Rethinking the family business

By Bill Fotsch and John Case

At Comfort Supply, a Tennessee-based distributor of HVAC equipment. Clay Blevins, the president and principal owner, makes sure employees understand the important numbers in the business, such as revenue, gross margin, profit and inventory by branch. That way, they know what’s going on and can learn how the data affects the performance of the business.

Every Friday, Comfort Supply’s key employees review the business’s results and update their forecasted performance for the next couple of months, so the company stays focused on the future. They also see an updated forecast of their next quarterly bonus and the projected value of the company at year-end. Meanwhile, they can participate in an employee stock ownership program, or ESOP, which gives them a stake in the longer-term value of the company.

Many CEOs like to say their employees are “like a family.” Sometimes, their companies employ people who are literally kin but often that’s not the case. Team members are mostly unrelated. Still, their employees will confirm the CEO’s view that the company does feel like a family.

As Clay Blevins correctly realized, what brings a team together and turns it into a “family business” aren’t only the fun things everyone does when they relax together, like going to a company bowling night. It’s also being part of a group that makes them feel respected and treated fairly. The employees, in turn, respect the people in charge. In this environment, it’s natural to pitch in when someone needs help.

Part of this respect comes from the sharing of financial information. In a family, everyone has at least a general sense of how the family unit it doing financially. Blevins understands that it makes sense for companies to make their teams privy to information that allows them to grasp what makes the numbers move, and he acts on this at Comfort Supply. Sure, team members may need some help understanding a company’s fundamental economics. But many learn quickly, once they grasp a few key numbers and figure out what makes those numbers move.

Families also share rewards, like a holiday bonus. Blevins take same approach with the company’s ESOP. 

They also stick together when times are tough. In a business setting, that shapes how a “family” business reacts to a business downturn. Typically, companies lay off some of their employees in tough times. But no one lays off a family member, and a “family” business will look for alternatives to downsizing, too.

As we suggested in an earlier article, there are plenty of options to avoid layoffs: Pay cuts (starting at the top), so that everybody shares the pain. Voluntary leaves of absence. Putting people to work on maintenance, capital projects, and facilities improvement. You’ll need cash to fund the latter option, of course. But shouldn’t every family have some money set aside for a rainy day?

In a family business, family members come first. Everyone knows how the business is doing, everyone shares responsibility for improving results, and everyone has a stake. Companies that operate like this will naturally outperform their competitors, because they have more hands, brains and hearts invested in figuring out how to improve.

Bill Fotsch is founder and president of Open-Book Coaching. John Case is a writer who has published widely on open-book management and related business philosophies. (To subscribe to authors’ biweekly email newsletter, please send the word ‘Subscribe’ to [email protected]).