What does personality have to do with growing a family business? And why is understanding the personality of an entrepreneur a key factor in a successful succession or exit?
This week, we’re joined by Chief Science Officer at Hogan, Ryne Sherman, and Entrepreneur and Succession Planner, Stephen Shortt, to understand what it takes to build a successful family business.
Join 20,000 listeners every month who get expert insights on building amazing workplace cultures!
Join the conversation as we discuss:
- What personality is, and why is it important
- How to assess personality
- How entrepreneurial personalities shape family businesses
- The unique dynamics of family businesses
- Leadership in family businesses
- Children in family businesses
- Managing a successful succession in five simple steps
If you own a business and have ambitions to exit or manage a successful succession, this one is for you!
All the links mentioned in the show.
- LinkedIn: https://www.linkedin.com/in/rynesherman/
- Website: https://www.hoganassessments.com/
- Podcast: The Science of Personality Podcast. Featuring some of the world’s leading experts in personality psychology and business, this podcast explores the impact of personality on life, leadership, and organizational success. https://podcasts.apple.com/us/podcast/the-science-of-personality-podcast/id1517116280
- Article on the Personality of Donald Trump: https://www.psychologytoday.com/intl/blog/the-situation-lab/201509/the-personality-donald-trump
- LinkedIn: https://www.linkedin.com/in/stephenshortt/
- Website: https://successfulsuccession.com/
- Podcast: Killer Family Business: https://successfulsuccession.com/podcast/
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- Connect with Leanne on LinkedIn
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⚠️ NOTE: This is an automated transcript, so it might not always be 100% accurate!
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Ryne Sherman 0:00
which was this top five company globally and was just completely ruined? Mostly by his personality right.
Al Elliott 0:16
Hello, and welcome to the truth lies and workplace culture podcast where we simplify the science of people. My name is Al and I’m a business
Leanne Elliott 0:23
owner. My name is Leanne. I’m a Business psychologist and welcome back
Al Elliott 0:27
we like to think that we put the phone in the fundamentals of people.
Leanne Elliott 0:33
Fi and the science of consciousness the car,
Al Elliott 0:38
I know buyers day you are you are so today we’re talking about the business of family from dinner table dreams to Boardroom deals. Great title, by the way. And so we’ve got two fantastic guests joining us Leah, who’s the first one.
Leanne Elliott 0:53
So our first guest today is Ryan Sherman. Ryan is Chief Science Officer at Hogan assessment systems. Now you’ll remember Hogan we’ve talked about Hogan before. Dr. Sherman, I should say, is an expert on personality assessment, leadership and organisational effectiveness. He is also co host of the science of personality podcast, which exposes listeners to the latest research on these topics. His research on personality and its interaction with everyday situations was also awarded federal support from the National Science Foundation. No, that wasn’t enough. He’s also received numerous awards for his research, including me named rising star in 2016 by the Association for Psychological Science and the sage young scholars award in 2018. What are you
Al Elliott 1:40
going to win an award
Leanne Elliott 1:42
Al Elliott 1:44
Sure, go meet Ryan.
Ryne Sherman 1:46
So I am Huggins, Chief Science Officer, which means I run our data science division and joven. The Data Science Division really consists of maybe three different parts one part where we do customer research for clients helping clients find personality based solutions that fit their specific needs.
Al Elliott 2:04
And our second guest is Stephen Shore. So Stephen is a strategy facilitator. He’s a team development coach, leadership coach, and more importantly for this podcast, a personality profile. Now he’s spent his entire life and probably most of his childhood actually in family businesses, and he started a few of his own. He’s bought family business reasons for bought hope that’s easy for me to say. He’s bought family businesses from his parents. He’s grown them internationally sold them. And he’s learned a lot about successful succession planning, and also made a few mistakes along the way. So he facilitates workshops, delivers keynotes and teaches on leadership academies in Europe, North America, the Middle East Asia, I think there’s a continent that Steven isn’t a king on. Now, what’s interesting to Stevens parents still work with him or for him, I don’t really know how it all works. Should we go meet Steven?
Stephen Shortt 2:50
I’m Steven short, I am from Dublin in Ireland. I’ve grown up in two family businesses, I bought both of them sold one of them, which was reliant 100% on international travels, so sold out just before COVID, so December 2019. And so as my wife says, we’ll never play the lottery because that was the day we want it. I have a personal interest in family businesses and the different nuances and the different problems and baggage that can go along with that, and helping other people throw up because I very nearly walked away from the whole thing. Until I’ve found the different tools and mindsets and things that I needed to do to actually have a successful succession and now couldn’t be happier with what I’m doing and still working and actually living with my folks
Leanne Elliott 3:36
to fantastic experts with us today to unpick everything about family businesses and how to navigate them right through to running them successfully and selling them successfully. But before we get on to that owl, we did our first news roundup last week segment didn’t get any complaints. I think, can we do it again?
Al Elliott 3:56
I got one bit of feedback saying that they laughed because the music was so inappropriate. So I’m working on that because I was like, oh my god, I seems alright, but so there might be some more music this week, and hopefully a bit more appropriate. We would welcome your letters,
Leanne Elliott 4:10
we would share your pitch.
Al Elliott 4:14
Okay, so what are these trends that we’re talking about this week? What have you spotted Lian
Leanne Elliott 4:17
going any word give me like some kind of claps and like new word alert. New word.
Al Elliott 4:21
Just told editing owl. He’s got to go viral.
Leanne Elliott 4:26
Do we have any word the great regret? Any guesses?
Al Elliott 4:31
Is it when you are in year 10 of your marriage and it’s Valentine’s day like it is now? No, I’m only joking. My
Leanne Elliott 4:40
biggest regret on that one is you didn’t give me anything.
Al Elliott 4:43
That is a huge regret. I won’t lie now. So what’s the biggest what’s the what’s the great regret for
Leanne Elliott 4:47
the great regret? So we had the great resignation of 2021 We saw lots of people decide to leave their jobs. What’s now being dubbed the great work threat, is it these people apparently regret making that decision. In fact, there was there was a survey carried out by some HR experts at paychecks. And they found that 80% of people who quit their roles in search of greener, greener pastures, regretted the new
Al Elliott 5:19
icon, and then kind of makes sense that there was the great resignation. Everyone was doing it. You know, it’s like Shell suits in the 80s. Everyone was doing it. I wonder I wonder if Australians and Canadians and Americans will know what a shell suit is? Very, very. Maybe I’m gonna offend people saying very Liverpool and Manchester centric, but it seemed like to me that the North only sheltered northern style, but basically, yeah, a lot of people were doing it everyone was doing it. And I thought, Well, why not? Why not? And so I blamed you know, I blame tick tock. Because they’re all like, Yeah, you should resign. And then everyone’s like, why do I do now and ago? I don’t know. You resigned in
Leanne Elliott 5:57
the news? Apple, you know, not the fruit the company.
Al Elliott 6:02
You know, the one? Yeah, I’m surrounded by everything Apple sells. Our office looks like an apple. That apple warehouse, I think.
Leanne Elliott 6:12
Yeah. So Apple has its first ever head of people. Oh, yeah. So apparently, Carol service is stepping into Apple’s new Chief People Officer role. And he’s taking on everything to do with people and human resources. Previously, that role was kind of combined with the head of the retail side of the business, which person and called Deirdre O’Brien. Well, she
Al Elliott 6:35
Leanne Elliott 6:37
don’t know, but maybe thinks she has Irish heritage. So yeah, first heard of people, which might sound a little bit surprising when you think about Apple having 150,000 ish employees, maybe more. So yeah, it’s one it’s a big job for somebody to take on retail and people. But equally, I can make sense to him. Well, there’s two roles were combined. We think about when we talked about on our employer brand episode, the overlaps between kind of internal brand and external brand in terms of customer experience and employee experience. It makes sense to me. But equally, you know, like a lot of organisations now they’re realising that having somebody who is dedicated to people and culture is the best way to go. So yeah, congratulations, Carol, we look forward to seeing what you get up to
Al Elliott 7:21
then get on the podcast, Carol. Come on. Hey, Carol. I like the idea that the apples values, I hope they’re called apple core values. I’d like like, oh, very much. Sorry, I’m sorry, as well, was your third.
Leanne Elliott 7:35
And finally, this was a little news article that in the Atlantic that caught my attention this week, it was about the work husband and wife. Why. So yeah, I’m sure everyone listening will know this, you know, you’ve you’ve probably had a work wife or a work husband or a work partner. It’s been something that we’ve kind of noted in both the media and in the literature since 2015. And I’ve got a definition for you of a work spouse. So it’s a special platonic friendship with a work colleague, characterised by close emotional bond, high levels of disclosure and support, a mutual trust, honesty, loyalty and respect. Some people have argued, that is connection somewhere sits between friendship and romance. And I get that I’ve had a couple of work husbands in my time, one of them is still very much in my life right now. And he’s one of my best friends. And I think it’s a really important relationship to have in the work becomes
Al Elliott 8:32
slightly upset that the people who created this idea of that where they defined it, they started off work spouse, and they went to special platonic and I’m like, that’s the first two letters of spouse, why couldn’t you have just gone the extra mile and make an sp Oh, USC and go special platonic. Other pin open?
Leanne Elliott 8:51
Al Elliott 8:54
Leanne Elliott 8:57
Need some work?
Al Elliott 8:58
We’ll work on that for next week. Okay, so back to the structure of the show. So what we’re going to talk about is we’re going to basically try to aim to last that’s that’s not a great confidence thing. Today we’re going to try to aim to, we’re going to be answering these these seven questions. First of all, what is personality? And why is it important? We’re going to defer to Ryan for that for who is the expert in that? How do we assess personality but more from Ryan? How entrepreneurial entrepreneurial personality shape family businesses, but from Ryan bit from Steven I think from them, unique dynamics of family businesses. Then finally, well, penultimate under leadership and family businesses, talking about children and how all that works, and then talking about children managing a successful successful succession. That’s not easy to say I wish I hadn’t written that down
Leanne Elliott 9:41
successful succession. It does need a little bit of thought and intention. So let’s
Al Elliott 9:46
kick off with personality. I think we all have an idea of what personality is you know, all they’ve got a bad personality, a good person, and they’ve got the kind of personality that does x y Zed. What Ryan said was that Hogan which is the company he works for, thinks of personality is what others think of you they He’s this fancy term like reputational inventory or something he’s gonna say, I’m sure in a minute. And I thought that’s basically your brand, isn’t it? Because we go back to what we said last week or the week before Jeff Bezos is saying that a brand is what people say about you when you’re not in the room. So therefore, Hogan is basically looking at your personality, which is what people say about you when you’re in the room. So let’s hear from Ryan,
Ryne Sherman 10:20
if you look at the field of personality psychologists from academic scientific side of personality, or if you go to even Wikipedia, and look up the definition of personality, it’s kind of a sad state of affairs, because it’s really clear that there’s actually not total agreement about what personality is. So there’s sort of little nuances of difference about what’s included and what’s not included in personality. But in general, when we’re talking about personality, we’re talking about individual differences in the way that people behave, think and feel. Now, some people would say, well, also motivations are included in there. And some people would say, well, personality is the driving and causal force of behaviour. At Hogan, we don’t really think of personality that way, we really do think of personality in a much more sort of reputational sense. So that is, what do other people think about you? Right? What do other people think about the way that you think, behave, feel? What did they tell us about you? How have you behaved in the past, according to people who know you? And for us, that’s the real key. The real key insight from personality is that reputation that you’ve earned behaviorally, because that’s what’s best kind of predict how you’re going to behave in the future. And and Hogan, that’s what our assessments are really about. Our assessments are about predicting how other people are going to perceive you predicting how you’re going to perform in the workplace. And so that reputational component is really the central part of what we do. So from my point of view, personality is really the sort of summary of how you think, feel and act across time and across a variety of situations.
Leanne Elliott 11:57
Typical psychologists not be able to agree on anything. It depends Fergana, a really great definition there from Ryan. And one of the reasons that I personally love Hogan assessments and the way their tools work. And the obvious follow up question. Now we understand what personality is. Why is personality important? There? Ryan has a podcast, it’s called The Science of personality. But Ryan starts a podcast by saying people are the most consequential and dangerous forces on Earth. I asked Brian, to explain this a little bit more.
Ryne Sherman 12:27
I think if we look around the world, and we look at the problems that are which are facing humanity today, almost all of those problems are caused by humans. Right. And that hasn’t always been the case. Right? So if we looked, you know, 1000s and 1000s of years ago, what are the most challenging problems the human face, a lot of those problems were caused by the environment, a lot of those problems were caused by other animals, a lot of those problems were caused by weather, right? were caused by a lack of resources, a lack of food, no ability to hunt, no ability to farm, right, there’s a lot of problems that our human ancestors faced, for a really, really long time. And humans have sort of solved many of those problems, right? I mean, those I mean, okay, it is the case that there is still poverty in the world, that is the case that there’s still people who go hungry in the world. But by and large, as a sort of species, humans have done really, really well at solving those sorts of old problems. The new problems, the real problems that people face and have been facing for the last several 1000 years are problems of other humans, right? What are humans doing? Were humans destroying the environment? Are humans destroying each other? And so I mean, I think if we look at, you know, you know, what, what’s the biggest impact on human life is actually other humans, right? Other humans doing that kind of destruction mean, there’s a war in the Ukraine right now, which is, which is between humans and I don’t know how many different species have gone extinct because of humans, because humans are hunted them, or they killed them off. Right? So in that, that’s what I mean, when I say when we say that humans are the most dangerous inconsequential force on earth. That’s what we really mean. Like, there’s really that we are the thing where, you know, we’ve we’ve found the enemy, and it is us, so to speak. And so from our point of view, if humans are so powerful, and humans are so consequential, it makes sense to sort of understand that thing, like what’s going on to kind
Al Elliott 14:29
of put things into perspective, when Ryan says, we’re the most dangerous things on earth. And this is down to our personality, from what I can understand. But we’re going to go into more of this in a second. So I can see why personality can’t be changed that easily. But how should we try and change? Is it possible to change it like why would it be a personality clash? Is this possible to change your actual personality? We asked Ryan,
Ryne Sherman 14:51
the research shows pretty clearly the personality is pretty stable. That is people tend to get the same scores. If you take the assessment again, whether it’s Hogan assessment or any other kind of personnel Are the assessment if you take this, if it’s a good assessment, and you take it again, you should get pretty much the same score, particularly if you take it in the short time period, like, you know, within a day or within a week, even within a month, you’ll get pretty much the same scores the next time. So for the most part, personalities pretty stable, there seems to be some research suggesting that maybe you can, at least to some extent. Now, I think it goes back to that question you asked earlier, which is really what is the definition of personality, if we think about personalities are sort of our biology, right? Because we know that there are biological connections to the hormones that we have genetics are related to how we behave and think the answer is probably no, you really can’t do it. I mean, that’s not technically true, we actually can change we can change our biology, right. So a couple of clear examples, like one is a strong blow to the head, that does actual damage to your brain will often change your behaviour in the way in the way that you behave. Which is not a great example. Or well, it’s not a great if it happens to people, but but it is an example of how biology shapes our personality. But other things about our biology can shape how we think and behave to right. So in a depressants, by some respects, I mean, that’s really what they’re doing, where they’re about changing your hormones, so that you behave feel think in a in a different way. So there’s sort of there’s sort of biological interventions, but we’re talking about like non biological interventions, to change our personality. And there seems to be some evidence that through really hard work, training, coaching feedback, you can change your personality to some small extent. So it’s not huge amounts, right? We know the personality is very stable from time point to time point. But through practice and feedback, we can actually change the reputations that we earn with our colleagues and peers, and to some extent, change our personality from that, from that point of view, I guess the way I would put it is, it’s sort of like a golf swing or a tennis stroke. And if you’ve practised a certain golf swing or a certain tennis stroke for a long time, it can be difficult to change it. You need a lot more practice of that swing or and you need a really direct feedback from a coach says, no, no, no, do this, do this instead, right? The problem is with personality is imagine you’ve been practising that golf stroke, or that tennis stroke your entire life. Right. So that’s what makes it so difficult to change is that it really takes a lot of concentrated effort, but But it can’t be done.
Leanne Elliott 17:25
So I think what Ryan is explaining in there is that yes, the research shows us that personality is fairly stable, over time and over our lifetime. And changing our personality can be really difficult. But in terms of changing our behaviours through coaching or feedback, that might be more achievable. And what we’re talking about there is self awareness, self awareness is this first step to making any necessary changes.
Al Elliott 17:51
So self awareness, if we’re not careful, does sound a bit like one of these terms? It goes, Oh, everyone should be self aware, sit on a mountain cross legged. But the fact is that I think you’ve told me before, there’s actually kind of a monetary value you can put towards self awareness.
Leanne Elliott 18:06
Yeah, so I mean, self awareness is is often cited as a really powerful capability for any leader to have. And it was actually a, an article that was published in the MIT Sloan Management Review, basically, some to summarise so that successful leaders know where their natural inclinations lie or know their personality. And they use this knowledge to either boost those inclinations or those preferred behaviours, or compensate for the mitigate those less productive behaviours. An interesting study also found that self awareness impacts a company’s bottom line, which sounds almost unbelievable. But Korn Ferry international found that companies with strong financial performance tend to have employees with higher levels of self awareness and poorly performing companies. So it seems to me that, you know, understanding yourself is really important. And it’s just one of the reasons why assessing personality can be a really powerful tool for leadership development. And taking that one step further. Assessing personality is also a great way of getting the insights we need to make a variety of decisions within our business. As Brian explains,
Ryne Sherman 19:13
personality, I think is really important for the workplace for several reasons. So really, actually, it was Bob Hogan, the one and Joyce who were the people who really kicked personality in the workplace off as a thing that that was going on. And this was for a couple of reasons. One was that employers have really critical decisions to make it doesn’t matter what employer you are, you have to ultimately make decisions about you can’t hire everyone. You have to so you have to decide, you know who to hire, you have to decide, in some cases who to let go, who to lay off, you have to decide who to promote, you have to decide who’s high potential, you have to decide who’s the safety risk. All of these are critical questions that employers have to answer and the data are actually really clear that companies that are better at answering these questions are going to stations that are better at answering these questions are just far more successful. And so if you want your organisation to be successful, you have to do a really good job of answering these sort of key personnel questions. And suddenly, the next question is, how do you do that? How do you get good at answering personnel questions, and there’s a few possible options, right? You could flip a coin and say, oh, I’ll just decide who to hire at random. You could give people a lie detector test. You could interview people, that’s a very common technique for deciding, you know, who to hire or who not to what personality assessments offer is a way to make decisions about people that is scientifically based, right? So there’s lots of research showing that personality predicts pretty much everything that every meaningful difference in sort of life outcomes that we care about, it predicts criminal behaviour, it predicts substance use, it predicts substance abuse, it predicts marriage, it predicts marriage longevity predicts actual longevity, how long we live, it predicts workplace performance really quite well. So. So that’s one way to decide as well as to use a personality assessment because we know that this actually predicts workplace performance. I
Al Elliott 21:08
mean, as business owners, we have to make decisions. I mean, that’s fact and the most difficult decisions tend to be around people, who do you trust, who do you hire, who do you fire, etcetera, etcetera. As Ryan says, we can go we can use the CIA technique with lie detectors and all that kind of thing. But the fact is that Hogan seems to be able to do this without too much sort of intrusive examination. So if personality accurately predicts the future behaviour, then it stands to reason that we measure that personality using an inventory like Hogan, or Hogan is going to measure how someone might act in a certain situation. What’s interesting about this, is that Ryan wrote an article back in 2015, about Donald Trump. This is way before he got elected in 2017. And I think he accurately predicted what to be like to be as what Donald would be like, or Trump would be like, as a president, I’ll link to this in the show notes. He basically said he was low on diligence, low on prudence, and high on bold ambition, which essentially just predict what however you feel about Trump, I don’t think you can dispute that. That was that sort of personified his entire administration his entire four years. But this was also really interesting. He suggested this is what Ryan suggested, was that, and I’m going to read this, the personality of Mr. Trump also highlights the characteristics of those who will likely support and vote for him. In other words, we like people who are like us. So if this is the case, then that kind of almost did a sort of snapshot of the prevailing personality of the American culture. In 2015, I thought was really interesting. Here’s what Ryan said,
Ryne Sherman 22:42
nobody’s quite as public as Donald Trump, right? I think I just read today that Instagram or Facebook, or both are letting him back on and he’s actually or at the time that he was kicked off was the most followed person on Facebook. Right. So I mean, we sort of know a lot about Donald Trump. So from my perspective, it was relatively easy to write an article about his personality to frame his stuff, his personality in those terms. But looking back on it like Yeah, I think it did pretty well play out just like we would expect, right. I mean, you know, the, the positives, and the negatives, and it’s actually really funny. Looking back at that the article in the comments and on on that, is that I got compliments and complaints on that article from both liberals and conservatives, right. So liberals said I was too nice. And they complain, they said, You were too nice to him. He’s awful, horrible, terrible person. And conservatives said I was too mean to a my cutting down too much. And so. So I kind of feel like, you know, I probably hit the nail on the head if neither if everybody agrees that I’m wrong, For opposite reasons. And maybe it’s not so
Leanne Elliott 23:50
bad. I think what winds really demonstrated very well there is that using a psychometric can give an objective opinion. It’s not whether you like it or not you agree with your politics or not? It gives you an objective opinion. I think he’s clearly done that, as he said, by having equal confidence and equal complaints.
Al Elliott 24:04
So what’s interesting is that we’re talking to Ryan, who’s obviously got lots of practical application, but also scientists, then we’re talking about someone, Stephen, who actually uses it in the real world as well. And so what’s funny is that Steven forgot to kind of use the this inventory for his own family business when he took over
Stephen Shortt 24:22
one of the things that we’ve discovered through this and then we work with psychometrics, our businesses is psychometrics personality profiling. But the cobblers kids have no shoes. We were completely almost ignoring our different personalities in the business and butting heads and how similar we were in some things and how different we were in some things.
Leanne Elliott 24:38
So we’ve made a case for psychometrics being useful. But of course, if you’re a regular listener, you will know that not all psychometrics are made equal his brain to explain
Ryne Sherman 24:48
the thing about personality assessments is there’s no there’s no regulating body other than the courts, which you know, sort of around personnel and hiring decisions Other than that, there’s no real body to regulate what It means that anybody can create a personality assessment. Anybody can create one today tomorrow, and just start selling it. And one of the big misconceptions is that many people think that, that they’re all equally valid, they all work equally well. But unless you actually have the data to prove that your assessment works, that your assessment is fair, that your assessment is unbiased, it’s, I think, just too easy to fall into a trap of all, you know, that all personality assessments are equally valid, you really need those that are scientifically backed, that have evidence for the validity, or that that is their accuracy, and that have evidence for their for their psychometric properties, that they should be able to offer you a technical manual, you should be able to evaluate just the quality of that assessment from from those materials. And if you can’t do that, then the chances are that you have a pretty bad assessment on your hands.
Al Elliott 25:56
So of course, the Chief Science Officer of Hogan is gonna say Hogan is great. Of course he is. But we want you to ask Stephen why he chose Hogan, over what the 100 Probably 100 plus other inventories out there.
Stephen Shortt 26:10
So Hogan is our preferred Personality Inventory. And the reason that I really like Hogan because it first of all, it’s in the workplace, it’s predominantly about how you are perceived and work and the proceeds. But it’s also important, it’s not about your identity, it’s about your reputations, how others are, how others view you, it’s not how you see yourself. It’s the age old thing of we judge ourselves by our intentions, and we judge other people by their actions. So Hogan is actually able to cut through an awful lot of that when you’re looking at your report, or when you look into our reports to the person that’s actually how they’re likely to be perceived. So you can get a much clearer understanding of, maybe that’s why everybody’s given out to me about this thing, because I am flaky or I am. I don’t feel deadlines because of this. So I find it really interesting. And it’s also a great way to be able to show people a, this is where you might have some unconscious biases. But be this is how you’re likely to approach a problem. This is how your parents are approaching a problem. Can you see a massive gap in the scale? That’s why you’re clashing and butting heads. Let’s look at it from each other’s point of view. And let’s find the middle ground and have those conversations that are not attacking. And not saying, Oh, you’re wasting our money. It’s like, No, I’m investing in software that we need to grow for the future because things have changed, etc, etc. I’m thinking
Al Elliott 27:27
Leo, perhaps we should have done a Hogan before we started our business. It’s funny, I’m very like, Oh, I’ve got some great ideas. And then as soon as they’re half done, I lose interest, whereas Leanne’s very much like, you know, let’s just plod on and get this finished. And you know, and in this finish, anything you see that’s finished, is because the hands either finished it or shouted at me to finish it. So what I did like about what Steven saying was that it was, Hogan is relatively simple to understand as a non psychologist as just a normal person. Of course, there’s lots of complicated things going on beneath the water. But first people like me like simple things, and Hogan is brilliant.
Stephen Shortt 28:01
What we really liked about Hogan is a the depth of the 27th, scale zero to 100. And like, you can get such a holistic nuance to somebody and you can really dive into the subscales and get a really, really clear picture of how they’re likely to be seen. And we found that clients respond really well to that. And they can understand that they can understand the concepts very easily where they are, and those scales and how they go together. So it’s and it’s scientifically, very robust. There’s a lot of history and a lot of experiences going into it. I’m not, I’m not a data driven person, not a process driven person, much more about the practical side of things. And I just know how it works. Like when I use it with people, I can see it works, and I can see the benefits of it. So that’s why we continue to do.
Leanne Elliott 28:48
So when you’re choosing a psychometric tool, being aware of the science and research behind it is really important, not only so that you know that you’re measuring the right thing and measuring it consistently. But that you can also get the data you need to make confident decisions within your business. As Steven said, when it comes to being robust. Hogan is one of the best out there.
Ryne Sherman 29:07
I think we have the best global norms anyone’s ever created about personality. And we’re continually updating those all the time. That’s a big part of of the data science mission is continuous improvement of our assessments and our norms. And then the third part is is our research archives is maintaining all of this knowledge that we have, right, all of the data that we gather all the research and studies that we do keeping those organised so that we’re just always accumulating more knowledge and keeping that at our fingertips is a really important part of what I do or what my teams do. So when somebody takes a personality assessment, if it’s a true false test, or if it’s a one to five sort of rating scale test, you get some kind of a number at the end of that test. So like let’s say you know, you took for a very short test the four item test on humility in there was a one to five rating scale. You have the possibility of scoring anywhere from a four to a 20, right? You could have marked them all the one, you could have marked them all five. So you have any possible range between a four and a 20. But the problem is that number itself doesn’t really mean a lot to people. If I if I got 12 on that test, what does that mean? It’s kind of hard to say. So what we do is we actually convert those raw scores into norms. And we do that by saying, Okay, well, just the same way, like a doctor might with height or a doctor might with weight, we say, well, people, like you who take the assessments. What’s a typical score would be but typically get, what’s the standard deviation? What does that distribution of scores look like. And so what we actually do is we report back to people where they fall in that distribution. So when I say a norm, that’s what we’re doing, we’re saying this is the distribution of scores. And when we give people a score back, it’s a percentile score. So maybe, maybe the 12 is at the 50th percentile. So you know, about half the people score above me and have people score below. But that’s what that helps give that score a much more interpretive meaning. And then you can really understand much better what that means. If you score in the 95th percentile versus the fifth percentile, for example.
Leanne Elliott 31:07
Ryan’s explained gnomes are really well there. And I think one that you’re probably very familiar with is when we talk about IQ, you probably know that an average IQ will sit somewhere around 100, a score of 100. And you also know if you hear somebody with a high IQ, or if you hear an IQ of like, 145 160, you automatically know that’s a really high school, because you have the context. And that’s what norms do that give us the context of our scores in relation to other people.
Al Elliott 31:35
Okay, so family businesses start with an entrepreneur, Dad, I don’t think there’s any other way you can possibly start. And there must be this kind of trend with entrepreneurs, because we’re all very different. So we must have some common traits. So let’s listen to Ryan and hear what the typical personality of an entrepreneur is. So we have
Ryne Sherman 31:50
data on hundreds and hundreds of entrepreneurs. Gosh, we’re probably getting into 1000s now of entrepreneurs who have taken our assessments of Hogan. And so there is actually a really clear profile that we see with entrepreneurs, it’s just quite amazing. Like, every time we collect the new entrepreneurs sample, like I can just plot out what that profile is going to look like. Because they just all it just always comes back the same. And a few things that we see. One is that they tend to score really high on a scale that we call excitable and excitable is about sort of volatility, being really feeling emotionally attached to lots of things and being willing to change and flex and, and having a lot of energy towards projects. That’s what we see with a lot of entrepreneurs. Makes a lot of sense. They’re really flexible. about change. What they want to do is go Oh, no, this isn’t working, get rid of it, stop, do something else change something new. So entrepreneurs are really good at disruption. Part of it’s because of excitable, they’re also very high. Imagine that they can be creative, they tend to think in new ways. They tend to score pretty high on ambition, they tend to score pretty high on what we call inquisitive, which is again, it’s about creativity. So basically, what we see with entrepreneurs is they see problems, right, they see a lot of problems, they want to fix those problems, right. And they’re really committed to doing whatever it takes to fix those. And they are happy to break down current systems to blow everything up, to restart to to fix that particular problem. And that’s what makes them so great at what they do is that they can say, Okay, this is bad, let’s get rid of that. Let’s change it, they can disrupt whatever’s going on. The problem is, when you start running a really successful business, right, if you’re an entrepreneur, you started this business and start to grow, it starts to become successful, because you did solve some problem that was really critical that people needed solve. All you’re looking for is more problems to solve. And many times, that’s not what your business needs, your business doesn’t need more change. What it needs now is stability, it needs someone to sort of steady the ship, right? You’ve done all the disrupting, and you’ve done all the changing and now it needs someone who can really fine tune and get it on that long term progression. And many cases, entrepreneurs aren’t very good at that what they’re very good at is disrupting is right making a lot of change. But first of
Al Elliott 34:02
all, thanks, Ryan, for us entrepreneurs thinking we’re special and you’re saying we are the most predictable type of people out there. Thank you. But I think it’s really if you are an entrepreneur, you will resonate with that imaginative people imagine. So when they think they’ve imagined comes to life, they imagined some more, which means that we are probably really bad for business. We’re great for starting them. But if you get us halfway through we are going to pick it up badly because we’re gonna go like Elon Musk took over Twitter went right get rid of everyone. We’re gonna do this. We’re gonna do this now. And it’s like, well, listen, established business for 15 years. All right, hadn’t made much money but still has a different discussion for a different day. So when we talk about family businesses when the No I’m first talking about, in fact, we talked about with Stephen I think, was we talked a lot about sort of subprime. That was the first thing that came to mind, wasn’t it sopranos the unless you if you’ve potentially lived on the moon for the last 20 years and sopranos is basically about a mafia family. But they’re not they are some of them are family but basically scrubbing. As family, it was interesting that we immediately thought I wonder if like family business and the mafia have any similarities?
Leanne Elliott 35:09
I think that’s interesting, is it because when you think about kind of famous family businesses in pop culture, they’re the ones that tend to spring to mind, you know, things like The Godfather, or sopranos, or, you know, or the mafia, or or, you know, even with them like that TV show six session. Oh, yeah, I can always meant to you based on the Murdochs and meant to be kind of a legit. But even then there’s some questionable activity happening there. So it just makes you wonder, is there some overlap between entrepreneurial organisations and criminal organisations.
Ryne Sherman 35:42
So really impressive data set collected by some of our colleagues in the Netherlands, who actually, were able to I don’t actually know how they did this, they were actually able to sort of, not necessarily infiltrate, but get but get in with some organised crime organisations and get assessments from individuals there who are not currently in jail, right? So typically are in prison, right? So typically, when you have, we have other prison samples, and Hogan, right, but these are people who are criminals who got caught or who were convicted anyway, these are individuals who are not convicted who are not, you know, the, some of them may be under investigation, some of them may be being monitored, but none of them have been convicted of a crime at the time when when they were assessed. So it’s, as you might imagine, is a hard sample to get. So it’s not a huge sample, I think we’ve got about 60, or 70, folks in that sample. And the remarkable thing about their profile is just how similar it looks to that entrepreneurial profile, I would say sort of key differences here. So a couple of things that I think stand out when we look at entrepreneurs, and the way that we look at criminals is that they’re both right in for destruction. They both are creative, they both can look at avenues for success. They’re both looking at ways that hey, how can I achieve? How can I solve some problem? How can I fix something? The differences, right is is really about laws. It’s how strict are the laws, and so in certain countries, and in fact, there’s a business paper many, many years ago, I think it’s a very overlooked paper where this business professor essentially theorised that there’s some fixed number of entrepreneurs in any population, and how many of them go to prison versus succeed really depends on how strict your laws are, right? If you have really strict laws, maybe you put many of them in prison. If your laws are very strict, if you’re pretty loose about what what can happen, then many of them are going to have to start these thriving businesses. And so that’s one of the key differences is just sort of how strict the laws are locally. But the other, the other difference that we see with, with entrepreneurs and organised criminals is is there tends to be an empathy component. So we see a little bit more empathy in the entrepreneurs that at some deep level, the entrepreneurs might actually worry about harming other people, right? They really, they really care more about that. Whereas the organised criminals have a lot less the other thing that we tend to see, we don’t have great data on this. But it’s seems to be the case, is that sort of background, right? So I mean, Elon Musk has been highly successful entrepreneur, but he didn’t start from nothing. Right, his parents had pretty provided a pretty strong financial base for him to start off with. And he also got a pretty good education, right? In the criminal world, we’re often talking about people who don’t have that, right. They didn’t come from a strong socio economic background. They didn’t come from a privilege area. They didn’t get to go to the best schools or anything like that. And so but but they have the same desires that those entrepreneurs do, right, they want to disrupt they want to change and see problems, they see ways to fix it, they see ways that they can be involved. And they want to gain status. And they this they’ll come up with a different creative means if you don’t have access to sort of, quote unquote, legal means for achieving status and success, they will resort to illegal ones.
Al Elliott 39:08
I love this. I love the fact that criminals who are not caught are just very good entrepreneurs, they see a problem, but they’re also vitally and highly and ultra aware of the constraints that they’ve got when producing this solution to this problem. Like what was that story about the gold heist you told me the day that every P every ring or something being sold
Leanne Elliott 39:28
recently, 1980s UK, six men broke into the brinks mat security depo near London Heathrow Airport. And when I think they thought there was stealing cash, but accidentally stumbled on like gold like gold blocks that are worth that time, like 25 26 million, which is what three four times the value for those six people were never caught. And it’s estimated because the vast amount of gold that they found and how they kind of got rid of it and
Al Elliott 39:56
the ranks that
Leanne Elliott 39:58
go along with it. Um, that yeah, that if you have a piece of jewellery gold jewellery in the UK that you bought after 1984, chances are there is a little bit of it, that you can originate back to this, this stolen gold supply.
Al Elliott 40:11
I love it. I love it.
Leanne Elliott 40:12
So giving the population what they want, without being too concerned about the constraints of the current regulations in place now call me crazy owl. But this reminds me of a young entrepreneur who established his first business by selling beer outside of regular UK licencing hours.
Al Elliott 40:33
Yeah, that was me. That was me. And it was it was asked to send ostensibly legal but you notice that I don’t use the word 100% League. If you didn’t want to hear how I broke the law, and how the law won, then go back to the episode at the end of December where you’ve got my story and the story. And we tell you all about it. So growing up in rural Lancashire, it’s kind of weird because when I think of family businesses, I think of farm shops, I think of farms or shops, that farms shops, barber shops, shops, and so I kind of think of, of just family businesses, whereas actually there are some huge family businesses like Guinness is started by Arthur Arthur Guinness. And it’s um, and he starts off with his idea that that people would have he’s building a business for his children, his grandchildren. Now as all the has a butterfly kind of entrepreneur, I kind of find anything longer than a 10 month plan. Fascinating. I was wondering whether the Irish big family Catholic family lent itself more to family businesses than other countries. So as Steven is there anything to do with, like, culture country in family businesses,
Stephen Shortt 41:49
so funnily enough, the term family business really only came into existence in the last 75 to 100 years, with really the Industrial Revolution, and people really forming these huge businesses that have multiple offices and headquarters. Because before that, all businesses are finding businesses, like if you were setting up a store, or a service, or a farm, or anything else, who even you’re gonna pay somebody down in the town, a couple of bags of flour to work, or you’re gonna hate kids, we’ve had 16 of you start working. So family business as a as a, as an outlier almost really only happened in the last two generations. So and people started to use the term family business, especially in America, like the mom and pop, it was, originally the mom and pop thing was kind of not really professional. And I’m really serious. But then actually, family business started leaning into this because there are values based and they have a longer view of the client and everything else. So there are people who prefer to work with family businesses. But there are some people who prefer to work with, with corporates. But you mentioned Japan, and Japan, to me is fascinating. So the oldest business in the world is a small hotel in Tokyo, and I’m dying to get out to see them. Because it is it’s, I think it’s 100 generations old or something outrageous like that. But the thing in Japan, and you can look this up, this is true. 80% of adoptions in Japan to this day, are people who are 30 years and older. It is adoption is huge in Japan, but not have kids. It’s people who are running family businesses who aren’t so sure that their Jr has what it takes. So they find an executive, they find somebody that they think can carry on the business. They adopt them legally at 30 years of age, they take the name, they do everything else. And it becomes a family business. But it’s to me business by adoption, not necessarily because your bloodline is actually flowing through the industry for the business for generations, which is fascinating to me,
Leanne Elliott 43:50
that is really interesting. Taking the concept of family businesses to an entirely different level. As we said, alumni or very small family, businesses, just the turnovers. And one of the dynamics we’ve had to work really hard on and we still do, if I’m being honest, is separating work life and family life. It’s really tough. I mean, if you think about going out for a drink with your mate from work, and not talking about work. Of course you do you just do. That’s the way it is. So here’s Stephens thoughts on one of the most challenging dynamics of working with family.
Stephen Shortt 44:25
So if you’ve got family business owners, a family business, who they talk about the business all the time they have dinner and every dinner devolves into a board meeting or a conversation about the business which you don’t get in other families because you’re not working together as well. I think there’s a lot of extra baggage that happens. Because there is not just the professional dynamic. There’s also the mother father, child dynamic and where the authority lies, and you might in a company you might feel actually I’m the Marketing Director, I’ve done i I’ve earned my chops, I know what I’m doing, I can have a professional conversation with the CEO and say, look, the direction that we’re going in is wrong, we need to be on tick tock, we need to be doing all this other stuff where for the kids are, and you can have a professional conversation, there are kind of rules of engagement around how those meetings go. Even in a even in a casual working environment, where there’s with the parents, sometimes there can be a Nelson, don’t tell me what to do. I’m in my living room, you’re in my house. And there can be that element of tension. And it’s actually one of the things that I tell people to do when you’re having meetings like this, don’t don’t have them in the house, don’t have them in the office, go out for dinner, go somewhere else, go to a rugby match, go to do something else that is not either of your territories for want of a better expression.
Al Elliott 45:46
This is gold. We’ve only just recently learned this. And we now go out for coffee, if we want to talk about anything about business because if you have an argument in your home like I’d love to say that oblong HQ is is massive complex, like the Apple park, but really is just a three, two bedroom apartment. We’re one room is our office. So if we’re sitting at the dinner table, and we’re eating dinner, and I say I want to do this kind of thing. And the angles, no, I don’t. Because we’re in the context of our home, it feels like a personal disagreement. I don’t say the word argument, a personal disagreement, which in itself is personal. Whereas you go outside, you go somewhere else, you have a cup of coffee, you sit down, I’ve got these ideas. And we’ve done hints and we’ve fallen out when we’re out. But then almost like we come back in, it’s like, okay, that was a thing. We didn’t agree. That was done. So we’ll dive into the five P’s that Stephen comes up with in a second. But the first one stands for purpose. And it’s really interesting, because it contextualises, all of your discussions,
Stephen Shortt 46:47
everything in succession planning, everything always comes back to the first P which is the purpose. What are we here to do? I mean, are we here just to get into this nitty gritty? Or are we taking a much longer view and family businesses tend to take a longer view because there is that sense of succession? Actually, Arthur Guinness, from Guinness, you know, you’re familiar with one of these small Irish brand. He had one of his tenants was think in terms of generations yet to come. So he wasn’t even thinking in quarters or years or tenure targets, he was thinking about great grandkids that haven’t even been like the grandkids aren’t even here yet. So his thinking was so ground, that he was thinking much more long term. And anecdotally, it was like he didn’t get as flustered with these things. You could see them as being petty or whatever. With family look, I mean, I have, I use a phrase a lot, which is Blood is thicker than water, but it short boils faster. So brothers and sisters working together, for example, to holiday can get under your skin much quicker than any other teammate. But one of the things that I’ve found is that you can have the blowout or have an argument. And people can be shocked about Oh, my God thinks this is they’re having a big blowout, but then two months later, they sit down at a board meeting or meeting and it’s the error is clear. They’ve had that quick bash, put they had the sense of okay, right, we need to get on with this now. And we’re really we’ll sort this out later. So I think that there is a there’s a sense that when you’re about to blow up, if you’re remembering, look, we’re not just in this for the quarter, we’re in this for the long term, stuff, petty stuff starts to get dissolved away.
Leanne Elliott 48:27
And I think that is the interesting dynamic about working with family. On one hand, you’re more likely to get dragged into a heated debate, shall we say, when you’re very familiar with somebody, but equally, you probably will as you go, Okay, let’s park this. Let’s move on, we have something else to focus on. Now. It is an interesting dynamic. But of course, there are other ways to join a family business. And that’s to marry into it. We are Steven about the differences he’s observed with his friend and client, Evan, who married into a family business.
Stephen Shortt 48:56
So yeah, so he’s a friend of mine for many years. We were we were very friendly competitors when I was in the language travel business. So he was very gracious to share his story. It probably did it. It had the same. He had the same issues in terms of there needs to be communication. What was the plan? What was the succession plan for this? What were they going to be doing? Where were they aligning? What would their expectations what was his expectations? But I think what he he probably he didn’t say this in the pocket. He didn’t say it to me either. But I would imagine when you have your own family, you can be a little bit more kind of alpha. Just telling me what you want to do. You can kind of lose the cool a little bit. Not so much with the inlaws I suspect and feeling have gone. Maybe I can’t have a go or I have to be a little bit more patient and I have to swallow that a little bit more. But, I mean, it was a very easy transition in the end like there were he talked about it in the podcast, once they were able to kind of understand the expectations for the people that actually were here. able to accelerate a couple of those things. And both sides got what they wanted, and was able to have the freedom to do what he wanted in the school to make the changes and to grow the business. And the the in laws, were able to walk away feeling, okay, it’s in safe hands, whatever we’ve built in, we’ve done and it’s not our kids, but it’s, it’s still in the family. So I suspect it was a little bit more polite, perhaps than a traditional family business when you have a couple of mom’s extension. Bush, as far as I know, they’re still they’re going on still very well.
Leanne Elliott 50:37
When we’re talking about the current generation within family businesses, or what are typically the parents within businesses. They’re also the leaders. And having the right leadership in place, as you know, is critical to the success of all businesses. In fact, there was some research done by PwC recently, and they found that first generation businesses 42% had double digit sales growth. But by the fifth generation, only 22 percentage, and 48% are only in single digits. So reasons for slow growth can be things like risk aversion, market changes, and succession problems. But another key issue can be the misalignment of leadership around the company’s purpose, values, mission, vision and brand. So it seems safe to say that picking the right successor to lead a family business can be challenging, and perhaps a little bit more emotionally charged than in your regular business. But before we dive into that, let’s remind ourselves the importance of leadership, his reign,
Ryne Sherman 51:41
almost the obvious place, the personality can help us with leadership. So there’s a lot of data over the last several decades on leadership and about having effective leadership and having the right leadership in place. Basically, when the right leader is in place, organisations thrive. And the individuals who work in those organisations thrive, the individuals who live in those communities thrive. And when the wrong leaders are in place, really bad things happen. You know, organisations fail the individual suffer. I think there’s really clear ones if we look at and this is true, whether we’re talking about corporate organisations, right, you can look at organisations like Enron and say, Wow, that’s not a great place to be, or an organisation like Apple, and we’re okay, that’s a really thriving organisation, getting the right leaders in place is really essential. And personality assessment, that’s one of the big things that we do at Hogan is use personality assessments to help organisations find their future leaders to find those right leaders to put in place in the corporate world, we know that the CEO is responsible for somewhere between 20 to 35%, of public company’s stock price. And so I mean, what’s that all about? That’s all about getting that right, CEO. So again, we’ve talked about terms of content in terms of knowledge in terms of experience, but that’s relatively easy to evaluate the much more challenging thing to evaluate is their personality. And are, are they going to make really, really bad decisions? Like, I give it one example that it’s clear, as is with Jack Welch, who pretty much ruined GE, through I mean, he was named like time to serve. I think it was Time Magazine, man of the century, or leader of the century or something like that. And, and, and But unbeknownst to people on the outside, he was completely ruining GE, which was this top five company globally, and was just completely ruined, mostly by his personality, right? It’s actually quite interesting. One of the things that he said was that leadership is all about charisma. I mean, that’s what he said, Right? Leadership is all about Chris is all about charm. It’s all about convincing people persuading people. We don’t think that that’s what leadership is about, we think the leadership is about building a team that’s going to be really effective and productive, right. And so I think it just really underscores the point that getting those right leaders in place is really critical. And personality assessments is, in my view, the best way to do that.
Leanne Elliott 54:11
Family businesses, as we’ve said, start with entrepreneurs, and entrepreneurs, sorry, I’ll have a very specific personality profile. And that might not always go very well with a growing business. So as a business owner, that’s growing your business, whether it be a family, business, or otherwise, looking at leadership expertise, and approach, both now and what you’ll need in the future is going to be a vital step in ensuring its survival. Here’s Ryan’s advice.
Ryne Sherman 54:37
So what we find with many entrepreneurs is that it’s really really valuable to have a an exit plan is to do what you’re good at is to say, Okay, I’m really good at disrupting and once we’ve done the disrupting, I don’t need to disrupt any further because that’s what they really are. That’s really what they want to do. An alternative is to have a number two, who works for you who can sort of To pull the reins in on some of the disruption, you can say, hey, we have a plan. Remember, this is a good plan, we’ve agreed to the plan and we need to stick to this plan for now we don’t need to. Because the reality is that while many people get inspired, right, there’s a lot of people who go, wow, that’s right, we need this change something we need to do. Most people, there’s about 90% of people can’t handle constant change, entrepreneurs love, constant change, they love we’re going to do something different every day. Most people can’t handle that most people want some modicum of predictability. They, they want to know, okay, I know what’s going to happen today, when I go into work, I know what I’m expected to do. And when entrepreneurs are in charge for too long, that you lose that expectation, you lose that sense of security, you lose that sense of predictability in order and structure in your life. And those people just quit, they get burned out. So that’s one of the real risks was entrepreneurs staying into the role too long? Is that the burner? They’re really talented employees out?
Al Elliott 55:58
Yeah. And I think that something that Ryan says there is that entrepreneurs, entrepreneur, if that’s a verb, well, it is now. But I think the the fact is that that’s what they do. But what happens if you have, you know, you have have a child who is not an entrepreneur, they’re more of a CMO, they’re more of a Chief Operating Officer, they’re more of an artist, you know, it kind of tough in that situation. So we’ll come back to family dynamic in a second. But we have to be realistic. The fact that the entrepreneurs who started businesses 4050 years ago, are ageing, and they’re probably in the baby boomer generation, what happens now,
Leanne Elliott 56:35
I think you’re right, that is a really interesting dynamic of a family businesses and, and having that, you know, current generation CEO or MD That is ageing. We heard from Ryan before that personality is fairly stable, but it can change under particular circumstances. And ageing is one of them.
Ryne Sherman 56:53
We do know that as people get older, their personalities change in more predictable ways. So as we get older, we tend to become more conscientious, we tend to be more rule following, we sort of learn the rules of society and find out that that’s actually pretty rewarding to follow those, we tend to become more agreeable, we try to get along better with people, particularly as we move into the workplace, we realise that, oh, the way to succeed at work is to sort of get along a little better, so become much more agreeable, we tend to be get a little more extroverted. As we get older, we also tend to become less neurotic, which is, or another way of putting that is to become less emotional, become more emotionally stable, as as we get older, as well. So there are these sort of common trends that everybody follows.
Leanne Elliott 57:37
I think a big one there is, is what mine said about becoming more risk averse, and risk, being risk averse, and being an entrepreneur aren’t typically things that go hand in hand. Steven also identified the older personality as a factor, and what it means for a family business.
Stephen Shortt 57:54
There’s a there’s a fret, another phrase that I use, and I use it a lot when keynotes and workshops, which is, what got you here is not going to get them there. And when you have a current generation that is risk averse, and they built it up the blood, sweat and tears, and they’re looking at the next generation, especially an unconscious bias of actually, we had to sacrifice so much for you to be in this position. You never had to sacrifice that. And now you’re taking it for granted. There is a real unconscious bias of you your your change could wreck this because we know what we’ve been doing for the last 30 years is keeping us here. But actually, if you don’t change, you’re gonna get stomped by the market. So the next generation sees the world they’ve grown up in the world that they’re going to be living in, they know the changes that the company needs, because they’re saying this is outdated, or that’s outdated. So there is a big tension pole between those two areas. And that’s somewhere where we can have really in depth conversations. And having those personality reports like Hogan makes it so much easier to have those conversations as a researcher
Ryne Sherman 58:59
out in out in Hawaii, who was studying personality and the structure of personality, so which traits go with which traits and he was doing this in little children. And he he was having teachers, right, the kids personality, third graders, fourth graders, fifth graders, sixth graders, at the University School, and Honolulu, Hawaii. And he had collected 1000s of these teacher ratings and done some factor analysis to try to sort of understand what the structure of these traits are. And then he just said, Okay, well, I’m done with that study, and eventually retired. And that data set sat around for about 30 or 40 years, when another researcher at the University of Oregon named Lou Goldberg said, Hey, wouldn’t it be great if we could go find those people and see how they’re doing today? And that’s actually what they did. They got a grant. They went and found these people to find out sort of, you know, what did they see? 30 or 40 years later, right? So when you’re in third, fourth, fifth grade, you We have teachers ratings of your personality. And then they actually brought 1000s of people back to the Kaiser Permanente Hospital in Honolulu, Hawaii. And they did all kinds of things and medical tests, they did interviews, they had been taking more personality assessments, more modern personality assessments. But one of the things that they had was video recorded interviews of their sort of life history. And when I met with Lou Goldberger, we said, hey, wouldn’t be really cool if we could code those for behaviour. So one of my colleagues and I had been spending a lot of time coding behaviour from actual live interviews. And he gave us hundreds of these videos, we went back to our lab in Southern California, gave these videos to our trained research assistants, who then encoded how these people behaved in video. So to again, sort of put this all these pieces together, we have what your teacher said about you, and third, fourth, fifth, sixth grade. And then we have how you behaved 30 to 40 years later, in a video interview, right? So we’d be measured things like, you know, how frequently do you talk? How sort of creative do you sound? We measure things like how anxious and nervous do you feel in the interview, right? We were able to predict how you behaved in that interview based on what your teacher said about you. And the third, fourth, fifth or sixth grade, which I think is pretty amazing, right? So I think that really speaks to when we’re talking about stability and personality, right? So your reputation when you were little predicts how you behave when you’re older, we can
Leanne Elliott 1:01:35
predict using using personality metrics using these behavioural, there’s behavioural coding, how somebody will act in 30 years time, based on how they are as a child.
Al Elliott 1:01:47
So this is fascinating. So potentially, parents at a very young age will have instinctively a good idea of whether their kids are going to be good enough to take over, not even good enough, because that’s a really judgmental thing to say, are going to be suitable to take over the reins of perhaps the position they’re taking over. Now, what happens if you look at them and go, No, that’s not gonna work? Do we straight up, tell them then I’ll get involved. We are Steven
Stephen Shortt 1:02:12
B, I just did a video last week of how do you tell a child that they’re not getting the business because there are times when you’re looking at a Chromebook, you don’t have what it takes, you don’t have the personality, you don’t have the hunger, the drive or whatever. And there’s all kinds of things that you can do. I mean, for me, when it comes to the next, the current generation family business, there are four S’s of what you can do with a family business. The first one is stop. So if the current generation tragically dies, or just retires, and there’s nobody to take over, whatever, the business just stops, it’s just current generation, besides not going into that office anymore, shoulders down, boom, that’s it, stop. That is my third least favourite. The second one is cell. So the sale you can decide, okay, my kids don’t want it or I don’t want to give it to them, I’m just gonna sell the business take to get the maximum amount account for the amount of hard work I put into it, I leave them, give it to them in an errand and so whatever, I’m gonna go off and sell around the world on the yacht, whatever it is you want to do. If that’s what you want to do, brilliant, there’s plenty of specialised services companies that can help you to maximise that tax law, everything else. That is my second favourite, because it’s a cleaner way of making sure that everybody’s happy. The third s is survived, that is my least favourite. Because survive is when they put somebody in place that is really just a caretaker, somebody just just keep things ticking along, don’t rock the boat. The problem with that is the market is going to change, your competitors are going to start catching up. And for me, the survive is just a very long, prolonged painful stop, that you have no control over, you’re just kind of bouncing along. So it’s my least favourite option. My favourite option is scale, the final S which is putting the right people in the right place to scale through the generations to actually make a difference in the generations. So an example that I had with a client of mine, who’s actually a friend of mine as well. He is the kind of the typical CEO out there driving the business meeting people networking, negotiating, bringing in stuff for the business, there are about three, three and a half million in revenue. His son is starting to make moves to say I’d like to join this, I like this, but he’s not a CEO. He’s not an out there. He’s not a gregarious type of guy that’s going to be out there. pounding the pavement coming up with ideas and being creative, great guy and very process orientated, very detail orientated. So it’s going to be much better in a clo type role. So he’s a great operator, or he will be a great operator he has the personality has the attributes to do it. So what we’re looking at doing, it’s not going to be for a couple of years. But when the succession plan comes in, we’re going to be looking for a hired gun, an external CEO. And we’re going to say, Okay, here’s the plan, you’ve got 10 years as the CEO, we’re going to pay you a tonne of money, you’re going to get bonuses, here, there, and everywhere, you’re going to take the business from three to 12 million over the 10 year period, you’re going to really drive this business on, my son is going to work alongside with you as the CFO, learning everything about the business, then in 12 years time, or 10 years time, whatever, when you got to see that 12 million, we’re going to give you a massive golden, golden parachute, off you go, you can now go and be a gun for hire for someone else and join a bigger company. And that’s their progression plan. That’s their personality, their ambition driving and growing, then the son will step in as the CEO. And once the business is at that size, then it’s about maintaining and managing and being able to keep that on the strike. Now, the example that I really use, this is Apple, Steve Jobs, the quintessential kind of highly creative CEO, really only looked at new products, and marketing and plants, everything else was handled by Tim Cook. Apple, hugely creative, growing at a huge pace really outperforming the market in terms of products in terms of design in terms of everything else, then Steve passes away, Tim Cook becomes the CEO, they haven’t really invented anything new, but they’ve never been more profitable, because they’re at the size that CEO, Tim Cook is very process driven, make sure that everything is done properly, everything is done correctly. And there’s not this wild, kind of let’s throw some money into r&d on this. So it’s that kind of an idea. There are lots of different ways that you can have succession, depending on who your pick is. So what’s the purpose of the business and then who’s to pick who’s the right person, and who’s the right person for now. And in that example, they’re not the right person to lead us for the next 10 years to get us to where we’re going. But once we get there, they’re absolutely the right person to lead us.
Leanne Elliott 1:06:56
I think it’s important to remember that yes, whilst we can make some confident predictions about how people will behave based on how they are as children, equally, the leader we need in our family business is going to be entirely dependent on what stage of growth our businesses in. So as a parent, can you really make a confident decision looking at your five year old if they’ve got what it takes to run your business? Probably not? Yeah,
Stephen Shortt 1:07:20
I mean, I would, I would always advise people not to just take on the next generation, because of the next generation like to just go I will. They’re the fruit of my loins. So they’re obviously as amazing as I am, well, they have the same drive. That’s just asking for trouble. So one of the things in the Prepare section of the five P’s of successful succession. It’s all about the internal and external development. So if you take if somebody is joining the family business, they should really join as low as they possibly can to or to work their way up. It. And I’ve seen it in the past, and we’ve all seen it. This is the this is the stereotype that enrages me about family businesses. When somebody says, Oh, well, she’s the marketing director, because she has an Instagram account, she knows nothing about marketing, it’s just she has an Instagram account. So that’s the view, that’s the future of the business or whatever. So they haven’t earned the position. They’re just there because their families so they haven’t actually swept the floors, they haven’t published the doorknobs they haven’t done the teas and coffees or gone on the crazy flights to go meet a client somewhere else. So I would always say that you need to spend time both on internal and external development come in as low as you possibly can. And, or go somewhere else and get trained in a similar industry or similar position. So if you want to be a manager, a marketing director, for a three to 5 million euro family business, you should really go on to be marketing director for another similar size business, that is not your family have actually worked your way up, and then come across at that level, if you’re not coming across at the same level, you should start as low as possible and work your way up. So you can you can start from the age of like single digits, if they have if you see something in them, I would be really against the idea of trying to groom somebody that they view that this is their only option or that they’re they have to join the family business. But having those conversations, letting them go, come back, go to somewhere else come back, burn their chops, if they are 1617. And they don’t know what it’s like to work somewhere else and get fired and have somebody scream at them for not doing the job, they should probably go do that. So as they know what it’s like they’re not just coming and going Mommy and Daddy I’m going to be late or whatever and that can be problematic. But really, the training and the coaching. It can be for any age, it can be at any age, that training and coaching is not just for them to take over the business. Also as a parent, you want the best for your your kids, you want to actually instil as much as you can in To them, whether that’s taken over the family business or going somewhere else. So learning the life lessons, giving them the rope to do some stuff, really growing up in the family business, you should be doing the same things you should be starting at the same levels. As somebody else who comes into the business. Now you are going to have, if you’re so inclined to take over from the business, you are going to have a different trajectory, even though you start at the same time, the same level as someone else. And you are probably going to be getting a lot more coaching or not not structured coaching, but you’re going to get mentoring and coaching, whether you like it or not. So you’re gonna be able to develop at a better pace that other people maybe aren’t. But while you’re doing all that God code working for someone else in the business and working, that can be 20 years, it can be for as long as the current generation really wants to work in the business and wants to work with the next generation. But once the decision has been made, the junior is taking over the that that process is now going to be in training that we’ve set, right, we want to, you want to take over that process should only be five years max, ideally, three. Because it’s not like you’re walking away, you still got you’ve still got the opportunity to mentor and coach that person behind closed doors. But anything longer than that, and it starts to drag on for the team as well, like, who am I going to who’s making the decision. So that’s where I say the five years is the maximum. But before that you could be working together for 1520 years, slowly learning and building and sharing responsibility.
Leanne Elliott 1:11:37
We’ve covered the personalities within family businesses, we’ve covered some of the common pitfalls that we can fall into, we’re going to round up this episode of some practical tips from Steven on what successful succession looks like a while is is transferable to other types of businesses. There is a personal element that comes with family businesses, particularly in terms of balancing work and family life. So first, Stephen shares his experience of when he was ready to leave the family business, but instead decided to take action.
Stephen Shortt 1:12:05
If I set the scene, it was a very grey West, cold Friday afternoon in Dublin, which could have been at any time of the year could have been the summer could have been in winter, but it happened to be in winter. But it was I remember, like it was it was almost caricatures how bad the weather was and how bad I felt it was this cliche of a movie. But it came home. And I remember I’ve been arguing with folks for weeks about different courses, we should be running in the school. And then we had an English language school, or the technology or the marketing with everything else. And we were just butting heads all the time. And I remember coming home, my wife was about eight months pregnant with our second child. My youngest daughter, my eldest daughter was playing in the in the kitchen. And I slumped down the kitchen table. And I said out loud for the first time stuff that have been going on in my head. And I said out loud, I’m gonna have to leave a family business. Because if I don’t, my parents will never see their grandkids, because we will not be able to be in the same room. I don’t know if I’m gonna have to swear in your podcast. But that was the I had to just vent that. And the second I said it, every cell in my body viscerally reacted to No, that’s not that’s not the plan. That’s not what we want to do. So once I kind of perfected a little bit and given out, I knew, really, that’s the last thing I wanted to do. So I can’t be the first person to have a problem in the family, business and family businesses have existed since the dawn of time. There has to be examples and solutions and ways of doing this. And so I said about trying to find those and put those together, put them into place. And then fast forward 12 years, I bought both businesses from my folks sold one of them. And we’ve now moved sort of the other office, the company, the main business that I’m running now was based in the family home, so we moved that out into town. So now we sold our house, my wife and I and my kids, we sold our house renovated my parents, my family home, and we now all live in the same house and that kitchen table that I slumped out, we had Christmas dinner and New Year’s dinner at that table 12 years later, all living and still working together. What a
Al Elliott 1:14:19
story and the fact that they are still living living with his parents, although not working anymore, but still living with parents after high standard. Applaud that anyway. So Stephen says there are five P’s to succession,
Leanne Elliott 1:14:31
the five P’s are purpose, pick, prepare, promote, and patients. Here’s Stephen to bring this to life.
Stephen Shortt 1:14:37
What’s the purpose of the organ? What’s the purpose of the division? What’s the purpose of those marketing to and it’s clearly defined? Where are we going for the next five years? Who’s the right person who’s the pick that needs to bring in say, is it a creative Is it a process is it a whatever? Then the Promote so sorry, the prepare? Have they done it before like that prepare might be a bit shorter if you’re in a core But environment, or it could be still the good five years if it’s your business and you’re selling to or you’re giving it to a protege. But in a corporate business you have you got the qualifications, have you got the experience? Okay, I’m going to coach I’m going to I’m going to teach you about these clients, I’m going to teach you about this way of doing things or this these things that we’ve learned. And then it’s the promotion promotion is two meanings. One is to actually give them the job, obviously, to let them step up. But the second promote is to be their cheerleader to actually be publicly saying, Yep, no, that’s, it’s it’s next gens decision now, because it happens a lot in family businesses, when you’ve stepped back, especially if there’s kind of new ways of doing things. Sometimes employees that have been with the company for a long time will go to, let’s say, consult with the previous generation. I’m not so sure, just the way we should be doing. It’s not the way we did it before. Your job as the now previous generation or current generation is to be not, it’s juniors decision, absolutely, it’s the right thing to do. You gotta go talk to them. I’m not answering that. You can have all the conversations you want behind closed doors, and you can disagree vehemently with what they’re doing and try to counsel them. But publicly, you have to be their biggest supporter. That’s the second meaning of the promote. And then the fifth one is patience. Because at some point, it’s going to hit the fan. And everybody’s learning. So whether you’re in a corporate or whether you’re in a family business or a smaller business, the five steps are the same.
Al Elliott 1:16:28
Okay, so it’s been another chunky episode, we have covered all kinds of things in this. A couple of things you need to know if you’re anything we’ve linked to, or we’ve discussed, we will link to in the show notes. So just go to truth, lies and work.com. And you’ll see that the show notes will be the last up there under episodes. So you’re going to learn more about Ryan where you can find him where you can find his website and his podcast the signs of personality podcast. I just noticed whilst looking at the video before he’s got a short SM seven B which is what I’ve got is a microphone. So clearly he knows what he’s talking about. And if you wanna learn more about Steven, he’s successful succession.com Again, links in the show notes to his LinkedIn, his website. He also has a podcast on surprisingly called killer family business podcast. There are some great guests on there. In fact, one of his guests we’ve stolen for an upcoming episode we have
Leanne Elliott 1:17:17
and I particularly enjoyed. I think it’s actually the first episode when you talk to his parents and get their perspective on on building a killer family business without killing your family, as Steven calls it. Thank you so much around Steven for your incredible contribution today. We have learned so much lots of things about lots to digest. Loved
Al Elliott 1:17:36
Leon, I think we’ve deserved a glass of wine. Shall we go and enjoy what we
Leanne Elliott 1:17:40
have. Have a have a good week and we will we will see you on the other side.
Al Elliott 1:17:44
See you next week.
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