Organizational Development for a Family Owned Business
Organization: Hightowers Petroleum Company
Hightowers Petroleum Company is a private company owned by Stephen Hightower. The company is an offspring of a string of family businesses originally started by Yudell Hightower, who relocated to Middletown Ohio in the 1940's, from the cotton fields in Mississippi. Yudell would eventually sell his janitorial business and invest the proceeds in his son, Stephen Hightower's business. Today the company employs three generations of Hightower's and continues to distribute gasoline, diesel, biofuels and related products and services throughout the United States, Canada, Mexico, and Africa.
The company's mission statement reads "Fueling America's Needs one Customer at a Time" and this is born from the fact that the owner started with one contract and one client. He knew that if he really concentrated all his efforts of delivering excellent service to that one client, who happens to be the State of Ohio, he could convince other clients (States) to give him work. He went about meeting with the various state department buyers in an effort to understand their frustrations with managing their fuel supply. He then went back to his office and worked on solutions for each problem and won the hearts of these procurement officials by being proactive and attending their individual needs. Today the company is still focused on being that "big supplier with a small feel to it" differentiator.
1. The Issues
Most businesses in the United States are family owned. Their contribution to the economy as well as to the immediate community cannot be ignored. The consumers of products and services offered by these businesses are fully appreciative of their efforts, however not all family businesses manage to continue to operate across family generations as most of them do not last long. Just a third of them manage to make the generational transition. This is made even more challenging given the complex dynamics that have to be considered in the running of family businesses (Andrews, 2010).
Performance in innovation is often considered crucial for a family business to compete favorably in the market. With growing competition, product cycles getting shorter and increased market segmentation, family owned businesses face the need to constantly innovate or they risk being out-competed. Strategic posture is used to refer to the way the management in an organization responds to demands from the external environment (Ozgener, Oout, Kaplan & Bikes, n.d).
An active posture denotes these people taking efforts deliberately to ensure good management of expectations of the key stakeholders. A passive posture is the complete opposite and the management does not take any measures to meet these expectations. Without a doubt, the two strategies greatly affect innovation performance in any family business (Ozgener, Oout, Kaplan & Bikes, n.d). Furthermore, it is absolutely essential that succession planning is paid attention to, in a family business so that there is smooth transition to the following generation.
Organizational Diagnostic Factors Analyzed
This case study seeks to analyze the 1) ownership; 2) structure; 3) politics; and 4) culture of the family owned business, Hightowers Petroleum Company. These are the most critical factors to be considered for the longevity and success of this business, and with the right interventions in these key areas, the necessary change can take place to develop a strong and prosperous organization.
1. Assumption(s) and why it is critical to analyze
Bolman & Deal's theory is to assume that the organization represents a family and that the central concepts seek to examine assumptions around needs; skills and relationships. It further looks at the image of leadership to empower and the basic leadership challenge to align the organization's needs with the needs of the people. In this case-study its critical to understand how the metaphor of a family fits into an actual family business and how this impacts the family members and non-family members of this "family."
Areas like ensuring that the family maintains control of the business and the satisfaction of both the financial needs of the family and the business must be given attention. Family businesses that get to succeed from generation have open and clear ownership structures -- for instance, regulation on the trading of the shares. These regulations are often carefully crafted and can last for as long as 20 years (Caspar, Dias & Elsdrodt, 2010).
Some of these family owned entities are holding money is channeled back into the company. This is advantageous as the issuance of new stock is likely to dilute ownership (Caspar, Dias & Elsdrodt, 2010).
Actually, a number of families make the decision to completely not accept external investment. The growth of the companies is fully fueled by reinvested profits. Some of them make the decision to bring in private equity to inject the much-needed capital into the company and to improve their corporate governance strategy. While deals of that nature may bring value to the company, the control the family wields ends up diluted. Some other companies choose to issue an IPO. To ensure that their control is significant, several family businesses have restrictions on the share trading (Caspar, Dias & Elsdrot, 2010).
The first step should always be to approach siblings and cousins. Further, the holding can purchase shares from current family members. The payout policies often have a long-term perspective so that the business is not recapitalized. Because of the low dividends and the restrictions on exit, some of these businesses have adopted "generational liquidity events" so that the cash needs of the family are met. Such activities can include selling holdings that are publicly traded or the selling of family shares to the company or employees. Proceeds from such activities are channeled to the family members (Caspar, Dias & Elsdrot, 2010).
1. Recommendation & Intervention
For navigating through the developmental stages within the context of Ownership in High towers Petroleum Company, authors suggested three key guidelines. Firstly, shareholder meetings should be held as they provide a platform for conducting discussions about specific ownership- related issues. Secondly, instituting directorial and advisory boards serves a long-term purpose, assisting the president broaden his/her view. With development of the organization, the role of these boards becomes ever more significant, particularly in the Formalization / Expansion and Sibling Partnership developmental stages. A board must constitute a group of fair and neutral individuals who incur no benefits from the specific decisions the board makes. Finally, business planning must take place in the following four ways -- the strategic business plan, business contingency plan, management development unit, and continuity plan. The board is in charge of assisting the president with development of all the above plans (Andrews, 2010).
In handling family business issues, it is imperative to include some method of obtaining objective assistance. The numerous facets of competent conduct in a profession against dimensions of competency, like quality, strategic capability, and resource management are determined by competency mapping. This process enables a methodical scrutiny, collection and assessment of behavior, providing a systematized means of making decisions with regards to an employee in the organizational structure of High towers Petroleum Company. This helps boost employee morale, improve organizational culture, maximize individuals' fit with their jobs enhance communication, assist personnel in managing and alleviating stress levels, promote teamwork, recognize training needs, facilitate skills improvement of managers, etc. This sort of intervention, in case of family-owned companies, offers the required objectivity essential for resolving issues impartially (Sharma, 2012).
Several assessment tools are available that can reveal the key traits of an individual, remarkably constant in different circumstances and over time. Hightowers Petroleum Company's human resource professionals must convince the company to take advantage of employee promotion, and even selection tests, in order for achieving improved talent management, more accurate assessment of members of the family keen on joining the company, and more effective development planning all through the organization. However, the business must also offer opportunities to outsiders (Sharma, 2012).
Nepotism remains a key threat to family business performance. Therefore, leaders in all family businesses have to decide whether employment in the firm has to be earned or is, for family members, a privilege. While the just and fair human resource (HR) policies require employment of competent personnel, in some instances, family members who do not have the appropriate qualifications can get employed or promoted. Such employees often prove to be idlers, not contributing to the company's growth and performance. One example of a problem individual in the company is the chief executive's son accorded the responsibility of an important portfolio, but being slack and incompetent. One cannot complain and get these people to follow directions; the best option is…
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