Author: Alan Creedy

This week we finish our discussion of barriers to succession with:

4. Serving more than one master.

Change is hard enough. But there is an old biblical reference that is always true: “You cannot serve two masters.” The business needs to stand on its own and only insiders should have influence. Too often non participating siblings or spouses exert undue influence on the process. Parents or children try to compromise to please all parties and the business suffers.

We are all subject to outside pressures like family and non – business obligations. It is when those obligations interfere with the future and even the present of the business that they become inappropriate and, possibly, dangerous.

The antidote is another old saying: “To thine own self be true.” This means that you must separate your external obligations and make choices and decisions and commitments for the business based on merit not on the wishes of a non participating party. Each participating individual must take personal responsibility for personally being a positive contributor and also for how they may be contributing to the problem. Each must be fully accountable for the RESULTS.

3. Control

Some time ago a friend of mine’s wife had a terminal disease. This usually laid back man proceeded to become increasingly difficult and controlling. Fights and tantrums occurred over seemingly meaningless things. None of us could understand what was happening to him until a psychiatrist friend of mine shared that a common human response to a life seemingly out of control is to control anything we can… no matter how trivial.

As independent owners we are used to a form of absolute control. For better than two decades our profession has been going through increasingly rapid and complex change. Any observer familiar with the statistics would conclude that we have done a poor job of adapting. Ultimately some of us, especially as we age, become more and more rigid in our beliefs and needs.  I have given up pushing people to change. Rather, I am actively working with people to develop a new dream. Sometimes that dream is what I call “Safe Harbor” which is my euphemism for finding someone else to buy the business. In other instances that dream is a revised strategy, focus and mission. Either way, the key is to take one’s mind off your circumstances by looking beyond the circumstances.

2. Lack of forgiveness

Things happen and when they do others sometimes take offense. Sometimes the offense is legitimate others not so much. Some people have a very difficult time letting go and forgiving. As long as unforgiveness prevails the company is operating as if something were fouling up the gears. Occasionally, the whole business is sidetracked. Until it can be resolved either by one buying the other out or selling the whole thing or truly forgiving one another, time will continue to erode the business. It’s helpful to remember that:

Unforgiveness is the poison we take hoping someone else will die!

1. Lack of appreciation and recognition

I have another friend who is a self made multi millionaire and serial entrepreneur. Over his life time he has held high public office, bought and sold many successful businesses for a premium and best of all has many close friends. What drives him, though is that his father has never told him he was proud of him. I knew his father and I knew he was proud of my friend. But he had never openly acknowledged it. It remained an issue until 2 years before the father died. My friend made many good decisions and accumulated much wealth but he would have given it all for his father’s acknowledgement. Have you, as a parent or sibling told those other family members how much you appreciate them and respect them. Try it, it’s addictive.

Likewise something few people recognize is the need for that generation aging out and transitioning to a lesser role or no role at all is the need to be acknowledged and respected for their contribution. I am in that generation and I witness it regularly. It is expressed simultaneously as a fear of the future without their identification as the business leader and a sadness that their children and staff don’t recognize what they have been through and sacrificed to bring the business to its current level.

I facilitate a leadership exercise to overcome this problem and it’s always interesting how surprised team members are to find that they are appreciated.

These 10 barriers to succession are prevalent throughout organizations. They are mostly a result of poor communication and equally poor leadership models. Both can be fixed.

Last week we began a discussion of the ten things that are the most frequent barriers to real succession planning. Failure to plan this important event is an invitation to disappointment frustration and alienation among family and staff. This week continues that discussion with #7.

7. Entitlement

Often referred to as the “lucky sperm club” the next generation often sees advancement and eventual ownership as a “right-by-birth” as opposed to an opportunity based on merit.  At a minimum, this creates low morale among regular staff members and, maybe, siblings. At its worst, it leads to disastrous events that can either break up the family or ruin the business. A business needs leadership and it is the duty of the current generation to ensure successors are capable of carrying on the business into the future.

But their is an other side to entitlement and that is when the senior generation views themselves as entitled to continue in a leadership role long after that role should have been assumed by the younger generation. I am amused to see my cohort group of Boomer owners so resistant to passing the baton to their children. Amused because I so clearly remember their vows 30 years ago not to repeat their parent’s behavior. We cannot let our personality be so inextricably connected to our business that we cannot let go when we it is time.

6. Scarcity

There is an abiding assumption among the funeral profession that there is not enough business. Of course in some markets (especially in the NorthEast) that is true. But this natural predisposition becomes truly problematic within the family busyness as parents, children and siblings worry that there isn’t enough business to support them all.  It eventually becomes the Elephant – In – The – Room.

I use a tool developed by the Center for Creative Leadership called Visual Explorer to unemotionally surface these issues so families and staff can talk about them. It is especially helpful in creating an environment where people feel safe talking about what they expect of each other. Once people face the unspoken issues they can move toward solving them collaboratively

5. History

Past experiences, conflicts, assumptions and events shape our ability to work with each other.  People have the ability to forgive. Apparently they find it harder to forget. “oh, you have always been this way!” is a statement I hear too frequently. “What way?” “Always?” Often this is an aggressive attempt to shortstop a conversation that would be healthy but risky to the parties. Here again, Visual Explorer is an excellent tool for discussion and exploration.

Speaker and family business expert John Davis made this comment as he addressed the St. Thomas Center For Family Enterprise:

“When I introduce the concept of making the B.O.S.S. successful all heads turn towards the father. I announce to the father he has just been demoted, and that the real boss around here is four constituencies that make up the acronym. The B stands for Business and what the Business needs to be successful. The O stands for the Other. The first S is ‘what do I want for my Self?’ The final S stands for the Stakeholders, which generally includes the family, employees, customers and vendors.”

Mr. Davis outlines 10 barriers to succession planning which I have modified to represent the more common among funeral homes and cemeteries.

#10 Unwillingness to express themselves and be vulnerable

A result of poor and ineffective communication, an unwillingness to be vulnerable and be open, even if it subjects one to criticism. is a key cause of misunderstandings and resentment. Often this ineffectiveness has been so frustrating that people give up and aren’t willing to be open any more. A major stumbling block.

“That is exactly what happens in a family business,” says Davis. “Family members have expectations of each other about what they want in an emotional sense. They are reluctant to express it and no one offers it, so they think they aren’t worthy.”

#9 Artificial Harmony

Avoidance of conflict often afflicts family businesses. This trait is especially strong in the funeral profession where the culture discourages conflict. Differences, conflict and disagreement are often interpreted as: “you don’t love me” or “you don’t care”. Disagreement is most often misinterpreted as personal. Rather than use the naturally available differences in perspective to make them stronger, They maintain either a facade of harmony or open resentment.

#8 Choosing sides

Too often communication is done indirectly. In other words through someone else. Because of the risk of losing control or reluctance to see another person’s side family members draw in other family members and staff to represent their feelings or opinions.

With almost 30 year’s experience I think I can safely say I know something about Preneed selling and marketing.  Sadly, it has been my experience that most independent funeral homes practice a form of benign mediocrity in which everyone fails to reach their potential but they all love working together.  “Happy Failures” is what we used to call them. Being an employee  who isn’t working out or your brother-in-law who can’t find a job isn’t an appropriate criteria for success in selling. Here are some of my favorite parameters:

1. How many contracts would a salesman sell if a salesman would sell contracts?

Assuming the firm serves more than 200 families per year, the average salesperson is capable of producing between 125 and 150 contracts. Of these, 20% is the minimum expectation for self generated business (non – walk – in / call- in). At Trust 100 our counselors were trained to achieve this minimum through direct mail, family followup and other lead generating devices. We had a few counselors who routinely produced 200 + contracts a year.  These people did not work long hours.  Rather, they followed the training to the letter and worked smart.  If your firm serves less than 200 families see below.

2. Ratio of contracts to At – Need Call Volume

Flags are frequently waved about a selling a ratio of  one contract for each family served. It has been my experience that few independent funeral homes are emotionally prepared for this level of activity. It requires a very high level of marketing activity, call backs and assertive (as opposed to aggressive) salespeople. A 1:1 program inevitably leads to customer complaints and At – Need staff dissatisfaction. Few owners are comfortable with this although it is easily addressed. One of our clients kept a complaint file on his desk and told us if we weren’t getting complaints we weren’t working hard enough. (we grew his business 20%). In my experience 50 – 60% of at – need volume is about the tolerance level for most owners. Complaints are rare and staff are happier. A ratio of 40% or less is unacceptable because it means you are not capturing your walk – in / call – in. I learned this personally while President of a large SouthEastern funeral home. Typically funeral homes generate an actual contract level of about 20% out of the spontaneous walk – in. What they miss is that there is an equal amount of walk – in that gets turned away because staff is busy or simply doesn’t see it as “their job”. So I have always maintained that spontaneous preneed is about 40% of At – Need Call Volume.

Caveats:

If you are serving between 100 and 150 families you SHOULD be getting 1:1 since counselors are capable of producing that many contracts annually. In these instances counselors may work a little harder but there are usually few complaints.

If you have a counselor producing 200 contracts a year and is the only counselor in an 800 call funeral home DO NOT BE IMPRESSED. It simply means that the preneed program is understaffed. Remember an 800 call funeral home should be producing 320 contracts in walk – in alone. These folks often win awards with their impressive dollar volume but, in reality, they just wait for the phone to ring. (bet I get some venomous emails on that one)

3. What Are They Selling?

First, I do not compare contracts with at need revenue without first removing cash advances and sales tax. Leaving these in will obscure what is really happening. I compare only the actual at need funeral home revenue without cash advances to the same factors in preneed. We found that there are only two reasons that preneed sales are LESS than at need sales: 1. The counselor needs more training in the field (not classroom). This can be fixed. 2. The counselor does not believe in funerals. This cannot be fixed. They must be released.

 4. Counselor Turnover:

Often times in larger funeral homes it is difficult to size a sales force because the early hires find it easy going as one fish in a big pond. They frequently make life miserable for later hires forcing them to leave. If you have lots of counselor turnover look into this phenomenon first. Always do exit interviews. If this is not your problem then take a close look at training, compensation, lead generating and recognition.

5. Sales Mix

Most programs I analyze for my consulting clients put me in a dicey situation. It’s pretty easy to identify an underperforming sales program just by its sales mix. A healthy program should have an average age below 72 and preferably below 70. I think many of our programs were in the high 60’s. Single pay policies should be no more than 50% of the mix and preferably less. As said before the average sale dollar for dollar should be AT LEAST your at need average. It is not unusual for me to see programs with an average age of 78 or higher and single pay 85% or higher. Can you say: “Waiting for the phone to ring?” This sales mix tells me you are doing nothing to impact your future…but you feel good about it.

5. Compensation:

A word is in order about compensation. I have found the most successful compensation plans must first be simple. If they are complicated your staff will never trust you. Second, I believe that people should be paid the same way and in the same proportion that the company is paid (including chargebacks). We had a very successful plan for commissions and bonuses. We paid a proportionate amount of the commission schedule we received from the underwriter. In this way those who sold better quality business (lower ages, more multipay) were paid more. We then paid a monthly bonus based on production. Under $50,000 no bonus, $50,001 to $75,000 minimum bonus, $75,001 to $100,000 medium bonus and more than $100,000 for the month maximum bonus. Note: these are gross sales. The bonus itself was paid based on commissions net of commission chargebacks. This system paid everyone from underperformers to our top people fairly. Our lowest people averaged about 5% of net face sales and our highest performers averaged between 8% and 10%. That meant that compensation ranged from a low of $35,000 annually to well over 6 figures. The best part: everyone liked it. No complaints and no suspicion. You could figure out what you made yourself very easily and compare it with your check.