Are you a family or a team?
A recent Denver Business Journal article about the rapid growth of two Colorado-based companies — Snooze and Larkburger — caught my attention the other day. Not just because Snooze has great breakfast with a cool atmosphere and not because I’m envious of Larkburger for locating in ski areas. It’s because of their methods of expansion — not franchising and promoting a family feel.
I was extremely fortunate early in my career to help Kinko’s expand from a small group of stores to a company with 1,200 locations and 25,000 employees (we didn’t call them that; we were all co-workers). We eschewed franchising, instead adopting a bizarre but exceptionally effective growth model with “partners” rather than franchisees. The owners were literally partners with the founder, which eliminated much of the franchisor-franchisee strife.
In addition, we had a family atmosphere. The tight-knit, cultlike culture at Kinko’s cultivated much socializing, paired numerous couples and created many lifelong friendships. Further, profits were shared throughout the company. This fostered tremendous loyalty and was a key component in our growth.
We grew to a multibillion dollar company in this fashion. However, the story doesn’t end there. Our structure and familylike culture were not only tremendous advantages in the early years but also enormous impediments in the later years.
When the time came for us to roll up all the different partnerships (S-corporations) to ready the company for sale (yes, virtually every business has to transition ownership at some point), it took us years to pull it together.
However, from my perspective, the transition from family to team was the most difficult. Tight-knit families put up with dysfunctional behavior. Teams don’t. Families place bloodline ahead of performance. Teams don’t. Family members are often rewarded uniformly. Teams reward their stars more than their average or poor performers. Families often overlook faults and, in fact, foster them by avoiding conflict. Effective teams don’t.
It’s unlikely that you’re going to look for a better brother or sister. “Hey bro, now that we’re older, you’re not quite the brother I need to get to the next level” would be a pretty difficult conversation. Yet that discussion must take place for a team (that is, a company) to continue growing.
My experience is that family-oriented companies can often make great progress in the start-up or early growth phases. However, family behavior eventually becomes a significant impediment.
I’ve seen family businesses flourish, but I’ve also witnessed families ripped apart partially because they’re in business together. I’ve also observed many family businesses compromise on the service they provide, the rate they grow and the ultimate value (such as sale price) of the business.
I’m sure many family business owners read ColoradoBiz. My counsel to you? Do what makes your heart sing, but realize that if you choose family over team, you’ll eventually limit your results. Make it a rational decision, not a default problem.
One day at lunch, years after we left Kinko’s, I asked founder Paul Orfalea if he would do it the same way if he had to do it over again. He struggled with the answer and reversed course several times.
Plan for success, in whatever way you define it, and build a culture and business model that will take you to the finish line. However, if you’re going to grow “big,” be prepared for some family squabbles.