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
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.
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.
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.
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.
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.