November 2016 eNewsletter
Nominate the “Rising Leaders” in Your Family or Private Business
Larry Grypp, President of the Goering Center
In any business, family or private, cultivating bench strength is critical to long-term success. By investing in a rising generation of leaders, we lay a foundation for succession, and by acknowledging the accomplishments of these rising leaders, we create highly engaged and motivated teams. These new leaders shape the future of our companies and collectively grow our regional economy.
To demonstrate its commitment to this region’s future generation of leaders, the Goering Center will honor a “Rising Leader” at its annual Family & Private Business Awards beginning with the annual awards celebration September 12, 2017.
Nomination Process & Award Criteria
The first annual nomination process began in October, 2016, and will continue through July, 2017. Each month, an independent panel of judges will select one semi-finalist from a pool of nominees, thus identifying 10 semi-finalists this first year. Semi-finalists will be chosen for their demonstrated success advancing one of the 10 Best Practices of enduring family and private businesses.
A nominee must be an employee of a Goering Center Core Member company who has been identified as a future leader in your organization, or is on a path of ownership succession.
Each month, the Goering Center will showcase semi-finalists in our publications and live events. By publicly acknowledging their accomplishments we will help establish them – and the companies they work for – as Rising Leaders in Greater Cincinnati’s business community.
With the New Revenue Recognition Accounting Standard, It Pays to Be Proactive
Blake Roe, CPA, Partner, Plante Moran
Although the deadline for implementation of the new revenue recognition accounting standard is a couple of years away for private companies, organizations have already reached a fork in the road. They must decide whether to engage in proactive planning now, or face risky consequences later. Because virtually all revenue transactions, contracts, and customer relationships will be affected, getting on track could take longer than you’d think. It continues to be a hot topic during our conversations with clients. Unlike most other accounting changes, the new standard will influence organizations not just at the financial-statement level, but also at the operational level.
The new standard might affect the presentation of accounts receivable on your balance sheet. If you have a line of credit with a borrowing base related to accounts receivable, this could affect the amount of short-term credit available to your organization. If that’s the case, you might need to meet with your bank to amend your credit agreement. Maybe you also have covenants with that bank. Will you be at risk of violating those covenants as a result of the impact of the revenue recognition changes?
Or consider this:
Compliance with the new standard might require you to re-evaluate how your IT system moves sales orders through the fulfillment process. If configuration changes are necessary, you’ll need to test the system using different variables, re-train your staff, and possibly arrange for third-party auditors to reassess the system. That alone could involve substantial time and monetary investment — but what if software limitations prevent you from making the required changes? Can you count on receiving timely assistance from your vendor? Or — in a worst-case scenario — will you need to switch to a new accounting system entirely?
It’s easy to see why it’s never too early to start planning. But before rushing into several projects at once, organizations should first conduct an evaluation to gauge the level of impact. Start with a broad diagnostic of the people, processes, and technology that will play a role. Organizations can then develop a game plan by prioritizing the actions that should be taken, estimating how much time each step will take, and determining which team members will need to be involved.
It’s appropriate to feel a healthy level of concern when it comes to these implications; but there is a glass-half-full perspective to be had. In implementing a new accounting treatment for contracts with customers, you might decide to restructure those contracts to obtain more favorable terms. If you’ve been thinking about making changes to your ERP system, but haven’t gotten around to implementing them, you might be able to roll them in with configuration updates that will now be necessary for compliance with the new standard. In this light, modifying the way you recognize revenue is not just a task, but an opportunity.
Will implementing the new standard require significant time and strategic thinking? Yes. But in the process, you could uncover solutions for improving your business model in the long run.
Family Business: The Next Generation Leadership
Joe Hice, Managing Director, Patina Solutions
According to The Family Firm Institute, only about 30 percent of family and private businesses survive into the second generation; 12 percent are still viable into the third generation; and only about 3 percent of all family businesses operate into the fourth generation or beyond.
In order to overcome these odds, family businesses need to do their best to develop family members to take on leadership roles successfully. Performance reviews and career plans are critical elements to all employees for growth and development.
The Harvard Business Review* also notes the tendency of family members “to specialize in the same aspect of the business, whether it’s finance, operations, or marketing.” According to the Review, “this can be problematic for several reasons. First, by staying in specialized silos, next-generation managers fail to gain the cross-functional expertise needed for executive leadership. Second, when close family members supervise one another, the personal dynamic can prevent candid feedback and interfere with coaching. Together these factors can create a leadership vacuum in the up-and-coming generation.” This makes an even stronger case for the need of performance reviews and development of family members and non-family employees alike.
As part of the annual performance review and/or assessment process, each manager, leader or coach should be asked to discuss specific career goals and objectives with the employee being reviewed. The purpose of this discussion is to provide two-way communication between the individual and the coach or leader regarding (1) developing additional skills to improve performance in the current job and (2) enhancing/acquiring skills in anticipation of new and/or evolving job requirements. The dialogue should be open and honest, with the goals being mutually set with the employee.
The company, individual employees and managers each have a role in employee development.
- The Company is responsible for creating a supportive learning environment where the employee can maximize his/her career potential. The Company will also assist as much as possible to provide the tools and support necessary to facilitate developing the individual employee’s career and personal growth.
- The individual is responsible for planning and obtaining his/ her career goals or objectives. The Company encourages all employees to take the initiative to uncover off-site development experiences such as participating in classroom training, seminars, and reading books. It is also important that employees take advantage of the on-the-job learning opportunities and additional responsibilities that exist in their current role. Individual career expectations should be consistent with the Company’s goals and objectives.
- Managers are responsible for assisting employees in assessing strengths and opportunities for growth. Managers are to encourage the person to pursue new levels or areas of responsibility, and act as an advisor to employees during this stage of the development process. On-the-job learning has proven to be one of the most effective developers of people, because it teaches employees to deal with real world problems. Therefore, it is very important that the manager challenges each team member to learn new skills both in their current role and to also prepare each individual member of the team for possible future roles and opportunities.
The Career Development Plan is another part of the performance appraisal and/or assessment to guide career development discussions. The Company will use these conversations to identify people for various opportunities as they grow. During the skills assessment and performance appraisal conversation, managers should document developmental goals and activities; create a plan and timetable to execute these goals; as well as, determine a method for continual feedback and monitoring.
In a family business this feedback is crucial to ensure everyone is on the same page as the business transitions from one generation to another. This also provides a road map for developmental conversation between family and non-family members in the organization.
*Harvard Business Publishing is an affiliate of the Harvard Business School