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5 Things you Need to Know: Family Alignment

5 Things you Need to Know: Family Alignment

This week it’s time for another installment of the “5 Things you need to know”, and the subject is one that I consider to be tremendously important: Family Alignment.

I’ve written about Family Alignment a number of times in the past, but I decided to attack it again just because it needs to be better understood.

Much of the content of this post comes from a “Quick Start Guide” (“white paper”) I wrote on the subject in 2016. If you want a broader and deeper look at Family Alignment, please feel free to read and share it.

Without further ado, here are:

5 Things you Need to Know: Family Alignment

 

  1. There are 2 Parts: “Intra” and “Inter”

The first thing to look at is making sure that the family members are aligned amongst themselves. I call that the “Intra” part.

I’m talking about general agreement on the family’s values and goals, along with the important questions regarding whether or not they really want to continue to work together.

Once you’ve answered that one, then there’s the all-important element of aligning the family with its external partners.

Here is where we want to make sure that the family is working with and investing in businesses that are aligned with the values and goals that everyone agreed on in the first part.

 

  1. Do the “Intra” BEFORE the “Inter”

It’s important to work on the “intra” part and make sure the key family members are all on board with each other first.

If you haven’t worked out what you all agree on, there will be issues that could derail things going forward.

The term “collective responsibility” is one I heard recently that conveys this well.

The family members need to develop a consensus that they are responsible to each other, and only then decide on what outside businesses, causes, investments and partnerships they’ll work on.

 

  1. Starting Down the Road to Governance

Governance is kind of a loaded word that I’ve written a lot about, and it still has some negative connotations when people hear it.

To me, family alignment and family governance go hand in hand. Working on getting a family aligned necessitates getting into the questions around family governance.

Working on family governance is a good thing, and it’s actually THE key to any family being able to successfully transition its wealth to the next generation.

It’s impossible to have an aligned family without some governance, and, by the same token, it’s impossible to institute governance in a family if there’s no alignment.

 

  1. It Takes a Lot of Time and Effort

Nobody ever said this stuff was going to be easy. It isn’t, and it takes lots of time and lots of effort.

You know those stats you always see about the high failure rates around intergenerational wealth transfer? This is why.

Most families aren’t willing to do the work required to make sure that family members figure out how they’re going to make decisions together, how they’re going to communicate clearly and regularly, and how they’re going to solve problems together.

I’m actually talking about a considerable amount of time, not just in terms of hours, but in terms of months and years too.

For a family to figure out all this stuff is actually a pretty big project. Those who undertake it seriously soon learn that it really is hard work, BUT, they usually see great progress quickly once they begin.

 

  1. Process is Much More Important than Content

Unfortunately family alignment isn’t something you can just buy off the shelf. It isn’t some piece of “content” that you can pay your lawyer and accountant for.

The process of figuring out the answers to all of the important questions, together, as a group of relatively equal family members, is the most important thing.

If the Smith family has a beautiful family mission statement and a 50-page family constitution, but they haven’t had a meeting in years because one half of the family isn’t speaking to other half, that’s nice content with zero process, and a disaster waiting to happen.

If the Jones family meets regularly, has great exchanges during which they work together to define and achieve goals as a group, even if they don’t have anything in writing, then they’ve got the process down nicely.

Which family will succeed in passing the wealth down?

The family that is aligned and has taken the steps to determine its governance will have better odds.

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You Look Concerned. Or Are You Just Confused?

You Look Concerned. Or Are You Just Confused?

This week I want to look at the question of clarity.

My premise is that when you can see things clearly, there are plenty of potential benefits, so taking the time to make sure that you are truly seeing things clearly is usually well worth it.

Family businesses are full of ambiguous situations that can often exist for years or even decades. Many roles and responsibilities are poorly defined, but somehow, sometimes almost miraculously, things still manage to get done.

Family businesses are notoriously resilient.

 

Communication Breakdown

One of the major challenges that most business families face is clear communication. It has always been that way, and probably always will be.

Of course each person has their own communication style, and some are simply better at it than others.

When I work with a family, I’ll often spend more time at the outset just working with them to make sure that they all really understand each other than on anything else.

I also believe that just about anyone can improve their communication abilities, if they want to. Part of my job is usually to make them understand why it’s worth their effort to do so.

 

It Starts at the Top – But…

We’ve all heard that everything important starts at the top. I agree with that, in general, but that doesn’t mean that if you aren’t the one at the top, there’s nothing you can do.

Communication is a two-way street. To me, that means that the “sender” and the “receiver” of any communication have a responsibility to make sure that the message was understood.

One of my favourite expressions is this one, is attributed to George Bernard Shaw:

“The biggest problem with communication is the illusion that it has taken place.”

 

Allow Me to Clarify

Now, in the interest of being “ultra” clear, I will try to make sure that everyone reading this understands what this means.

The biggest problem with communication is that very often the person who has spoken or written something truly believes that the person to whom they were speaking or writing actually received and understood the message as it was intended.

Unfortunately, far too often, in reality, the person either did not receive the message, or they got it, but didn’t understand it.

I personally drive my family members crazy sometimes with my obsession to handle my end of any communication. “Did you hear me? Could you please acknowledge that you understood?”

 

Getting Back to Confused Versus Concerned

The idea for this blog came from seeing someone’s face and trying to evaluate what was going on in their mind. I do this a lot, and you probably do too, even if it is only done subconsciously.

The particular situation isn’t important (and, truth be told, I don’t even recall what sparked it) but it struck me that sometimes people appear concerned about a situation, but if only they were less confused, they would end up less concerned.

 

Clear Up the Confusion

My “prescription” for many families is pretty much the same.

Clear up the confusion, the ambiguity, the “fog” and the uncertainty, and everyone will have less things about which to be “concerned”.

This is why families so often feel “stuck” in a situation and then due to inertia, they remain there.

It is usually only when something changes that they get propelled into action.

 

Shine a Light

Quite often what the family really needs is an additional perspective on things. Each person in the family is naturally preoccupied with their own situation, which they typically only see from their own viewpoint.

When they bring in a person from the outside, who can then shine the flashlight onto some of the areas of confusion and ambiguity, things get a bit more clear.

 

Shared Viewpoints

If the person with the flashlight is also skilled at facilitating a conversation around ways to determine a collective shared viewpoint that everyone can buy into, then they can really start to make progress.

The word “consternation” came up when I was thinking through this “confused vs concerned” idea. I wondered why the word “consterned” doesn’t exist. Maybe I just invented it.

So, if you are consterned with things going on in your family business, I suggest that you work on ways to clarify things first.

When things are clearer, you’ll have fewer things to be concerned about.

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The Dimmer Switch vs. the On/Off

The Dimmer Switch vs. the On/Off

This week I’m going to touch on a very big topic that I haven’t written nearly enough about. It’s also a subject that lots of families face, whether they have a business or not.

The idea came to me a couple of weeks ago while listening to the weekly teleconference of the Purposeful Planning Institute.

As I had stated in Huge Liquidity Events – Great News, Right?, there was going to be at least one other blog that came from that call.

The great nugget for this blog actually came from the Q & A at the end of the call. (Many Thanks to Matt Wesley of Merrill Lynch)

 

Having the “Money” Talk 

One of the call participants asked a question about helping their client families have the big talk about wealth.

You know how this goes. Wealthy parents talk to their advisors, the advisors strongly suggest that the parents begin to share information about their wealth with the kids, and the parents usually balk.

They understand that they should have the talk, but that doesn’t mean that they know how to do it.

 

The Dimmer Switch Analogy

The man who asked the question was looking for ways to help his clients begin the important stage of sharing information about the family’s wealth with their children.

The answer that came back was brilliant, and it is one that I plan on using. Parents often think about this “talk” as an all-or-nothing proposition. They shouldn’t!

It’s not a binary situation, where you go from complete “secrecy” to “full disclosure”.

It’s NOT a regular light switch, where the family was in the dark, and you flip the switch up and now everyone sees everything.

 

Time for your Pupils to Adjust

If you’ve ever gone to the movies during the day and you walk out into the daylight, you know that it takes time for your eyes to adjust.

In the same way, you really don’t want to “blind” your children with everything in one shot.

There is no need to quench their thirst for information with a firehose.

I like the dimmer switch analogy for a couple of reasons.

 

Shine a Little Light

I think the idea of “shining a little light” is the perfect antidote to the idea of “keeping them in the dark”.

And everyone knows what a dimmer switch is, and what it does. It allows you to control the amount of light.

So where should you begin?

 

Why Are We Here?

So let’s say you’ve decided that you can’t wait any longer and you need to talk about your wealth with the next generation of your family. Great. It’s not rocket science.

A frank and open way to get started is to tell them that you love them and that you care about them, now, and for the rest of their lives.

You could also share that you understand that if things go as they usually do, they will very likely outlive their parents, and that’s a good thing.

So, given that, there’s a lot of “stuff” that you have accumulated over the years and you need to begin to figure out what’s going to happen with it all after your gone.

 

One Step At a Time

The stage is now set. You have made them aware that you will be having some important discussions going forward.

And you control the dimmer switch, on both “how much” and “how fast” you’ll shed the light.

You don’t have to do it all today. Or even this week. Or this month. But preferably once you start, you do continue again sometime this year.

They may ask questions. That’s a good thing. You need to respond to all of their questions, but that doesn’t mean that you have to tell them everything they want to know.

Take your time. Turn that dimmer switch very slowly. But do turn it. And don’t turn it back the other way, although I’m not even sure if you can turn this metaphorical dimmer switch back towards darkness.

 

Dialogue > Monologue

You may have pictured yourself giving your family a speech about this subject. I strongly urge you NOT to look at it this way, or to act this way.

The “go slow” approach works well because you can adjust as you go. A dialogue, where you take the time to listen to their questions and concerns, is what you should be going for here.

 

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5 Things to Know: Asking for Help for a FamBiz

5 Things to Know: Asking for Help for a FamBiz

This week we’re back into the “5 Things to Know” series, and the topic comes from something that happened again recently, happens to others, and will surely happen in the future.

I’m talking about a member of a family business reaching out for help, and then backing off. So here are my 5 things on asking for help for your FamBiz.

  1. It’s Not Easy, or Even Simple

If you’ve read my stuff, you know that I make a distinction between what’s easy and what’s simple.

People who haven’t lived in a FamBiz often think that our issues are “easy” to deal with. My response is that the issues are usually “simple” (i.e. easy to explain) but rarely easy to actually handle properly.

For a family business member to reach out to an external resource is not easy or even simple.

Family businesses almost always have a culture of inward stuck-togetherness that looks down on asking for outside help

A lot of good stuff stems from that type of culture, but a reluctance to ask for help is one of its main drawbacks.

 

  1. It Takes Courage

Because of the family dynamic that “we’re all in this together”, if one member of the family is troubled by what’s going on inside the group, it takes plenty of courage to even think about bringing in an outsider to help.

It’s much safer to stay quiet and hope for the best. That’s why so often they wait until the “pain point” is so great that it becomes a choice between asking for help and simply walking away.

(Note I said “simply” walking away, not “easily”)

Some think that asking for help is a sign of weakness, but it’s really a sign of courage.

 

  1. It Starts and Ends with Trust

I will overuse the word “trust” here, I apologize in advance, but please trust me.

You need to trust your gut on this. When things are bad and there’s no reason to believe they’ll change, trust me, hope is not a strategy.

You already have folks you trust on the outside, so if they’re not the ones who can help, then ask them who they would trust.

When you first contact someone, do they seem trustworthy? Do they listen more than they talk? Do you have reason to believe that others trust them?

Finally, do you believe that they’ll be able to win the trust of your other family members? If not, you’ll probably need to start over.

You can “disqualify” people quickly if you don’t feel you can trust them, but unfortunately you can’t “qualify” someone very quickly.

 

  1. It’s Possibly the Most Important Move You’ll Make

It’s not easy, it takes courage, and it involves that nebulous thing called trust, but what’s the alternative? Is it really “walking away”?

One of the biggest issues in business families, and the main culprit in most FamBiz failures, is poor communication among the family members.

It’s normal for conflict to be present. You probably can’t “solve” all of the conflicts, but you can certainly try to understand them better, so you can manage them.

But that won’t likely happen, until you bring in someone from the outside to sit around the table with you: someone with a different last name.

 

  1. If You THINK You Should, You Probably Should

Timing is everything in life, so when should you reach out for help?

Well, if you’ve been thinking about it, if you can feel it in your gut, trust your gut. If you think you should, especially if you’re lying awake at night thinking about it, then it probably is time.

If you reach out to the right person, they’ll understand everything I’ve written here; how difficult it was for you to reach out, how much courage it took, that you’ll be on the lookout for clues on trustworthiness, and why this move could prove to be so important to your family.

If you reach out and then stop responding, the outsider should give you space but not cut off completely. They’ll “get” the fact that the timing may not be right.

They’ll recognize that you’re dealing with internal issues, and that you’ll occasionally make some progress on your own, and believe that an outsider won’t be necessary, or at least you hope so.

And they might even write a blog about it, and send it to you.

/by

Huge Liquidity Events – Great News, Right?

Huge Liquidity Events – Great News, Right?

This week’s blog topic comes from two unrelated news stories, that just happened to occur at the same time.

The first was seen by the whole world, as Hurricane Harvey hit the Houston area.

The second was more obscure, as a local Montreal family business was sold, for a “considerable sum”.

 

Liquidity for All!

Something that struck me about this hurricane was that storm damage from the wind was only minor, and the much bigger issue was the rain, causing flooding.

When the wind died down, the initial fear subsided, only to be reignited as the downpour of rain continued for several days.

In somewhat similar fashion, the family who had their big “liquidity event”, selling their business for a reported 10-figure amount, will likely have a two-phased reaction.

At first, once the documents were signed, there was likely relief and perhaps a bit of a dazed feeling, but all was probably pretty positive.

That’s normal, after months or years of work finally culminate in the actual sale.

 

And Now What?

The second generation of the family had been running the business for the past few decades, and there was some G3 involvement in management.

I don’t know any details about the size of the family or its complexity, but I do know that a sudden, large pile of liquid wealth certainly has the potential to magnify any issues

As I alluded to in Solid Wealth vs. Liquid Wealth, an operating business has a certain “untouchable permanence”, so family owners are more likely to be content with occasional distributions.

But when family wealth appears simply as a dollar sign followed by a long number, it seems so much easier to just carve up into pieces.

 

Two Possible Scenarios

These situations often unfold in one of two major ways.

Sometimes the family leaders are so focused on trying to consummate the deal, that there’s very little planning or preparation around what’ll happen next.

That can actually be a good thing. There really doesn’t need to be a huge rush to figure out what comes next, and thoughtful decisions are almost always better than rushed ones

Other families, depending on whose advice they’re heeding, will already have a whole slew of structures set up in advance of the liquidity event, and when the deal is signed, the resulting wealth simply gets re-allocated into these different structures and accounts in rather short order.

As much as I like to preach about the importance of planning, this may not be the best way, depending how much the family was involved.

 

Purpose, Values, Vision

I sure hope that before any irrevocable decisions were made, the family took the time to have a discussion around the purpose of the family’s wealth.

You know, some discussion around the family’s values around the wealth they’ve created, and an initial look forward to what the family’s vision of the future is? Yeah, that can be pretty important.

 

Destructive Powers

I often talk up the Purposeful Planning Institute and their weekly teleconferences, and this week provided a great quote that happens to fit perfectly.

The call featured one of my favourites. Matt Wesley of Merrill Lynch, and a couple of his colleagues, and it will be the subject of a future blog.

But the quote came from Wesley, who related a story about a patriarch who’d accumulated a large amount of wealth, and his preoccupation for the future.

“I don’t want my kids to destroy the wealth I worked so hard for”, he said. “But I really don’t want the wealth to destroy my kids”.

 

Greener Grass Syndrome

People living in areas struck by drought may have been jealous of the forecast for Texas and the rain they were expected to receive. “Wow, lucky them, we could sure use some rain around here”.

Likewise, those working in a family business, without access to the liquid wealth they wish they had, may also be jealous of the family that managed its business sale.

 

Time Will Tell

It remains to be seen if the family handles the windfall of liquid wealth in a productive way, or whether this event will sow the seeds of destruction that is so common for underprepared families.

Be careful what you wish for, you may get more of it than you can handle. And good luck!

/by