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Working Out the Family Dynamics – Before Vs. After

Working Out the Family Dynamics – Before Vs. After

My Bias Has a Clear Winner

This week we’re revisiting an old idea but looking at it in a new way. There will be some flashbacks and an interesting juxtaposition that came from a peer call that inspired this post and the lookback.

We’ll also have a look at two ways of doing something important that each occur with some frequency, and for which I have a clear bias for one over the other, even though it is way less popular than the other.

An 8-Year Blog Flashback

As I sat down to write this piece, I began with some notes from a recent call that gave me a good starting point, but it was not nearly fully formed, and coming up with a title was presenting a struggle.

As I turned it over and over in my head, I had a flashback to a post from 2014, and then had to shake my head as I did the math and realized that I wrote about another version of this over 8 years ago.

The good news is that I haven’t changed my mind and my bias remains intact. If anything, it has been reinforced.

Back in 2014, inspired by a webinar by the Purposeful Planning Institute, I wrote Pre-Mediated Planning, Sounds Good to Me.

That blog was inspired by Dean Fowler, a psychologist with a long history of helping enterprising families work through the intricacies of an intergenerational wealth transition.

Having come to this work many decades ago as a mediator, frequently brought in by lawyers of disputants, Fowler was advocating for clearing up potential landmines before they became problematic.

The 6-Month Rush and 4-Year Clean-Up

Getting back to the recent peer call, one of the leaders was referencing a case where the family had rushed through some of the structural planning for an upcoming transition in about six months, and who were then pleased that that work was now behind them.

Lo and behold, however, once some of the previously uninvolved family members learned about some of the terms that had been arrived at by the family leadership, problems quickly appeared.

Once a number of the ideas that some thought of as a “fait accompli” were deemed deficient in the eyes of those who were actually most affected by them, it became apparent that things were quickly grinding to a halt.

As it turned out, it took this family about four years of working on coming up with a workable plan to straighten things out.

The 4-Year Process Wrapped Up in 6 Months

During the ensuing discussion, someone mentioned that the reverse might have been an easier road to take.

When asked what they meant, the reply was, “Well, what if the family had instead taken four years to discuss and negotiate the kind of scenario that would work for everyone.”

“Then, they could have easily wrapped up the legal work in less than 6 months!”

It was only later that it dawned on me that this was essentially what Fowler had been referring to when he spoke about “Pre-Mediating” the plans.

My Bias Versus What Typically Happens

I have a strong preference for supporting families in the long process of sorting out what they want and what will actually work, ideally before they make commitments in writing with legal consequences.

However, I also know that this isn’t how things typically play out.

Family leaders, unsure of exactly how to proceed, consult with professionals who are only too happy to make suggestions based on work they’ve done for others, whose circumstances likely resemble those of this family, but also differ in important ways.

The family leaders, wanting to trust the experts, hoping for something quick and simple, and not knowing any better, usually just go along.

And that’s where you get it done in six months, only to need four years to fix it.

The Same Story, Over and Over Again

As I wrote the lines above, I flashed back to another blog I wrote about this, Successful Planning, Who Should Be Involved.

The money quote from that one, which I wrote back in 2015, is:

    “Plans that are about us, but don’t include us, are not for us”.

If it seems like I’m repeating myself, I guess I probably am. The good news, I supposed, is that when I wrote these previous posts 7 and 8 years ago, the battle seemed to be more “uphill”.

It still is, for sure, but hopefully less steep in 2022.

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Can Communication Really Be Overrated in a Family Enterprise?

Aren’t the Three Rules “Communicate, communicate, communicate”?

This week I want to touch on one of the sacred cows of the family business space, and that’s the constant harping on the fact that improving communication is THE number one step that families need to work on.

Regular readers know that I fully acknowledge that most family enterprises are quite complex, and therefore the way that they communicate with each other can almost always be improved for the benefit of all.

This remains true, and almost surely will for as long as families choose to work together or share the ownership of assets as a group.

So I’m not planning on throwing communication “under the bus”, but I do want to shine a light on the way some people treat the subject, and simultaneously ignore a much less popular aspect of what it takes for relationships to be at their best.

So What Is It That’s Underrated?

Before I get to the underrated element, I need to give a shout out and a tip of the hat to the man who put this on my radar a couple of months back.

I discovered the Vermont Center for Family Studies almost a decade ago, when I was trying to figure out why people who work with business families should go through the trouble of learning about Bowen Family Systems Theory (BFST).

At the time, the head of VCFS, Erik Thompson, just happened to be launching a training program for people curious about BFST, so I jumped at the opportunity to dive into the Bowen pool.

I soon discovered that this pool doesn’t have a shallow end, which I suppose is a good thing, since I did dive in.

So perhaps you think that understanding family systems is underrated, vis-à-vis communication, and I guess you’d be partly correct, but that’s way deeper than where I’m going.

Making Relationships Work Better

Families who continue to work together from one generation to the next need to constantly work on their relationships, because those relationships are crucial to being able to continue to make decisions together for the benefit of the family group.

Good communication will of course contribute to such relationships, but there’s a lot more to it than simply more and clearer communication.

Thompson now holds regular free online events on Zoom where he shares ideas that come from his BFST training that he now uses with his leadership coaching clients.

It was during one of these recent calls that he said the magic words that inspired this post:

       “Communication is Overrated.  Self-Regulation is Underrated!”

Okay, so any regular reader will know that at this point I jotted those words down with a huge smile on my face, knowing that I had just landed myself a blog topic.

There Are Two Parties in Any Communication

Whenever there’s any communication, there are (at least) two parties, one who’s attempting to deliver the communication, and someone else, who’s the intended recipient.

On which end do you suppose the self-regulation comes into focus?

This is a bit of a trick question, I’ll admit.

Your first inclination might be to consider the receiver of the communication, and the importance of not overreacting to what was said (or written). And that makes plenty of sense.

But, and this is where Thompson was actually pointing, too often it is the people who are delivering the communication who could benefit from working on their self-regulation.

Communication as a Weapon

He then related a scenario that came from the “couple’s therapy” realm that some may be familiar with.

Two spouses are encouraged to work on the ways that they communicate. One dives in head first and begins reading up and studying and taking communication courses, so as to be better armed for the task.

However, lacking the requisite self-regulation, they now use this “one-up” position to lord this over their partner.

“I’m communicating properly, you’re not!”

Can you see how the communication “silver bullet” clearly missed the mark?

Can you imagine a similar scenario with family members who work together?

It’s Never as Simple as It Appears

This is yet another example where “how you are” (i.e. being) is more important that “what you do” (i.e. doing).

Self-regulation is the “being” part, while communication is the “doing” part.

Yes, continue to work on how you “do” communicate.

And, also focus on how you regulate yourself when you’re doing it.

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Leading the Family Conflict Dance

Some New Ways to Look at Conflict in Families

Anyone who’s ever been involved in a family enterprise knows that the potential for conflict is never far away. 

Those of us who work in an advisory capacity for such families have seen every sort of denial and attempt to pretend that “our family is different”, yet those are actually quite rare.

There isn’t necessarily anything new under the sun for me to share here, but I did come across a couple of new angles on this question recently, and I thought they were worth writing about, if only to spur more discussion on the topic.

A Recent FFI Session on Conflict

The Family Firm Institute hosted a recent half-day webinar on the subject of conflict, and since two friends and colleagues of mine were among those presenting, I thought I’d check it out.

They did a nice job of covering the territory and the feedback was great. My take-away tidbit, though, came from a comment from another experienced practitioner in one of the break-out rooms.

She’s someone who not only works with business families, but has also lived the family business experience, having followed her father into this work.

She recalled a quote of his, which was the initial inspiration for this post:

           “We don’t run from conflict. We dance with conflict”

“Ooooh, I like that”, I thought, as I jotted it down. “This will turn into a blog post”.  (Thanks KSM)

Something Good from Social Media

The second different angle that came my way followed in short order, when I wasn’t expecting it, from social media.

I love LinkedIn and have found many treasures there, initiated plenty of relationships there, and swear that there’s nothing else like it for business.

But my go-to “regular” social media is Twitter, which I use mostly for news, sports, and politics, because I’m a bit of a junkie for those subjects.

But every once in a while, I get a great nugget there too, and this was once such case.

I follow Dan Rockwell, a.k.a. LeadershipFreak, and he shared a tweet about conflict that included this magic line:

                         “Conflict Is a Leadership Opportunity”

If you go to stevelegler.com and use the “search” function and type in “conflict”, you’ll find blogs, videos, podcasts, etc. that discuss conflict in various ways.

But I’ve never, ever, heard it put this way, and it struck me.

One Plus One Equals Five

So now we have a couple of elements to work with, and you may already see where I’m going.

We’re talking about dancing and leadership, and when people dance together, ideally, in most cases, someone takes the lead, and it helps when their partner is a good follower.

This metaphor actually has some legs, and the feet at the end of them are wearing their dancing shoes!

And we haven’t even brought in the dance teacher yet, who, if they’re any good at their job, will always play the appropriate level and speed of music so the dancers can succeed.

Willing Partners as a Starting Point

In order for any family to deal with their conflict, they need to acknowledge that it exists, and then someone needs to have the courage to take the lead and put it on the table and insist that it’s high time that the family face it and manage it.

Notice I did not say “make it go away”, because that’s usually not a very realistic expectation and can be a bridge too far.

It’s rare for conflict to completely disappear, but acknowledging it can usually allow people to discuss it in ways that they can learn to make some changes in order to be able to manage it.

Or Maybe You Need the Teacher First

It’s great when the participants are ready to discuss the conflict and try to dance with it by themselves, but sometimes there’s an unwillingness to engage from someone, usually caused by a fear of making things worse.

In such cases, it can help if you find yourself a “dance instructor”, who can then convince the other party that you can learn how to dance with conflict together.

Or even if the parties aren’t all ready for the dance lessons, the motivated party might begin searching for someone who can hopefully lead them to some agreement down the road. 

There are opportunities for leadership whenever there’s conflict. Who will step up in your family?

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Serving Families in Crisis, Hopefully Without Hostages

Expect the Best, Train for the Worst

Friends, colleagues, and regular readers of my newsletter (same $0 as this blog subscription) know that I recently participated in a training program that was off the beaten path for those in my field of practice.

It’s taken me over a month to reflect on the experience and share it here, because there was so much to absorb.

Everyone with whom I spoke about this opportunity, before I went and since I returned, has been intrigued by the fact that I attended, and curious about what I gleaned from the experience.

This week I’ll share the salient highlights, along with some surprises.

 

“Intro to Crisis/Hostage Negotiation for MHP’s”

Before diving in, the only reason this possibility came to me is thanks to my social capital, i.e. the relationships that I’ve built and maintained with the fantastic people in the community I’ve encountered, via PPI, FFI, and FEC.

Being involved in various capacities with these peer networks has resulted in many cherished relationships, and with relationships sometimes come unique invitations.

So it was when Amanda Koplin, founder of Koplin Consulting, reached out to me and asked if I’d like to fill one of the extra spots in the upcoming training program she was organizing for her team.

She’d mentioned this weeklong program during our work together on a PPI committee, and I guess I sounded intrigued enough for her to extend this generous offer to me.

I still recall her initial idea: “In a hostage situation they send the cops, because it’s a crime; but it’s actually a mental health crisis”.

 

Role Plays and Playing Roles

So there I was in Nashville, surrounded by mental health professionals – “MHP’s” — (which I’m NOT, but trying to fit in) all being trained by ex-FBI folks.

Meanwhile, we were all learning the material these trainers normally teach to law enforcement officers.

There were some official “role plays” along the way, but I was also quite pre-occupied in playing the role of not sticking out too much.

It’s amazing what you can learn when you step out of your comfort zone. And yet, it was not nearly as uncomfortable as expected.

 

Key Takeaway Message

As I’ve shared with many since then, the most important learnings were about the attitude and demeanor one needs to adopt when presented with a crisis situation.

Not surprisingly, the ability to remain calm is fundamental to becoming a resource to those in crisis. 

Their brains are filled with anxiety and therefore not functioning in an optimal way, so just by being there and remaining calm, you can already add lots of value.

Perhaps my lack of discomfort with this aspect stemmed from the fact that I’d been down this road in previous training programs, notably those in conflict resolution and Bowen Family Systems Theory (BFST).

It was underscored once again, and should never be forgotten.

 

Connecting with Those in Crisis – Not with their Heads

The second take-away was the importance of connecting with anyone in a crisis, and not just with their head. As noted above, their brain isn’t fully functioning in a crisis, so they’ll respond better to those who connect with them in other ways.

Getting someone to trust you in such situations comes down to connection at a deeper level whether you call it heart-to-heart, at a gut level, or having your souls connect.

Please note that these are my interpretations of what we learned, and these words were nowhere in the course materials.

In fact, I attended in search of learning to better connect with members of families I work with, so don’t be surprised that my learnings fall here.

 

Surprises Since My Return

Since coming back home, many people have asked about the experience, and so many of them get hooked on the hostage aspect, and not the crisis angle.

Indeed, some family enterprise situations do feature folks who do feel like hostages, but that’s really a whole other subject, because those are usually more “chronic” as opposed to the “acute” situations we learned about.

I suppose I shouldn’t be surprised that colleagues also seemed curious about the “what to do” in a crisis angle, whereas my experience was more about “how to be” in a crisis.

Like many life situations, much of it comes down to a negotiation of some sort, which isn’t rocket science by any stretch.

Keeping a cool head always helps.

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Why Succession Planning Fails…

Why Succession Planning Fails…… Despite Mostly Good Intentions

We’re all familiar with expressions like “failing to plan is planning to fail”, which might lead one to believe that families experience poor outcomes because they never got around to planning anything.

While there certainly are plenty of those examples one could point to, that view is actually pretty simplistic, because there are in fact many professionals who are kept quite busy working with and for families in these important endeavours.

Yet despite the amount of time and expense that goes into these activities, the results are often sub-optimal.

This week I want to dig into some of the main reasons that continues to be the case.

“We’ve Already Done It – It’s Taken Care of”

For people like me who toil in the world of the “family circle”, where the relationships and human capital are key success factors, a common refrain we get when we speak to people from family enterprises about succession planning is “Oh, we’ve already done it; It’s done!”.

These well-meaning family members truly believe that because they’ve taken some structural and legal steps to address legal ownership and tax issues, that there’s no more work left to be done.

And because that work itself was long, costly, boring, and took them away from other important activities, the last thing they want is to revisit any part of it.

The professional advisors they worked with to get that important stuff done likely also led them to believe that they were now finished with this “unpleasant” work.

Making Plans for People Without Involving Them

So we’ve seen that thinking the work is all done is a common pitfall, but it’s often combined with an ever bigger misstep, which is not having all the right people at the table from the outset.

See: “Continuity Planning: Who’s at the Table?”

I know that this can sound like heresy to some, but when you’re making plans that will directly affect the next generation of your family, and in a very significant way, after all, it’s kind of crazy to me that so much of this work is being done without even so much as a discussion with those whom it will affect the most.

I wish that these situations could be the exceptions, but they are very much the rule.

Having the professional advisors of the parents draw up all the plans and agreements for the rising generation without even asking them what they want (or do not want) or telling them what they can expect, is very much the tail wagging the proverbial dog. 

But maybe that’s just me.

Not Keeping Everyone Involved as Things Evolve

Another reason that succession planning fails is again a variation of those noted above. This is where some plans were made, long ago, and even though many things have changed and evolved, those old plans remain on the shelf and are deemed “still good enough for now”.

Revisiting what was done way back then sounds like it makes sense, but we’ve got more important things to do now, and we will get to updating those plans when we get around to it. Stop me if you’ve heard this one before.

The business enterprise whose succession you planned for years ago is quite likely a very different business today.

Even more importantly, those heirs to whom you were leaving things when they were teenagers have also (hopefully!) evolved and grown into much more prepared adults, and their abilities, potential roles and expectations have also surely changed.

People & Relationships, Not Structures & Legal Documents

If you’ve noticed, there is a thread that runs through the problems I’ve outlined above, and that’s the fact that structures and legal documents, although important components of succession planning, are insufficient by themselves.

The people and the relationships between them, are a far bigger part of the picture, and always will be.

I know the subject can be delicate and having conversations about it can seem scary, and so most people want to avoid them.

But not having the discussions is even scarier. Making assumptions about your offspring and how they’ll handle what you leave them is fraught with potential traps and situations that can be avoided.

Family leaders who’ve achieved a lot of success expect to leave some sort of legacy, but too often they forget that this involves the people more than the financial wealth.

See Is Your Continuity PAL in Danger?

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Ready, Set, Go, for your Family Meetings

Notice We Don’t Start with “Go”

The “Blog Ideas” folder of my inbox is typically pretty current, as things I put there are either written about or else discarded within a few months of their arrival there.

This week I’m finally getting to one that stands out due to the dust it has gathered for over a year now.

A friend and colleague, Michael Palumbos, who I got to know through the Purposeful Planning Institute (PPI) had sent out an email to many of our brethren in March ’21, with “Research Question” as his subject line.

He was polling a few dozen people who work with families on the “three things to do as a foundation” when beginning to work with them as a “family business coach”, as he labelled us.

I sent my ideas to him, he collated over 20 responses from colleagues, and he shared his distillation with us all as a thank you.

I don’t know why it’s taken me a year to write about this.

And the “Top 3” Is:

I’ve paraphrased the exchange between Michael and our PPI colleagues above.

Below is his version of what the responses boiled down to, verbatim:

  • Determine if the family is ready and willing to do the work.
  • Assess where the family is today and where they’d like to go.
  • Utilize family meetings to increase unity and education

Allow me to share my thinking around these three key pillars of working with any family.

1. Start with the Foundation – Are We Ready?

This seems pretty benign and simple on its surface. I can assure you that it’s anything but.

Some families will never be ready to do the work necessary to try to increase the chances of having a successful intergenerational transition.

One of the trickiest parts stems from the simple fact that a family isn’t one unitary entity, but a system composed of a number of different individuals.

Just getting to the starting blocks of working with a family on such a long-term project can be an accomplishment in itself.

The idea of hiring an outside person to work with the family can be scary for many, and is often a bridge too far.

It can be helpful if the person in the family who reaches out for assistance is from the current leading generation, but that’s not a guarantee that it will work either.

 

2. Where Are We, Where Do We Wanna Go

Once a family does agree to get started, because they believe they’re ready, it’s important to take the time to evaluate where they are, how they got there, and where they are hoping to go together.

When laying out the plan for an upcoming generational transition of leadership and ownership of family assets, those family members who are part of the system are all different, both in terms of their abilities and their wants and needs.

That’s why having an unrelated person there to help guide them and lead their discussions is key. 

Let’s just say that when I tell “Dad” something he might not want to hear, he will at least hear it better than if it came from one of his offspring. And that works with other generations too.

In terms of where the family wants to go, some have a multi-generational view, while others just want to get through the next transition, and either of those can work.

It’s usually simpler and easier to get consensus for the shorter timeframe projects.

 

3. Initiating a Series of Regular Family Meetings

Assuming that the family is ready and that they’ve done some preliminary work to have an idea of where they’re hoping to go together, the way to actually make it happen is centered on instituting regular family meetings.

These can be once a year, quarterly, or something in between. It might make sense to have them in quick succession when starting out and then changing the calendar later.

But you need to create a repeating process where family members will come together to discuss how the family is going to govern itself as they all relate to the business or the assets that they own together.

You need to schedule the next meeting before everyone leaves, and you need to know who’s expected to do what in the interim.

It’s not as easy as it sounds, which is why so few families actually make it work.

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Succession Without Governance Equals Chaos

Very Important Words for Families to Understand

This week I’ll cover some ground that will feel quite familiar to regular readers, but will combine some elements in new ways.

I often spend time considering the specific words we use when we talk about ideas around working with families, and there will be some of that too.

And of course, the genesis of the idea for this blog will also be part of the scene too, because this week it comes from some folks I consider both friends and mentors.

Let’s get on with the show.

Teaching Family Governance to Advisors

I’ve been a proud member of the faculty of the Family Firm Institute for a few years now, where I was brought in as one of the instructors for the course on Family Governance. It’s something close to my heart and has long been the subject of my writings here.

When I joined the faculty, there were already some great folks teaching the many courses that are part of FFI’s Global Education Network (GEN) program.

Included among them are Kirby Rosplock and Dennis Jaffe, both of whom taught me when I was a student, and whose industry experience cast way longer shadows than mine.

It truly has been a humbling honour to work with them, especially as we were recently tasked with updating the course materials. 

It was during one of those meetings that the line from the title of this post was uttered, and then repeated.

That’s when I knew this would become a blog post.

An Evolving Vocabulary and Using the Right Words

The members of FFI are mostly advisors who work with enterprising families, and they enroll in the GEN program to learn from others, so using the right terminology is part of the deal.

Personally, I’ve tried to shy away from using the term “succession”, in favour of “continuity”, but most people still use succession, especially with the popularity of the TV series Succession these days.

So when Kirby blurted out “Succession without governance equals chaos”, who was I to debate her words?

And then later when Dennis reprised her words, verbatim, that was it, I had my money quote.

It does kind of summarize a lot, especially in only five words.

So What Do We Mean by Governance?

I’ve long known that the term “governance”, especially when related to a family, can elicit groans, skepticism, and a general “allergic reaction” from many, if not most.

I normally try to soften things by adding that family governance essentially boils down to 3 questions:

  • How are we going to make decisions together?
  • How are we going to communicate?
  • How are we going to solve problems together?

I still talk about those, but today I want to add some meat to those, because they sound just a bit too simple and theoretical when you get right down to it.

Those “how” questions lead to a need for further clarification, around other questions that start with “who”, “when”, and “where” that typically get lost in the shuffle until it comes time to implement the governance.

What About the Chaos, and How Do You Avoid It?

Now the idea that “chaos” results from ignoring governance as an intergenerational succession approaches is one that some may doubt.

Well, if you want to tempt fate, “stick around and find out”, to borrow from a recent meme (a cleaner version of FAFO – see Urban Dictionary).

The basic questions posed above won’t answer themselves, and are best discussed:

  • well in advance of any issues, 
  • in as collegial an environment as possible, and 
  • with as many members of both generations as you are able to involve

Regular, Repeating Meetings to Discuss and Agree

The secret, if there is one, is to begin having a series of regular meetings, where, slowly but surely, you begin to learn to work together to find the answers to those questions.

You can’t be in a hurry to finish, because you will never finish. You’re playing the infinite game, it’s all journey, with no destination.

This can be hard for many to grasp, but that attitude is necessary to develop, and it can be contagious.

There won’t likely be any single memorable meeting, just many small decisions, made together, over time, that’ll enable your family to succeed with your succession, without the chaos.

Because succession without governance does equal chaos.

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Striving Before Thriving in a Family Enterprise

The Order is So Important

This week we’ll be looking at some ideas that are a bit different from those I’ve been sharing lately, so please join me as I “freestyle” a bit, while still trying to keep it real, too.

As is sometimes the case here, there’s kind of a convoluted story to how I got here, and I’m so glad to have a place to share these musings with others who appreciate my missives.

Contrasting a couple of words that exhibit some similarities is nothing new here (see On Observing and Absorbing in Enterprising Families and SFTU Versus STFU) for a couple of examples.

This week, we’re going to deconstruct “striving” and “thriving” to see what we can learn.

My first conclusion, which I hint at in the title, is that doing them in the right order is key. 

A second take-away involves the fact that family members from different generations should probably experience them at different times.

What Does It Mean to Strive?

Let’s start by looking at the meaning of the verb “to strive”. 

Here are some Google results I like:

  • make great efforts to achieve or obtain something
  • struggle or fight vigorously.

I like those because the words “effort”, “obtain” and “struggle” really resonate with me when I think about striving.

They feel to me like they are all about what you put into something.

What Does It Mean to Thrive?

Now let’s move over to the verb “to thrive”. 

Here’s some of what Google comes back with:

  • grow or develop well or vigorously.
  • prosper; flourish.

Now when I look at words like “grow”, “develop” and “prosper”, what I see are the results of some of those same efforts that one has “put into”.

This exercise has already borne fruit for me, as the “input vs. result of the input” angle is an unexpected bonus for me.

Now let me get to the convoluted story to set up the bigger picture for enterprising families.

Beginning with the End in Mind

With a tip of the cap to Stephen Covey, let’s begin with the end in mind, which is how this topic landed in my lap to begin with.

I was on a Zoom call where a recently retired executive was talking about her exit from her prominent role in her organisation, and she smiled as she shared how it was all going.

“It feels like I’m thriving without striving”, she related.

I quickly jotted those words down, believing that that would be the blog post subject.

Lately I keep hearing about the fact that everyone in my field talks about preparing the rising generation of the family, while the senior, “NowGen”, who are expected to exit, aren’t considered enough.

“I’ll write about how important it is to find opportunities for them to thrive without striving”, was my idea.

Well, not so fast.

Where Else Does This Apply? (Everywhere!)

As I considered that after having strived for so many years during one’s career, later on it would be good to simply thrive, based upon all the hard work one had already put in, I then thought about the entry, as opposed to the exit.

Imagine my “A-Ha Moment” when I realized that sometimes, especially in very successful families, the rising generation show up and are already thriving thanks to the family’s success, while many of them have not been forced to strive for themselves.

Thriving without having strived seems like a bit of a disconnect.

If you know anything about the challenges that such families face, you will instantly recognize how relevant this can be.

Stumbling Upon a Fundamental Truism

Success means more when it is connected to one’s own struggles to achieve it. 

This reminded me of one of my favourite Zig Ziglar sayings about putting in the hard work early in your career:

If, early on, you do:                   what you’re supposed to do 

                                                      when you’re supposed to do it, 

Later, you’ll be able to do:       what you want to do 

                                                      when you want to do it.

In a family enterprise, there is a time for striving, which hopefully leads to thriving. There can then be many years of striving and thriving at the same time.

Eventually, the leaders become elders and can continue to thrive, but without necessarily having to strive as much anymore.

After all, there are younger family members who are there for that, and presumably they’ve been well groomed for that.

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Why Set Up a Family Office

Plenty of Reasons to Make Such a Move

What used to be an obscure corner of the world of wealthy families has begun to go more mainstream over the past decade or so.

Whereas the term “family office” has existed for a long time, it used to elicit raised eyebrows of confusion, which nowadays have given way to nodding heads instead.

In many cases the confusion remains, but more people have heard the term and hence think that they know what someone is referring to when they hear it used.

Let’s dive in and look more deeply at this, from the perspective of the family who should be at the center of any family office, rather than the view of the professionals who work for such enterprises.

“If You’ve Seen One Family Office….”

Confusion about the family office space is compounded by the fact that no two family offices are alike, nor should they be.

They exist to serve a family, and every family is different and therefore has different needs, plus these needs evolve and change over time, meaning that they’re in a regular state of flux (or at least they should be).

This topic could take up an entire book (and it has) and I’m trying to hit a sliver of it in a blog post, so let’s get to the question in the title, “Why would a family even consider setting up a family office?”

On Inflection Points, Evolution, and Leadership

I’ve written on this subject before, notably in Putting the Family in the Family Office, for my site, as well as for other websites, for example, Don’t Forget the Family at the Family Office.

For a family to suddenly decide it needs a family office, there’s usually a catalyst, and the most frequent one is a liquidity event. 

For readers unfamiliar with that term, think about a family that owns a business worth $100 million one day, but then sells it and suddenly has $100 million of “liquid assets” instead.

Such a family suddenly has a new set of priorities and needs, and a family office can be the ideal way to address those.

Other families create a family office when they reach various inflection points as they evolve, often when there’s new leadership in the family, thanks to a generational transition.

But let’s never forget that the family’s needs should be driving everything (although this is often the exception rather than the rule).

After the Why – When, Where, Who and How

The Why and the When are typically connected, as the event kicks things into motion, bringing up other questions.

I laugh when I see articles about the best places in the world to set up a family office, focused on jurisdictions that are advantageous for tax and investment reasons.

Regular readers know my penchant for focusing on the family’s human capital over its financial capital.

The Where may become a factor as things evolve, but is rarely a huge concern at inception, unless there are billions of dollars involved.

The main questions I suggest families focus on are all about Who and How.

Don’t Forget the Family!

I’m a firm believer in having some family members involved at some level, because the family office will be responsible for a huge amount of the family’s net worth, and like any family business, the owners can and should play an important role.

If no family member is qualified to play the top investment role or handle other important executive functions, it becomes paramount for someone from the family to at least become quite conversant and comfortable with these subjects.

There’s certainly at least an oversight role that needs to remain in the hands of competent family members.

One Person at a Time: Grow with the Flow

One of the most important parts of the How is the question of timing.

I almost always advocate for a “go slow” approach, because you really want to get the culture right.

Hiring a person and making sure they’re the right fit takes time, and when you set up a family office, you’re truly playing the long game.

You need to find competent people to fill the roles that you can’t handle within the family.

When you add more people, you want to make sure they all fit well together too, and that’s not something to rush through either.

And since they’ll all be serving your family, you’ll want more than one family member involved in the selection process too, maybe several.

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Serving Exceptional Families – Proceed Slowly

Not Every Family Needs “Full Service”

The past couple of weeks we’ve been looking at “connecting” with members of client families and then matching the solutions we have to these families.

All this made me consider one of the biggest questions that people often have for me when they learn about the kind of work I do.

The questions come in a variety of forms, but generally boil down to this: “Who ARE these families that actually do all of this governance stuff?”, along with “where do you find them?”.

If you stopped 100 random people on the street, you likely wouldn’t meet any people from such families, and very few would even have a personal connection to one.

However, if you shared the names of families who continually work on their governance, those names would be recognizable to most.

Are We “Exceptional”; Do We Even Want to Be?

Not every family is destined to be exceptional, and many don’t envision themselves as such either. 

For some families, just imagining themselves in this way is actually unnatural and even abhorrent.

Too often, though, professionals who serve families who’ve achieved a certain level of wealth creation begin to make assumptions about what these families should be doing to preserve that wealth.

Well crafted strategies to minimize taxes and keep financial wealth protected have become the go-to starting point for such families, because a whole industry of professionals exists to take care of these issues.

I’m always wary of situations where the tail ends up wagging the proverbial dog, and for me the “dog” is the family.

I prefer to help the family figure out what makes it exceptional and then plan for ways to grow and preserve that.

Once the family has set those priorities, by all means then let’s get the professionals involved to figure out the best strategies to employ to help accomplish that.

Many Varieties and Versions, and Ways to Make Progress

Some families will have an operating business that they wish to preserve, and finding ways to ensure that it continues to evolve and thrive with the economy, while still being owned by the family, might be their focus.

Others may have had a liquidity event, and are now searching for new opportunities, either through direct investing or philanthropy, or both, and incorporating the rising generation of their family into those projects will take center stage.

Still others may be searching for ways to recreate the entrepreneurial spirit and create a “family bank” that will allow their offspring and all of their human capital to thrive in their own ways.

There are so many possibilities, and the path chosen will vary from one family to the next.

No Two the Same = All ARE Exceptional

And because no two families are the same, they ‘re each potentially exceptional in their own right.

Too often, as advisors, we want to show how smart we are and we rush to get the family moving on our pet project for them, and that where we may be doing them a disservice, hurrying them into action.

A family is a system of many moving parts, and it takes time to engage all of those people properly, to the point where they even understand and believe that there may be a “family project” that will arise from the financial resources that have been created, by previous generation(s) of their family.

Vision, Mission, and Values Work

Some colleagues reading this will nod their heads and agree that helping the family identify its values and then figure out a vision and mission are great first steps, and in many ways I agree with them.

I’m advocating for more basic connection work in advance of those specific projects, which then become more clear with time. 

Discovery work with such families can take months before recognizing where we should actually begin to co-create a family project together.

Yes, the values need to be surfaced at some point, typically early on. But then the mission and vision need to be carefully considered in the context of where the family is now, and what its capacity is to undertake its first steps together in new ways.

An Iterative Process, More Journey than Destination

We’re talking about a family journey over the coming decades together, so there should be no rush to complete the plan in days or weeks.

It should be an iterative process; more about a journey than a destination.

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