Restructuring the Public Works Department in Carlsbad, California

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 Mission/Purpose

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. Ownership

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 companies that are held privately but have subsidiaries that may trade publicly but the key areas are still in control of the family. A private holding company owned by the family ensures that conflicts of interest are avoided where institutional investors might push for conflicting demands. Most of these family owned businesses pay low dividends as the 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).

HR Intervention

Competency mapping

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).

Succession planning

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

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 marginalizing them. Aside from this, other Nepotism issues, such as inequity issues can, to some degree, be resolved by outlining clear organizational HR practices and policies to which all board members are bound (Sharma, 2012).

Dispute resolution

Since family members' claims nearly always involve personal problems within the family, it may be best to keep such claims private, therefore, other mandatory options for conflict resolution must be taken into account. Hightowers Petroleum Company's HR department may need to formulate a list of grounds for termination of family members from employment. Divorce or separation, for instance, from key family member can lead to immediate discharge. Though the task of planning for workplace dispute resolution between members of the family may be a difficult one, it is essential for avoiding hassles in future (Sharma, 2012).

Change management

Family-owned companies prove to be somewhat slow in accepting change. These businesses are typically unused to directing funds towards research and development, as well as reinvesting their profits into the firm's technology development. Family members are accustomed to getting higher dividends, and are therefore, unwilling to part with them. The Company's HR team has to understand the significance of change; they should attempt convincing top managers and other non-participative company members that change will eventually enhance their earning capacity (Sharma, 2012).

Family emotions

Any relationship is centered on emotions, and thus, the family-owned firm must deal with it with grace. However, emotions and fervor must be in relation to the business. Family-owned firms assert that familial emotions wreak havoc within the firm. Sibling rivalry, ego clashes, alienation, dissatisfaction, inter-generational thought clashes, etc. are some common problems that such companies face. The head of the business family plays a key role in making sure that family emotions stay clear of the business. Therefore, he should urge family members to openly communicate with one another, and develop a means to mentor every family member entering the business. Management has to outline the demarcation between business and family explicitly. Hightowers Petroleum's HR unit can aid the family head in managing this issue through recommendations on the right posts to be allotted to new family entrants, as well as on family member mentoring (Sharma, 2012).

Defining Authority

Management should clearly define the authority and role associated with all positions within the organization, in order to avoid any chance of conflict and ambiguity. A feeling of professionalism must be cultivated in all employees of the organization, and particularly in Hightowers' family members; no statement must be viewed with reference to personal relations; in the workplace, every interaction is purely business. When younger family members tend to hold a higher post within the company, elders in the family must not undermine his/her authority (Sharma, 2012).

1. Structure

A. Assumption(s) and why it is critical to analyze

Organization is factory or machine with central concepts of rules; roles; goals; policies; technology and environment. Leadership is social architects with their basic challenge aligning structure to tasks.

With the presence of clear guidelines to guide the businesses, family businesses can craft winning business strategies. Two factors that often ensure success are commonplace, long-term perspective and strong boards.

Strong Boards

Strong governance is common in large family businesses. The family members avoid the issue of the principal agent through active participation in the boards of the companies. They advise the companies based on the vast experiences that have been gained over generations of business. The experience of these family members serves as an asset to the company's management. While their experience can prove very important, the daily running of the businesses does not have to be in their hands as fresh perspectives from outsiders can be game changing (Caspar, Dias & Elstrodt, 2010).

A long-term Perspective

This is important especially in ensuring that the family's control of the business is not diminished and ensuring that the wealth of the family is not put at risk. The temptations that come with short sightedness can hence be avoided, and the best interests of the business are given the first consideration. It has been noted that short sightedness can bring even an established businesses down. "Blue sky thinking" is therefore an asset of these businesses (Caspar, Dias & Elstrodt, 2010).

Recommendation & Intervention

Several factors come into play while determining company structure; these include organizational mission, culture and function, size of the company, personalities involved and its budget. The structural options range from collective to bureaucratic. Hightowers Petroleum Company's structure must not be a static one, but must be revised to take into account significant strategic changes. Downsizing and upsizing of the company also ought to be measured and tactical; the effect on strategy, and in turn, on structure must be taken into consideration. All structures have one common requirement, though; that of having consistency and concurrence of aims and values. Different kinds of corporations require different structures. Hightower Petroleum Company, which has numerous key functions, can possibly benefit from an independent status of all these functions, for enabling the different approaches and cultures required for business operations. A professional executive could, in particular, be hired for leading the department of service delivery, with a charismatic head to lead the advocacy division. Moreover, the division for service delivery could combine the essential controls and standards without imposing them onto the campaigns unit, as they are prone to deter creativity. However, well- defined systems would be required for attaining coherence in the organization, in addition to maximum utilization of expertise across the entire company (Strategy, Structure and Organizational Culture, n.d).

Often, a need is seen for a robust functional strategy in such sectors as: information technology, human resources, and accounting. Hightower Petroleum requires substantial expertise in all of the above functions; the sectors must strive towards professionalism. In case of organizations that aren't single-issue groups, study into, and propagation of, expertise pertaining to issue resolution will be a prerequisite. The organization's strategic focus and its size will determine whether to set up an autonomous department for dealing with issues. How many employees a manager is able to control differs because of various factors, which include: the skills, abilities and temperaments of both managers and staff members; the complexity and nature of work undertaken; everyday supervision; and the time required by the manager in planning and strategizing. Another factor that plays a contributory role is the availability of precedents and procedures (Strategy, Structure and Organizational Culture, n.d).

One of the general organizational rules is, in ideal circumstances, the Chief Executive Officer cannot have over 4-6 heads of departments directly under his wing (i.e. directly reporting to him). This scope could enlarge when every departmental head has a small remit and a relatively simple scope of work. Middle- level company managers may have to lead a greater proportion of the organization's workforce. Here again, the complexity and scope of the task will determine the ideal number of persons reporting to these managers. For instance, while one single head can successfully work with a large number of persons (say, 30 or more) tasked with easy, uniform duties of data processing, a manager who heads a team of project analysts / consultants with greater complexity of duties must be given the responsibility of having far fewer personnel (a maximum of 6-10) reporting directly to him (Strategy, Structure and Organizational Culture, n.d).

Several different means of coordination are present, which are rather necessary based on remit and structure. Some of them are as follows:

Programs, rules, and procedures (to handle day- to- day activities)

Referrals and remits (who must be approached for assistance and the extents / levels of responsibility)

Establishing goals and targets (While these fix achievement aims, they also permit flexibility in method.)

Generating slack resources

Creation of self-contained duties

Laying aside funds for vertically-structured information systems (Central direction and coordination is not possible until and unless the persons in charge gain access to full information)

Hightowers Petroleum Company's systems must have the minimum required level of efficiency needed to effectively accomplish the task and avoid needless bureaucracy. However, they must be universally accepted and known, for simplifying and unifying their use rather than rendering them obstructive. Absence of proper systems may be time-consuming as well as disruptive; for example, if the company doesn't possess a uniform document distribution system employees will not know who and how many staff members have received a copy of the document, or whether it is meant exclusively for them, etc. This also holds true in case of emailing systems; the task of constantly copying emails to several recipients can be a great waste of time. Rules and systems can effectively decrease systemic irritations and workloads (Strategy, Structure and Organizational Culture, n.d).

Hightowers Petroleum Company should have a staff procedural manual. The company should compile and hand it out to all existing company personnel, as well as new recruits. The compilation process serves as a great opportunity to scrutinize and discuss current systems, for streamlining them and ensuring familiarity, acceptance and adoption of systems throughout the company (Strategy, Structure and Organizational Culture, n.d).

1. Culture

1. Assumption(s) and why it is critical to analyze

Assumptions are around cultural and social anthropology with metaphors of tribes, theater, or carnivals. Analyze cultures on rituals, ceremonies, stories, heroes, myths and people in organization are actors.

An organization's culture is the norms, beliefs and values that guide it. These three are developed in the company over time. An organization's culture can greatly impact its attitudes and performance. It is therefore necessary that businesses assess their organizational culture frequently and make the necessary changes to ensure their survival. Family businesses often have cultures that have been passed down from generation to generation. Where such cultures are not suitable for the company given the times, the business can go down (Strategy, Structure and Organizational Culture, n.d).

1. Recommendation & Intervention

A group's cultural pattern is defined as the cumulative collection of assumptions it holds. In fact, this set of inter-connected assumptions lies at the heart of all cultures, giving rise to a unique system of beliefs. In the current turbulent times, family-owned companies lead a troubled existence. Only a few family-owned businesses survive and sustain their operations onto the second generation. The causes leading to these firms' decline include insufficient resources and capital, incompetent management and poor economic circumstances. However, an investigation into family businesses reveals that family business culture has a key role to play in ascertaining whether the company will continue to earn profits after its first generation. Each category outlines orientations that depict how family business heads employ vastly varying assumptions while operating their companies. Hightowers Petroleum Company, for instance, shows a paternalistic pattern on assumptions, emphasizing charismatic and personal traits of the founding figure and family; a professional, pattern on the other hand, focuses on impersonal rules for carrying out organizational operations (Dyer, 1988).

An area that has been the forte of family- owned businesses for many years is values- centered management. Because of the intersection of ownership, family, and management, in these organizations, company values are of particular import, as family- owned companies' intertwined nature indicates that powerful family values maintained by the founder and his/her family will likely be transmitted and transferred onto the company. The internal understanding of values by the family has a powerful influence on the behaviors that may or may not be acceptable in the organization. The value system of the owning family guides their central decisions pertaining to issues like organizational structure, business strategy, governance, corporate culture, leadership style, and owners' commitment. Furthermore, family values guide their approach to assets' stewardship, reflecting their regard for the family's legacy; this, in turn, leads to establishment of a sense of commitment and identity of family members towards the business. Similarly, family values markedly shape governing of the business, and, chiefly, shape commitment of family members to the organization (Ceja & Tapies, 2011).

A majority of companies, like Hightowers, are of the view that balancing different cultures in their organization would be a good option. Management consultants provide tools to assess staff preferences and suitable organizational culture(s). Diverse organizational cultures may prove successful, but no optimum exists (best-fit and appropriateness remain the key). Interventions in this respect may be time-consuming and complicated. It is, however, evident from corporate analyses that, successful companies that are unable to adapt company culture with changes in environment, will be prone to sustainability issues (Strategy, Structure and Organizational Culture, n.d).

Organizational culture automatically alters with growth and progress of the organization, even when no proactive interventions are in place. Organizations, at first, tend to center on their founding figures and their vision. With growth of the organization grows, there is a need to departmentalize activities and establish organizational systems. Work is delegated to functional teams. This is normally a difficult task for the company's first CEO or founder, because of either of the two reasons: