Animal shadows on a white background

“Clunky Ownership Syndrome” in Family Business

“Clunky Ownership Syndrome” in Family Business

Ownership usually doesn’t get much attention in the area of family business, and there are many reasons for that, and we’ll get to some.

Maybe I’m emphasizing it too much. I did a quick search of my website (www.ShiftYourFamilyBusiness.com) and found that I’ve already written 3 blogs with “ownership” in the title.

Everything is relative, though, and even with this fourth blog on the subject, that’s less than one blog a year about this “forgotten” circle. (see: Ownership: the Forgotten Circle of Family Business)

 

Status Quo That Lasts

The people who own a business have certain privileges that come with ownership, but with those, there are also responsibilities.

Most people who work for a family business know who the owners are, and they’re usually given certain deference.

The owners, in turn, try not to act like superior overlords, and this dance can continue for decades, as long as nothing changes.

 

Fast Moving World

While ownership remains fixed over time, the two other “circles”, family and business, are constantly in flux.

The business evolves, new products are launched, new locations opened, expansions bring in new employees, and new markets are developed.

Financial results are compiled monthly and quarterly.

The family also changes, as members find partners and have children, people get educated and find their passions, some join the business, and everyone grows older every year.

Oh, and some die.

Things are constantly evolving, and changes are part of life, and these days things seem to move more quickly than ever.

Yet ownership usually stays fixed, and rarely even gets a second thought.

 

Clunky by Definition

I chose the word “clunky” to describe the situation because it felt like the right word, and I’ve used it to explain this to people in the past.

Searching shutterstock.com to find an appropriate image for this post, I almost had second thoughts, as the photo choices for “clunky” were mostly 1980’s cellphones.

(I went “outside the box” a bit with my choice of hippos; not sure it worked (?)).

Then I Googled “clunky definition” and I was immediately sold on the fact that clunky was the right word.

Here’s what came back:

clunky: awkwardly solid, heavy, and outdated.

 

So What? 

I’m not suggesting that ownership should necessarily change more frequently than it does; that would be stretching it.

What I am saying is that the definition above includes a couple of words that many family businesses should be thinking about much more than they typically do.

There are only four key words in that definition, so you can probably locate the two that are ringing alarms bells in my head.

 

Awkward!

“Awkwardly solid” almost sounds like a backhanded compliment. Solid is usually positive, but when it’s awkwardly so, well, maybe not so much.

Family business relationships are often already awkward, simply because family and business overlaps cause complex situations.

Now throw in ownership overlaps, compounded by the fact that things are stuck in the past, and things get even clumsier.

 

Outdated

“Outdated” is probably the simplest word to describe the issues that I’ve seen regarding the ownership of family businesses.

It’s not hard to understand why things change so infrequently, but that doesn’t mean that everyone should just be cool with it.

Rising generation family members crave some clarity about their futures, but they often continue to put up with vague replies when they broach the subject.

“Don’t worry, some day this will all be yours”

 

When Exactly is “Some Day”?

Once again I feel the need to explain my views on this, lest readers get the impression that I think ownership changes absolutely need to happen more regularly and quickly.

I’m advocating for some thoughtful discussion and planning, and hopefully some transparency.

 

Transition Planning

As the business evolves and family members age, transition plans are contemplated to make sure that people will be prepared to assume their future business management roles.

Don’t forget that there needs to be an ownership transition too.

 

Two-for-One

Do you really think it makes sense to think about those things as completely separate discussions? I don’t.

And if you ask those being groomed for future management roles, I bet they’d agree too.

Look 15 years into the future. People will be that much older, and the business will have grown.

If nothing changes, your current ownership structure will be pretty clunky.

Start planning those changes now too.

Family of adults and kids sitting together

Realistic Family Governance Goals

Realistic Family Governance Goals

I recently spent a day in New York City at the second annual conference of the Institute for Family Governance.

It wasn’t only interesting, but in some ways inspiring. But upon further reflection over the following days, I almost felt like it might’ve been a bit too inspiring.

I’ll get back to that part later.

 

Generative Families

The opening speaker was Dennis Jaffe, who didn’t disappoint, as usual. His presentation was titled “Do you need a different mindset to create a fortune than to hold onto one?”

I love that title because it’s a question that answers itself, with an “of course” as soon as you read it.

Jaffe went on to talk about what he terms “generative families”, which others call “legacy families” and still others dub “enterprising families”.

Generative families, according to Jaffe, see themselves as a “collective entity”, who’ve decided to develop into a “great family”.

 

Great “Family” vs. Great “Business”

This reminded me of a line that some people like to use with successful business people, to convince them to shift their focus.

“You’ve already created a great business;

now, why don’t you create a great family?”

It also fits nicely with the question that served as the title of his presentation.

Jaffe has studied dozens of such generative families who’ve been successful at transitioning their wealth over several generations.

 

Examples and Role Models

The rest of the day continued with examples of families who’ve figured out that family governance is the key to having a great family.

Simply put, without any governance, a family’s legacy has virtually no chance to survive over generations.

In the past few decades, people like Jaffe have done the work of learning what these families do, and have written about it so that other people can follow these role models.

 

Too Inspiring

So here’s why I think that in some ways the examples we heard about might actually be “too good”.

I’m willing to bet that none of those families made the decision to create a governance model on one day, and then had created and implemented it successfully within a year.

I bet most of them still had lots of work to do even after a decade. This work takes lots of time and effort, over many years.

 

Family Culture

Mitzi Perdue was our closing keynote speaker and she talked about family culture, which includes the answers to questions like “who we are” and “how we do things”.

She also correctly noted that these things don’t just happen by chance.

This stuff takes lots of work, and it takes lots of time.

And it takes a different mindset.

 

Family Alignment and Vision

I know that in order for a family to be receptive to putting any sort of governance into place, they need to be aligned, and have a similar vision of what’s possible.

Regular readers of mine also know this to be true (assuming they’re drinking the KoolAid).

But I feel like many of the attendees at this conference might have had the impression that some of the examples we heard about possibly seemed “too perfect”.

Advisors to families, and families themselves, who’ve never heard of family governance often need time to grasp everything that’s involved in this work.

Likewise, the entire family will rarely buy in all at once; there usually needs to be an “early adopter” or “family champion” who “gets it” first, and then leads the way.

 

Ironman Inspiration to Get Off the Couch

I love analogies, and I think of these great generative, legacy families that are the role models, as if they were champion Ironman Triathletes.

They’re awesome and inspirational, and that’s why they’re on TV.

Most people will never get to that level, and if they choose to stay on the couch because they know they’ll never be an Ironman, then that’s a missed opportunity.

Lots of families could benefit from getting off the couch and just going for a walk or a jog.

 

One Step, One Person, One Family at a Time

Family Governance starts with a mindset, and a group of people who are aligned.

It takes lots of time and effort to get there.

The good news is that it’s very incremental in nature.

Start small, get another person on board, and grow slowly.

Don’t compare yourselves to the best and get discouraged.

It can be done, and it is so worth it.

 

Shifting FamBiz Time Horizons

Shifting FamBiz Time Horizons

Family businesses are known for looking at things from a much longer time perspective than larger, publicly traded companies.

They aren’t concerned with how their decisions will affect their next quarterly earnings release, and instead focus on how things will look in a quarter century.

 

How Fixed Is a Time Horizon?

The long-term view can stay the same for decades, but sometimes events occur that make changes desirable over a much shorter timeframe.

One of my continuing roles in managing our family office is handling the asset allocation to various professional outside investment managers.

We recently decided to divest one position and I was surprised to learn that there would be an early withdrawal penalty for not having held it for the 5-year minimum.

Hmmm, I wondered, why had I not noticed that back then (it’s been over four years)? Simple, at the time it did not seem like it could ever be an issue.

Things change…

 

Time Flies

In another sphere of my life, a couple of years ago I was in Boston with the family, and we went to the Harvard bookstore to look at their swag.

I curiously asked my kids if they’d ever thought of attending that school.

I’ve since done campus tours at most of the Ivy League schools, plus a bunch more, with both of them, and yet in a few months that important chapter of my life will also be behind me.

How could my focus change so quickly? It feels like just yesterday we were looking at daycares.

 

Teens, Seniors and the Sandwich

Maybe it’s just that I’m part of the sandwich generation, with two teens and an octagenarian mother who depend on me.

During those life stages, a few short years can change many aspects of one’s life.

But every family has people at various ages and life stages, and that’s part of why business families are so complex.

 

Family Life Cycle

If you read some of the books around family wealth and making it last over generations, you’ll surely come across authors who talk about “100 years” as a timeframe to consider.

I have to admit, when I first saw this a few years ago, I thought it would be difficult for most people to grasp.

Heck, I was working in this space, and I was having trouble wrapping my mind around it.

I’m pretty sure I “get it” now, but I’m not sure if it’s because I’ve become used to hearing it, because I’m a few years older myself, or because I’ve “matured” into a different life view.

 

Legacy Families 

If you want to learn from families who’ve been successful in transitioning wealth from one generation to the next, and done so more than just once, well, you almost have no choice but to look at those who have lasted a century or more.

At the recent Institute for Family Governance conference, one speaker mentioned that a 20-year investment time horizon for a family might be considered “short term”, and I agree.

But if I want to look at things that way, first I need to almost be able to remove myself from the equation.

I now realize that maybe the investment we were divesting shouldn’t ever have been made because it did not fit such a long time horizon.

 

My 100-Year View

Or maybe for my family, a 100-year horizon isn’t appropriate, because our family never quite reached the wealth level necessary to become a “legacy family”

Maybe another lesson here is that it’s easier to help some other family deal with these questions than it can ever be to look at this for your own family.

It’s really difficult to look at these kinds of multi-generational issues when you and your life are part of the equation.

It’s much easier for me to draw out your expected lifespan and matter-of-factly talk about how things will look decades later. Doing that for me, um, not so much.

 

Not Fun? Doesn’t Mean You Don’t Need to Do It!

Realizing that things are complex and potentially not fun does not absolve you of the responsibility to actually take care of important things, though.

Thinking about the importance of this is the first step to getting started. Now go and find someone who can keep you on track.

Then together you can take the steps needed for a true 100-year plan.

Santa Playing with the ipad

Christmas Resolutions for a Family Business

Christmas Resolutions for a Family Business

I hope everyone reading this has a great Christmas, or whichever other holiday they celebrate at this time of year.

I also hope nobody thinks that I actually wrote this on Christmas Day.

I’m a creature of habit and pride myself on being consistent, and my blogs have been going out to subscribers on Mondays for years now, and I’m not changing that just because it’s Christmas.

Recently I started writing them a week ahead of time to take the pressure off my website/social media team.

And if you’re wondering if there’ll be another blog in your inbox on New Year’s Day, stop wondering, because that’s a Monday too.


Timing Is Everything

Because I knew that this would be arriving in people’s inboxes on Christmas, and realized that many people wouldn’t be reading it until later, the “Resolutions” part that’s normally associated with New Year’s feels less clunky.

And it should help me make my point. So what is that point? Glad you asked.

During a recent exchange with a potential client, a lightbulb went on in my head as I realized they had some possible similarities with one of my current client families.

And in fact, I know of a few other families who could benefit from the kind of work I’m doing with them.

 

Rising Generation Group

The family client in question is one where I work with only the third generation sibling group. I’ve met with the parents only once, and this is an engagement that began almost two years ago.

The parents of the four Millennials from that family decided to hire a coach to work with their children, and that is what I’ve been doing with them, almost exclusively without their parents’ involvement.

I admit that this is a bit of a “non-standard” type of engagement, because most parents would not think of doing this in such a “hands off” fashion, but they put their trust in me to work with their offspring and haven’t looked back.

The other family I mentioned, the potential client, is one where the third generation family members are a larger group, and it includes four groups of cousins. But I’m going to suggest they try something similar.

 

Budget for Development

So the holiday tie-in I’ve contrived is that giving a generational group of people the gift of hiring them a coach to work with them could be a great Christmas gift.

But the gift can be even better if it is combined with a resolution (New Year’s tie-in!) to essentially stay out of trying to direct what the group works on with the coach.

If you are hiring someone to tell your kids what to think and do because they aren’t listening to you, save your money and time and forget it.

If you want to establish a budget for their development, especially to work on things together, that’s a pretty cool angle to take.

 

A Leap of Faith with the Right Attitude

My client family kind of took a leap of faith with me, but it was combined with the right attitude of trusting their kids enough to let them figure things out with me together.

My premise with them has always been that parents who have built up a business or great wealth all have the same fear:

that after they‘re gone, the kids will fight over things

and the wealth will destroy the family.

Having me as an independent, unrelated outsider to work with them has been a great exercise in teamwork for them, as I am essentially mostly a guide and mentor, as they do the real work of planning activities for the extended family group.

 

Early Stages

The early stage work we’ve been doing is also paving the way to the future important discussions that they will soon be having with their parents, once their parents recognize that they are ready.

After they’ve gotten to know each other better, and have learned how to work together as a team, those future “tougher” steps will be soooo much easier for everyone.

 


Xmas gift, NY resolution…

If you’re a family with the worry I noted above, why not resolve to look into this idea in 2018? I’ll gladly share some of the secrets of what I’ve been doing and see if it could work for you too.

conflict between family member in an office enviroment

Embracing Conflict in Family Business

Embracing Conflict in Family Business

Last week I mentioned the Family Firm Institute’s annual conference that I attended in Chicago in October, and how I came home with many weeks’ worth of blog material.

So today I’ll take one of the sessions that I enjoyed and build this post around it.

Here’s the title of the presentation in question:

 

“Can Embracing Conflict Spur Positive Change?”

Joe Astrachan and Carrie Hall were the presenters, and they based much of their discussion on a recent survey of some of the largest family businesses in the world.

Here is a link to their report.

Often when people like me get called into a business family, it’s because there’s something going on that could be described as “conflictual” in nature.

One of the first pieces of “good news” from the conflict is that it has heightened the sense that there’s a need to call in an outsider to help get the family to a better place.

Now, if that outsider is open-minded, well trained, and comfortable with a high conflict environment, then why couldn’t the conflct actually spur positive change?

What’s the Alternative?

Too often families will avoid conflict, or even any semblance of conflict, at all cost. Certain family cultures simply don’t “allow” any expressions of confrontation, negativity, or even challenges to authority.

Unfortunately, that often masks important differences that actually really NEED to be expressed, brought out, and dealt with.

One of the first pieces I recall reading about this, the one where you could say I had my “A-Ha moment” on this subject, was “The Invaluable Gift of Conflict”, by Matt Wesley.

 

Two Main Components

The presence of conflict, aside from it resulting in the arrival of an outsider to assist in moving the family forward, is also that visible conflict is preferable to simply having issues simmer quietly under the surface.

The consequences of unexpressed issues can be bitterness and dissatisfaction that lasts for years (decades?) before finally exploding. Unaddressed issues will often only get worse with time.

But the second “good news” aspect of conflict in a family business is the “energy” that it can create, and that energy can be harnessed, for “good”.

 

Stagnation and Apathy

One of the side effects of having people who are displeased in key positions (in the business or in the family, if not both) is that it can breed apathy and a feeling that things will never change, or that they’ll only change far in the future, and only when their perceived “problem person” is gone.

That apathy and feeling of resignation can turn into stagnation very quickly.

Conflict that erupts and becomes visible can be much healthier because at least you can see it and you’re forced into action to deal with it.

 

“One Story”

Back to the presentation by Astrachan and Hall.  The biggest “take home” message for me was their idea of creating “one story” for the family to tell.  Some background and context are necessary here.

They described a situation where there was a severe rift in a family, yet a couple of the branches of the family managed to come back together.

One of the keys to making it all work, was to come up with the “one story” that the family would tell (to themselves and to the world in general) about the business and the family history.

 

Singing from the Same Hymn Book

Any family business that has lasted more than a few decades will do well to compile and tell their story, if only for the “marketing” power that this can have.

When it comes time to “inculcate” younger members of the family into the business’s culture, these history lessons are pretty important too.

But in the case of a family “coming back together” after a rift, the part of the story dealing with the cause of the rift, and more importantly, the way the family overcame it, can be huge.

 

Positive Change

The presentation (and this blog) are about positive change, and getting the story straight can have more of a positive influence than many people will realize.

The first step may just be to learn to “embrace” the conflicts that you can actually see.

You can only get through difficulties when you actually put things “on the table”. And if you need outside help, then get some.

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.

The Dimmer Switch

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.

 

5 Things to Know: Asking for Help for a FamBiz

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.

Different shapes and forms of tents

Combining Strategy and Structure for Families

Combining Strategy and Structure for Families

I got an email a few weeks ago, inviting me to an upcoming Family Office conference, and the wording of the subject line caught my eye.

Now that my thinking on the issue has gelled in my head, I’ll try to turn it into a useful blog post. Here goes.

 

Strategy AND Structure

Let’s begin with the email subject line, so that you’ll get the context:

“Essential structures & strategies from leading families”

The event itself was billed as a “Family Office and Investment Conference”, but the tease in the subject line had succeeded in intriguing me to believe that they might be talking about topics that are much more up my alley (i.e. family issues)

When it comes time to plan the transition of a family’s wealth from one generation to the next, a lot of effort is usually put into finding the best way to structure things.

There are many different ways to accomplish the goal of transitioning the ownership of assets from the current owners to the future ones, and the choice of which way to go will often be driven by the family’s advisors, who each have their particular favourite techniques and structures.

The family client relies on advice from these trusted experts, who are believed to know what they are doing, and strictly speaking, they usually do.

So what’s my issue with this? I’m glad you asked.

 

The “What” Shouldn’t Come First

A family faced with this scenario is really only going to do this once per generation, and few families are experts in knowing exactly what they want, or even knowing what’s possible.

The tactical experts who advise them are just that, “tactical”, they specialize in the “what”, and when a client shows up looking for help, the expert will almost always go back to the “tried and true”.

But what if they’re pulling an old structure off the shelf that they used before for another client whose situation was completely different?

Too few advisors will take the time necessary to explore the “why” questions with their client families, and to think in terms of the overall family strategy, in order to make sure that “what” they are proposing actually makes the most sense.

 

“Why” Should Precede “What”

It’s really useful for the family to have the important planning discussions amongst themselves to plan strategy before engaging the outside structure experts.

As I wrote back in March, in “We Treat Them All Equally – (That’s Good, Right?)”, these discussions are not necessarily done quickly or easily, but they sure are important and worthwhile.

You may be curious as to my selection of the image I chose to accompany this post, perhaps wondering “what’s with all the different tents”? Each of them is a structure, and they are all different, some of them markedly so.

 

Are We All In This Together?

In “Going Far, Go Together” I wrote about families that are planning to stay together for the long term.

What I didn’t stress at the time was the actual question that the family needs to clarify beforehand, i.e. does the next generation of the family WANT to stay tied together, and continue to work together as a shared ownership group.

Too often there is a presumption that the answer to this question is YES, and when that happens you can end up with siblings who are forced into partnership with each other.

If such a scenario is going to turn into a disaster because of the family dynamics, wouldn’t it be better to figure that out in advance, and not go down that road?

 

Strategy Before Structure

At the risk of harping on this too much, I’ll say it again. Before you decide on the best structures to hold the family assets for the next generation, the family needs to sort out the questions of who is on board.

It can be very tempting to choose a complex solution proposed by a tax expert who shows you to the penny how much tax you can save by going with their suggested methods, but if that solution means the next generation will be stuck in the wrong kind of tent for their trip, what was the point?

A huge tent built for the desert may not be what most of the family needs. Work out the strategy first.