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Horse shoe with a 4 leaf clover and a lady bug

Genetics, Luck, and Karma: Secrets to FamBiz Success

Genetics, Luck, and Karma: Secrets to FamBiz Success

People ask me where my blog ideas come from, because I find something different to write about each week. My answer: “anywhere and everywhere”.

This week it’s from watching Jeopardy, and one of Alex Trebek’s brief interviews with the contestants.

 

Top 5 of All Time

A bartender named Austin Rogers had a fantastic run recently, running up over $400,000 in winnings in just over two weeks, which placed him in the top 5 of all time Jeopardy winners.

After he had accumulated some sizeable winnings, Alex asked the likeable young man from New York to what he attributed the success he’d been having on the show.

His honest reply struck me as quite refreshing:

“Genetics, Luck, and Karma.”

 

Fits with Family Business Success Too

 I couldn’t help think how nicely these three elements fit with family business success too.

I realize this isn’t necessarily obvious, but hey, that’s why I write these blogs, to share my thoughts on just this kind of thing. Let’s take them one at a time.

 

Genetics

The family business angle fits pretty clearly with the genetics comment. “He sure seems to take after his Dad”.

Yes, indeed, we do inherit many traits from our parents, and in a thriving family business, the hope is usually that the next generation will have many of the same positive characteristics that made the parents successful.

Problems can arise though, when the children have different positive traits, and clashes can happen when the generations don’t see eye-to-eye on everything.

 

Luck

Luck is a bit harder to get agreement on. Successful people like to think that they alone are responsible for their company doing well, and in most cases that’s true, but it’s only part of the formula.

I can’t help think that luck has more influence on how things turn out than most people acknowledge.

Yes, I’m quite familiar with the expressions “You make your own luck” and “The harder I work, the luckier I seem to get”, and they resonate nicely with me too.

But, for every business person who blames failure on “bad luck”, there’s probably another who should be thanking “good luck” for their success.

 

Karma

If you think that luck was a difficult concept to grasp, let’s move on to karma, and try our luck there.

Let’s start with a quick Google search, which turned up this nugget:

          Karma (car-ma) is a word meaning the result of a person’s actions as well as the actions       themselves. It is a term about the cycle of cause and effect. According to the theory of Karma, what happens to a person, happens because they caused it with their actions.

That wasn’t exactly what I thought my search would turn up, but who the heck am I to argue with Google? That might not bring me good karma. (See what I did there?)

A lot of different things come to my mind when I think about karma. The “Golden Rule”, and “Do unto others” are a couple of them.

I also think about humility, and not acting like you’re better than everyone else, because that probably won’t create good karma.

 

Humble and Kind

The Karma idea made me flash back to a blog post from June 2016, Humble and Kind, in which I wrote:

And if you do start out humble and kind when you are young, how did you get that way? My guess is that most of it comes from your parents and the example they set.

When family businesses fall apart, it is usually in large part because of family conflict, so what happened to the humility and the kindness?

When I first thought about Karma and family business, I thought about in the ways that the business interacts with customers, suppliers, and competitors; you know, the outside interactions.

But now that I’ve re-read the excerpt from that blog, it makes me realize that the internal Karma, within the family, is probably even more important.

Teaching your children about karma brings good karma.

 

Something to Think About

Back to Austin, our Jeopardy contestant. He eventually lost a game and was dethroned, but his reaction seemed to fit with his penchant for keeping the karma gods happy.

He was last seen laughing and high-fiving the woman who beat him.

His luck might’ve run out, but his karma was going strong.

Word purpose in a dictionary

5 Things you Need to Know: Purposeful Planning

Once again this week’s blog comes from a being an interested listener/participant on the weekly teleconference of the Purposeful Planning Institute.

The guest thought leader was Babetta von Albertini, who is a relatively new PPI Member, but who also heads up the Institute for Family Governance, which will have its 2nd annual conference in NYC in January 2018.

That these two groups fit together well should go without saying.  Purposeful Planning and Family Governance could almost be considered two sides of the same coin.

 

Case Studies

The title of the call was “How to Give Powers to Trust Beneficiaries” and during the first part, von Albertini covered the details of two actual case studies that she was involved in recently.

As I listened attentively, I had a bit of an “A-Ha” moment and I realized that Q&A time (where often the questions are replaced by comments) was fast approaching.

I jotted down a few notes about the cases she’d presented, and I concluded that she’d almost given a perfect definition of what Purposeful Planning is (or should be).

 

Jumping In

I was the first person to “Press 1” so I got the floor first (this isn’t unusual for me on many of these calls).

If you listen to the recording, you’ll note that my summary was well received by the host, the speaker, and subsequent participants.

This not only stroked my ego, but also inspired this blog post.

Without further ado, here are:

5 Things to Know about: Purposeful Planning

 

  1. High level, strategic planning

So many of the people who are “experts” in the field of estate planning or succession planning are actually specialists in certain “tactics” that are often employed in the process.

Purposeful planning takes things to a higher level, and looks at things from a bigger picture view, from a higher level.

It truly is a strategic exercise, and it involves the complex interaction of a variety of specialist fields.

 

  1. A team of experts, collaborating together

Because it is complex by nature, a truly strategic effort necessarily involves a variety of specialists.

But a bunch of experts who stay in their silos rarely makes for a great plan. The experts actually need to collaborate and work together to find the solutions that suit the family client.

 

  1. The family is at the center of everything

As I just alluded to, the client is the family, AND the client is at the center of everything. Purposeful planning looks first and foremost at the purpose of the wealth, which is to serve the family.

Too often, estate and succession planning are simply a compilation of tactics put together in a way that sounds great, in the same way that Giorgio Armani looks great on the mannequin in the store.

If it isn’t custom tailored for me, it probably won’t fit, and it will ultimately be uncomfortable and look silly on me.

But I will have paid a hefty price for it…

 

  1. Simplicity is valued over complexity 

The case studies that were discussed on the call also involved a very interesting key step along the way. There were many long legal documents, including a bunch of trusts, but there was also a painstaking review process of those.

The key step was a two-page summary that was prepared for each document, which laid out, in simple terms, what was included in the 60- or 80-page document.

That way, anyone and everyone could actually understand them and discuss them intelligently.

Wow, clarity and simplicity, what a novel concept!

 

  1. Beneficiaries are empowered 

One of the major concepts that I left for last but not least, is that part of the family-centric nature of purposeful planning actually strives to empower the next generation beneficiaries.

How many of us have heard of people who are “trust fund babies” who are actually severely hampered by their position as recipients of funds for little or no effort?

Purposeful planning tries to actually empower them to have a say and some control over their lives, and doesn’t treat them as less capable people who are simply entitled.

 

An Idea Whose Time Has Come

Members of PPI probably already “get” most of what I’ve written above, but sometimes we all need to be reminded of some of these things.

More than that, we need to grow the number of those who get it, and make this planning the rule rather than the exception.

Animals in a farm

Old MacDonald Had Family Governance (E-I-E-I-O)

Old MacDonald Had Family Governance (E-I-E-I-O)

Over the past two weeks I’ve been at the cottage trying to unwind and unplug a bit.

I woke up early one morning, and by the time I got up to start the coffee-maker, the bare bones of this blog post were already complete.

If you’ve ever wondered, “what kind of person wakes up thinking about family governance, while on vacation?” you now have your answer.

Because of the happy coincidence of the first letter of the adjectives I’d been dreaming about, this “Old MacDonald” blog was born.

Without further ado, here are my “E-I-E-I-O” of family governance.

 

Egalitarian

Family governance should be egalitarian in nature.

Family goverance is not the same as business governance. A business should be a meritocracy, where everyone’s rights and obligations stem from their place in the hierarchy.

In a family, simply being born into the family gives you a place at the table, and everyone’s place is more or less equal to everyone else’s.

So in the “family circle” governance needs to be much more “egalitarian”.

 

Intentional

Family governance needs to be intentional.

When I use the word “intentional”, I’m getting at the idea it doesn’t just happen by itself. You need to work at it.

Most families don’t “do governance” because they don’t need to.

If, however, your family has sufficient assets that are expected to survive the current leading generation, and continue to be owned by a group of family members in the next generation, then you absolutely NEED family governance

And you must also realize that it needs to be intentional, so you will need to work at it.

Evolving

Family governance needs to evolve.

This may not be the best time in history to reference US politics, but I’ll do it anyway.

The “founding fathers” came up with their constitution, which has served as the base of their governance for over two centuries.

But in the meantime, those who have been governing the country have amended it a couple of dozen times.

My point is that governance must naturally evolve over time. Don’t expect to be able to figure it all out in the first go around.

“Start where you are, use what you’ve got, do what you can”. And then keep moving forward.

 

Incremental

Family governance should be incremental.

It usually shouldn’t evolve in big spurts. A little bit at a time will almost always be better.

A family is made up of various different members (with a “quack quack” here and a “moo moo” there), and you can only go as fast as the slowest member.

Those who want to go faster will often lament the others who slow everything down, but they’ll also help the family from acting too quickly.

 

“Our Own”

The family needs to OWN their governance.

The governance that any family puts in place will be unique to that family.

It needs to be created “by the family, for the family” if it is to be useful.

Only by creating their own governance, will the family “own” their governance.

They cannot buy it, “off the shelf”, anywhere.

 

And On That Farm He Had Some…

Because there are so many creatures on the farm, Old MacDonald needs to proceed very thoughtfully and carefully.

He would be wise to bring in an outsider, preferably one who has some experience and training, to facilitate the development of the family’s governance.

When I said “By the family, for the family”, note that I never said “by themselves”, in fact most will not get very far without an outside perspective.

 

Intentionality of the “Project”

In fact, the outside person who is brought in also should also act as the “project manager”, and a large part of their role is to keep things on track and moving forward.

Family governance is not a natural thing, and it needs to be nurtured along the way.

If your family intends to successfully continue to own assets together into the following generation(s), you cannot ignore family governance.

There are all sorts of different animals in a family, and if you want them all to sing together, you’ll need to work at it.

Sharing Some Rocky Mountain Kool-Aid

Sharing Some Rocky Mountain Kool-Aid

I just returned from another fantastic Rocky Mountain experience: four jam-packed days, over two conferences, hosted by the Purposeful Planning Institute.

This has become an annual trek to Denver for me, which will surely continue for years to come.

 

Four Going on Five

I first attended PPI’s “Rendez Vous” in 2014 and returned again the following year. Last year, they added something new, an additional conference called “Fusion Collaboration”.

I decided to do both in 2016, and I jumped in with both feet again this year.

There was some confusion again, on the part of some attendees at either or both this week, about the difference between these two conferences.

I came up with an analogy that got a great response from everyone with whom I shared it, and the title of this post gives you a clue as to what it’s about.

 

Try Some of this Great Kool-Aid

Fusion Collaboration, the newer portion, is aimed at technical professionals who deal with business families, and families of wealth, and its goal is to introduce these more transactional folks to some of the other, deeper ways that these clients need to be served.

The presenters at Fusion are mostly specialists who work on the less technical aspects of wealth transfer, in what I like to call the “family circle”.

Many people used to call these the “soft side” (and still do), but now it’s more often dubbed “relational”, or “family dynamics”.

Fusion Collaboration is PPI’s attempt to get them to try Purposeful Planning Kool-Aid and “get them hooked”.

 

Let’s Swap Kool-Aid Recipes

By Wednesday evening, Fusion was wrapping up, and many of the lawyers and accountants and transactional specialists were preparing to depart, only to be replaced by a fresh crop of attendees.

The people who came for Rendez Vous, for this, its seventh incarnation, didn’t need to be enticed to drink the proverbial Purposeful Planning Kool-Aid.

Most of these people already subscribe to “Kool-Aid Aficionado” magazine, and they bring their Kool-Aid mixing and serving tips and recipes to share with their friends.

Besides the relational experts, many traditional transactional professionals who’ve become Kool-Aid fans also attend this conference regularly.

 

What’s In this Stuff?

If you’re curious about the main ingredient in this enticing beverage, it was nicely summarized by PPI’s founder, John A. Warnick, in one slide, which read:

                      Purposeful Planning   =   “Client-centric”   +     “Family-centric”

Most professional advisors already recognize the importance of putting the client’s needs and desires at the heart of wealth transition planning,

They also usually understand (in theory, at least) how important it is to bring next generation family members into the picture, preferably early on.

 

Secondary Equals?

Many of those who’ve traditionally driven the discussions around the pieces of wealth and business continuity, and transitions to the next generation, would consider themselves the primary drivers of this important work.

That may be true in the strict “transactional” sense, but more and more families are demanding a more holistic approach, which naturally involves a host of other experts from different, perhaps “secondary” domains.

Ideally, a collaborative group, or better yet, a team of advisors, will work together to figure out and design a complete inter-generational solution, along with the client family.

In order to do this work efficiently, and effectively, it really helps if the advisor team can work as collaborative equals.

 

Who Are They?

To give you an example of the types of specialists I’m talking about, here are some words and titles from some of the business cards I collected this week.

  • Legacy Advisor
  • Independent Trustee
  • Family Enterprise Advisor
  • Facilitator
  • Coach
  • Consultant
  • Psychologist
  • Gift Planner
  • Communications Specialist
  • Family Dynamics
  • Philanthropy Consultant
  • Family Legacy Advisor

And I know I’ve easily missed at least a handful of specialties.

 

July in Colorado 

After the opening dinner of Rendez Vous, as a table exercise, the “Elders” in attendance were asked to share with the “Tenderfeet” why we keep coing back every year.

At my table, most agreed it was the people, all of whom seem to come for the right reasons, i.e. to serve families better.

It’s also a great place to fill up on information, ideas, best practices, contacts, and lots of hugs too.

Oh, and Kool-Aid, of course!

Hoping to see you in Denver in 2018.

Would you like a glass, or a whole pitcher?


Links to previous Rendez Vous blogs:

2016SWEET SECLUDED RENDEZ-VOUS

2015RENDEZ-VOUS WITH A PURPOSE

2014THE RISING GENERATION IN FAMILY BUSINESS

 

Father’s Day Introspection 2017

That Time of Year

Every year when Father’s Day rolls around, I get mixed emotions. Being a father is truly the greatest joy of my life, and this weekend will be my 18th as a father, but also my 9th without my father.

When I work with members of a family, I like to help them see things from each other’s points of view, and asking them to project forward or backward many years comes naturally to me, stimulating conversation through curiosity.

Asking a father to think back to when he was at his son’s current age will naturally shift his viewpoint.

Likewise, having a son project to when he will be his Dad’s age and imagine what that could be like, forces him to adopt a different mindset.

 

My Own Journey

For the first few decades of my life, I only saw Father’s Day from one perspective.

When our son was born, I developed a new appreciation for the third Sunday in June, as I was now a father too. Having my father still around then, I got to experience the “dual roles” of son and father.

I didn’t get to enjoy too many of those, unfortunately, as my father was struck down too soon by cancer, so now I am back to only one way of experiencing this special day.

 

Father–Son Experiences

This past week I was in Halifax for the Family Enterprise Exchange’s (FEX) Symposium, where there were plenty of father-son teams and stories.

(There were of course mothers and daughters too, but this is my Father’s Day blog and I’m a guy, so please excuse the gender slant this week.)

Whether it was a father and son on the stage, recounting the evolution of their relationship, or members of a family at my table during one of the sessions, I couldn’t help comparing what I was seeing and hearing to my own experiences.

It felt like most of the relationships I witnessed were healthier and more open than the one I had with my father, and much closer to what I feel like I’m living with my son (and daughter).

 

Objectivity Problem?

I can’t be sure of my biases here, but I think I’m being pretty objective.

Were these isolated examples of great family relationships?

Was my view of them skewed by their efforts to show “good behaviour” in public?

Was it a sign of the times that younger generations have got the father-son relationship figured out better?

I can’t be sure, but I do know that the fact that my Dad and I were in a family business together certainly DID have an effect on our relationship.

 

“We’re Not Gonna Do That”

I shared a fundamental story of ours many times during the FEX Symposium, one that I wish had turned out differently.

In the mid 1980’s my Dad had joined CAFÉ (Canadian Association of Family Enterprise, forerunner of FEX) while I was completing my Bachelor of Commerce studies at McGill.

Those studies were part of what I understood to be my “duty” as his only son: to fulfill my “destiny” as his successor.

One day he told me that many of the advisors who had spoken at CAFÉ events were very much against the idea of hiring your kids right out of school and straight into the family business.

I recall looking at him with a hopeful twinkle in my eye (which he clearly didn’t read the way I had hoped), waiting for the next line.

At that point he put his hand on my shoulder and “reassured” me with, “But we’re not gonna do that!”

Once again, he decided for we.

 

Wait, Why Not?

My hope is that modern day sons would have the courage to say, “Wait, why not?”

I really wish that I had, and if my son were faced with such a situation, I hope he would too. But I don’t plan on ever putting him in that kind of situation.

And for any other father-son team experiencing this question, please resist the temptation to taking this short cut to working in the family business.

 

Worth the Wait

If it’s right, it’ll be even more right, later.

Let your kids become their own selves first, outside their parents’ shadows.

It is worth it for them, and it will be for the business too.

Family Business Legacy

My Beliefs on Family Legacy Advice

Class Assignment

(This week’s post is the slightly edited text of a class presentation that I made this week at the Bowen Center for the Study of the Family, at Georgetown University in Washington D.C. where I just completed my first year in their Post-Graduate Training Program.)

 

According to what it says on my business card, I’m a “Family Legacy Advisor”.

My beliefs, which I’ll share with you today, are very much about how I see that work, and how I’m becoming inextricably tied to it.

More and more, it’s becoming who I am, and not simply what I do.

Here are three of my foundational beliefs:

  • I believe that Family Harmony holds the Key to a Family’s Legacy
  • I believe it’s always worth making the effort to improve family harmony
  • I believe working on family harmony is a lot of work, and, it all starts with working on self

 

How did I get to this point? 

I had my calling 4 years ago, doing the course work in a program called Family Enterprise Advisor

There, we learned the three-circle model, Business, Family, and Ownership, with each circle representing a system.

It dawned on me that for the first 4-plus decades of my life, I’d been led to believe that the Business circle was the only one that mattered.

As my studies progressed, I soon began to understand that the Family circle was more important, and it was often neglected, and that I was naturally more attuned to the important work that often needs to be done in the family circle.

So, I began working on myself, with coaching training, mediation courses, and facilitation programs, including an entire suite of courses in a program called Third Party Neutral.

And of course I began training in Bowen Family SystemsTheory.

 

How has my Bowen work contributed?

Well, starting with two years in Vermont, in their program, and this year here in DC, my Bowen Theory work has helped me in a number of ways.

It has:

  • Sharpened my focus on the effort involved
  • Emphasized the work on self,
  • And continuously reminded me that this work is a never-ending pursuit

 

Challenges

My calling came along with a desire to “help” people and families to deal with issues that I myself had dealt with in my family.

My mistakes, my parents’ mistakes, and the ones that I discovered when I married into another business family, were all there as experience that I wanted to transfer into wisdom to be shared.

But as WE all understand, telling people what they should do doesn’t work so well, so transforming myself into someone who “does Bowen” was an idea that I thought would be useful.

 

Bowen Family Systems Theory

I’ve since discovered that you can’t just “do” Bowen, you actually have to sort of “be” Bowen. Not Dr. Bowen, but maybe be a “Bowenite”.

Learning a new way to “be” so that you can lead people, and model behavior for people, takes time, practice, and effort.

One huge challenge that I’m just now starting to comprehend is the difference between HELPING people and being a RESOURCE for people.

The difference sounds subtle, but it’s actually quite stark.

You can’t help people who don’t want to be helped, and trying to help them is quite often counter-productive.

 

Moving Forward

My way forward is to become a resource to people who want to improve their family harmony, and in order for me to “be” that resource, I need to continue to make the effort to understand myself.

My Bowen training has helped me understand many things in a new and improved way, and I feel like I’m miles ahead of where I was just a few short years ago.

But, my understanding of self, and my work on differentiation, feels like it has so much further to go.

 

Understanding Self and Others

As I understand myself better, I understand others better as well.

These efforts are worth it, for me, for my family, and for whichever families seek me out as a resource for their own work on harmony, as part of their desire to preserve their legacy.

And so I added one more belief:

I believe that I can actually help more families by acting as a resource to them, instead of trying to help them.

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.

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?”

Advantages and Dis-advantages of Liquidity Events

Liquidity Events in a FamBiz: Pros and Cons (Part 2)

Part 2 of 2 – The Cons

 

Last week we looked at some of the positive aspects of a Family Business liquidity event, so now it’s time to look at the other side. Longtime readers may recall a 2014 blog, Solid Wealth Vs. Liquid Wealth, covering some of this territory.

Today we’ll look at career questions, owners who suddenly “expect” to get “their share”, the leaky bucket syndrome, and family alignment.

 

Career Questions

When a family owns a business, many family members often have jobs and careers that depend on the company. A liquidity event will usually affect that in a big way, and typicallly NOT positively.

Even in cases where only a small number of people depend on the business for their livelihood, those people will usually be intensely affected by the change. Yes, a few people will likely still be needed to manage the liquid assets and other company and family affairs, but their roles will change, and not just a little.

Then there is the question of skill match. You have people you want to give a job to, and you have stuff that needs to get done. Yes, THAT skill match. How will that look after a liquidity event? Does your VP of HR child have what it takes to manage your investments?

 

Can’t I Just Take “Mine”?

Last week I ended the blog with a laugh, directed at those who “own” a piece of a family company who would like to have the ability to liquidate their ownership.

This week, I will turn and laugh instead at the person who controls the liquid assets and wish them good luck in satisfying a contigent of co-owners, trying to keep them happy.

If you own 10% of DEFG Corp., that’s all well and good, but try spending it.

But what happens when DEFG is sold for $XX,000,000? It’s suddenly tempting to try to get your hands on the $X.X Million that is “yours”.

Note that I used quotation marks because it may not be as much “yours” as you hoped or thought. (See Putting the OWN in Ownership)

 

What Happened to It All?

The answer to the question about “taking mine” is almost always “NO”. And that’s followed by an explanation about why the family is planning on keeping all of the wealth together, and will manage it for the long-term benefit of the family, including current and future generations.

The fear that these families have, and it is a REAL fear, is illustrated in the image that I chose to accompany this post. Most people won’t come out and say this, so I will.

If you simply take the liquid wealth and divide it up among the family owners, many of them will simply urinate it away. Okay, so I used a different word, but I am sure you get it.

That fear is very often justified. Is there a component of control and “I know better what’s good for you than you do”? Yes, and as long as the one contolling it can pull that off, they will be alright with it. The wealth creator can usually do it, but for their kids, it’s not as easy or obvious.

 

Family Alignment

“It’s hard to keep a family united around a pile of money”

I wish I could remember where I first heard that spoken, because it has stuck with me. It was surely said by someone who was preaching the benefits of family philanthropy, because getting family members excited about working together for some common good is one of the chief benefits of the establishment of more and more family foundations.

The subject of Family Alignment is worthy of much more treatment than I can give it here, and for those interested, you’re in luck. Please check out my Quick Start Guide on the subject. Family Alignment: What it is, Why you need it, How to build it

 

Liquidity DO’s and DON’Ts

My preferred style is NOT to tell people what to think, but to make sure they don’t miss out on things that they should think about.

Whether or not to pursue selling a business, or entertain an offer for one, is very personal and depends on a whole variety of circumstances, and timing is often a huge variable.

Thinking through “what comes next” for you and your family should be done before you sign the official paperwork, not after.

 

Liquidity Events in Family Business

Liquidity Events in a FamBiz: Pros and Cons

Part 1 of 2 – The Pros

 

The expression “liquidity event” is not necessarily well understood among the general population. Let’s take a look at it from the Family Business point of view.

Essentially, a liquidity event takes place when the owners of a business, in this case a family, sell a substantial portion of their business (either shares OR assets) to an outside party, for cash or another form of asset that can more readily be turned into cash quickly.

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