56. Meghan Juday - There is no business like a family business!

Meghan Juday is a fourth-generation leader and Chairman of the Board of Ideal Industries, a 100+ year old family business.  In this episode Meghan talks about her journey to become the first woman leader in the family business, and some of the lessons about family and governance she learned along the way.

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Links:

Meghan Juday website and bio

The Lodis Forum

Board Refreshment: 50% of boards have at least one director who is no longer adding value; how do you know if you are the “one”?

Big Ideas/Thoughts/Quotes:

How I started in the family business

“I got a phone call from my dad, I had a three-week-old at the time, and he called me and said, "Now that you don't have anything to do, can you just come work on this project?" But you know what's crazy? It's like people talk about how challenging parenting was and I was like all kind of ready to go, and that three-week-old sleeps all the time. I was poised and ready for the big onslaught.  I was thinking, what’s the big fuss is about, this is fine, and so I said yes to this opportunity.  Honestly, had he called me with a six-month-old, I would've been like talk to me in three years.”

Family Governance

When I joined the board, I became intrigued with the interplay between family governance and corporate governance.  In talking with other families, a lot of times family businesses will have a very strong corporate board and they'll put a lot of time and investment into it, but they kind of starve the family as something that's not important. I n my mind, family governance has to be equally invested in and taken just as seriously.

“My rule of thumb is family businesses should expect to spend and invest as much on their family, their family engagement, risk mitigation, and family education as they do on their corporate board.”

Family Governance: “The structure necessary to keep a disorderly system (the family) ordered.”

I think that the family, like any system, really wants to descend into chaos. A lot of decision makers, a lot of influences, everybody wants the key roles, everybody wants to be able to tell the CEO what to do. I mean, I'm saying this hyperbolically, but it's really important that family governance is intentional.

“One of the conversations that we have in our Family Council every year is what is going to change in the next 10 years whether or not we have a plan. We look at several different systems, we look at the families.  We have all those cute 8-year-olds, in 10 years they're going to be 18 – we better have a plan. We had better have talked to them about the company. They better have been exposed to the family between now and then.”

“Family Assembly” is really just the term we use for the entire family.  We do quarterly calls with our CEO to talk about business updates, have a quarterly call with our CFO to do financial overview and do education and training around just being comfortable with understanding some of these financial dynamics. And then we have an expert series as well where we bring in subject matter experts on various topics that may have some relevance.

We changed our compensation committee to also embrace culture because we want to make sure that the compensation is driving the culture we intend as well as the business results.

I really think the board needs to be kind of forward leaning or future leaning and have the skillset sets and expertise of where the company wants to go directionally, strategically.

Changing the paradigm

What's so interesting about the previous generations being so thoughtful and thinking with such a stewardship mindset, is that they saw our family basically had two branches, and depending on who died first, voting control would flip flop between the branches.

But they really just wanted to work together. If you harmonize the elections, then you don't have these big swings, and so they decided unanimously to put all of their voting shares into this Voting Trust. They still get the financial benefit of that, but the voting control goes to the trustees and the people who own voting shares, they can remove a voting trustee at the drop of a hat as well. There's like a lot of moving parts in making sure that the voting trust is working on behalf of the full interest of the family.

It took time for the family to adjust to the fact they have a voice, they have a say, they have insights to share, that it wasn't all just top down. That really did take time, but I think we are seeing some very positive results

We noticed in my generation that we had some dysfunctional communication dynamics, that were really making it hard for us. We had all this amazing governance, but it was really making it hard for us to make proactive steps forward, and so a bunch of the fourth generation, I was super proud of them, decided that they did not want those kind of dysfunctional dynamics to be continued and passed down to their children as it was to us.

We hired a licensed therapist who specializes in family business dynamics, and we did therapy as a group every two weeks for two years and we did a lot of like one-on-one therapy as well with the therapist, and it was so unpleasant…it was super challenging and very stressful.

However, we've made progress. During that therapy process, it really brought the rest of that fourth generation along and said like, "Here, we've done a lot of really strong and powerful things and we've now seen all the opportunities given to those family members who feel disgruntled, and we are convinced now that they have been treated correctly and that they're not taking their ownership and their part of the issues."

Having done that work, it totally shifted the dynamics, so now nobody's falling for it anymore. They used to fall for it all the time, 'Oh, you're such a victim. We feel so sorry for you," and now it's like, "You've had your opportunities, you have your resources, go fix your problem," and so it's calmed down significantly.

Transformation of the Board of Directors

The goal was to make changes with the board, but I was getting a lot of pushback with some of the directors. They were coming to board meetings not prepared to engage straight into conversations. They were expected to be presented to, et cetera, et cetera.

There was some undermining also going on [in the boardroom].  I had a director who offered to be chairman instead of me, and I could just stay on as vice chairman, and I was like, "Oh, my gosh, that's so nice." He's like, "Well, I'll mentor you." And I was like, "That is so nice, but how about this? I’ll still be chairman and you still mentor me." And he was like, "Oh, God, that's not going to work."

When I moved the first two board members off, they had been on our board for a really long time - and by the way, all these people are wonderful people - but one of them had been on our board for over 20 years. That person is not independent anymore, even if they're trying to be, you know?

Board composition drives board culture.