As a part of our series about 5 Things You Need To Run A Highly Successful Family Business, I had the pleasure of interviewing Alicia Goodrow.
Alicia Goodrow is a legal counselor, tax planner, and strategic advisor to family-owned companies, women & minority owned business, and entrepreneurs. She accomplished one of her professional goals during COVID by publishing a book for this community of business leaders. In her free time, she sings in her church choir, hikes, reads, and has adventures with her husband and two young adult kids.
My grandfather and great grandfather owned a family manufacturing business in the shipping industry. As a child, I visited the “shop” every couple of weeks to select new scrap wood to be blocks for my play structures. I listened for years to the background noise about how my uncle and my grandfather’s brother were unsuitable successors for many reasons. And I was aware that it was not my dashing WWII Air Force pilot hero grandfather’s first job choice to inherit the responsibility for the business. When my grandfather eventually retired, I was able to help the family structure a sale of that business.
When I was in middle school, my mother launched a disruptive school uniform business in Houston designed to break a monopoly in the private school uniform world. The business strategy, people dynamics, and just plain hard work around family ownership of a business was important to shaping my career path. I folded thousands of pairs of khaki pants and did inventory each year after Christmas. When my parents needed to sell their share of the business due to my father’s business transfer, I was in law school and witnessed the chaos, hurt feelings, and diminution in value that came from lack of good exit planning. Eventually, I helped my mother sell out her share of the business when I was a young lawyer.
Can you share the most interesting story that happened to you since you began this career?
Well, you probably don’t want to print the MOST interesting story. But I will share a story about the most influential family business owners I represented as a young lawyer. The real estate development business was owned by two families who acted as if it were a single family business in their leadership, economics, and succession planning. The founders were not brothers but were both active leaders in their church community and were bonded together in business and in family responsibilities as legal and spiritual guardians for each other’s families.
Family businesses often raise capital from outside sources while retaining voting control and significant economic upside. This double family business launched a new business after one of their businesses failed leaving investors with significant losses. In the offering of equity in the new business, they offered up EXTRA BONUS equity to anyone who had lost money in their prior deal. The new investor group (who had lost their money) largely resubscribed to the new deal because of their trust in the leadership and vision.
The founding fathers’ honesty and attention to detail was impressive. They broke all of the “best practices” rules that my mentors were teaching me about establishing backup plans, hierarchical leadership, and protection of the founders’ equity. Very few private companies and no public companies would have the vision and flexibility to take care of prior investors. The creativity and care they demonstrated in rebuilding the business after a failure was a good example of the power of strong family leadership that can bend the conventional economic rules to both take care of other stakeholders and shift directions for the benefit of the whole enterprise. The strong family values of this enterprise made a deep impression on my career direction and my way of counseling other family businesses in crisis.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
Hmm. Lawyers aren’t really allowed to admit their mistakes. And my early career was likely full of them. One mistake was to misspell the chief executive’s name on all of the closing documents (perhaps 100 or more). No one caught the mistake until he was at the airport leaving Houston. I had to drive to the private airport late at night and catch him on the tarmac to get all of the pages re-signed. Lesson learned — everyone cares about the spelling of their own name.
What do you think makes your company stand out? Can you share a story?
Our client care is outstanding. But what makes our firm special is our care for each other. The “virtual law firm model” may be common now as an accidental outcome of COVID. But 10 years ago it was not. The founders of the firm realized that the human factor — the collaboration, self-care, community building, and trust factors — would not happen automatically in an all-online environment. So the firm deliberately implemented monthly in person meetings, an annual retreat, and several other continuous team building activities to nurture the human side. Out of that attention to the human factor came a Wellness Committee that had daily lunch break calls during the COVID lockdown time. We’ve launched a group for partners caring for elders, a film club exploring diversity and inclusion topics, and several other human-interest groups. In many ways, I know my partners better from these deliberate online activities than I might if they worked down the hall from me.
Our lawyers reflect this model of self-care and honest collaboration in our client relationships. Lawyers can carry many titles include advocate and counselor. I believe our model makes us better, more thoughtful counselors who listen carefully to the holistic needs and goals of family-owned businesses instead of jumping directly into advocacy or technical lawyering.
Are you working on any exciting new projects now? How do you think that will help people?
Yes. I am helping a family-owned business gets its house in order to pass significant ownership to one of the next gen leaders in a logical and economically sound way while collaborating with the founder generation around “fairness” to the next gen members who are not involved in the business. At the same time, the next gen leader is working to develop her own “women-owned” brand alongside her father’s historically successful business. Working with generational succession is challenging and rewarding. Working as a mentor and advocate for women and minority business owners is a passion.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
The most important mentors in my early career were those who dared to tell me I was wrong or I was acting like a jerk. They cared enough to correct me. In many ways, the hard words — the humbling words — were the strongest form of advocacy that they could make for me in my career. They wanted me to be better. I did not have many female role models in my early career. Finding my own leadership style took time and the path was filled with missteps. Having male mentors who called me out for being too tough or too arrogant was important in helping me find my voice and my confidence in leadership.
How have you used your success to bring goodness to the world?
I hope that I do that daily in small acts of generosity and kindness. I do try to live by the Girl Scout Law especially its affirmative commitment to “Make the World A Better Place” through my professional and volunteer activities. For more than 12 years, I served as a Girl Scout LeaderI hope that the legacy I left in the lives of the 25 + girls who grew up in Troop 599 has helped them grow into young women of Courage, Character, and Confidence, bringing goodness into their worlds as their generation rises to leadership. My strong network of women in business chipped in as role models and co-leaders for these young women in their Girl Scout journey. That collaboration between women in business and middle and high school girls creates a powerful chemistry that can bring societal change over a generation.
Ok thank you for that. Let’s now pivot to the main parts of our interview. How do you define a family business? How is a family business different from a regular business?
A family business is one where a single family controls the voting interests in the company. Most family businesses are privately held. But there are notable examples of family businesses that sell public stock in a non-voting or restricted voting class and retain the voting class ownership within the family group.
The principal difference between a family business and other businesses is that a single group of affiliated individuals have a disproportionate amount of power over the company’s economic and operational decisions. The group dynamic and functionality or dysfunctionality of the family can have a significant, and sometimes hard to see, impact on the direction of the company.
A secondary difference is that the company can either be more or less stable in terms of long-term commercial viability depending on succession plans within the family group. This dynamic does not exist in the same way in regular businesses.
In your opinion or experience, what are the unique advantages that family-owned businesses have?
In the best cases, a family-owned business can take risks or explore opportunities that a regular business might shy away from or see as beyond the scope of the leadership mandate of the business. The King Ranch Company is a good example of a company that has diversified in somewhat unusual ways that a regular company might have avoided in the context. An historical ranching enterprise, the King Ranch Company has branched out into retail merchandise and brand licensing on popular trucks and other luxury goods. The empires that Elon Musk, Jeff Bezos, and Virgin Atlantic are building, in part to support their dreams of space exploration, are far more adventuresome than a corporation operating with quarterly shareholder reports in mind.
A family-owned business can act with the multi-dimensional interests of stakeholders like employees and local communities in mind instead of having a singular focus on short-term shareholder returns. I think of companies like H.E.B., a very successful family-owned grocery chain in Texas. They set aside up to 15% of the equity for employees. They provide educational subsidies to even entry level employees. And they have a corporate culture that makes them very popular community leaders and not just places to shop.
A family-owned business can often more honestly develop and operate by a code of ethics or statement of purpose. The King Ranch Company brand stands for environmentally sound principals and stewardship. The HEB brand stands for customer service and community support in ways that other brands might have difficulty matching.
What are the unique drawbacks or blindspots that family-owned businesses have?
A family-owned business can operate in an echo chamber without outside voices to challenge leadership. The family behind Purdue Pharmaceuticals certainly operated without sufficient outside input around the development and marketing of opioid-based pain medicine.
It is very rare for a second generation to have the right set of drive and talent and interest to assume leadership in a family-owned business. The ideals and drive of the first, entrepreneurial generation don’t always translate into the next generation. But the founders often very much hope and dream that their heirs will want to inherit and grow the business. The blind spot is that well-intentioned but often misguided drive by the founders to create legacy in leadership and not just legacy in wealth.
My Air Force Veteran grandfather was a fine, but unenthusiastic successor to his father’s manufacturing company. Perhaps if my great grandfather had sold the business, his sons could have leveraged their personal passions and talents into even greater happiness and perhaps greater wealth. This pattern of well-intentioned but perhaps misguided forced legacy of ownership repeats frequently in family-owned companies.
What are some of the common mistakes you have seen family businesses make? What would you recommend to avoid those errors?
- Failure to plan for succession — Work with outside tax, financial, estate, and business coaches at least once every 3 years to evaluate your succession plan and consider new alternatives.
- Failure to honestly evaluate family and non-family talent pools — Use readily available talent assessment and evaluation tools to match the right person to the right job. Be clear about job descriptions and responsibilities. Be clear about consistent behavior rules.
- Co-mingling businesses and non-business activities — Work with your lawyer and accountant to create separation for risk management, business expense and income management, and planning around different lines of business, different types of assets, and personal recreational assets. Do NOT hold the family ranch or ski lodge in the same legal entity as the manufacturing facility. Do NOT try to deduct the trips to Hawaii with the grandkids under the cement pouring company budget.
- Failure to really understand the company value — Work with outside CFOs, investment bankers, or valuation experts from time to time to honestly evaluate your company the way the market evaluates it. Take action around issues impairing that value. Be prepared to evaluate a third-party offer at any time.
- Failure to imagine selling the company — The highest and best outcome for your family may be a sale to outsiders. Keep that in mind as a matter of good psychological discipline.
What advice would you give to other CEOs or founders of family businesses to help their employees to thrive?
- Establish clear and clean lines of reporting and authority. Do not let family members interfere or jump over these lines.
- Involve non-family employees in goal setting and company identity. Make an effort to be inclusive in corporate culture.
- Make the workplace safe for non-family employees to share creative ideas.
- Make the workplace safe for non-family employees to report problems — especially problems involving family member employees
- Pay fairly and use best practices for management and employee development.
- NEVER rely on the phrase “we’re like a family” to cover up poor practices.
How do you define “Leadership”? Can you explain what you mean with a story or example?
Leadership is the art of embodying the goals and vision of a group and inspiring individuals and the group as a whole to tap into their best selves to work collectively towards that goal.
Donna Cole is the founder of Cole Chemical and one of the co-founders (with this author and others) of Pantheon of Women. Cole Chemical is a specialty chemical transport and logistics supply company providing services as a Minority/Women-Owned Business to Fortune 100 companies. Pantheon of Women is a film and theater production company providing financial and other support to women writers, producers, directors creating works that lift up positive stories about women and the guys who support them. Donna Cole is the inspiring leader providing energy, funding, networking, and tireless creativity to these ventures. How is chemical distribution related to film production? In Donna’s view, her leadership in both enterprises has a dual goal of making money and empowering women and minorities in business. Her vision — and the vision of a vibrant community of M/WBEA businesses — is to provide extraordinary opportunities for financial and business leadership growth for historically untapped populations. Aligning this vision with her teams gave her company the steam to become one of the largest M/WBE suppliers in Texas and to empower hundreds of other M/WBE suppliers across the country to expand their vision of what is possible. Finally, Ms. Cole has recognized that her daughter’s goals do not include inheriting her mother’s business. So Ms. Cole is working toward her end goal of selling her business to another M/WBE ownership team that will continue not only the commercial business but also the activism and leadership in the M/WBE community.
Here is our main question. What are the “5 Things You Need To Run A Highly Successful Family Business”? Please share a story or example for each.
Leadership: The energy business is full of ups and downs. The price of oil can hit $120/barrel one week and six weeks later is almost negative. A couple of years ago, a storage shortage in the global market created an inverted pricing structure and crashed the energy markets in Texas. My client was CEO of a family-owned engineering company. He announced that he would take a significant pay cut as would the senior leadership team to avoid layoffs for 6 months. This kind of quick-acting, personally painful and very visible leadership can save companies.
Vision: Where have we been is less important than where are we going. I’m currently coaching a family business that has great potential to increase its market share dramatically but has to sell off 70% of the equity to bring in diverse leadership with access to different markets. Having the vision to know where you can go allows leaders to see beyond the wall and make hard decisions about change.
Adaptability: Know when an apparent catastrophe can be an opportunity for growth. One client (a brother-sister owned business) provides services to the residential home industry. When COVID struck, many said their business would crater. Instead, they focused on automation, processes, and training internally. When a strong but unexpected outcome of the “work from home” world was a sharp rise in home sales, their business almost doubled. They rose to the occasion with their new processes and newly trained staff and significantly improved their market value.
Outside Voices: A strong leader knows when to step back from leadership to empower others. I once coached the CEO/Founder of a successful, multigenerational company to promote a non-family member to a senior position on par with the next generation’s most senior member and to empower them both. The new “second tier” team saw the business through different eyes and made many proposals for change. Adding the trust of the founder to the actions of the second generation leaders allowed them to gradually assume responsibility, build respect, and implement change.
Humility: As Kenny Rogers says, sometimes, you have to “Know when to fold’em.” Markets change, people change, technology changes, and sometimes there is no way to pivot around the consequences. Having the humility to listen to the voices outside telling you that it is time to stop or sell or close down a division, an enterprise, or a whole business is sometimes the best course of action. One of my most successful entrepreneurial family businesses regularly launched new ventures (in the hospitality business) — and regularly closed the ones that just didn’t work out. Having the courage to try something is bold. Having the humility to see when plans fail is often the key to preserving the value for the long-run.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
It sounds, on first impression as an arrogant quote: “Lead, follow, or get out of the way.” As I have matured as a leader in business and in the community, knowing when to follow and when to get out of the way are very important lessons. We teach our children leadership skills. The most successful ones hone those skills through Girl Scouts, Boy Scouts, sports, student government, theater, and other outlets. Then they carry the leadership skills into their first jobs and find that they are paid to follow (or sometimes to stay out of the way). This is a challenging lesson. Successful leaders use that early phase of their careers to learn to lead from behind the scenes or “manage up” while still officially supporting the leadership and its vision. A successful mature leader will realize that even when he or she may hold the title or authority of leadership, the smart thing to do is often to follow or get out of the way. This thoughtful consideration of role is a daily challenge to those with talent, resources, and training. But the mastery of role balance is empowering on many levels to individuals and to groups.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch with, and why? He or she might just see this if we tag them 🙂
In the business world, Debbie Fields (Fields Bakery Franchise) or Scott McClelland, CEO of HEB, who is a big supporter of women and minority suppliers.
In the entertainment category, Beyonce with her leadership in women and minority-owned businesses — specifically in Texas — comes to mind.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I am passionate about empowering young women globally to see themselves as agents of change in their communities. Introducing young women into the opportunities in technology and energy innovation in high school by pairing them with senior management and taking them to large STEM innovation events like Offshore Technology Conference, the IEEE Conference, South by Southwest, and other events gives them a vision of their own future beyond the walls of their high school educations.
How can our readers further follow your work online?
My website for my book, Back of the Napkin: A start-up’s legal guide from idea to enterprise, www.backofthenapkinbook.com has my most current articles and insights about business. To read additional articles about succession planning for family-owned businesses and related topics, follow me on LinkedIn https://www.linkedin.com/in/llcqueen/ and my law firm at Culhane Meadows PLLC.
Thank you so much for joining us. This was very inspirational.
The complete interview can be found here.