Soundtrack to a Financial Advisor's Life – Professor Will Tabor Discusses His Research on Family Business Succession Planning and BBQ Joints
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Will Tabor, Assistant Professor of Business Administration at Belhaven University Discusses His Research on Family Business Succession Planning and BBQ Joints
Trevor Chambers:
Hey, everybody. This is Trevor Chambers from Olde Raleigh Financial Group. Today on Meet the Masters, I’m really excited to do this, I’m going to be talking to Will Tabor. Will is an Assistant Professor of Business Administration at Belhaven University down in Jackson, Mississippi. Say hi, Will.
Will:
Hey, Trevor. Good to be with you.
Trevor:
It’s such a pleasure to have you. So what’s going on in Jackson… well, let me actually, before I do this, I’m fumbling this whole introduction. So one of your areas of research, the reason why I got Will on today is because he focuses on family business, some of his research, family business and specifically succession planning, so I’m really excited to have him talk about that. Obviously, we here at Olde Raleigh Financial, we’re in the financial planning business, so this dovetails really, really well.
But, before I get into all of that, you’re in lovely Jacksonville, Mississippi this morning, the 29th of May, 2020. What’s going on down there, how’s things?
Will:
Things are okay. You know, it’s quarantine life, so nothing too exciting. We’re doing all right. I got two kids and they’re enjoying being at home. Their mom is maybe, getting a little bit stressed, but you know, I think that’s pretty common across the board.
Trevor:
So just for historical reference, for the futures of millions that are going to listen to this podcast, we’re in the middle of the plague of what we call COVID-19, so that’s what’s going on. Well, I’m glad to hear that everybody is at least doing well. Yes, there’s a lot of frustrated parents across the United States of America. You’re a professor, obviously are going to look pretty different in the fall I would imagine, or could potentially look pretty different in the Fall for you guys, I imagine.
Will:
Oh yeah for sure. Right now, it’s anybody’s guess, what’s going forward. We’re in the south east and our state is opening back up at this point, so our university is planning to be open back up, but who knows what the future holds, we’ll just have to see.
Trevor:
Well certainly. So Will, lets get into it. Tell me about you, how did the awesomeness of Will Tabor arrive at this point, beyond being a professor, I see you got, in my deep research online here, it looks like you’ve got some Mississippi State University, some Westminster Theological Seminary, you got some Vanderbilt in there, I mean what’s going on? Tell me about you.
Well, kind of a jack of all trades, maybe not in the best sense. So I went to Mississippi State undergrad, ended up doing some graduate work at Vanderbilt, and then went to Westminster Seminary in Dallas. I was there for a few years, after that, I actually worked in College Ministry for about five years, and did that in New Orleans at Tulane University, and always had a desire to go into academia. I’m from Mississippi originally, my wife is from Mississippi as well, we had a desire to be back in Mississippi and closer to family.
So ended up doing PhD work in business management of all things, kind of a couple of reasons. I started a new Ministry when I was in New Orleans, and I was leading a group of students with volunteer work and trying to talk to them about how we form and build a group. I was reading theology, reading philosophy, but I also found a lot of times I was reading things related to business, and how do you work with people and how do you form an organization and lead an organization, and became more and more interested in that space. So one of my long term hopes was to think more deeply about how religion relates to business, something folks rarely associate together, but it was something I was looking to do. Mississippi State had a good program in that, and since we wanted to back closer to home, ended up doing my PhD in Business there.
Trevor:
Wow! What an interesting kind of twist on things.
Will:
Yeah, and my dad had a business close by, so I helped him out with that during my time, and so kind of got interested in the area of family business during that time. Mississippi State has a great program for family business.
Trevor:
Oh, I didn’t know that.
Will:
Yeah, that’s kind of the research interest. A couple of works there have done some real important work in that area, so it was a good place to study that. So that’s kind of how I got involved in that.
Trevor:
so what was dad’s business?
Will:
My dad, he runs an environmental consulting business. It’s more science based than somebody with a Ministry background is probably equipped to run, but I helped him with a lot of the business side of things, and managing clients, and things like that. So yeah, it was an interesting experience.
Trevor:
Cool. And mom and dad, they’re in good health, everything is good?
Will:
Yeah, they’re getting a little older, and my dad needed some help, so it was a good opportunity to do that.
Trevor:
I bring that up, because that’s a classic situation, right, so we can get more into that in terms of family businesses and planning there, because health does play a big role. So tell me about your research areas in family business, can you talk a little bit about that? What did you find anecdotally speaking that surprised you, or maybe didn’t surprise you, when you got into this? So kind of a two part question I guess.
Will:
So my research in family businesses, particularly at first, focused a lot on non family employees. The reason for that is there’s a big need to understand it, it’s kind of a less understood area in academia. It’s kind of an interesting dynamic. You have this family business, a lot of times the family business primarily exist to benefit the family, less so than say making profit, or increasing revenue, or whatever it may be. So they want to give jobs to their family, they want to build a culture that’s based off of family’s values, they someday hope to pass the business onto a family member.
Well, how do non family employees fit into this? A lot of the literature just kind of assumed that they were unhappy. Research has shown that family firms tend to pay less, they offered fewer promotional opportunities business those are reserved for family. There’s questions of justice, if you’re a better employee than a family member, you’re still likely to get passed over for a promotion. So how do they perceive this? Part of my interest in it was, that doesn’t really make a lot of sense. Why do these people choose to work there? Why do they continue to work there? So a lot of the assumption was, well, they had no other opportunities.
But what I found as I got into the research was, that’s actually probably not the case, that family businesses often times have very strong cultures. They have values, they’re very values based business, they’re not just interested in profit or making money, or whatever it may be. And a lot of people find a lot of value in that, they want more out of work than just a place to collect a paycheck. So what I found was that a lot of the literature has probably been making some false assumptions about what it means to be a non family employee in a family business, that is actually is probably something that a lot of folks appreciate and desire to be a part of.
So the literature seems to be moving more in that direction as times go on. One of the challenges is that family businesses are not all the same, and that while a lot of family businesses are probably great places to work, there are a lot of examples of them being tough places to work. A simple example of that would be Bernie Madoff, he was running a family business. So a lot of the reason, from what the research shows, is that he was able to get away with his large financial scheme about 10 years ago, was that he was part of family business, he had full control over the business, his sons were working in the business with him, so he was a little bit more able to get away with things because of the family business.
So as time has gone on, I’ve kind of pulled back a little bit on my assessment that family businesses are great places for non family employees to work. What I think I would say is that it depends, and that as any academic would say, it depends on the situation. But what I do think is interesting is that there is a sense in which there are just a lot of people who just want to work in family business, even if they’re not a part of the family. I think that’s something that’s been interesting to learn.
Trevor:
And why is attracting non family members so important to the life of the business? If that’s what you want to do, assuming you don’t want to exit out of it at some generation.
Will:
Yeah, that’s a great question. So basically the research says that the toughest problem that family businesses face is succession, and how they pass it on to the next generation. I think people could see how that’s difficult, it’s a big transition. But the second issue that family business owners name as being their biggest problem is hiring, and it is non family employees, and dealing with all the aspects from justice issues, for instance, family businesses operate on a different notion of justice, it’s not who’s the best, it’s whose blood line are you in, what is your last name, that determines promotion, well they have to deal with a lot of issues related to that. So things such as that become a real challenge for these businesses.
Interestingly, 80% of employees at family businesses are non family. So while a family may run it, the people that are kind of driving the rest of the business and the day to day of the business, are non family members, so thinking through that dynamic is essential for all family business owners if they go beyond just mom and pop running the day to day of the store.
Trevor:
So it’s less of a meritocracy in terms of [inaudible 00:13:05] tend to be stuck on that level of bloodline versus are you the best person for the job, that’s a big transition.
Will:
That’s exactly right. Our sense as Americans, some of this is a little bit unfair, that they don’t operate on a meritocracy, that family are kind of given advantages that non family employees aren’t. So one of the things that suggests is that family businesses put additional expectation on their family members. I talk about this in my most recent Harvard Review article, is that family businesses need to expect more in terms of education or experience from their family members, so a lot of times family businesses will send off that next generation, they send them off to another firm for five years after they’re finished with school, to say work for a different firm and to learn different things, but to also kind of get their grounding outside of just working for their parents.
Another thing I mention is that family businesses need to give tougher assignments to their family employees, travel expectations need to be a little bit higher. They kind of need to show that this is something they’re committed to, and if they’re going to receive a lot of the benefits from this family business, if someday is going to be theirs, they need to kind of demonstrate that they’re committed to it, that they’re confident to lead it. Not just because it’s important for them to be the leaders, but they also need to keep the morale high of their non family employees who are going to be automatically passed over, just because of the relationships of the family. So that’s something they need to consider.
Another issue that these family businesses face, and this is just a little bit of a side note, is the justice issue doesn’t just go between family and non family, it also goes between family members. This is what’s called the Fredo effect, from the Godfather, he’s a little bit less confident than the other family members, and there’s a sense in which families feel like they need to treat their children equally, if I give my kid this, then I need to give their brothers and sisters that. So there’s that sense, and one of the issues that’s often faced in family business is how do you deal with a child who is maybe expending less effort, not working as hard, or maybe they just don’t have some of the abilities that their siblings do, so that’s a real challenge that they face there.
So justice and how family businesses treat those that are non family and the family employees is a huge issue, but also how they treat the different siblings as well, because if one child is putting in a lot of work and effort and they’re treated the same as the prodigal son, then that’s a whole another problem. It’s an interesting deal when you combine family dynamics with a work environment.
Trevor:
Well, I have sensed some of that myself, I worked in a family business, I worked with and for my sister in law and my brother in law, so I have a sense of that. I talked to a guy, somewhere here locally, who’s got a family business, and one of the things he said is that, it’s not a given that the next generation will keep this thing going.
Will:
That’s right.
Trevor:
I think it also requires a good dose of being humble. That’s not always the case, but it’s a gut check, right, at some point. It’s not a given that you’re just going to take over the keys, and it’s not a given the thing will even be there. I don’t know if you want to speak to that, in terms of like what pragmatic things have you learned through the research that have to be done? You talked them a little bit, but it sounds like it’s almost like a mindset that you have to get into.
Will:
Yeah, that’s a huge issue, is how do you do this handoff from one generation to the next. Research has shown that family businesses, I believe it’s Danny Miller and his colleagues, he talks about this. As a side note, he wrote a book called Managing For The Long Run that is a great resource for anyone [crosstalk 00:18:28]. But anyway, he did some research, him and his colleagues, and they found that family businesses tend to do better than non family businesses, from a performance perspective, in general. But that’s only when the first generation of the firm is leading the business. After that, you tend to see a big drop off in the business, that the second generation may not be as able or as qualified or as committed to the business that the first generation is, so there usually is that drop off that occurs.
I don’t know if there’s a simple solution to fixing that. A lot of these folks who start businesses, they’re very talented, they work very hard, they put tons of time and effort into their business and then they pass it on to the next generation, there’s no promise that the next generation will feel the same way or be the same way.
I think what is most important is that, it needs to be a long extended handoff, and that it needs to be a thought through, well developed succession plan, it needs to be something you may need to put 5 to 10 years into preparing this, so you make sure that the generation wants to lead the firm, that this is something they want to do. A lot of times they don’t, they have other interests, they may not feel it’s for them. A lot of times they may not think that it’s financially rewarding enough, something along those lines. So you got to make sure they want to do it.
If they want to do it, you need to make sure they’re well mentored. This is something that I talk about in my article, that your greatest resource isn’t just having family members mentor these future successors, but it’s also having your non family employees do it. In order to allow the family leader to do all the training for the next generation, you need to bring all the different resources you have, you need allow for instance, maybe your salesmen or other folks that work for you to introduce you to different aspects of the business, so that they can know the ins and outs of the business and also build those relationships with other clients, or other people that they’re going to work with. All the different stakeholders of your business, your suppliers, your clients, all these people need to be brought in so that they have those relationships, so they know the different parts of the business, so that the next generation is prepared to take over.
Now what’s probably an interesting challenge with the handoff, and I think what’s probably less considered by family businesses, is what is the older generation going to do once they leave the business? They’ve dedicated their lives to this business, they’ve put in time and effort for years and decades of their life into building this business, a lot of their identity and their sense of worth is built into being the leader of this business. And they’re getting older, and now the next generation is ready to take over. What do you do there? So a lot of family business leaders need to think about like, are there hobbies you can do, or is there philanthropies you can get involved in, or volunteering, or something along those lines, is there some kind of other work you can do? Is there a role you can have in the business that you’ll be happy with, that won’t also impede the younger generation from leaving the firm.
Those are all big questions that family business leaders need to consider well before they do the handoff, because if they don’t, it may be very hard for them to let go and pass it on to the next generation, which will only cause friction in relationships, and potentially hurt feelings among the next generation. So all these things need to be well thought out years in advance, it’s not just something that’s going to happen overnight, and every different aspect of it has to be considered, from a relationship, to things like compensation and timing, all these things need to be figured out well in advance.
Trevor:
Yeah, in my world, we deal with that all the time, that’s what we do. We talk a lot about, you have to teach yourself, because today, I’m not really worried so much about you today, you know what I mean? Because you’re good, your health is good, your business is thriving, or your career is thriving. Yes, you’re going to have challenges in the present, all of us do, and I think you’re talking about it too, we got to talk about what is the future [inaudible 00:24:07], 10, 20 years out? And that’s an area that’s hard to talk about, but it’s necessary.
The other side of this equation, there’s the business, but in order to have a business, you got to have this other thing called clients. I think, especially family businesses, and I don’t know if you want to speak to this, but it seems like if have a plan like in anything, it’s going to build confidence in your client base as well. That’s kind of a critical part of this.
Will:
Yeah, yeah. Definitely clients are depending on you, especially in your line of business, I imagine that’s extremely important.
Trevor:
Yeah, absolutely. Any business.
That’s right. And then also your employees as well, they need to have that confidence, clients and your employees are depending on you for the service. They don’t want to just think that you’re just handing over the keys to your kid for nepotistic reasons or whatever it may be. So that’s always a thing that needs to be considered and something that family business leaders need to be very sensitive to.
Trevor:
Right. Before we started, we were talking about the general size of family owned business market, in terms of GDP or whatever. We’re not sure exactly how big it is, but it’s majority of companies that make up our economy are family owned, by far. So there’s that. Can you speak to, we have demographic changing right now, always changing, but we’ve got baby boomers who are business owners who need to transition. This is just big. I mean, for somebody in your space that’s researching this specific, there’s a lot of business, there’s a big addressable market here. Can you speak to that?
Will:
Yeah, that is a good question. I think there are a lot of different aspects that especially with… could you rephrase the question? Sorry.
Trevor:
Okay, yeah. Let me just write that down on a note. I didn’t mean to catch you [inaudible 00:26:48]. Here’s where I’m going with this, and maybe it’s not worth exploring, but it just seems to be, all these boomers, and they’ve got to make this transition, and it’s a big, [inaudible 00:27:05], maybe worth rehashing what we talked about. But it just seems to me that this is a kind of zenith moment right now, these next 5 to 10 years, as boomers trail off.
So let’s change gears a little bit. In your research, are there any hidden consequences for not planning, in terms of business succession? Do you want to talk about that?
Will:
Yeah, there are a number of issues that can arise from not carefully planning, from the younger generation may not be well prepared to lead the business, they may not know all that’s involved, and they may get into it and then realize that they weren’t prepared, or this wasn’t what they thought they were signing up for, and there could be a ton of issues created from that. They may feel like they need to go in a different direction, maybe consider other career opportunities, so those issues can arise.
You also have to consider any siblings, do they feel like they’re being treated equally as the child who is now taking over the business. There can be some friction created there between the chosen successor and their brothers and sisters, and also between you and your children, if this is just quickly run into and isn’t discussed with them in a way that they believe is fair and equal to how their brother or sister was treat. So that’s an issue, especially from a family dynamic perspective.
With your clients and employees, we talked about this a little bit earlier, but employees and clients are very dependent on you, and their livelihood, their lives are dependent on your business. So if it’s very hastily done, they may not have that relational comfort with the chosen successor that is needed. They may feel like they signed up, particularly with employees, they may feel like they signed up for something that your business isn’t actually growing into. For instance, some may hope to someday buy you out or to lead your business, and if just pass this on to the next generation of your family, they’ll feel potentially betrayed, as if you weren’t honest with them about your intentions. And with clients, they may not have that sense of trust or connection with your child, that will keep them on board. They may begin to look for other suppliers or other businesses to work with.
You need that time to build those relationships between those employees and clients, to work through some of the issues related to the family dynamics. So succession is something that needs to be well thought out many years in the making, before it is actually done.
Trevor:
There’s so many emotional issues, the more you talk, it’s a lot of emotional issues, that you got to work through. And it’s business, typically, successful business people are pretty pragmatic, it’s like, I got a problem, I’m going to go under the wall, that’s the problem, over the wall, around it, that’s how business people think. When you cater into the emotions of dealing with children, or not dealing with them, and expectations that didn’t make it or over exceed it, I mean it’s a lot of stuff.
Will:
Yeah, that’s I think what I find most interesting about the field of family business. This is broader point, I think it does illustrate, I think is important for everybody in business, whether they’re a family business or not, to realize that it’s never just business, that people always have emotions, they always have dreams, and hopes, and all these things that build into the day to day of their work. It’s not just about a salary, it’s not just about the best deal or the most profit. And a lot of times business folks think that that’s all that it’s about, and that’s a huge component for sure.
But emotion and just life in general and relationships drive family business for sure, and drives all businesses. The more that leaders can understand that and be sensitive to that and think through those things, the better leaders they will be. And in the family business space, it’s never just business, it’s always family and business. It’s never just family, it’s never just business, it’s always family and business. So it’s a different way of thinking about business altogether.
But if leaders can move beyond this idea that it’s just about the bottom line or profit, it serves them well, regardless of whether they’re in a family business or not.
Trevor:
Well said, perfect. We were talking earlier, before we started as well, talking about demographics, there’s a lot of baby boomers going through this right now, a lot. So I guess in your line of work, business is booming, because people need this knowledge. Let me say this, switch over to something a little more personal if you don’t mind, what are you reading? What are your podcasts, and what your Netflixing these days? Delve into that a little bit.
Will:
Oh man. Let’s see-
Trevor:
You talked about I think Dan Miller, is there anybody else [inaudible 00:34:03] that’s kind of cool?
Will:
Yeah, Danny Miller, his book Managing For The Long Run, I mentioned that, it’s got to be one of the best books on family business that’s out there he is a top, top entrepreneur, family business researcher, done great work, can not recommend that enough. A guy named Ivan Lansberg, he wrote a book named Generation To Generation, it’s a very good book for thinking about succession and the handoff. That’s a good place to start for anybody that’s interested.
Will:
One of the things I’m interested in, and this kind of fits in a little bit with what I was talking about, with the combination of emotions and business together, the book I’ve been in interested in most recently that I’m reading is a book called Bourgeois Virtues. It’s a libertarian economist, it’s a little bit political, so that’s part of it. It’s a University of Chicago professor named Deirdre McCloskey, and she talks about how the virtues like courage, love, all these things that the ancient philosophers talked about, are built through a free market system. I think that’s an interesting idea, not everything I agree with in there, but I think it’s kind of a different take on how we think about business in particular, and how it can serve not just a way to make money or product new goods, but also build up some positive values in people. Because of my Ministry background, I think that’s an interesting concept and something I’m looking to do more research in.
As far as podcasts, there is Tim Keller out of New York, he does some interesting stuff, it’s more religion based, but that’s something I’ve been interested in.
Then as far as Netflix is concerned, there is a show called The Last Kingdom, that I’ve gotten really into with my wife. It’s kind of Game of Thrones-ish, but it’s a little bit more historically based, and it’s kind of like 8th to 9th century England, and how the Anglo Saxons came to conquer England as a country, and it’s kind of going back and forth between the different clans that were involved there. It’s a good show, got some interesting moments.
I did the Tiger King thing, I don’t know if I should admit that in public.
Trevor:
I got to be honest with you, my kids said, dad, are you going to watch this? I’m like, no, I can’t do it. But I’m not judging, believe me, I’m not judging, because there’s plenty of stuff like that that I would probably never admit to, it’s hilarious.
Will:
I don’t know if it’s the best show, but it’s one of those shows you just can’t take your eyes off of. I’ll just kind of leave it at that. The recent Michael Jordan documentary is pretty cool as well. But yeah, that basically sums it up.
Trevor:
I love it, all right. One more thing and I will let you scamper off to your research and professor stuff, super hero stuff there. Give me a shout out in Jackson, Mississippi for one or two of your favorite places you’re beginning to go, from food.
Will:
In Jackson?
Trevor:
Or wherever, in your neighborhood.
Will:
Let me think, where are my favorite? I’ll tell you a couple. So my wife grew up near Memphis, and so I think everybody needs to eat ribs and the Rendezvous in Memphis. It’s a world famous restaurant, get the dry ribs there, can’t beat it. Then also, so I went to Vanderbilt, so everybody needs to go to Nashville and eat hot chicken. It is a Nashville specialty, and it will change your life.
Trevor:
Can you give me a brief description of what hot chicken is please?
Will:
It’s fried chicken and it’s very hot. That’s basically it.
Trevor:
I like that.
Will:
It’s like craw fish meets chicken.
Trevor:
Interesting. So it has a little seafood wrinkle flavor profile?
Will:
Different hotness, really just the heat. Just the heat.
Trevor:
Oh, I see. That sounds [inaudible 00:39:49]. All right, cool. Well Will, we got to do this again, I hope we can. I don’t know what you’re specifically researching right now, you hinted at it, but I look forward to perhaps having another conversation with you. This has been just absolutely fabulous. And all the entrepreneurs out there, this is just one more thing that you’ve got to think about, in terms of long term planning, so we appreciate your thoughts.
Listen, have a safe weekend, and we’ll talk to you soon.
Will:
All right. Thanks Trevor, I appreciate it.
Trevor:
Thank you. Bye, bye!
Will:
Bye, have a good one!
Trevor:
Yeah, you too!