How to Improve Accountability in a Family Business

How to Improve Accountability in a Family Business

I received an email from a client.

“I enjoy your posts and find them helpful – especially the recent one about motivating employees. Can you provide some help regarding ‘accountability for owners’? My brother and I own the business. We both have some KPIs, but because we are both owners, we don’t really report to anyone, so there are no ‘consequences’ if we don’t hit them.

“I think this flows down to the rest of the staff. They know nothing drastic is going to happen if we don’t hit our targets. We could perhaps nominate one of our employees to hold us accountable, but they are not going to ‘crack the whip’ for obvious reasons. Hope this makes sense? We would appreciate any tips you can come up with.”

What follows was my email response:

This is an interesting question. Accountability (or the lack thereof) is one of the most common issues that clients who operate family-owned businesses want to solve. It’s a broad-ranging topic that probably warrants a whole book on the subject, but here are some recommendations that I have found helpful:

Role Clarity.

When members of the same family (and especially the same generation) are working in the business, it is important to create a clear separation between the ownership of the company, the management of the company, and the key functional roles that each family member performs.

It is important to have “single point accountability” for each role in your organization. If everyone is accountable for something, then no one is. There may be two owners, but there can only be one CEO. If you have not made this decision, then start here. Whoever is named CEO is now accountable for making sure everyone in the company (including your brother) achieves the agreed performance standards.

Once you have role clarity, every functional role (including the CEO) should have a documented Role Scorecard that lists, at minimum, the Key Duties and the Metrics (KPIs) the person in the role is accountable for delivering.

Key Duties.

List the critical duties or actions that need to be carried out to the agreed standard in the current quarter for each role. For some roles, the key duties may be constant every quarter, but if your role is anything like mine, what I do now is very different from what I was doing one year ago. Role Scorecards should be updated every quarter to ensure they remain relevant to what the person is expected to be doing right now.

List the most important duties (“actions”) the person in the role is expected to perform ranked in descending order of importance and specify what percentage of their time that should be allocated to each activity. Describe any performance standards (“outcomes”) where applicable.

For example, if you expect a salesperson to spend 25% of their time making outbound phone calls to potential leads on your database every week, and to book a minimum of 10 sales appointments every week, make this time allocation expectation very explicit.

Communicate “what” needs to be done, and give them the context for “why” it is important, but where possible, give people the freedom and autonomy to figure out “how”. An exception to this would be where a “how-to” process checklist must be followed in order to meet certain standards that are mission-critical or where safety is a factor.

Metrics / Key Performance Indicators (KPIs).

Where possible, every role should have performance quantified on an ongoing daily/weekly/monthly basis with one or more Metrics/KPIs. The person in the role must be willing to will be held firmly accountable for consistently achieving the “green” standard of performance for these Metrics.

The “green” target defines the level of performance that a good person (not a slacker) should be able to attain most of the time (e.g. 90% of the time).

Performance thresholds may change based on current trends, or perhaps seasonal factors. These should be reviewed every quarter to ensure they are achievable and relevant to what is currently happening in your environment.

See these articles: How to identify your Metrics (KPIs) and The benefits of having the right Metrics and Setting performance thresholds using the traffic light concept.

Ideally, every role should have a Metric, but it is not always feasible. Here are my recommendations for metrics for roles that are hard to quantify.

Core Values.

Core Values apply to every role in your company. These are the rules for behavior, unique to your company, that everyone, including family members, is expected to demonstrate. No exceptions. Not the typical empty platitudes you see on the wall of a corporate foyer, but the real “way we do things around here” expressed in words and phrases that mean something to all your people.

See this article: How to create Core Values

Make performance visible.

Radical transparency drives business execution. Capture all Metrics, Projects, and Tasks on a software dashboard so everyone can see how everyone else is tracking and can see that each person is being managed and treated fairly based on their results.

“It’s not personal, it’s strictly business”. (quote from the movie “The Godfather”)

A fear many business owners express is that confronting a family member about poor performance can be perceived as a personal attack, and create long-lasting family resentment. As a result, many leaders avoid having the confrontation, hoping the issue will fix itself. Hint – it doesn’t.

I always say to clients, “Accountability is meaningless without consequences”. This does not mean that people will be fired for missing goals, but you need to clearly demonstrate that performance expectations are to be taken seriously, and failure to achieve results will be dealt with in a way that is known by all parties up front.

You see, it’s not the poor performer who is the problem. Most often there is a weak (or non-existent) management in place to drive accountability.

See this article: How to hold people accountable.

Practice the 5 to 1 ratio.

If you are a manager and want to be more effective at business execution, a tip I have found useful is to practice “The 5 to 1 Ratio” in your interactions with your team members.

5 Parts Praise: Lavish your people with praise and gratitude for the good work they are doing (as evidenced by your software dashboard)

1 Part Discipline: Don’t procrastinate when it comes to doing unpleasant work. Confronting below standard results or negative behaviors is not fun, but it’s an essential part of being an effective manager.

See this article: The 5 to 1 ratio for management

Integrity: It’s not what you say, it’s what you do.

If you are named CEO of a family business, it is your role to ensure all staff and family members are held accountable to achieve the standards as outlined above.

The CEO and family members must set the example here. Your credibility as a leader hinges on whether or not you are perceived as being accountable yourself, and whether or not you apply your rules consistently with others. If you let even one family member off the hook, you are demonstrating a lack of integrity to the rest of your staff.

If you are not prepared to take a stand on this, then your team will not take your Core Values or your Metrics seriously, and they will not take the CEO seriously either.

Which of these areas resonate as something that could be improved in your business? Please feel free to reach out if I can help in any way. 

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Until next time…
Stephen

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