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Baby bird

A Pitcher, a Golfer, and a Baby Bird

A Pitcher, a Golfer, and a Baby Bird

Whenever I hear a really good analogy, something in my brain gets triggered, and I want to find ways to remember it, perfect it, and share it.

When people ask me how I come up with blog ideas every week (for over 250 weeks now, and counting) I usually note that the difficult part isn’t in having enough ideas, it’s having too many.

So when I hear the same analogy coming from two completely different areas, I take notice, and I try to find ways to combine them into one blog.

 

The Pitcher

Last week I was watching a Cubs game on TV, and Jake Arrieta was on the mound. The colour commentator was John Smoltz, a former pitcher himself, and a Hall of Famer too.

He was talking about issues Arrieta had been having with control, and Smoltz mentioned that he was working on finding the right grip on the ball in his hand as he threw his pitches.

“You’ve got to think of the baseball as if it’s a baby bird”, he said (I’m paraphrasing here) “You don’t want it to fly away, but you don’t want to squash it either”.

This sounded very familiar to me.

 

The Golfer

Years ago, when I still played golf (or rather “tried” to play golf) I was having issues with a really bad slice.

A slice is when you aim the ball at the green, and you hit it and for the first second that you watch it, you’re really happy, but then the ball just decides to take a right turn, often into the woods.

I don’t recall exactly where the advice I heard came from, but I absolutely remember reading or hearing the story about the bird.

“Think of the golf club like a baby bird, you don’t want it to fly away, but you don’t want to squash it to death either”.

 

Business Family > Family Business

So what the heck does all of this baby bird stuff have to do with family business? I’m glad you asked.

When people think about family business, they usually think about the business part of it. In the term “family business”, the word “business” is the noun.

My preference is to talk about the “business family”, where the word “family” is the noun.

I think I’ve been pretty consistent with this, as even the secondary title of my 2014 book, SHIFT your Family Business, is “Stop working on your Family Business, Start working on your Business Family”.

 

Parenting

When I meet with members of a business family, it usually doesn’t take very long for issues to come up that have a lot more to do with “parenting” than they do with “business”.

And it’s the parenting part that brings us back to the baby bird analogy. As a parent myself, I too have struggled with the temptation to grip the bird too hard.

As a former child, I can tell you that at times I felt like I was a little too “directed” in my life. Being “directed” is a close cousin of being “squashed”.

 

If you love someone…

It saddens me when I meet people in their 40’s or 50’s who work in their family business, and it becomes clear after a short time with them that they’re not really there because they want to be.

If they could hit the “rewind button”, they would have made different choices. Unfortunately, there is no “rewind button”.

These issues almost always stem from the baby bird being gripped too tightly.

Instead of just throwing more balls than strikes, or too many lost golf balls, the consequences are much worse.

 

Go Fly Now

When the baby bird is held in your hands for too long, it will never learn to fly on it’s own.

Even worse, when the time comes that the bird HAS TO fly, and it can’t, because it never got the opportunity to learn to fly on it’s own, parents will often criticize them for not having what it takes.

 

Too Loose > Too Tight

While you may think that it’s simply a matter of finding the right balance between gripping too loosely and gripping too tightly, that may be true for the golfer and the pitcher.

For the parent, gripping too tightly causes far more problems.

Family standing on the side of the river with their kids pointing at something

5 Things you Need to Know: Family Vision

5 Things you Need to Know: Family Vision

A few weeks ago in Family Business: How Do Values Fit In? I touched on the idea of a “Family Vision”, and I’ve been meaning to get back to it, so here goes.

I’ve decided to make this one of my occasional “5 Things” pieces, much to the chagrin of my wife, who wonders why five is always my go-to number. (It just is, Dear, it just is.)

  1. Values Should Come First

Before you do any work on a family vision, it really makes a lot of sense to do the values work first. The vision is about the future and where you want to go together.

“Oh cool, the future!” you might think, and you may be tempted to jump right in and skip over the values part, but I recommend against it.

The values are about where you are now, and hopefully what all family members agree on about where they are together.

It’s kind of important to know that before you try to figure out where you’re going to go together.

  1. Common Vision Is What You Need

Just as it is important to understand the values that family members have in common, it should go without mentioning that a family vision is supposed to be a “common vision”, for the family, by the family.

But I am mentioning it, because sometimes there is someone in the family who needs to be reminded of this.

A family vision that comes from one person only, and that has been carved in stone by its sole creator, will not be worth the stone tablet it is printed on.

  1. It’s about Discovery and Co-Creation

Once you’ve figured out the values and committed to the concept of the common vision, it really becomes an exercise in discovery and co-creation.

One key is just being curious about where different family members see possibilities, which can open up discussions that you hadn’t thought of before.

Discovering areas where younger family members have passions and finding ways to create a vision together can be very powerful.

If you’ve built a particular business that may or may not excite the younger family members, wouldn’t it make sense to at least hear their ideas and try to find ways for everyone to have a stake in the family’s share assets?

    4. You Can’t Rush This Stuff

One of the bigger misconceptions about any of this values and vision work for families is how long it takes to actually do it in a thoughtful way.

It may sound tempting to try to schedule a few hours or even a day to do all of this. Yes, you could do it that quickly and you could conceivably get some value out of such an exercise.

Ideally, and for best results, this kind of work is NOT done quickly, or in one shot. My preference is to do the values work in two separate sessions first, before even getting to the vision.

Also, the larger the family group, the longer you should expect it to take.

Remember, “If you want to go fast, go alone, if you want to go far, go together”, as I wrote last year (Going Far? Go Together).

    5. It Doesn’t Happen by Itself

One of my favourite expressions is “these things don’t just happen by themselves”, and that’s certainly the case here too.

There can actually be quite a bit of work involved just in getting a family together, and then to get them all to understand the importance of the task at hand.

Depending on their ages and their previous involvement in important family discussions, it may take some convincing for them to actually believe that their input will be welcomed and heard.

The word “intentional” really fits well here. There needs to be an intention to do the work that needs to be done to discover and co-create a family vision.

Make the Investment

In my book SHIFT your Family Business, the letter “I” in SHIFT stands for “Invest”, and it’s all about investing the time necessary to do this important work.

Of course there is a financial investment that goes along with this, but for families with considerable wealth it’s a drop in the proverbial bucket.

The time required is the biggest investment, but those who take the time to get it right will be rewarded by the resulting legacy.

Traffic Light in Family Business context

“Yellow Light Family” – Proceed with Caution

“Yellow Light Family” – Proceed with Caution

Last week’s post (Happy to Be Wrong on FEX) talked about the great symposium I attended in Halifax earlier this month.

If you’re a regular reader (thanks!) you know that one of my best sources of blog material comes from these kinds of events.

I often do some sort of “Top 10” of things I picked up, but I’m going to devote this blog to one specific presentation I attended.

In coming weeks, I’ll likely dig in to a few other memorable sessions from the FEX conference.

 

Green, Yellow or Red Zone?

The symposium had a good mix of sessions; a couple for families only, others just for advisors, but most were open to all.

In this advisor-only session, Jim Grubman of Cambridge Family Enterprise Group presented “Green, Yellow or Red Zone Clients”.

He introduced the concept of the “Two-Axis Model” of wealth advising, with technical issues along the X-axis (horizontal), and personal and family dynamics on the Y-axis (vertical).

In each case, the model ranges from low complexity to high, from left to right and from bottom to top.

The colour-scheme was reserved for the family dynamics axis; green at the bottom, yellow in the middle, and red at the top end.

 

Technical Bread and Butter

Grubman mentioned that as you go from left to right on the “technical axis”, more complexity is usually seen as a positive for advisors.

A family with complex technical needs is often a plus, in that it allows you to showcase your abilities to solve their issues, and to charge accordingly.

The more people, entities, trusts, and jurisdictions a family has to deal with, the more the advisors will relish the task. At least the best advisors do.

 

The Family Dynamics Axis

The vertical axis, on the other hand, where family complexities increase, can be a very different story.

This is where the “traffic light” comes into play.

The low complexity families, with little of no conflict, anxiety, addictions, etc. are where most advisors prefer things to be.

Green is good, because there’s no family stuff to trip you up.

As you begin to see any of those issues, you leave the safety of the “green zone” and get into the yellow territory. At this point many who advise on technical issues (legal, tax, trusts, accounting, cross-border, etc.) quickly feel like they’re out of their depth.

Sometimes it doesn’t take much to raise the proverbial red flag, and get the advisors to scratch their heads wondering if they will be able to resolve the family issues.

 

Break It Down

Here’s where the real value of the presentation came for me. Rather than simply looking at the family dynamics question globally, Grubman breaks it down into several components.

In many cases, one thing sets off alarm bells, but others are hardly any concern.

For example, the sensitive issue could be the family’s level of conflict, their communication style, addictions, perceived fairness, or lack of governance systems.

When you can put your finger on it with greater detail, you’re much better placed to deal with it.

It can also help to look at “state versus trait” variables. There could be a situational factor at play, which may just be temporary. (Traits are fixed, while states are transitory)

 

Isolate the Issues

When the advisor team can share their views using this type of breakdown, they can pinpoint the issue more easily.

A family that looked red, or “very yellow” can look much less daunting once you see that there is really one key issue that is flashing, and that the others are pretty green.

 

Coordination and Collaboration

Now I’m gonna switch from what Jim Grubman was saying to Steve Legler’s take.

No single advisor will be able to handle a family with any complexity above green, on either axis.

Technical professionals work together to solve the family’s asset-related issues. On the family dynamics side of things, the same should also be true.

Families will benefit from advisors who can coordinate their activities at a minimum, and hopefully even collaborate.

 

Inter-Disciplinary Fluency Helps

FEX’s FEA Program helps advisors develop the inter-disciplinary fluency they need to properly serve families.

Knowing what families need, and how the pieces all fit together, is key. And so is being able to work together.

Tools like Grubman’s help us all do a better job for families.

Happy to Be Wrong on FEX

Happy to Be Wrong on FEX

Last week I had the pleasure of taking part in the inaugural FEX Symposium in Halifax, Nova Scotia.

It was the first national event of Family Enterprise Xchange, the successor organisation of both CAFÉ (Canadian Association of Family Enterprise) and IFEA (Institute of Family Enterprise Advisors).

The launch of FEX over the past several months has not been without its share of bumps in the road, as one might expect when combining groups with different histories, cultures, headquarter cities, boards and staff.

CAFÉ had been around for over 30 years and primarily served business families from its HQ near Toronto, while IFEA was still in its first decade, serving those who advise business families, out of Vancouver.

One Big Tent

The idea to take these two groups and put them together under one big tent was already pretty ambitious, but there were also a dozen or so local chapters that needed to be dissolved and centralized.

From the time it was announced in 2016, I liked it, “in theory”, yet I was sceptical about how it would play out “in practice”.

There were more times when I feared the worst. As we wrapped up the final session, I happily admitted that I was wrong.

 

Plays Well with Others

Back in the early days of CAFÉ (the 1980’s), my Dad had joined and really got a lot out of the organisation, especially his PAG (Personal Advisory Group), so I had my own historical connection there.

Now, as one of over 250 “FEA” designates who did the FEA program and passed their rigourous written and oral exams over the past few years, I have an even more personal connection.

I’m also well aware of the fact that some families aren’t really comfortable surrounded by so many advisors, feeling a bit like chickens mixing with foxes.

As an advisor who came from the other side, I feel like I “get it”, and know how to behave less like a fox. I had less confidence in my fellow advisors, however.

 

Fearing the Worst

I was worried that some advisors would not appreciate the families’ discomfort with having so many of us around, and that they might behave in ways that justified the families’ reluctance to attend.

Once again, I am happy to admit that I was wrong.

As it turned out, there was a critical mass of advisors, such that we mostly stuck together, with many friendly groups from the same class cohorts spending lots of time together.

 

Stronger Together

The families who attend FEX are there to learn, and the advisors who have done the FEA program have demonstrated that they too are aware of how important it is for them to learn and stay abreast of leading edge thinking in the field of family enterprise.

In the early days of writing this blog, my marketing people would ask me if I wrote these blogs for families or for their advisors.

My answer was always a sheepish “Yes (?!?)”

I write for the families looking for guidance AND for the advisors who are trying to provide the best guidance they can for those families.

It isn’t “either/or”, it’s “and/both”.

I also write for me, to force myself to clarify my own thinking.

Yes, some of my posts are more slanted to advisors and some are more directed at families, but how different are the messages? Not that much.

And so it is with FEX. There are families and advisors, and all of us are trying to do better and help each other do better.

 

Great Start, More to Come

The Halifax event was a great start, and I know that the FEX team is well aware that much work remains to be done.

They have planned the 2018 Symposium for late September, in Niagara on the Lake, so they will benefit from:

  • A few extra months to prepare
  • A time of year with less conflicts for many
  • A more central location
  • A very successful kickoff event in Halifax in 2017

Congrats to all involved in making it a success. It was an awesome event. I really did not expect it to be, and I am so glad to admit that I was wrong.

(It wasn’t the first time, and it won’t be the last.)

Values of a family owned and operated business

Family Business: How do Values Fit In?

Business people often have a tendency to concentrate so much on their day-to-day business that they end up losing sight of some pretty important basic matters, like their values.

Values form the unconscious base of everything we do, and they impact so many of our regular decisions without us even realizing it.

Business consultants love to use “values” as a buzzword that they lump in with “vision” and “mission”, often without a good grasp of the differences between them.

This topic area is potentially very broad, so I will keep this post focussed on values, and I will look specifically at the role they play in family businesses.

 

What are Values?

Values are a person’s principles or standards of behavior; one’s judgment of what is important in life”, according to a definition I just Googled, which is good enough for our purposes here.

A business’s values usually reflect those of the owners, executives and leadership. Some values that people brag about include ones that are so basic that they’re almost meaningless.

Any business that brags about integrity and honesty almost makes me wonder why they felt the need to spell those out as important. I’d hope that they were a given.

 

When Does This Matter?

Values are always important, but they’re usually running in the background and aren’t really noticed, until there’s a clash somewhere along the line.

I mentioned that a company’s values emanate from its leadership, and so the critical time to examine them is when anticipating a change in leadership (management and/or ownership).

A business built on hard work, collaboration and diversity won’t likely do well if the incoming leadership espouses none of those same core principles.

 

Why Are Values So Important?

Because values operate largely unnoticed or in an unspoken way, it sort of makes them the “operating system” behind the culture of the organisation.

A small group can run well without giving this much thought, but in a large or growing group of people, having some general agreement about the values that drive the group is essential.

People talk about alignment a lot these days, and rightly so. What they don’t always mention is that the alignment of values is really at the base of much of this work.

 

Family Values vs. Business Values

Now, you may be inclined to believe that business values should guide the business, while family values should just “stay in the family” and should never have an influence on how the business operates.

I would suggest that this type of thinking is not conducive to long-term success. Eventually, something has got to give.

When a family owns and leads a business, then that family’s values are important for the business. There doesn’t necessarily need to be a 100% overlap in family values and business values, but the more overlap the better, and ideally you want as much overlap as possible.

 

How Do We Get This Right?

Lots of consultants who work with businesses have tools and exercises that they use with teams in the business, to help them discover and align around key values for the business.

If your business has already done that, that’s great. But, please don’t stop there. And, please resist the temptation to bring the results of that business values work to a session on the family’s values.

 

The Values Two-Step

Any values exercise needs to have two components:

  • Individual values section
  • Group values section

These can be run one after another, or, sometimes better, after a break that can range from a couple of days to a couple of months.

Group values work needs to start with the individual values of the group’s members, and it needs to involve only those values of the members of the group.

 

Purity of Values

In a family values exercise, you may even want to do the exercise with members of only one generation at a time, so that the elders don’t unduly influence the younger participants.

Most importantly, do NOT begin with a list of values that comes from elsewhere, like the business, or the founder. The group values should be generated by the individual values of the participants in the exercise.

If the group values list you derive is to have any “value”, it needs to come “purely” from those in the group.

 

Take-Away:

Do the Values work, but take the time to do it RIGHT.

family owned business challenges

5 Things you Need to Know: Family Meetings

This week we are back to the “5 Things you Need to Know” format, and our subject comes via an emailed question.

An overseas colleague and fellow Family Firm Institute member recently asked me for my thoughts around family meetings.

Rather that send her a lengthy reply, I told her I would write this blog in response, and I hope that many of you find it useful.

(Note: we are talking here about enterprising families having an occasional get-together with many family members, some of whom are involved in business matters, along with many who are not.)

 

  1. Involve Many People

The more people you can have involved in planning the meeting, the better. Input and ideas should be solicited from as many of the participants as possible beforehand, and it should never appear to be a one-person show.

Furthermore, on the “many people” front, the execution of the meeting(s) or day(s) should also feature as many different people in leadership roles as possilbe, and active involvement by everyone (as opposed to passive) is a must.

 

  1. Not Just Business

The business aspects of the meeting are naturally important, otherwise you likely wouldn’t go through the trouble of officially convening everyone in the first place. But please resist the temptation to make it “all business”.

If you want people to look forward to these events and attend them regularly (see No.3, below), they ought to have reasons to look forward to them.

A mix of business, fun as a large group, education, fun in smaller groups, downtime, physical activity, icebreakers, and just plain socializing are all worthwhile considerations for the schedule.

 

  1. Regular, Repeating Forum

An error that some families make is to try to have THE family meeting, once, to finally share a bunch of information that they have been keeping private for a long time. That is rarely the best course to pursue.

Rather, having regular meetings, on a repeating basis (annual, semi-annual, or other) is almost always a better idea. Those in attendance who are new to much of the content need time to absorb it, learn, and get up to speed before they can even conceive of the questions they’ll have.

The idea is to have a “forum”, or “an exchange of views” that brings out interaction and learning, which is better suited to a regular and repeating event, with an agenda that evolves over time.

 

  1. Past History and Future Outlook

Most family businesses considering holding this type of meeting have been around for a few decades.

So, sharing stories and facts about the history of the business, 10 and 20 and 30 years ago (or often much longer) can help give everyone in attendance a better appreciation of what came before, including major milestones, successes, and failures.

The trip through time should not necessarily end with today, though. Projecting another 10 or 20 years ahead, and getting various points of view on how family members see the business and their potential future involvement is also an opportunity that should not be missed.

 

  1. Process is More Important than Content

You may approach the idea of a family meeting as a chance to tell, teach, or share a number of important pieces of information with those members of the family who are less aware than others, in order to “level the playing field” and make everyone feel involved.

That is a noble idea, and at the same time, the temptation for too much content is always there. People who are thirsty for information are not always best served with a fire hose.

A habit of regular meetings, with the participation of many people, including interactivity, talking and listening, sharing of information to level of the information playing field, getting to know each other better, and of course having fun, are the ways to judge the success of family meetings.

The processes involved in all of this are what you need to get right, and the actual content is secondary.

When you get different people volunteering to serve on various committees to plan parts of the next meeting, you will know that you have launched a worthwhile venture that will stand the family in good stead for the long term.

Although you won’t likely get there quickly, slowly but surely it can be done. And you will all be glad you made the effort.

A cartoon of a man who broke a mirror and is trying to clean it up

Start cleaning up your M.E.S.S.

Procrastinating is a topic that gets lots of attention, because people blame their problems on an inability to get moving to get things done.

I get that it can be difficult to get things started, but instead of talking about procrastination, I prefer to think in terms of “inertia” and “momentum”.

Procrastination is more about “why”, whereas inertia and momentum are observable phenomena.

 

Physics Over Psychology

Maybe it’s because the “physics” side of things seems easier to grasp than the “psychology” of procrastination, which is about why we put things off.

Recently I was talking to a member of a family facing some complex inter-generation transition issues. It became clear that the enormity of what was in front of them was a significant stumbling block to mustering the courage to move forward.

It was while I was enumerating some of the ideas around ways to get started that I stumbled upon a mess.

Well, not a mess, but a M.E.S.S.

 

Start Moving 

The M in the mess is for Moving, as in “Start Moving”.

This is all about creating some action. Thinking and planning are great, but by themselves they are useless.

You need to introduce some action, even if you aren’t sure that you know the perfect first move. Sometimes you need to move backwards before going forward.

If you’ve ever had your car stuck in the snow, you know that rocking the car is the best way out, and that means back and forth, and once you’re unstuck, then you can figure out the best way to your destination.

 

Start Early

The E in the mess is for Early, as in “Start Early”.

I know that nobody has a rewind button, so we can’t actually start something yesterday, but if you could, that’s often what I would recommend. (see: There Is No “Rewind” Button)

Like any kind of planning that involves multiple generations in a family, getting an early start on things is usually a good idea.

How often do you hear about people who got into trouble and then said “if only we had started earlier”, compared to how seldom they lament starting too early?

 

Start Small

The first S in the mess is for Small, as in “Start Small”.

It often doesn’t take that big a move to undo the inertia that holds us back. We think in long term moves over months and years, but it is the small gestures that take only seconds or minutes that are the essence of those bigger moves.

If you want to run a marathon but have never even done a 5k, well maybe you need to be more realistic and start with an attainable goal.

If you haven’t had a productive conversation with your kids without it turning into a screaming match, then planning a weekend family retreat is probably not the step you should be aiming at.

 

Start Slowly

The second S in the mess is for Slowly, as in “Start Slowly”.

One of the problems with the “overcome procrastination” mindset is that once you get up the nerve to move, there is a tendency to want to go quickly.

That can backfire, because moving too quickly can result in injury, mistrust, and confusion.

When you decide to try to run 20k to train for that marathon right off the bat, you will probably get hurt. When you suddenly start talking about writing up a family constitution next weekend, after hardly allowing any family involvement in decisions, it will be met with skepticism and confusion.

 

Recognize that it’s YOUR Mess

If you continue to do nothing, you will have a mess to deal with and it will be YOUR mess. If you don’t accept responsibility for it, there won’t be much anyone else can do to help you.

 

Start cleaning up the M.E.S.S.

It’s your mess, so start cleaning it up. Get Moving, and do it as Early as possible. Start Small and Slowly. And keep going, so that you can gain momentum.

As you begin to move and clean it up, that movement and progress will attract others to join in and believe, and they will help you.

At the end of the day, getting the others involved in figuring things out is what you are really after, isn’t it?

 

Bottom Line: Start Moving, start Early, start Small, and start Slowly

 

running a family business tips

Who Gets to Decide? (Part 1 of 2)

Last weekend at the Bowen Center spring conference there was plenty of food for thought, as expected, as we talked about family systems and how they also apply in other organisations.   (See A Systematic Business Family?)

There was also lots of fascinating scientific information presented about collective behaviour in the animal kingdom, and we learned some surprising things about how schools of fish and groups of locusts work together, subconsciously, to move about en masse.

Wait, am I saying that human families work the same way as fish and locusts do? Well, not exactly. But I’m not saying that we’re completely different either.

Family vs Other Groups

It’s also really interesting to think about how a family group is similar to and different from other types of human groups. Things we learn in the family realm are used in other circumstances, and things from other groups of people are used in our families.

There are more similarities than most of us realize and the same goes for animals and humans. We’re obviously the most advanced species, but our evolution surely followed many similar paths.

Leadership and Decision-Making

But how do groups of people and animals make their decisions, especially those that affect a group?

Leadership has been written about ad nauseum and there’s little doubt that it’s important to the success of groups. One thing that I’m starting to notice more is that the singular leader is becoming less of a phenomenon, and group leadership is getting trendier.

Authoritative and dictatorial styles are giving way to collaborative and consensual ways of leading. (See: Is Your Family “In Line”, or Aligned?) And what better area to look at these benefits than family business and intergenerational wealth transitions.

Family Business and the 3 Circles

The Three Circle Model has been around for over 3 decades now and while some find it too simplistic, I’m still a huge fan. (See: Three Circles + Seven Sectors = One A-Ha Moment )

Each of the circles, Family, Business, and Ownership, are separate, yet overlapping, systems. By “system” here, I am referring to a group of interrelated people.

In a first generation family business, there’s usually lots of overlap and having circles with the exact same group of people is a real possibility. Even then, it’s important to make family decisions as a family, for the family, and business decisions for the business, as a business.

If you’re lucky enough to transfer the business and wealth to subsequent generations, things invariably get more complex. The family will usually continue to grow, and the business may grow even faster, especially by adding non-family employees.

System = Group of Related People

But you still have three systems, or groups of related people. Some will have formal leadership positions, with titles and clear roles; others, well, not so much. But why not?

In order to make decisions, a business has a CEO and an organisation chart, and formal roles and procedures. Should it be the only circle like that?

If there’s an ownership group, or system, shouldn’t it, too, have a formal structure, along with decision-making bodies and procedures? A shareholders agreement should contain most of this information, but is it actually ever used, and do the owners know what’s in it?

Last, and certainly NOT least, is the family. Talk about a potentially thorny group, and likely the circle with the least formal structure and rules. But decisions still need to be made.

All in the Family

So if a business is run based on some sort of formalized hierarchy and procedures, and an ownership system is subject to a shareholders agreement, then at least some governance exists for these interrelated groups of people in the family business realm.

Is there a good reason why the Family should be the exception?

Question:

Do families really go through the trouble of working this stuff out, “just for family issues?”

Answer:

Only the ones that care about their legacy and want to make sure that all of their hard work doesn’t end up being for naught.

Bottom Line:

Family Business is complex stuff, and “formality is your friend” when you want to ensure that that the transition to the next generation will be successful, because decisions will always need to be made.

Next week in Part 2, we’ll look specifically at the Family circle and take this to another level, literally, with “Who Gets to Decide Who Gets to Decide?”

Father and Daughter playing

Is Your Family “In Line”, or Aligned?

The subject of family alignment is near and dear to my heart, and it has been for a few years now, probably since I first heard it.

Family alignment can mean different things to different people, but in the arenas of family business, family legacy and family wealth, it seems to be more and more common, and recognized as increasingly important.

The first time I tackled this subject, last year, I didn’t just write a blog on it, I created an entire “white paper”. However, since I kind of despise that term, I called mine a “Quick Start Guide”. Link here: Family Alignment – What it IS, Why you NEED it, How to Build It.

Part of what prompted this blog now is my newfound interest in the subject of family governance.  Well, it’s not really a newfound interest in that subject, it’s more of a newfound appreciation for the word governance, especially as it applies to families.

Back in January, my blog, “Family Governance, Aaaah!” recounted how I had come to terms with my revulsion of the “G-word”, thanks to repeated exposure to it from more and more respected places.

Collaboration and Leadership

Around the same time, I read the book “The Collaborative Leader”, and another light went on.  In that book, authors McDermott and Hall talk about two words that seem to have a symbiotic relationship (my words, not theirs).

They explained that the words “collaborative” and “leader” are actually very difficult to separate, because one is almost always used to describe the other. There is almost an implied nature of each within the other, so to speak. (Again, my clumsy words, not theirs)

To collaborate requires leadership, and to lead requires collaboration.

Hmmm, interesting, I thought to myself.  I wonder if I can think of other pairs of words like that.

 

Alignment and Governance

So naturally, my thoughts lead me to alignment and governance, admittedly, two much less common words.

My thinking goes like this.  If you want to align your family, it needs to be governable, and if you want to govern your family, it needs to be aligned.

Now if you really want to pick holes in my arguments you certainly can, and maybe not just small holes, but bear with me here.  And let’s agree to take a 2017 perspective, not one from 1987 or 1957.

Just as the definitions of collaboration and leadership have evolved, so have those for alignment and governance.

 

Getting Everyone in Line

Decades ago, having everyone in your family “in line” had a different meaning, likely much more autocratic and “top down”. I think we can all agree that that horse has left the barn.

In the same way that leaders today need to be collaborative and collaboration needs leadership, today’s governance structures exist best in situations where there is alignment.

It seems like this would be true in any situation, not just in the areas of family governance and family alignment.

Where do you Start?

The good news with these pairs of words is that in order to get moving, you can start working on whichever one resonates more.  If you want to help someone with their ability to lead, but they don’t really see themselves as leaders, you can work on their collaboration.  And vice versa.

If you have an aversion to family governance, you can work on family alignment, and for those who think family alignment is too “touchy feely”, maybe you can convince them to work on family governance.

Are You Feeling Lucky?

If you’re lucky, your family (or the families that you work with) will automatically have leaders who love to collaborate and people who “get” governance and are easily aligned.

Most people aren’t that lucky. Most people need to work at these things.

My favourite expression in this regard is “Things don’t just happen by themselves”.

Some of the current buzzwords that I hear and like on this subject are the following:

  •  Deliberate
  •  Intentional
  •  Purposeful

Please recall that your legacy comes from both people and assets, and your wealth and legacy won’t preserve themselves.

Bottom Line: You can work on better alignment through governance, or better governance through alignment, but you need to work on them. Intentionally.

Family Business - Family Ownership Tree

Pruning the FamBiz Ownership Tree

Family businesses come to life in different ways, but their ownership structure usually starts out pretty simple. With the coming of age of the next generation of family members, things inevitably get more complex.

Preparing the rising generation to work in the business is a subject that gets talked about quite a bit. Preparing them to be good owners is also something that we are beginning to hear more about as well. All of this is good news.

But my subject today is based on a real life case, brought to my attention by a colleague. I asked her for permission to address it in this space, because I have not seen much written on it, and it can be pretty tricky.

Unfortunately there isn’t necessarily an easy solution, but then again, in the arena of family business, there rarely is.

 

The Case of the XYZ Family

My colleague and I are members of a “study group” of a dozen or so members of FFI, we come from a handful of countries, and it is always interesting to note the cultural flavour that comes with the stories we share.

The XYZ family is based in another country on another continent. X and Y are brothers, and they own their business 50/50. So far it’s pretty simple. Oh, one more important point, X is a silent partner, and Y runs the business.

I don’t know for sure but will assume that there is no shareholders agreement in place, likely because of the standard, “hey, we’re family, we trust each other, we will work it out” attitude.

 

Arrival of the Next Gen

The business continues along without issue, and the brothers start families of their own.   Y, the active brother, has a son and a daughter. X, the silent brother, eventually also has a daughter.

Just to add a bit more complicating “spice” to the story, Y’s son, Z, ends up going to work in the business along with his Dad, Y. X remains silent. Everything is fine, right? Well, for now, seemingly, yes.

 

Projecting the Future

So if you are Z, the son working in the business, what might concern you, long term? What issue keeps you up at night, to the point that you would raise it with your friendly neighbourhood family business consultant?

If you guessed “ownership”, give yourself a gold star.

The young man has likely already witnessed some of the difficulties that his father has had in running the business while being responsive to a silent partner, uncle X.

When he projects to the future, he sees a situation where he is the only family member working in the business, but his “silent partners” could be his sister, and his cousin.

If ownership follows the standard equal distribution among children that is the default in their country, he foresees himself owning 25% of the shares, and having to answer to his 25% owner sister, and their 50% owner cousin.

 

Sustainability in Question

When something can’t go on forever, it won’t.

Just to make sure we see the difficulty here let’s add another layer. Let’s say Z has five kids, and his sister and cousin only have one child each. And let’s say only one of his kids joins the company and runs it, along with his silent relative partners.

How would it be to own 5% of a company and run it for relatives who own the following shares:

Owner-Manager:        5%

Siblings:                        5%   /   5%    /   5%   /   5%

Cousin:                       25%

Second-Cousin:        50%

 

Thanks, but No Thanks!

Talk about a thankless job. Family businesses CAN last many generations, but those that do are the exceptions, not the rule.

We often look for whom to blame when they don’t last, yet sometimes just the way they are structured and the simple math of family division make it nearly impossible to make this work.

 

So Do We Give Up?

No.

We look ahead and foresee the potential issue, and talk about ways to resolve it. The brother owners need to realize that this can’t work long term, and figure out their next steps.

Assuming that Y can buy out his brother’s 50%, that would resolve a big chunk of it, for now, anyway.

They might even use a formula that Z will be able to follow to eventually buy out his sister down the road.

Bring it up, talk it out, resolve it before it kills the business.