Professionalizing the Family Business Part 2

Listen To And Acknowledge The Findings

It is important to acknowledge what an unbiased company sees in your company. Usually, the following will appear as the issues that negatively impact the company.

  • The absence of a general and specific departmental operations manual that will guide the business conduct of a functional department, the interaction between departments and the management protocols that achieves good governance.
  • A clear set of personnel policies covering recruitment, compensation, career advancement and labor management may not be present or may be lacking in form and substance.
  • Shortcomings of the finance department in internal operational process, controls and work efficiencies.
  • The size of labor force and deployment within each department is not fully rationalized; some departments lack people while others are overstaffed in relation to job titles and work objectives.
  • The qualification of the key department heads in managing their teams and their ability to professionally interact with the other departments.
  • The lack of a team-spirited, functional organization and work culture.
  • The supply chain process is ill-defined and prevents better production planning and higher cost efficiencies.
  • The production process may be flawed if costs are too high due to aging equipment or over/under capacity performance.
  • The lack of adequate information technology support that allows greater work efficiencies and financial accountabilities.
  • Weak, poorly supported marketing team – in many cases, the marketing cost to sales is not defined nor present in the operations expense list.

Discuss To Agree With Proposed Remedial Measures

Remedial measures will require financial funding since the corrective measures may entail the following:

  • Upgrades, replacement and/or acquisition of additional equipment
  • Training to equip the personnel with new skills or to improve on existing ones
  • Culture formation and team building seminars
  • Market research
  • Upgrade of packaging or formulation of existing product
  • New product development to complement the present product line or to replace low profit, slow moving variants
  • Hiring senior and highly skilled professionals to provide better leadership and management

The consultant and the company will sit down to estimate the cost of this undertaking so that the owners can determine where the investment will come from. The funds will either be sourced internally or loaned. At this stage, the consultant’s new service arrangement can be established and approved.

Plan To Implement The Remedial Measures

A time frame will be established for implementation of the remedial plan. This effort can be planned for a period lasting between 6 to 12 months. A plan should enable owners to allocate funds accordingly.

If a key recommendation is to hire qualified senior professionals, e.g. a Vice President for Operations, the personnel concerned can become a 2-year understudy for an eventual promotion to the position of General Manager.

Rate The Effectiveness Of The Corrections

The resulting impact of the improvements should be measurable. For ex-ample, how more productive are the key personnel after the attitude formation and team building workshops? At the very least, work productivity should increase by 25%.

The improved work productivity should result in lower production costs and drive up the profit margin. Better marketing moves should result in higher sales volume and grow the gross revenue and net operating income levels of the company.

If the targeted results are not achieved, review the situation and fix the problem areas until your goals are met.

Start Delegating

While the improvements are underway, begin the process of decentralizing the management operating system so key managers can start owning up to a track record of success. This will enable the owners to reduce their stress levels and allow the company to run by itself with a system of checks and balances in place.

Formalize The Business Plan

With a stronger working group in place and many improvements that are generating rewards, the company can prepare a new 3-year business plan. This will provide the company an objective guide for raising itself to the next level.

Within 5-years that this process is underway, it is likely that the company will see its business grow in double digit numbers albeit any negative economic influences. If there are related challenges, the company will now be able to withstand the onslaught and come out stronger than ever.

There are many good examples of companies that have experienced phenomenal growth after professionalizing the business. Companies like Universal Robina, SM, Godiva, Aristocrat, Max are some of my highly praised models.

The Future Of Family Business

At this time, the children of the owners will be more inclined to take up the baton when passed to them by the founders. The family business can also consider going public with third party investors invited to increase the company’s authorized capital and put the business on the next level of success. The owners who still own a stake can become ministerial board members with voting rights intact. In future terms, non-participating children can look forward to benefiting from the company’s profit when cash dividends are declared at the annual board meeting.

about the author: Herbert M. Sancianco has over 20 years of experience in advertising, marketing and sates operations. He owns and manages Market Bridges. Phils. Inc.. a fall marketing services company, with offices at 11-0 Burgundy Corporate Plaza, 252 Sen. Gil Puyat Ave. Makati City. The author can be reached at [email protected] or at Tel: (63-2) 884-4/22 to 23. Source: www.trc.dost.gov.ph, photo from ,

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