business news in context, analysis with attitude

by Feargal Quinn

Content Guy’s Note: Feargal Quinn is the founder of Superquinn, the Irish supermarket chain that, until he sold the company in 2005, was known through the world for extraordinary customer service levels and exceptional marketing and merchandising techniques that set a high bar for the rest of the industry. Superquinn was known both for its ability to innovate and ideate, as well as a knack for seeing what others were doing and going farther, better and faster, always with shoppers’ best interests in mind.

Quinn also served for more than two decades as a senator in the Seanad Éireann, and has been active in broadcasting and in print for what he called “Retail Therapy,” in which he helped small business owners define their differential advantages and implement game-changing strategies. He’s also my friend … and I was thrilled the other day when he sent along a version of a column he’d written for Ireland’s Business Post, in which he offered six secrets for running a successful family business. In many ways - especially the section on innovation - I think these ideas are worth thinking about for any business. And so, I am happy to offer them here. Enjoy … there are few people in the retail business as smart as Feargal Quinn.

There are many many successful family run businesses throughout the country. I had the pleasure of working closely with some of them when I filmed the TV series “Retail Therapy” with RTÉ. I’d like to think that they learned from the time that I spent with them, but I also learned from them too!

All of the fundamental principles of business also apply to running a family business. However there are also a few more principles which need to be applied so as to ensure the smooth running of the business.

In every business there are many stakeholders: owners, customers, management, suppliers, and employees. Each has their view on how the business should be run. A family business has the added complexity that the owners, management and some key employees may be from the same pool.

1. Separate “Ownership” and “Management,” as well as “Business” and “Personal.”

Of course every business owner would love to see the next generation take over and build on what they have achieved. But some family members may have a different career in mind. Those who do work in the business should obviously be paid for their time and effort but all shareholders should benefit as the value of the business grows.

At the same time, set sensible boundaries between family life and business life. This is especially important where husbands and wives work in the business together. Perhaps agree not to discuss business while on holiday, at home at weekends and not after 7.00pm on weekdays.

It also is important to write a family mission statement. This made it clear for everyone where we see both the business and the family. We were also advised to hold an annual family council. The council allows for members of the family who are shareholders but not working in the business to participate too, and acts as a forum to air opinions. It proved to be a very helpful forum when the time came to sell the business.

2. Facilitate Participation Which Ensures a Diverse Range of Talents.

Make room for members of the immediate family who want to contribute to the success of the business. It is important that the next generation understand in advance, what are the rules of the game in terms of being able to work or participate in the company. At Superquinn we always had a policy which required that family members who are coming into the business must bring something of value - a qualification or a skill that would allow them to make a real contribution to the business.

It can be tough for the founder’s son or daughter to earn the respect of more seasoned employees when they start. All of our children worked in Superquinn and they always began working on the shop floor. My son Eamonn began working at Superquinn when he was 11. Several years later he worked at a butchers counter in a supermarket chain in the U.S. When he later joined Superquinn, he brought with him much experience of the trade, as well as years of experience in fund management. He initially began in the fruit and veg section, and in time, he worked his way up through the business to becoming Marketing Director.

One of the dangers a family business needs to avoid is becoming inward-looking or doing things as “that’s the way we always do it”. Ensuring family members bring new ideas, skills and experience from other business or markets will benefit the business and the individual.

3. Innovation.

For any business to survive and grow, it must have a culture of innovation at its core at all times. Too many businesses get stuck in the old, comfortable way of doing business. Instead of anticipating a changed marketplace (as we always sought to do in Superquinn), it can be tempting to bury your head in the sand and hope that the new challenge that you face will simply go away. And therein lies a recipe for disaster.

In family businesses, the innovation imperative is equally true. But often in a family business there can be a resistance to change. Over time, this resistance can slowly and quietly stymie the business, inching it towards irrelevance and ultimately, extinction. Family businesses must be mindful of this tendency.

In fact, the urgency of having an innovation culture is even more imperative in a family business. If your winning product or winning customer service or wide product range is what makes you successful today - it is easy to forget that developments in the marketplace, new ways of doing business, or a dynamic competitor will eventually render any standstill business redundant.

In Superquinn some of our best initiatives came from studying what was being done by others – our instore scratch bakeries, our Sausage Kitchens, our traceability system, the SuperClub loyalty scheme, online shopping, etc. not to mention customer service ideas.

4. Set large company standards.

Even if your business is small try to operate to the same standards as a large company. For example, have regular management meetings at a fixed time each week/fortnight with an agenda and managed by a chairman. These should consider operational and financial results, agree short and medium-term objectives and review previous objective results.

Longer term strategy should be discussed on a formal basis annually. This ensures your management team are involved in the decision-making process, take ownership of their responsibilities and are more accountable for their actions. Differences of opinion can be more easily floated, discussed and resolved in this environment.

In Superquinn we benefited enormously from having non-family directors on our Board. Our Chairman, Vincent O’Doherty, came to us from the Moy Group and brought with him both experience and an alternative insight that worked wonderfully with the family directors. Non-executive directors can play a key role also.

5. Act Swiftly to Resolve Situations of Conflict.

Conflict is an inevitable part of running any business. In a normal business situation, a difficult or uncooperative employee eventually leaves or is dismissed. But dismissal is not a solution where the source of challenge is coming from a family member who is part of the management. There is anecdotal evidence to suggest that families who come together on social occasions other than for business have a better degree of communication and a better chance of success in management conflicts.

Where a family business encounters challenges in resolving a dispute, I would strongly encourage them to avail of mediation services at an early stage. There is little to be gained in prolonging a dispute and dragging it through the courts system. Mediation enables a dispute to be resolved privately, quickly and at a low cost - allowing everyone to get back to focusing their energies on running the business.

Within family-run businesses, conflicts can be more pronounced in the first generation after the Company is founded. This is why succession planning is so important. Planning ahead for succession, can help the business to cope with the great change which occurs when a founder or other key person steps down.

6. Plan for succession.

The old adage of death and taxes being the only certainty in life can have a major negative impact on a family business. For example, if all the equity in the business is held by one generation the next may be faced with having to sell part of the business to pay for taxes triggered by their demise. However, with proper planning this can be reduced. Don’t put off talking to your tax advisors now.

Similarly, I have seen the founder of a family business keep such a tight reign that, after his sudden death, the next generation struggled to manage as they hadn’t grown their experience despite working in the business for many years. I speak from experience when I say that most people find it very difficult to walk away from a business that they have put their heart and soul into over a long period of time.

The next generation can have a dramatically positive impact on a business - but they can only flourish if given the space. The next generation needs to be allowed to test their ideas and while they will make some mistakes along the way, they hold the potential to grow and expand the business, sustaining it so that one day they can hand over a thriving business to their children. In these situations, my advice to first generation founders is to step back and place their trust in the hands of the next generation.
KC's View:
As I mentioned above, I think many of the elements of this piece are appropriate for every business leader, not just those who run family-owned companies.

Whether it is the importance of creating a culture of innovation within a company … working to bring together diverse people, personalities and talents … setting ambitious, audacious standards … or hiring people who you know can, will and should replace you in your job at some point … I think these are all valuable nuggets of advice, from a master retailer who I wish were still in the game, just because he always has been fun to watch.