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The Crowded Escalator Problem in Families

It Gets Dangerous When People Won’t Disembark

When going about one’s business in society, there are some unwritten rules that people follow that ensure the smooth and safe flow of people.

Some of these are based on laws that are written and enforced, but many are simply based on custom.

Driving a car is largely based on laws, with a few customs sprinkled in, and these are usually formally taught to those who wish to be licensed to drive.

How we walk through airports, shopping malls, and other public spaces is usually way less formal, and is something we learn from our parents, who are concerned for our safety and try to teach us how to function in society.

One such basic practice is to always get off an escalator when you get to the top (or bottom), and not to step backwards just to stay on.

Stretching the Metaphor for All It’s Worth

I may have used more words than necessary to set up my metaphor, but I’m glad that I was able to incorporate the part about how such customs of behaviour in society are typically taught to us from a young age by other family members.

In my work with intergenerational families, it’s always interesting to note how the proverbial apples don’t fall very far from the tree.

Yet there are some things that the leading generation sometimes does that don’t serve the family well, which are then learned by their successors, much to the dismay of the generation that then has to follow them.

Failing to disembark from the escalator, and not getting out of the way of those who are behind you, is a problem that we see far too often.

It’s not safe for anyone, and the repercussions are far-reaching.

Examples Abound – Let’s Look as Some

A couple of months back, in Starting Family Discussions Late – 5 Considerations I shared a real-life story about a large family in the town where I was visiting relatives.

The matriarch had recently passed away, which brought with it a hope that some of the uncertainty facing the rising generations might soon be clarified.

What I didn’t get very deep into then, and what I hope to address here, is the follow-on effects that such lack of clarity can have on the subsequent generations of these families.

When those in their 80’s and 90’s still haven’t ended their ride on the proverbial escalator, those behind them in their 60’s aren’t able to begin to make their own plans, which then stifles the ability of their offspring to figure out where they fit into things.

You now end up with people in the prime of their lives and careers, in their 30’s and 40’s, who are unable to make key decisions around whether or not they have a future in the family enterprise.

A Recent Extreme Tale

I recently made a presentation about legacy planning to an industry group in the center of the universe (Canadian readers all know I’m referring to Toronto).

During the Q & A, an attendee shared their story, which I will now relate here, while disguising some facts for privacy.

The G1 founder is in his late 90’s and still very much in charge of all major decisions, including many day-to-day ones.

Unfortunately, the G2 heir apparent passed away recently, reinforcing the founder’s perceived need to stick around even longer.

The G3 person who attended my session, who’s trying to run the company with a sibling (and both see things very differently, by the way) now has to deal with a meddling founder grandfather, a mother who suddenly holds a large ownership share despite never having been involved in the business, and a sibling equal.

When this person’s offspring, who are hitting their prime working years, ask their parent to try to paint a picture of their future in this family enterprise, how can they do anything but shrug their shoulders and say, “we’ll see…”?

Moving from a “Me Focus” to a “We Focus”

I’m often too indirect in my writing referring to the importance of “having important discussions”.

I now want to highlight that talk is insufficient, and that action has to occur.

A key action that needs to happen is for senior family leaders to get off the damn escalator.

They need to move from focusing on ME to doing what’s best for WE.

Hopefully some will recognize themselves and act.

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A More Important Type of “A.I.” for Family Enterprises

Probably Not as Big a Deal as Artificial Intelligence

A couple of months back, my wife took an extended work trip that had me alone in the house with just our two cats to take care of. 

I decided that it was an opportune time to clear out our freezer, which had begun to accumulate a variety of odds and ends that were too good to throw away, yet wouldn’t keep forever.

I keep an email folder of blog ideas that bears some similarities to such a home appliance, and lately I’ve decided to look behind some of the recent additions to see if there isn’t something I put in there a while ago that just might be right to serve up now.

Such is the case with this week’s post, which is all about Appreciative Inquiry, which I’ve seen labelled as “A.i.”, not to be confused with the now ubiquitous “A.I.” (Artificial Intelligence, for the uninitiated)

In my work with enterprising families, appreciative inquiry will likely be the more important A.I., at least in the short term, although this prediction risks looking foolish and out of date some day.

So What Is Appreciative Inquiry?

Rather than trying to reinvent the wheel, I’ve decided to share an introductory sentence from this piece I saved last summer, by Regina Koetters.

“Appreciative inquiry (Ai) focuses on what’s working well, why it’s working well, and how to replicate and build upon it. 

Developed by Dr. David Cooperrider and Dr. Ron Fry at Case Western University three decades ago, this approach has been validated by extensive research as an effective means of developing people, spurring innovation, and scaling companies.”

I hope that you can see why I like the idea of using Appreciative Inquiry with business families, where too often there can be a tendency to focus on the negative.

Positive Psychology Strikes Again

This is not brand new territory for me, as I’ve touched on some angles that come from the world of positive psychology before, notably in What Colour Is Your Cape?

Keeping one’s focus on what’s going well can be so important in setting the right tone with everyone we interact with.

It’s as much a “default mindset” as anything else, in my view, and can truly be a difference maker in so many settings.

And, it doesn’t come naturally to most people.

Maybe that’s why it’s so refreshing when you experience it.

Generative Questions and Positive Framing

Family businesses do a lot of things right in order to be successful, so sometimes when we are invited into them to be helpful, it can be a natural reaction to try to fix what’s not working.

But as my UK colleague Ken McCracken likes to say, they have some natural advantages that they’re already using, so it’s usually better to look at what they’re doing right.

(Listen to the podcast I did with Ken as my guest.)

The biggest thing to remember is to ask what are called “generative questions” and do so with “positive framing”.

These generative questions come from a place of real curiosity and a desire to learn when listening to the answers.

The constant search for more positive ways to look at things works better when the questions are asked in this way, as opposed to questions that contain judgement.

There are literally books written about this topic and also courses you can take to get better at this.

Hopefully this blog post will encourage more people to consider this methodology in the family enterprise space.

Not to Be Confused with Other Kinds of A.I. 

Off the top, I tried to make a humorous point about the other kind of “A.I.” that we keep hearing about in popular culture these days.

I also realize that there are even more things that go by the initials “A.I.”, including one I wrote about recently in No Beef with this Family Resemblance.

I imagine that in some family farming businesses there might be a reliance on the Artificial Insemination practices that I got to learn about thanks to my Dad’s post-retirement adventures in cattle breeding.

But for most family enterprises, and for the advisors that work with them, I think that Appreciative Inquiry is an idea whose time has come, and that more people should be looking into.

The questions we ask and the way we ask them are the basis for the good conversations we have, that create and sustain our most important relationships.

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Unpacking How Families Plan for Transitions

Please Stop Calling it a “TRANSFER”

Many families know that they should be planning for the eventual transition of their wealth or business to the next generation, but they avoid the issue for as long as they can.

This is unfortunate, and causes all sorts of problems the longer they delay things. The longer you wait the less good options you have available to you.

They put these important discussions off because they’re usually looking at this the wrong way, in my estimation.

Too often, they’re thinking about a “transfer”.

They really need to learn to consider this as a transition, or, better yet, a series of transitions.

A Process Versus an Event

I’ve tackled some of this here before, like back in 2018, in Don’t Transfer Family Wealth, Transition It.

One idea I shared then was that transfer is a word that’s often associated with a one-time event that takes place, whereby something is in one place at point A, and then “whoosh”, there’s a transfer, and now it’s at point B.

Transfers are typically pretty instantaneous.

The way a family looks at its enterprises and wealth, though, and how it should best move from one generation to the next, should be much more gradual, and needs to be planned that way.

But what about the “unpacking” that I teased, and the “series of transitions” I already mentioned? I’m glad you asked.

When you get right down to it, there are actually at least four parts to this complex question.

A Simplified Example

Because this gets messy as you add more people, I’ll use the simplest possible example, where only one parent owns and manages everything at the start of the example, and eventually only one of their offspring will own and manage it all.

You can imagine that if we have both parents and a sibling group, like many real-world examples, it gets hairier quickly, but I’m trying to demonstrate that even the simplest cases are more involved than they first appear to be.

My goal is to break this down into bite-sized steps, because the elders who put these discussions off just may be more willing to engage with the ideas in this piecemeal way.

Level 1 – Management of the Assets

One key element that needs to move from one generation to the next is the management of the business or the assets. We’re talking about the day-to-day oversight of whatever the business does in terms of operations or how it’s wealth is invested.

Non-family employees or outside professionals are also very likely involved in some aspects of this management and those people take their instructions and cues from someone who’s part of the family. At some point the rising generation person will need to learn how to handle this part of things.

This is sometimes the first thing that gets transitioned, as the younger person learns on the job, starts to get involved in things, and eventually becomes the person in charge of managing the day-to-day activities.

Level 2 – Leadership Roles

One level up from the management we find leadership, which has us moving away from the simpler day-to-day of management, but now looks at some of the higher level choices that need to be made.

Hiring and firing of employees and choices of advisors are a couple of elements that come into play here.

The junior family member eventually needs to be able to take over these roles as well, but not necessarily at the same time as they assume the management roles above.

Level 3 – Power and Authority

Even after the senior person has transitioned out of their management and leadership roles, they may still continue to exercise power and authority over many of the decisions. That sometimes only comes years after ceding the first two.

Level 4 – Ownership

Finally, there’s the legal ownership that needs to transition. This can take place all at once, or gradually, which is what I typically recommend, whenever possible. Portions of ownership can be transitioned as some of the other transitions are progressing.

 

Planning It This Way, AND Executing It Too

These four layers can and should be separated into these components when planning for transitions, and also when executing them.

An overlapping of responsibilities between both generations is a good thing, because these elements are rarely mastered in a day.

Hopefully this breakdown will help some families get moving.

The earlier you begin, the more good choices you have.

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Challenges to Working with Families as Clients

More Here Than Meets the Eye

Working with enterprising families brings up many challenges, which I write about here weekly.

I talk about getting the family engaged and aligned, and the importance of being intentional about everything, because things don’t just happen by themselves.

When I write about professionals who serve such families, I often highlight the need for us to collaborate, and how that’s typically never as easy as we’d hope.

But one of the ideas that I’ve given scant attention to is the idea of considering the whole family as your client.

Many of the advisors who work with such families do so mainly via the business the family owns, and they naturally consider the company as their client.

Others, who work with the owners of the company, look at those folks as their client.

There’s a growing movement afoot to consider the family as the client, and while it makes lots of sense on some levels, it’s also fraught with challenges.

“Who Is My Client” – A Really Good Question

My first exposure to this question came a decade ago when I embarked on my journey to this work and enrolled in the Family Enterprise Advisor (FEA) program.

As a “newbie” to this work back then, I didn’t appreciate the distinction, unlike many of my colleagues in the class, who’d already been exposed to the distinctions outlined above, although perhaps never having considered that the family should be their focus.

So for me, this wasn’t really an issue I thought I needed to concern myself with. Of course once I began working with families other than my own, things began to sink in quickly.

You might think that those who treat the business as their client would be used to this, since the business is typically also comprised of a number of people, as is a family. But it’s not that simple.

Even when you think you understand the idea that the whole family should be your client (which is a big leap for many), at some point you’re confronted with the realization that the family doesn’t always speak with one voice!

 

Plenty of Groundwork Needs to Be Done

In fact, getting a family to the point where they understand that they need to learn to speak with one voice on some matters takes lots of work in itself.

In cases where there are a number of non-family members in key roles in a family business, having different family members giving direction, especially to non-family employees, causes problems.

See Nose In, Fingers Out for Family Business

The idea that each family member sees things their own way, and often expects that their way is the way the family should go, also affects the way all outside professionals working with the family interact with them as a group.

Having been trained in the FEA program, I quickly understood that the entire family needed to be my client, and I adopted that mindset from the get go.

But therein lies the challenge, i.e. what are the limits of this important mindset?

Values and Vision Work, or Mediation

Much of the fun work that people like me enjoy getting into with families involves spending time with family members trying to ascertain their common family values and getting them to identify a common vision and mission for the future.

Some of the less fun version of working with family members who have disparate views involves things like mediation and conflict resolution.

If you adopt the mindset of “the family is my client” this gets easier, because it can serve as your “north star” and give you some important grounding, which is why the FEA program teaches us that.

We must always remind ourselves that the family is a system, with many interdependent moving parts and relationships.

We are invited to work with the system, but need to be careful not to become part of that system.

 

The Family As a System

This isn’t as easy as is sounds, as those within the system constantly try to pull us in to their view of how things should be.

By always keeping what’s best for the entire family in mind, it becomes more straightforward, but certainly far from easy.

Most families will agree in principle to this way of working without resistance up front. It doesn’t always last, though, as some family members realize they aren’t getting the special treatment they’d like.

Yet another challenge to overcome.

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Working with Families – Lessons from Chiropractors

Frequency of Interventions Varies Over Time

The time lapse between a blog idea and my eventually writing about it is usually a matter of weeks, typically somewhere between 2 and 6.

This week, I’m writing about an idea that’s been sitting in my “blog ideas” email folder for almost two years.

It just finally feels like it’s time to share my thoughts on this.

In my work, what I do with the “Smith” family is never a good predictor of what working with the “Jones” family will be like.

Likewise, the circumstances, timing, approach, and cadence of the work with the Brown family will be very different from what occurs with the Johnsons.

 

Some Patterns Are Common Though

The fact that the families and their situations are never the same doesn’t mean that there aren’t some patterns that develop.

In the same way that I work with very different families, my chiropractor works with all sorts of patients, and no two are the same for her either.

There’s an informative poster on the wall of one of her treatment rooms that does a nice job of explaining three different stages of care that chiropractors generally deliver.

The poster is in French, and I was worried about how I’d translate some of the specifics, but thankfully my friend Mr. Google helped me out and found a site with the same information in English.

Ever since I first had the idea to write about this, I’ve understood that there’s something useful here for those of us who work with families on the challenges of transitioning their business and wealth to the next generation.

How Serious Is It Now? How Often Do I Need to See You?

Over the years that I’ve been seeing Dr. B., the cadence of my visits has varied greatly, depending on what has ailed me.

Initially, it was sciatica, which probably fell under the heading of “Initial Intensive Care”, which is often the first stage and the one that made me make an appointment.

In my work, this might be analogous to some family conflict that has reared its head, and is too hard to ignore anymore.

Families who reach out for an external resource at such times usually need some version of lots of “intensive care”, if only to make them realize that they need to work through the issue, and likely won’t be successful on their own.

The chiro version of this looks at “pain & symptom management”, whereas my equivalent is something along the lines of clarifying interests and trying to find common ground, while providing a safe space and calm presence.

Rehabilitative and Corrective Care

The second stage of chiropractic care is labeled “rehabilitative/corrective care”.

Visits during such treatments are usually spaced out further, but still quite regular. At this point, we’re not going in twice in the same week, but we may have a number of visits, once a week or every two weeks for a certain period of time.

Working with families, this stage is probably the sweet spot, where you start to make progress with a family group.

You’re also possibly not dealing with a real “pain point”, and more likely building in some of the elements of family mission and vision, and laying the groundwork for family governance.

The chiropractic work here looks at “improved function”, which may be something as simple as having better and more productive regular meetings with family members, where the family’s relationship to the business is discussed.

The Holy Grail of Maintenance Mode

I’m happiest when I leave the chiropractor’s office with my next appointment set for a month later.

That means I’ve arrived at the maintenance stage, and I’m usually feeling as good physically as I have in a while.

The chiro world calls this “wellness/elective care”, which is mostly preventative and consists of minor adjustments before little things get worse.

In my work, this can be where a family “graduates” from requiring regular services from me, and an occasional check in is all that’s really required.

The Limits of this Analogy

There is of course no perfect analogy, but I think about this from time to time, especially early on with a new family.

It takes a certain amount of time just to figure out what the family truly needs, because often they don’t have a very good handle on this themselves yet either.

Hopefully I’ll have just the right touch for them.

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On Team Compatibility at All Cost

Equally Important for Advisors and for Families

Working with enterprising families as I do, I find myself interacting with individuals as well as with groups of people.

Early on in these relationships, it’s always interesting to try to ascertain who’ll get along well with the other members of the family when we’re all together.

While compatibility in working together is never enough to guarantee success, (see Sibling Compatibility Is Not Sufficient) it sure is helpful and preferable to situations where folks don’t get along.

When working with other professionals as part of a multi-disciplinary team of advisors, the ability to work well together is also paramount.

We’ll look at both of these subjects this week.

Examples from Plants and Pets

Regular readers know that my inspirations for these posts are varied, and this week is no exception.

If you’ve been on a Zoom call with me from my office recently, you may have noticed a couple of new plants that I added to my background.

As I researched this purchase of greenery, I learned that some plants are marketed as “safe for pets”, which wasn’t something I had ever even thought about before.

I’ve been a dog and cat owner for many years, and we have several plants around our house, and this just never came up for us.

But I guess for some people, having plants that won’t poison their best friends is something that they need to worry about.

It seems that some plants are not compatible with pets.

Fighting Like Cats and Dogs

The dogs and cats we’ve had over the decades have, thankfully, also co-existed quite well, as those in the photos I found to accompany this post seemingly do.

The old saying about “fighting like cats and dogs” certainly has some merit, but again, it’s not universal, just like having plants and pets sharing space isn’t necessarily dangerous for either.

Since we’ve been without a dog for a few years now, I occasionally check out some websites for rescue dogs in our area.

See: Honouring FamBiz System Exits

I don’t recall ever noticing so many of the descriptions that mention restrictions like “not good with children”, “not good with cats”, and even “not good with other dogs”.

Then again, there’s a reason why these dogs are once again looking for a home.

But note that compatibility is something to consider, because if you don’t, then there’s a high likelihood of future regret.

Family Members Working Together

This “high likelihood of future regret” is something that gets overlooked in continuity planning for families.

Too often, parents make ill-considered decisions about who will own what after they die, and siblings end up being partners, even though it was always clear that they were less than ideally compatible.

When I work with families I always try to make sure that we try to ascertain this compatibility question early on.

If it’s already clear that the rising generation would be heading for a future clash down the road, why not look for alternative ways to structure things to minimize this risk?

My default is that family harmony should not be sacrificed for the sake of the business or the family wealth.

Multi-Disciplinary Teams for Interdisciplinary Work

When someone is part of the family, it’s not easy to “just get rid of them”, and that’s what makes this work so interesting.

When it comes to working with other professionals in service of a family, though, there is, thankfully, much more flexibility.

Of course when these advisors all work for the same organization, they may still get stuck in some less-than-perfectly-compatible situations.

But by and large, it’s much more possible to invoke a personal “No A-Holes Rule” as I’ve tried to do. This is one of the benefits of my independent status.

Putting Together a Project Team

The Family Enterprise Advisor program I completed 10 years ago (where I had my calling) includes a project phase where all enrollees are put into interdisciplinary teams to work together with a real family.

This capstone assignment, coming under the heading of Knowledge Integration and Application, is the biggest benefit to that program.

I was able to invite myself to see some of the group presentations of the latest cohort recently, and was reminded of how important that project is in providing participants the “real life” opportunity to live this compatibility experiment.

I imagine that some teammates will work together again, and others won’t!

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Balancing Confidence and Competence

Problems Arise When They’re Out of Whack

This week we’re looking at a topic that applies to both the people who work in their own family enterprise and also those who work as professional advisors serving such families.

Ideally everyone who plays either of these roles will be able to do so in a competent manner, otherwise problems come up, and they usually aren’t that simple to deal with.

When these competent people are also very self-aware they typically have a confidence level that matches their ability, and they present a coherent narrative that’s easy to ascertain.

But when they exhibit a high level of one, combined with a low level of the other, it’s less pretty to see.

The Spark for This Post

Because I write a blog post every week, I’m constantly looking for ideas to expound upon here. 

As someone who speaks to lots of people in my field, who occupy various roles in this ecosystem, I’m part of many conversations that provide fodder for these posts.

I get plenty of ideas from others with whom I speak, and also many that come out of my own mouth, because I like to think out loud, especially when speaking with colleagues who also work with families.

That’s what happened here, as I was lamenting that there are some people who think that facilitating a family meeting is pretty simple, and that it doesn’t require much in the way of training or skill.

As I noted to a friend recently, “They are very confident in their ability to pull this off, even if they are not very competent”.

So this became my starting point, but as I thought about it I realized that it’s part of a much larger subject.

Overconfident Professionals 

Of course there will always be some people out there who are more confident in their abilities than they really should be.

The trick is to sniff them out early, so that you can upgrade the quality of the people you’re paying to serve you.

Unfortunately, sometimes we put our trust in folks for one thing, get to know and like them, and then we wrongly assume that we can rely on them for other matters too.

Some accountants, lawyers, and bankers can do a good job facilitating family meetings. But I daresay that most of them make sub-optimal choices for that role.

Overconfident Family Members

We also come across family members who work in their family enterprise who overestimate how good they are at their job.

One of the stigmas that family businesses sometimes face is that they are filled with incompetent people whose only qualification for their job is having the right last name.

I like to think that these situations are more the exception than the rule, especially once you get to a certain size of business, but these people certainly do exist.

The non-family employees of such businesses have a front-row seat to some of these situations, and I’m sure they end up with some interesting stories to share.

Competent Family Members Without Confidence

There are also situations where the reverse is true, though, and sometimes these are even harder to watch.

I’m talking about smart, competent people, often poised to become future leaders of their family enterprise, who don’t have enough confidence to really get them there.

These situations can often be helped with some coaching and mentorship, but it takes lots of time, effort, and patience.

It can be more difficult when the lack of confidence stems from less than ideal parenting, which is always sad to see.

If you hire your offspring to work for you and you then constantly belittle them and put them down in front of everyone, don’t be surprised if they don’t become top performers.

Finding the Right Balance

In the end, though, I think we can all agree that spending time and working with people who are both competent and confident is more enjoyable and satisfying than dealing with people where those two are not in sync.

Sometimes you don’t have a choice in these matters, of course, but when you are in control of the situation, sometimes you need to notice these things and make some necessary changes, even if it isn’t always easy.

Life’s too short to spend it with people whose confidence far surpasses their competence. 

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It’s Friday, I’m Confused

The Challenges Families Face Getting Advice

The ecosystem serving enterprising families continues to evolve and expand, which is a welcome development, because these clients now have access to better resources and ideas than ever before.

With this upside, of course, comes an accompanying downside, thanks to the overwhelming array of choices family leaders now face.

While speaking with a colleague one day recently, I tried out some new language describing this phenomenon and it landed nicely, which got me thinking about turning this into a blog.

Later that same day, on a Zoom call with a client I’ve been coaching for a few years now, I tried it out again. 

He laughed along with me as I delivered the punchline, so here we are.

A Couple Gets Started with Planning – A Parable

My parable begins with a couple, who finally decided one weekend that it was time to begin to plan for how they’d eventually transition all they’d been working for to the next generation of their family.

Recognizing that a variety of different professionals work in this area, they set up appointments, one each day, to get some advice on moving this project forward.

On Monday, they went to see an estate planning attorney; on Tuesday it was a visit to their long-time accountant; Wednesday they had a meeting with a life insurance specialist; and on Thursday they stopped in to see their banker.

By Friday, they were very confused.

Apologies to The Cure

As I recounted this fictional tale, the 1992 song by The Cure, “Friday, I’m in Love”, started to play in my head.

Upon investigation, it turns out that that song is almost the opposite of my made-up story.

The lyrics to that tune have a happier end to the week, after going through various sub-optimal days from Monday through Thursday, the singer ends up in love on Friday!

My proverbial couple is just confused by all of the well-meaning advice they received, and aren’t much further ahead than they were when the week began.

I See Your Nail and I Have a Hammer

It’s not that any of the professionals my fictional couple consulted with were wrong, and none of them was offering the family anything that wouldn’t serve part of their needs, in some way or other.

What this couple (and by extension, their family!) needed was someone who could take the time to understand their whole picture, before proposing the best “go-to solutions” that in which their profession happens to specialize.

This is probably one of the places where the term “best practice” becomes one of my biggest pet peeves.

All these professionals could tell the couple that what they are suggesting is a “best practice”, and they could do so with a straight face.

They could even point to dozens of clients for whom they’d done the same thing.

But when you get to Friday and you’ve heard that four times, describing four different ideas, you’re still confused.

Holistic Advice from Collaborative Colleagues

Recently more of those who serve this clientele thankfully recognize the shortcomings of the “old way” of doing this work.

While this is progress, we still have a long way to go.

It’s much easier to say that you offer holistic advice, that you consider the whole family your client, and that you collaborate with other advisors, than it is to actually deliver on that promise.

Client families deserve better, and with some more effort, more practice, and a larger pool of enlightened professionals, we might just get there some day.

Simplifying Complexity and Slowing Things Down

Two of the biggest obstacles we all face are the complexity of the situation, and the fact that many involved in the process treat it like a simple box that needs to be ticked, and try to rush through it.

My view on this is that rushing through complexity is a recipe for regret, and this does occur quite often.

Unless and until we can all learn that taking our time and getting it right the first time is the best way to proceed, we will continue to produce sub-optimal results.

The confusion families face is normal.

We all need to slow down, make sure we understand what they’re trying to achieve as a family, and help guide them there, however long it takes.

It isn’t rocket science, but will require a more mature way of professional interaction.

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Starting Family Discussions Late – 5 Considerations

It’s Never Too Late to Begin

While visiting relatives stateside recently, the matriarch of a local family enterprise passed away.

My cousin’s kids were childhood friends of several grandchildren of the recently departed, whose many businesses around town are part of the family’s widespread holdings and operations.

I hear similar stories frequently, including the unfortunate familiar refrain around how unprepared the family seemed to be.

Fortunately, it’s never too late to begin working on the family communication aspects of the larger family wealth continuity puzzle.

Starting Family Discussions Late – 5 Considerations

A Typical Well-Known Family Example

I’ll share some considerations I’d have if I were called into such a family at this stage, say, after Grandma’s funeral.

She was in her 80’s, one of two maternal figures in this family, the wife of one of two brothers who lead these businesses for decades. 

The business had been started by their father, i.e. “Generation 1” (G1).

The two G2 brothers produced 7 G3’s, many working in various businesses alongside some of their G4 offspring. 

The many G4’s are already giving birth to G5.

All over town, everyone knows this family and considers its members to be part of the “lucky sperm club”.

But most of them have no clue about what they own, what they can expect, or what comes next.

Many are probably hoping Grandma’s passing will be the catalyst to finally getting some answers.

  • Who Owns What?

One key question that will determine much of what ensues is “who owns what?”, from a legal standpoint.

My work is concentrated in the “family circle”, but it cannot be done in a vacuum, and the actual legal ownership of the assets is something I’d want to know before going too much further.

There’s a good chance that whatever documents and agreements are in place were done long ago and so this question, while simple on the surface, may not have a clear and ready answer.

  • Who Knows What?

I’ve already noted how this family has expanded over the decades, from what used to be one household, and then three, to where there are now a couple of dozen family units who are key stakeholders.

There’s a high likelihood that many family members heading those households are very much in the dark, and also craving some clarity of what lies ahead for them.

Often in these situations, some G3’s have more information than others, depending on their role and seniority.

This “information asymmetry” typically creates potential for mistrust and jealousy between family branches as things unfold.

The sooner everyone in G3 can be brought up to speed, the better chance of smooth sailing ahead.

  • Can They Work Together?

With many intertwined entities operating in this family enterprise’s sphere, questions about the potential for all family members to continue to operate together, rise to the top.

Keep in mind, these are siblings, cousins, and second-cousins, most of whom didn’t grow up in the same home, from several different family branches.

This is far from a “no-brainer”, and time needs to be taken to assess the compatibility question. 

A fact about this situation playing in their favour is that there are a number of business entities here, as opposed to one, monolithic company, so separating things could be simplified.

  • What’s Carved in Stone?

Back to the ownership question, is every detail carved in stone via structured entities (think trusts, etc.) or is there some flexibility around what can happen next?

Unfortunately, family members are often forced to be business partners with others with whom they’d never enter into such an arrangement, if they had a choice in the matter.

Flexibility around what can be changed is way better than rigidity in this case, but this needs to be looked at soon.

  • How Can I Best Help This Family?

There are surely already several professionals surrounding this family who are well placed to help clarify what’s next from a legal ownership perspective, based on the agreements mentioned above.

When there’s a complex web of families involved, it may be helpful to bring in someone who’s trained and comfortable dealing with the “family dynamics” angle too.

One outside expert alone won’t be able to untangle this alone, because of all the moving parts.

If the current professionals are overwhelmed, as they likely will be, they should bring in qualified outside resources to handle these human aspects of what lies ahead for this family.

We do exist!

 

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Family Wealth – Is Stewardship Still the Gold Standard?

More Options to Consider Nowadays

When it comes to preserving family wealth over generations, one of the biggest bogeymen out there is entitlement, and for decades now that’s what’s been keeping families up at night, and keeping many of their advisors busy trying to prevent.

Most of what I write about here concerns the challenges families face when trying to transition their hard-earned wealth from one generation to the next, and I almost always tie in parts about how the industry that serves these families is continuing to evolve.

This week we’re going to look at the concept of stewardship, which has often been hailed as the antidote to entitlement.

As this ecosystem matures, we’re coming to terms with the fact that while having rising generation family members adopt a posture as stewards is preferable to them being entitled, it may not be the “be all and end all” that some have held it out to be.

 

Better Than the Opposite, But Too Passive

I covered this briefly in The Many ‘Ships of Working with Family, where I added stewardship to leadership and partnership, among others.

Here’s some important background I’m recycling for context:

Definitions of stewardship include words like “supervising” and “taking care of” something, and often include adjectives like “responsible” and “careful”.

Clearly someone who wants to “take care” of wealth in a responsible fashion is preferable to someone who feels entitled to squander it.

It may not, however, be an enduring solution, depending on how much wealth there is, how quickly it can be expected to grow, and how large a crowd of family members it’s expected to serve long term.

 

Entrepreneurs in Each Generation

Some prominent members of the field of family enterprise have long held that it’s important for each generation of a family to renew itself with a new crop of entrepreneurs to keep things going and growing, as the family continues to expand.

In many ways, setting up the expectation that those who follow the wealth creator are simply supposed to maintain the wealth doesn’t always dovetail nicely with the idea of taking the initiative necessary to recreate something new.

I’m reminded of Jay Hughes’ view that those who follow the wealth creator risk getting sucked into that person’s “black hole”, which can exert a strong pull, from which it can be difficult to break away.

 

The Wealth 3.0 Version – Pushback?

During a recent Purposeful Planning Institute webinar on the subject of Wealth 3.0, we spent some time discussing how stewardship fits into that topic.

A participant asked the panelists about how the concept of stewardship might look a bit different from a Wealth 3.0 lens, which provoked a certain amount of unexpected (yet welcome) discussion.

Interesting points were raised about whether stewardship becomes a good outcome for a family, versus the idea of someone becoming a steward as more of a “job description”.

There was also talk about how while stewardship had been put on a pedestal until recently, there’s been more pushback lately, as families are looking at their wealth transitions more holistically and less as a “top down” venture, i.e. “thou shalt steward my wealth”.

I’m realizing that the concluding sentence of one of my blogs from less than a year ago, Finding the Liquidity Sweet Spot for Your Family may already be out of date.

That post ended with “I recommend they also become involved in co-creating their future as stewards of the family wealth.”  which in the context of that piece remains valid, but I might phrase it differently today.

The “Three Orientations” Viewpoint

The views on this question continue to evolve, of course, and a recent whitepaper from Merrill Private Wealth Management underscores an advanced way of looking at this question. See Inheritance Style Whitepaper

That piece notes that there are three different orientations that wealth inheritors can and do adopt, based on Merrill’s research.

In addition to traditional Inheritors (who may be entitled) and Stewards, they introduce the concept of Sojourners to the mix as well.

It may take some time for these ideas to crystalize in the family wealth transition ecosystem, but it’s clear to me that change and evolution to this question is afoot.

While stewardship can be an important part of the wealth continuity plans of many families, for a certain period of time (which might be measured in decades or even generations), it will rarely be a question of “set it and forget it” either.

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