Tuesday, January 19, 2016

How Family-Owned Companies Can Decide ‘Should We Stay or Should We Go?’

Stay or Go (2)Warren Buffett is reported to have said, "Never test the depth of the water with both feet.”

Such caution is respected by families that own businesses, especially when they consider a new location for expansion, relocation or consolidation purposes. The further away a new location is – say, in another state – it’s more likely the project causes company owners to contemplate the difficult-to-answer-question, “Should we stay or should we go?”

Also, complexity varies by project since it’s usually a more elaborate job to relocate a factory than, for example, an office or warehouse.

There are two basic ways for a family-owned business to launch a site selection project: Conduct studies and consider what the numbers say about various communities; or deal with emotional issues within the family unit before launching a serious location effort. Both approaches work and if desired both can be done simultaneously.

Gathering Data

Site selection consultants will say, rightfully so, that great clarity will result after hard information is gathered regarding labor costs, taxes, facility expenses and other factors in prospective locations. Then, those findings can be compared to the company's current situation. If you, the business owner, could reduce costs by 30 percent without hurting sales, would you be motivated to relocate? With savings of 10 percent, would you stay?

Acquiring Insight

It’s usually more than about numbers. Sometimes coaching occurs prior to data gathering to address family sensibilities about the project.

I've been in meetings where disagreements are aired by the company's founder (usually the parent or grandparent), their now-adult children and spouses, and sometimes by non-family members who are essential to smooth operations. To say that differing views are expressed would be an understatement.

Change: An Explosive Topic

People generally fall into two camps when it comes to the issue of change regardless of who originated the proposal – those who oppose and those who support.

Some will resist any business transformation or relocation simply because people dislike change and change agents. For an excellent list of the reasons employees resist change, which also applies to family members, see the book by Robert Kreitner and Angelo Kinicki, Organizational Behavior.

Those who prefer the status quo will often say, “We’re trying to fix something that isn’t broken – let’s tweak a few things and move on.” The resistance is understandable because revising a business process or establishing a facility in a new location presents disruption and uncertainty.

Supporters of change will often repeat a quote that “Insanity is doing the same thing over and over again and expecting different results” (often attributed to Albert Einstein, even though evidence that he ever said it is elusive). Support for change may grow if people feel confident that discussions are being conducted in an open, honest and participative manner.

Many will applaud when hearing about a new location that offers a nice quality of life and lower living costs. This is especially true for people who cannot afford to buy a house in some of our costliest cities; they will relocate to become a home owner, particularly when the new location offers better schools, lighter traffic and decent amenities.

The Focus of Coaching

Where there is disagreement or lack of clarity, this is where I come in as a coach. It may be too early for me to serve as a consultant offering data, but at the time it’s more important to explore personal priorities and look for opportunities to resolve conflicts.

At the outset, I encourage participants to acknowledge that we don't know what we don't know. I ask everyone to examine their own experiences; notably, how have they handled earlier turning points in their lives? If aspirations within the family aren’t complementary, how can they be reconciled? What are the fears about the future of the company regardless of location? It’s remarkable how fruitful conversations can become when the subject of fear is discussed openly.

Coaching success depends upon an honest airing of the issues with the intent to bring about extraordinary results for themselves and their organization. Although every case is different, the agenda is set by the client, not by me, although I focus on accelerating positive personal and business results.

The Pros, The Cons

Sometimes, we find the answer whether to stay or go before launching any study that pinpoints the optimum candidate locations. A stronger desire to relocate may result from a never-ending onslaught of taxes and regulations from states like California and New York that are hostile to business. In such cases, the owner “can’t take it anymore.” However, an assessment of family circumstances may outweigh other factors and result in a decision to stay in the current location.

Remaining in place or heading off to a new community is a strategic decision that affects the company’s future. Gathering information can be considered more of a tactical effort, although a critical one, that shows where and how any repositioning will take place.

So, when heeding Warren Buffett’s advice about how to test the depth of the water, it’s best to start by relying on a coach or consultant who will carefully use a “tape measure” on your behalf. That way, no one will “drown” trying to find a good answer to the stay or go question.

The resulting location decision, whatever it may be, can be positive for any family-owned enterprise. It does, after all, clear the deck for the next business-building steps to be taken.

* * *
One focus of this blog has been to address California’s hostility toward business, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, updated Jan. 14, 2016.

Joseph Vranich is known as the Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. He offers an introductory consultation at no cost to help company leaders understand the Site Selection process and to explore whether a project makes sense. See a summary of the process under "The Three Phases of a Location Project" at Finding Help for Your Location or Relocation Project.

Joe is a keynote speaker on the benefits of businesses relocating out of high-tax, high-cost, over-regulated states to friendlier business environments. More information is available at Biography and Speaking Availability. On Twitter, Joe is known as @LocationConsultant.