Many advisors who work with business families have their own inherent biases. This isn’t a big problem, especially when we recognize them and admit them openly when the situation warrants.
Personally, I love it when both a business AND the family behind it can remain together for the long haul, including through an intergenerational transition. Of course, such transitions are a point where many family businesses face their longest odds, because it isn’t always easy (or even possible) to get everything “just right”, as one generation leaves the scene and another one follows in their place.
When the family and their advisors, recognize that it probably isn’t going to work, that’s when some key decisions need to be made.
Family or Business as Priority?
The main question that often arises, even if it’s seldom expressed this way, is whether they’re going to prioritize the business, or the family.
The outside professionals who are working with the business are much more likely to prioritize the survival of the business, even if it’s at the expense of the family.
The business is the “main entity” of concern, they’re business specialists first, their client is the business, that’s the circle that they understand the best, that’s who they invoice, that’s what they know.
In contrast, I work in the family circle, so my bias is always to find ways for the family to be the major priority, not the business. In my view, the business is an asset, that happens to be owned by the family. Assets can be bought and sold. Family harmony? That’s a very precious intangible asset, and you can’t buy it, especially when you really need it.
Who Needs a Monolith?
Thankfully, the era of one monolithic company is not as common as it was decades ago. As noted a couple of weeks ago in “On Enterprising Families and Family Wealth”, it’s much more common these days for successful families to be involved in more than one enterprise.
In addition to diversifying the family’s financial risk into different industry sectors, another great benefit can be that there are more places for family members to excel in their own part of the overall family wealth spectrum.
Different Paths, Similar Destinations
Over the years we’ve all heard stories about the family with two kids and one store, who opened another store so that each of the siblings could have “their own”, or the brother who moved away to open a new location in a different territory.
Occasionally there would be a company that needed to be “split into pieces” to accomplish the same result, and it was this type of situation that I had in mind when conceiving this post, with the “pieces” and “peace” play on words.
These days it may be more likely to be one of the rising generation members becoming an “intrapreneur” and creating a start-up in a new industry but within the walls of the “mother house” company. Or it could be a family member pitching the “family bank” with an idea that needs funding, which could become the next key growth piece in the enterprising family’s wealth strategy.
It could be some family members looking at diversifying the family holdings into private equity or impact investing, or simply having those rising generation members who are so inclined, taking an active role in the family’s philanthropic initiatives, rather than remaining with other siblings or cousins in one of the businesses.
Many Ways to Achieve Peace
Of course the bigger the enterprise the more places there are for people to assume roles that suit them, where they’re less likely to clash with other family members.
In cases where rival siblings feel “stuck” together in one place that’s beginning to feel “too small”, figuring out how to cut the entity into the right pieces can be a struggle.
But my bias will always be to work to find a way to get that done and keep the family harmony intact, even if the business has to “suffer” some consequences.
Thanksgiving and Christmas Dinners
It’s hard to put a value on family harmony, but I always like to think about important family gatherings and the fact that these are places and occasions where you need everyone to be comfortable coming together.
If working too closely together makes this impossible, please consider trying some of the ideas here.