On-Demand: Foundations for the Future | Building Bench Strength

EisnerAmper employee:How do you actually measure competencies in an individual?

Lise Stewart:Hmm, that's a good question. And we're actually really lucky that we've got Natalie on the call here today because not only is Natalie a director in the Center for Family Business Excellence, but she also heads up our professional assessment center. So Natalie, would you mind explaining a little bit about the research that you understand and use and about assessments and some of the tools that you're familiar with?

Natalie McVeigh:Absolutely. Great to be here. Thanks, Lise. So as Lise said, competencies are what it takes to do the job, the skills, knowledge and our abilities. And then we have individual capacities, that's our runway to get things done. It's our talent. And you probably hear a lot about passion, everyone wants a job they feel passionate about. I think everyone on this call, the three of us is fortunate to have a job we're passionate about, but if you're thinking of a Venn diagram, when you have your competencies and your capacity, that overlap really is that passion piece. And the research shows that if we can use just 6% of our strengths and talents in the workplace, we're 60% more effective. Now, how does that measure with me, Natalie, and how I can be a value of my organization? So how do we get those capacities and competencies to measure?

And we do that by understanding what the job is, what is required for the job. And we also try to understand the culture of the organization. When we say leaders require X amount of competencies, is it business acumen, is their emotional intelligence, what are the anywhere from five to 12 things everyone is required to do here and how do we match that with the five to 12 things your specific role requires? And then we can do several assessments to understand that objectively, there are a couple assessments we use that are predictive that actually say, on your worst day, six months later, what will you do? Not just on your best day with your interview. And we also have some assessments that are descriptive, that just say in general this is how so-and-so behaves and that'll give us an indicator of how they can perform in the role.

We also use behavioral based interviewing. We can help coach to that, but to really understand that you're getting the right people in the right roles, so that they get to thrive and your organization also gets to thrive. It's much easier for them and for yourself when you're utilizing people in what they're good at.

EisnerAmper employee:And in a crisis situation like today, is there a way to predict how somebody will react to an unusual situation like we're facing right now?

Natalie McVeigh:Absolutely . What we've been doing is several different things with assessments now that's a little bit different than hiring. Although we have many clients who are still trying to find the right talent, some real estate companies are essential services. They need people to be there, but we're also finding that reduction in force is being done. And what you want to do is you want to make sure you're not just cutting bilaterally everyone at a 10% mark. You want to make sure the talent you're retaining is resilient, is agile, is able to wear more hats than usual, like happened and required in 2008. So there are assessments that can tell you mental agility, business acumen, ability to recalibrate, handle non-static challenges. So assessments can absolutely be used in that way.

Now, what assessments can also help us do is understand people's intrinsic motivators, the things that get you going. So your work doesn't feel like work and that is really important in a crisis because we've heard about burnout, whether it's working from home or working extended hours. But if you're in that passion piece, we talked about, it doesn't feel like work to us. And studies show that when work doesn't feel like work, when it feels like passion, burnout is decreased exponentially.

EisnerAmper employee:What about the whole question of succession? Moving people up in an organization and ultimately who's going to run the company. And many family owned businesses, this is a particularly touchy subject. Sometimes the CEO is the founder, who might've created the organization from nothing, who often controls so many functions within the organization and may or may not be ready for succession planning. How do you begin that conversation and really try to come up with a good plan for moving the family forward?

Lise Stewart:Actually, I can speak to that, because I've got a really good example. I'm working with a client right now where this is the issue. So we have a gentleman and he started the company about 25, 30 years ago. It's really his baby. But as he's getting to that stage in life where he doesn't have quite the same amount of energy that he's had before and he would like to be able to have somebody else to run the company. He doesn't want to necessarily leave altogether, but he does know that he needs somebody else who might be there to do things on a day-to-day basis. Now, it was interesting when we first started the conversation because he's a really well-liked guy, he's got a great personality and he brings a lot to the company.

And people kept saying, well, Tom, we just need to replace you. We need to find somebody who's just like you. And that's a really strong temptation in a lot of family businesses is to try to replicate somebody who's already in that key leadership role. Well, that's not always the best thing for the business, right? Because we need to make sure that we're putting somebody into that position that has the knowledge, skills and abilities, the competencies, not for the past and sometimes not always for the present, but most certainly for the future. So we want to make sure that the business and the senior leadership team have thought strategically about the growth and potential of the company. What direction is it going to go in? What kind of skills are they going to need in order to be able to realize that real potential?

So we often start by working with people in senior leadership positions to develop a strategy. And thankfully in this series, we're going to be talking about strategic roadmaps in another time, but we do spend some time understanding what those goals and objectives are, what the creative and strategic potential of the business is. And then determining what are the competencies needed in order to achieve that potential, and then we work backward from there. I also think that it's important to help senior leaders to develop some skills, competencies in coaching, so that they can become strong mentors and coaches for the next generation. I think that one of the reasons why sometimes our talented owners or leaders don't want to move on is one, they don't feel confident that the next generation is competent enough to be able to do the job. The other thing is they don't necessarily want to leave because they enjoy what they do. They just don't want to keep working in the same way that they have.

So sometimes we got to create a new role for them. And we're looking at how they can become a good mentor or a coach can be part of that role. And there are other creative things that we can do. So I think it is really important that businesses understand that we're not just trying to replicate current talent, but we're also trying to really understand what's going to be necessary in the long haul. So just to wrap that story up. So with Tom, as I said, he's a great guy. And it was interesting because he was the one that finally sort of said, I'm a really tactical, practical sort of hands-on guy. I don't see myself as being terribly strategic. He thinks that some of his entrepreneurial success has been pure luck. I'm not sure about that. I think he is really quite talented.

But what he said is that, what I really need for the future is somebody who can bring really new ideas, creative new ideas to life because the field that they work in is highly competitive, so that was a wonderful start. And that's what we're doing. We're building a new competency model for the future.

Natalie McVeigh:Absolutely. Lise is a hundred percent correct. We often see that its complimentary skills, not the same skills when we're balancing growth in the next generation of leadership, because what entrepreneurs do and it's amazing, they're also adept risk-takers. And sometimes the skill for maintaining a business are very different than building a business. One of the other things that's really helpful for the idea of succession is really how people are going to interact with the company. When you talk about an owner founder, there's usually one of those. Yes, sometimes they're partnerships, but as the next generation of leadership goes, whether it's inside the family or outside of the family, there's usually multiple stakeholders that get to do this. So finding leverage points, who gets to be the CEO or the co-CEO, there's a lot of research saying that co-CEOs are important.

How do we plug people in and really understanding those unique things that those founder, owners do. Like Lise's story, I've seen lots of founders who say it's luck and it's not really luck, it's that they're uniquely skilled, but they don't really remember anymore how they started acquiring those skills because it's been a lifetime of this business they built that feels a part of them. And so they just do things on gut instinct and sometimes they might doubt the gut, but that's an actual type of intelligence. We have glial cells that go from our brain to our gut and that is telling us something based on information. There's also a neuroscience that proves that wisdom is actually a thing that comes with age. Now, it doesn't mean that all people who are older, are smarter, in the case between Lise and I, yes, she's smarter than me. But for those of us who constantly repeat good things, we actually do become better, that 10,000 hour theory to be an expert. You've all heard that.

Well, it's only 10,000 hours of doing the right thing, the right way at the right time. So there's also the opposite. You can do 10,000 hours of the wrong thing at the wrong way, the wrong time. But for these leaders, they're so brilliant. And it doesn't mean that the next generation can't do it. The question is, how do we take that secondhand nature thing that feels like instinct, that feels like luck or magic, and how do we translate that to the next generation of leadership? We often call this as either a mind map or a transition map, it's taking what's called tacit knowledge. It's knowledge that I have, that I don't even know that I have that even if we went to the same schools and did everything the same way, we would still do it differently.

And a good example of that is Lise and I, we have lots of very similar training, backgrounds, beliefs, but even our clients would see that we approach it slightly differently. So how do we share that tacit knowledge? How do we understand what's there and then take the things that are good and also accrue new skills that can create that innovativeness and that growth that might not have been happening because we've been looking at it just one way throughout.

Lise Stewart:Yeah. I think it's interesting too that some of the questions that we get is that if it's a family member that we're looking to bring up into that sort of senior leadership position and to be the successor, for example, a lot of times, say father-son, mother-daughter, parents to children, there's been a lot of time spent, many times they share some of the same values and so on, but what about non-family members they were starting to bring up through organizations. So I think it's worth talking just a little bit about that and how we build bench strength. But I've got an example right now where I've got a wonderful family business. They own quite a lot of real estate, they're large and they're strong and they've got a number of families, younger family members coming into the business.

When I was doing the project to help them with their organizational design I interviewed both family members and non-family members who were in key positions. And some of the non-family members were really concerned that they would not have an opportunity to move up in the organization because there weren't family, right? That family would always get the first pick of the best jobs. And so what we've been working with the company to do is to really try to make sure that they are one, focusing on the competencies that are necessary, just because your family and maybe you've shared the dinner table for the past 25 years and you have a similar sense of humor and similar values, whatever it might be. It doesn't mean you are necessarily the right person for the job. So we try very hard to take just the family connection and sometimes the personality aspects, just move it aside a little bit and really look at the competencies necessary for the job.

When I explain that to some of the non-family members that the leadership in this company had agreed to do that, they were really relieved. They were also relieved to learn that there was going to be a competency model. They were going to have a chance to take a look at what were the skills and knowledge needed for those key positions and get the training that was necessary to be able to fulfill those positions, so that they felt like they had an opportunity. And I think in terms of morale and making sure that you're able to attract the best and the brightest talent, people need to understand that even in a family owned organization, that there might be some opportunities to be able to move into some of those choice positions that they have.

The other thing and , I think we may have mentioned it, but it's, one of the other things that we're seeing too is co-leadership. Sometimes having a family member and a non-family member share a leadership role, I've seen this with family businesses where there might be a family member who is a co-COO, and a non-family member who's also a key CEO or COO, whichever position. We're also seeing it sometimes now with sibling teams, we can do that when we know that the combination of competencies means that the company is going to have what it needs to get the job done. So when we look at competencies, as opposed to just people, we can put together a whole slew of different combinations that work really well for the company. And I think that, that's something that a lot of business owners, they're not thinking about that a lot. Have you found that too Natalie?

Natalie McVeigh:Absolutely. We talk about pathways as predictable, and I know that all of you who've done hiring, your process is completely rational. The problem is no one's in your head so it feels random. And I know that it's not just a dichotomy of rational and random, but that's people's experience of it. So when we can create a predictable pathway around a job position, it doesn't feel personal the decisions you're making. And as Lise said, it increases the opportunity choices. So when you're looking at the who's there, you've got five options, right? Or four, that's four. You've got a few options and so the scope is really narrow, but the moment you actually say, what can we do? What do we need to do? These opportunities open up for unique combinations. Now they require a little bit of time because when you go from one to two, there's joint decision-making, joint problem solving that needs to be taken into account.

But research shows our intelligence grows when we interact with people. There's a lot of research on collective intelligence that when there's a small group of people who listen to each other, they're actually 10 times smarter than the most intelligent person in the room. And why would you want to limit yourself to just the most intelligent person in the room? Why wouldn't you want increase that? Now that means though, when you're looking for a leadership profile, one of those competencies would be collaboration, which is important in organizations in general, but it becomes much more important in that job description, in what you are assessing for and looking for with people. You've probably heard the research that, only 20% of effectiveness really is that IQ. And then 80% is really those soft skills, those collaboration, those consensus building, those problem solving.

So finding a way to measure that, train for that, creating performance development plan so that people see a pathway in organizations. Being clear that we're making decisions around competency, not around anything else allows for equal opportunity. It also helps to really explain ownership when you're thinking of a family company, because owners can do a world of good, but we don't understand what ownership is. So a lot of times children feel like they need to, or they want to, or they ought to be in the family company because they don't know what else to do. But there's many leverage points in ownership where you could be a family leader of a family council. You could be a family champion, a family who goes and gives the donations or represents the family at the holiday party. You can be a family historian who helps understand and share the legacy and bring the family together. You can work in philanthropy.

There's many ways that family owners can join that. Don't just have to be these C-suite levels. And when you really take a good inventory of the enterprise that exists, most enterprises are many different ways and points of leverage. Some are several operating companies, several holding companies, so that there's a space for everyone so that the only way to stay together and interact isn't this coveted CEO role.

EisnerAmper employee:There's so much there. And at the end of the day, when we work with family owned businesses, I think the ultimate goal is harmony in the family and keeping the family together. And some of these decisions that you guys have been describing, especially around succession and who has what role, are sometimes difficult decisions. And I think the framework of writing down a framework of competencies and role models and how things will progress through an organization, if that can be sort of set forth in advance and even written down in a family charter and discussed, it can avoid a lot of the difficulty of some of these decisions. As you progress through the years with family, especially if you're in succession, you may go outside the family instead of hiring someone inside who may not have the perfect competencies to run the organization. Have you guys come across situations where the children or the founder just didn't have the right competencies and yet they very much wanted to be in the organization? What did those families do? How did they deal with it?

Natalie McVeigh:Yeah, I think we've both come over those, I can share an example. You probably can tell from my predilection is I think research is really helpful, it allows people to normalize their experiences. There's some great research called The CEO Next Door, that debunks a lot of myths about CEO's. And one of those myths is how long it takes to become a CEO and objectively it takes about 24 years. And so, one of the great things then is it allays people's fears, it also starts a frustration, right? You have a second generation person, the company has been there for 10 years and wants to take over, isn't excited about hearing that, but the answer might be not yet. And that's really, really useful and normalizing. And the question becomes, how does that person interact with the company?

So I had one client who did have five children and all five were in the company and at different levels, but they wanted to pay everyone equally, which created some challenges of its own. And all five, when we started this conversation, were bound and determined to become the CEO, because one, that's what they thought they should do. That's what they thought their parents wanted them to do. And the more we went through, they actually built the CEO job description. We sent out research, we had them look up other CEO companies very much like theirs. They built it together and then they genuinely assessed each other on if they were ready now. And by the end of that, there was a resounding no for now for all of us. And we might actually become there at some point in time, but during that exercise, three of the adult children, they were in their 30s, stepped away and they actually said, "We don't want to do this period. We'd like to find another way, but just knowing who we are and how we behave, and what's interesting to us, this doesn't seem like the rule."

By the end of the work with them, it was clear when we did assessments in another progression point, who in the family actually could be the COO, but no one could be the CEO. And then we hired from the outside, but since they helped build the job description, since they understood, and they also became a committee to help hire that CEO because they wanted to make sure that the family's culture wasn't changed. It worked out really well and we built a model of co-stewardship, of it can still be a family owned company. It might not be family run from the highest levels of the organization, but there was a lot of collaboration in there. Lise, I'm sure you have many examples as well.

Lise Stewart:Yeah. It's interesting. I do, and I think that there's a key point to be made. When I think about the story that you just told, Natalie, about bringing in somebody from the outside, we do a lot of hiring as you know. We're helping business owners and companies to find that talent so they can build their bench. One of the questions that we often get from people considering coming into a family owned business, from the outside is, oh, is it a healthy family? Are they normal? Or are they dysfunctional? They want to know what it's like to be able to work there. So I think that, since our subject really is about building bench strength, if you are a business owner and you want to attract talented people from the outside into your organization, I think that there's some things that they look for. And so you want to be aware of them.

One is they want to know how do you as a family make decisions, right? Is it always like fisticuffs? Is it always difficult or do you have a nice process for being able to make key decisions in the company? What's the opportunities look like? If they're not coming at that senior position, what are the opportunities for advancement, what does that look like? Sometimes they're worried about a bait and switch, and what that means is that, and I'm sure you've seen it, . You've probably seen it too, where somebody is hired from the outside and they're told, oh no, you're going to be able to run this company. We're hiring you for your knowledge and experience. You're going to be able to make decisions.

So this person comes in, they are settled into their CEO role or COO role or whatever it might be. And all of a sudden they find that nope, they can't make the decisions or everything is second guessed or their work is always micromanaged by a family member or maybe from the retiring owner or whatever it might be. There's a saying that I use a lot and it's, don't buy a dog and then do the barking yourself. If you hire talent from the outside, then let that talent do their job, your role as a family business owner and as the family itself is to figure out how can you clear the path so that this person can do as good a job as possible. So you want to try to remove some of those barriers and non-family members really don't want to be face-to-face with the internal turmoil or conflict that you often see in family businesses or privately held company.

So those are some of the things to be careful about. I think that sometimes bringing in outside talent can be wonderful because in some family businesses, they become a little bit insular when you have a number of family members who are making those key decisions and determining strategy. They know only their own world. So when we bring in outside talent, we're also bringing in a different worldview, new skills, new abilities. And I think that that can be really refreshing for organizations, but you have to pay attention to making sure that it's the right environment to bring them into.

And then, I think you'd also ask, sometimes you might have a family member who really covets a role and it's just not right for them. And that's something that parents often talk to us about. They'll say, they love junior or juniorette and they don't want them to leave. They want them to be happy, but they just really don't think that they can do the job, how do they break the news? And this is again where I think competencies and Natalie was talking about earlier too, if we can separate the person or personality from the role, and help family members understand, as Natalie said that there are many different roles that people can play, that we're putting people into positions based on their competencies and skills. And so starting to have that conversation as early as possible is also important.

So if you run a business and you have a family and you may have family members starting to enter the business or maybe they're considering it, or maybe they're still in high school, this is the time to start having that conversation about the competencies that are going to be necessary to get hired into your business. We like to say, deal with the emotional issues before emotion is the issue. So we want to start talking about the fact that, just because your family, you may not necessarily get a role. We hire for talent, we hire for competencies and this is how we do it. Start having those discussions really early on, then people's feelings don't get hurt because you've been able to manage their expectations already. So I think that, that's a really important part of it too.

EisnerAmper employee:It's amazing too though, because I think in a lot of families, especially when I think of real estate with very entrepreneurial leadership, big personalities, having those discussions, just getting those leaders to sit down with their families is often very, very difficult. Some of them are very old fashioned, it's my way or nobody's way. And just how do we encourage that regular discussion to talk about these issues openly with family members and as you said, set expectations appropriately?

Natalie McVeigh:, it's not unusual that expectations aren't communicated. Some studies have said in the workplace up to 90% of expectations aren't communicated and we find with real estate families or other family companies, or really any entrepreneur, they're so busy working in the business that they don't necessarily have enough time to work on the business. And that's usually what gets in the way is they're so busy being successful, so busy being accomplished that they aren't taking enough time to sit back and relax, which is why often, there's a moment in time where they just want to step back. They're kind of done. And that's often the thing that precludes them from having these conversations as well is they haven't sat down and thought about it. They don't know enough options of what to do. We often get clients when they come to us, is they kind of think they know what they want to do. Bob down the street did this with his family.

Every family is unique. Every company is unique, especially private companies. You get to design and create your own path for what's forward. So one of the things we love to do is just sit down and have an initial conversation with people to figure out the many permutations they can do. In my experience, it's that they don't necessarily know what the options are, why they're there and that's why the conversations don't happen in high school, unfortunately. But if it happens early, the chances of successes are much more increased and it also doesn't feel like someone's gone down the path. So I'll share one example of a client. And unfortunately they hadn't talked for about five years when I'd met them. And what happened is this company, he had wanted his sons to take over. He had four sons and none of his sons were working in the company.

Now, two of them just didn't want to, one was still in college and the other was working in a different company because he'd heard from a friend of his that he should go work somewhere else for at least three years before coming back to his own family company. That was the advice he'd heard, is you should get outside employment first. So he was on his own. He hadn't talked to dad, but he was on his own doing his outside time, putting in his dues before he came back. Well, dad figured that none of his children were going to come into the company and dad and mom sold the company, literally six months before the son had planned to return, but no one had started the conversation. And so what happens is not just from the parent's side and the children's side is it feels uncomfortable to have these conversations because we don't want to ask too much. We don't want to demand from our parents.

Parents are worried that the business might become a burden instead of a blessing. And so, we want to avoid those uncomfortable moments. The truth of the matter is though, those uncomfortable moments will happen, the question is, do you want to deal with them proactively or reactively? Now, the great thing with that family is they're talking now. They all love each other and they took the proceeds from the sale to start a completely different business. That's wonderful. But they did spend some time not speaking to one another and it's just because the son thought in his head, he knew what was happening and the dad thought in his head, and no one had said anything yet because they were both so busy just getting it done.

Lise Stewart:That's a really good example, Natalie. And I think that the point ... Well, the point I really want to share here is that we often use the word family owned businesses. So what we're really talking about here is a closely held business where the majority of the decision-making is with the family or one family member who's really active in the business. Much of what we're talking about also applies to partnerships. We work with a lot of real estate clients who are, they're in professional partnerships together. So I met with a business not too long ago. It was two gentlemen, still relatively young and they had formed a very successful partnership. And I started asking them questions about the future, and have they ever considered as their children get older, would they bring them into the business?

They just didn't consider themselves to be a family owned business. And I said, "Well, you're a partnership and with partners who both have families. And at some point you might have to be able to deal with some of these same questions." The other thing that they hadn't really given a lot of thought to is how they were training their bench. How they were helping other people in the organization to become as knowledgeable and skilled as they were. They just hadn't really stopped to think about this longer term picture, whether it meant, the way in which they were going to develop the skills and competencies of family members, as well as the policies and protocols that were going to be important to manage expectations and how they were going to start to develop their team.

So I was really glad they called us. It was a really nice meeting, but I think that it's very important to realize that so many of the concepts that we're discussing today are key in every type of business. So it's not just those that really consider themselves to be family owned, but any type of a closely held business. And in fact, as Natalie and I know, we're often using these same techniques in companies that aren't even privately held. When we start talking about succession, building a strong bench and understanding competencies, these are just great business skills that anybody should really know about. So I wanted to make sure that we were expanding that part of the conversation.

EisnerAmper employee:Great. Thanks for that. I just want to remind everybody before we go forward, that we're happy to take some questions. If anybody has questions, please put them in the Q and A box. One of the things that comes in these crisis situations like we're in today is it's very intensive and it's very difficult for people to operate when literally every day you're putting out a new fire, as I said earlier. So can we talk about retention a little bit. Generally and then especially in an environment like we are today, which is so unique.

Natalie McVeigh:Yeah. Retention has a lot of facets. One could be employee engagement, and the more we can share, the less there is for people to make up. Our brain's very efficient. It's very magical. It's also very tricky. And one of the ways that it's tricky is that it thinks it knows everything, so it quickly makes up for a lack of information. And when we don't have information, we make up a story and we make up negative stories four to seven times more likely again, because our brain is wired to assess threats, really quickly. So transparent communication is really important. What I can tell you, anecdotally, for many of the surveys that have gone out, understanding performance during COVID, privately held and family owned companies are outperforming people and keeping people at massive rates. Some of that may be that there usually is much more closeness.

The Edelman Trust survey always says that privately held companies and family companies rate, larger. But we're also coupled against people making up negative stories. So the more you can help people understand the why behind the changes that are being made, with clarity, again, that predictability doesn't make it feel personal. Yes, if you have to make cuts or furlough people, no one loves that. However, if you can explain it, your intentions, what the goal is at the end of the day, people are much more likely to spend some time understanding it versus changes happening overnight and no explanation. And you just assume people understand, hey, it's COVID, we're in a crisis, we're dealing with it as we can. That's one of the ways, I'm sure Lise has some techniques as well.

Lise Stewart:Yeah. Well, I think, as we take a look at some of our clients who seem to be handling this whole situation really well and retaining their top talent, there's a few things that they're doing. Leadership is very good at communicating all the different things that they're doing in order to be able to keep the company stable and strong. They're also soliciting information from their key personnel, right? So they're including them in those discussions. So people feel like they can really add value. I think the other thing that we're finding is that they're more flexible. So we're finding that senior leaders in these organizations that tend to be thriving or staying strong, have found that they've got to be flexible with their employees. So I had an interesting conversation earlier this week, I coach a number of senior leaders, particularly women and in businesses.

And I was discussing with a woman. She is the COO in an organization, and I was asking her about how it was going. And she's the sort of person that's so talented that she's often headhunted. So I know that she has opportunities, she'd leave the business if she wanted to. I asked her why she's staying, and she said that the family that owns the business understood that she has young children at home, and that she has the primary responsibility for their education during this time. She also has elderly parents and so her responsibilities are really being split. She's pulled in a lot of different directions. So in some companies, if she wasn't sitting at her desk 9:00 to 5:00 and working the long hours and in the same way that she did, when she was coming into the office, they might've given her a hard time, but not this privately held business.

They were very understanding of the fact that she needed to have that flexibility. They were very understanding of the impact of all of this on her family and on her work. She said that if she went to work for a larger company or perhaps one that wasn't privately held like this, she's not sure that she would have been treated with that level of respect, kindness, consideration and flexibility. So I think that, that's one of the things that we find in privately held businesses is that they often really pay attention to the personal needs of their employees. And I don't think that that should be ignored in any way when we start looking at how do you build and retain a great bench of talent. Use those attributes that make privately held family owned businesses so special, it's that interpersonal connection.

It's the belief that you're there for the long haul. It's the fact that we don't tend to treat employees like simple commodities or robots, right? We really care about what's going on for them. And we listen. The other thing too, is, as Natalie you were saying, people want to feel like they're heard and that they're adding value and that they're part of something and we're managing those expectations. So I think that that's really key.

EisnerAmper employee:Let me throw a little bit of a curve here, if everyone that's listening, if every organization was doing all the amazing things that you guys are talking about and have done everything right, and have structured everything the way you've described, they would all be running really efficient, well-organized and happy organizations. The reality is that many organizations are gone off the rails especially in today's environment, and perhaps the leader has not been leading in the way you've described and having those conversations. Or perhaps the family members in a real estate family particular right now are flipping out, because suddenly there is no cash for distributions and there's other things, and they don't know what's happening with values. So there's a lot of tension, a lot of potential disharmony within the family. And perhaps the current management just doesn't know exactly how to keep everybody together. So what advice would you have for a family that's kind of going off the rails?

Lise Stewart:I'm going to let Natalie take this. She's an expert in this area, go for it nationally.

Natalie McVeigh:Thanks, Lise. It depends on what portion is going off the rails. When we're talking about family or private companies, there's really three things we're looking at. We're looking at management, the science of the business. And then we're looking at ownership, which you're talking about the distributions and the cashflow. And then we're talking about that family group or partnership group, the relational piece. The most important thing is open communication and I mentioned earlier about making things up, but there are some things that owners should get. They obviously should get a financial return because it's their capital at risk. Now, you don't get financial return at the expense of the business. Now, the right is financial return, but the responsibility is financial literacy. So when we talk about this pathway of progression in the company for employees, there should also be a pathway for progression for owners.

So ideally you're creating financial literacy in the owner, so they get that they should get a financial return, but if they have financial literacy and they can see those PNLs, understand the capital expenditure or that some loans are being called back in, you name it, that desire won't be out of whack. There's also this idea of emotional ownership of really this lasting, long-term vision for the entity. And that sometimes means more than short-term gains. Now, you can use something similar, which is called psychological owners for managers as your co-stewards. So I think part of it is having a predictable pathway, and those are just six of the rights around ownership that's there. And really we want to calm the anxiety. Right now everyone's experiencing loneliness. Physical distancing is isolation. It doesn't have to be loneliness, but when we feel lonely, we are 250% more paranoid, more angry and more curt with one another.

So the question becomes when it's going off the rails, if we can come in with some empathy and say, I get that this is challenging. You may be counted on these dividends, or I get that this seems uncomfortable because we cut half of your team and you have to do more with less. So let's acknowledge what's happening first and let's figure out how we together with the resources and the decisions we have to make can one, understand the information, but two, chart this path forward, it is not unclear that is uncomfortable. But really keeping those stakeholder groups separate and overlapping when they need to is important too. Owners don't need to know the day-to-day, day-to-day managers don't need to know all of the things about what's going on in the ownership group as well. So being clear on our roles and educating and working within those roles is really helpful.

Lise Stewart:

Yeah. I would agree with that. And I think it's also important. I want to make sure everybody on the call knows that, we have a lot of information in our EisnerAmper website. If you'd like to really look at some of the writing that we've run on this, I know Natalie you've been pretty prolific when it comes to getting this articles out about some of the things that we've talked about today. So you can go to the website, you can go to the Center for Family Business on the website and I think that there's a lot to support some of the things that you've been talking about, including, I think one of the things that when we are prepping for all this, we talked about under performers in the organization and how we both identify, and then also deal with those under performers.

I know you've written about this and talked a lot about this nationally, and we both had just sort of, deal with this in company. So I'm just wondering, kind of as a final thought here, how might a business deal with somebody who's underperforming in the organization, identify them and then deal with that?

Natalie McVeigh:That's a great question, Lise. I don't believe and I haven't had the experience, I could be wrong, that people want to underperform. Most people get a good sense of themselves through their job, which is also why job lost through COVID has been very hard. But people want to have self-efficacy and they want to do that through their jobs. So usually when someone's underperforming, there are a couple of reasons, they could have lack of clarity about the role, what they're expected to do, by when. But you're a great organization who makes all of that clear. So that's clear to them that, that's not the reason for it. It's usually that they're in the wrong position. It's that the skill sets that they have aren't able to do the thing you're asking them to do very quickly.

So this is where assessments can be very useful because we find that family companies and private companies love loyalty. That is partly why they have really high trust. So it doesn't mean you need to get rid of them, and yes, you might need to at some point in time, but what you can do is find out where they can be better used in the organization. So lateral moves are really effective. When we see someone underperforming, the question becomes, how do we allow them to be self effective and use their agency in being successful somewhere else.

Lise Stewart:Right. Natalie, we do have one question here too about, since you've mentioned assessments quite a lot, somebody is curious to know, do you have sort of preferred assessments? And in fact, you might even kind of explain the difference between some of the well-known personality tests that a lot of people are familiar with and what is really a competency assessment, can you just explain the difference there?

Natalie McVeigh:Absolutely. So there are three types of assessments. There's descriptive assessments that I tell everyone to take home to their significant other spouse and they will read it, they were laughing and they would've said they could have saved you the time and the money because they could have pegged you on that. A description assessment like the Myers and Briggs, or the DISC, or many of the common ones you've heard of just says how you behave. And those are great. They do help you set up a common language. So you can say in the DISC model, D is dominant, but there's some other D words you can probably think of with someone who has a dominant personality, you'd like to call them. But instead you can describe it neutrally and you can say Natalie, your D behavior is just a little intense right now. So it's great for commonality.

It is also great for you to understand that that means I'm energetic and I want to get a lot done. So those are really useful, but those are not competency assessments. Competency assessments, I do have a favorite that I use. It's a predictive assessment. It's one of the first assessments that was created. It's based on actuarial data and it can be norm to a job. We can actually norm it to your competencies in a job. The one we use is the Chally and it tells you the strengths, the top 10 things you are the best at before you've brushed your teeth or your hair in the morning, that you just knock the socks off. There's also one in there that specifically goes to the role we're saying you should be in and there's one that talks about the motivators, which I mentioned earlier.

Like how am I motivated? What gets me going and how does that match against what the organization needs from me? And then at the end, there's one report in there that's kind of like the big five, which is my personality overall. Am I agreeable, am I aggressive, am I introverted, am I extroverted, and believe it or not, agreeableness and agility, which mentioned earlier, those are the two highest predictors that we've seen with success through a global crisis, like the pandemic. I may have a list of our assessments, happy to send them out to you and see which ones work for your needs in your organization.

Lise Stewart:That's good. I'm glad you mentioned that because I want to make sure everybody knows that you are the expert and you're the one to call if they have any interest in really trying to use some of these fantastic tools to understand the team that they have today, and also understand what they need for the future, and how to hire for the future, which would be a whole another conversation. So I just want to ... , I want to thank you and everybody on the real estate team for inviting Natalie and I to come and talk with you about this today, we could talk all day, we're really very passionate about helping our family owned and closely held businesses to be able to navigate what can be some really tough and difficult decisions. We want to see these businesses survive. We want to see them thrive. We love the work that we do, so anytime that we can come and help and have these discussions, we'd be honored to be invited.

EisnerAmper employee:I think it's been great. Thanks so much to the both of you for all of this wisdom. And as we in the real estate industry will know, we really need it. These are not conversations that are typically had by most families and it's great stuff. I want to thank everyone who listened in today, it was great to have you. Please, just as a reminder, our next webcast is on October 7th, it's called The Strategic Roadmap for Real Estate Families, and you can register on eisneramper.com. Thanks very much, everyone.

Transcribed by Rev.com