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Edwards Deming and the Family Business

 I recently was turned on to a 1984 video by W. Edwards Deming, the guru of Japanese quality and innovation. In the Five Deadly Diseases of Management, Deming correctly identifies the short term focus of management as well as the mobility of management as the reason for the decline inUS business, primarily manufacturing. He also mentions that Japanese businesses have both a long term focus and emphasis on learning the business as if it’s a family business. And that got me wondering if we need more “family” inU.S.  business practices?

 We all know the statistics that small businesses account for 90-95% of all new job creation. And we know that only a few family businesses make it to the Wal-Mart size, large business. It’s safe to say that family businesses are at the center of our job creation solution. Yet why do we spend so much time focused on the large corporations with their up and down cycles, mergers, acquisitions, private buy-outs, and shiny CEO’s when they only create 5% of the jobs?

 What hasJapanlearned that our large businesses could learn that relates to family and family business? Start by thinking about family. Families are composed of members who have both talents, differences, strengths, weaknesses, and usually a few outliers. They are held together by the planned and sometimes unplanned miracles of birth and marriage. Families start with the given of sticking together in both good times and bad. Families lean on strengths of members, yet find ways to work around weaknesses. And families expect and find ways to work through bad decisions and screw-ups by its members. There are consequences for actions, but firing is not one of them. Learning is done by modeling first, and no task is beneath any member of the family. And family knowledge is cherished and passed down at holiday meals from generation to generation.

 Now carry that approach to family businesses.  Most family businesses start with survival to the next generation as their mission. That’s always long term. Family businesses usually require and actually expect the next generation of managers to start at the bottom and learn the complete business. Mistakes are made but the family business solution often focuses on supplementing the existing talent, who created the problem, rather than simply replacing them.  They expect the problem causers to learn from their mistakes.  More woodshed moments than pink slips.

 These businesses place survival above annual income or take home pay. Family businesses also work hard at creating a culture that treats as many employees as possible like family. As a result, family businesses grow slowly, usually have lower turnover, and rarely create the need for a union.

 Can I point out exceptions to this description to family and family business? Of course! That’s not the point. The mindset is what is missing in too many companies andJapanhas shown the bottom line advantage of it. The family approach will never lead to situations termed “too big to fail.” Keeping family in business will lead to strategies termed “to important to fail.”

 Deming relates how these “family” traits are the norm for Japanese companies, even twenty five years ago. They do not focus on short term EPS or annual reviews. They expect the next generation of CEO to start at the bottom and “learn” the business. Rather than a signing bonus or office with a view to start, how about delivering meat at5amfor 5 years to learn how the largest meat packing company works? No annual reviews, but also no layoff as you learn the business.

 Toyota recently lost several billion dollars by not laying off people when its sales slumped following negative publicity with their brakes. It used the downtime to re-train its workforce and moved forward.Toyotarecognizes the strategic advantage of a loyal, appreciated workforce. No need for another Michael Moore movie here.

 Contrast that with our television ready, nomadic, MBA stamped, captains of industry. They focus on short term earnings and the impact on their bonus. Ever notice how many CEOs can shift from industry to industry and use the merger and acquisition route to grow earnings? Maybe you’ve also notice how many conglomerates fall apart and create far more layoffs than all those un-noticed family businesses.

 King Solomon realized three thousand years ago that there is nothing new under the sun. Edwards Deming confirmed it twenty five years ago. So perhaps it’s time for this generation of business leaders to focus on the success of the family as they plot the direction of their organizations. Maybe we should all take some time and re-focus on the family.

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