assembled the following list of good signs and not- so-good signs to help you keep up with what's really going on inside your family business.

It's a good sign for the family business when Dad strolls out of his office and announces, "I don't remember giving you guys raises last year, so I'll be putting another 10 percent in your pay envelopes starting the end of this month." That usually means that Mom has been on his case about starving her children for the sake of his company. He's hoping the 10 percent will keep the peace for another two years.

It's a good sign for the family business when Uncle Claude volunteers to sell his stock back to the company to avoid diluting ownership by willing the stock to his heirs. Claude's kids take a somewhat shorter view of the decision until they figure out how much cash will be coming their way in a few years.

It's a good sign for the family business when a key non-family executive, having just been told that the next CEO will be a family member, signs a long-term employment contract anyway. She says she believes in the company, the family and their way of doing business.

But it's a bad sign for the family business when the son who's the designated successor keeps getting the company's name wrong. He can never seem to remember whether it's "J.R. Smith and Co." or "The J.R. Smith Co." He says, "What's the difference?"

It's a good sign for the family business when the family council votes to set up a charitable foundation to return some of the fruits of success to the community where it's done business for nearly 50 years.

It's a good sign for the family business when the founders recognize that the company has outgrown their folksy style of management and agree to establish a board of directors, including some well-qualified outsiders, to help run the business.

It's a good sign for the family business when all three kids acknowledge that none of them has the skill or commitment to run the company. They urge their parents to keep ownership of the business in the family but to search for non-family executives to head the company.

But it's a bad sign when no two family members have the same ideas about the future of the company and the family's relationship to it. There's a clear need for action to turn a bunch of unmotivated dreamers into a coherent team with a shared vision for the family business.

It's a good sign for the family business when all family members working in the company, and their spouses, agree to a new compensation plan that ties pay and perks directly to individual and corporate performance.

It's a good sign for the family business when a potential conflict over who will lead the company after Dad retires evaporates like morning dew on a barrel cactus. The two younger family members who were gearing for battle suddenly realize how easily a shoot-out could blow big holes in the company itself. They opt for a non-lethal means of selecting the next CEO.

But it's a bad sign for the family business when the founder's retirement party falls flat because the guest of honor has decided not to retire -- for the fourth time.

James Lea, a professor at the University of North Carolina at Chapel Hill, is author of Keeping It In the Family: Successful Succession of the Family Business.

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