The Sledgehammer Versus the Chisel

This week we’re back to an “A vs B” blog, which I love because the format fits so nicely with my way of explaining things and the nature of a weekly blog, where I share quick insights into various aspects of family wealth transitions.

There’s also a cool back story to the genesis of this idea, and, to top it all off, it involves a couple of tools that we don’t use every day.

Let’s get into the way this came up for me first, and go from there.

 

Searching for a Family Champion

About six months ago, I was looking for someone who fit the bill of a “family champion”, as I was planning, along with colleague Joshua Nacht, to lead a breakout session at this summer’s Rendez Vous of the Purposeful Planning Institute.

I should probably direct you to a blog I wrote around that time on the subject of the Family Champion, which is a term that still is not as well known as it should be. 

See The Unsung Role of the Family Champion

It was as a result of our search for someone to join us at the conference to better explain and demonstrate this concept and role that we came upon the perfect specimen.

Because people from business families typically prefer not to be written about in random blogs, I’m going to refer to the young woman we found (and co-opted) simply as “Terry” (not her real name).

 

Champions Are Motivated

It shouldn’t surprise anyone to learn that a family champion, like anyone who wears the title “champion”, not coincidentally, is typically a very motivated person.

When Joshua and I had our first Zoom call with Terry to start planning the details of our session, Terry impressed us both with her story about how she emerged and evolved into the champion role in her business family.

She shared some stories about how when she first began to ask questions of others in her family, and in the business, about how things were set up and how they were being run, she actually had a bit of a “sledgehammer” approach.

I love a great metaphor, so this one really resonated with me, and I made a note of it to make sure that she would mention it during the presentation. (I also made a note about it as a blog topic)

But the metaphor, as I would soon find out, was not yet complete.

 

Evolution to a Calmer Approach

As Terry continued to detail the progress she has made over the years at becoming a more effective family champion, she shared that she had to learn to soften her approach over time.

“Now, I find that the “chisel” can be much more effective than the “sledgehammer”” she said.

That combo metaphor just has to become a blog post, I thought.

Many Tools in Every Toolbox

My love of great metaphors is only enhanced when they also conjure up blog posts from the past, such as this one: The Tradesman and the Toolbox.

That blog was about how the person wielding the tool is usually a more important component in the success of the mission than the tools themselves.  And this is also the case for Terry.

It wasn’t that the chisel she was now deploying was sharper, or better constructed, it was that her approach to the task had her evolve to a place where she now recognized that using a chisel was a more appropriate tool than the sledgehammer that she had chosen at the outset of her journey.

 

One Tool Is Rarely Sufficient

This also brings up the question about the sequence and selection of tools.  Had Terry started out with just a chisel, we can be almost certain that she wouldn’t be where she is now, because at the beginning, the sledgehammer served its purpose.

Likewise, had she continued to swing the sledgehammer and never switched to a softer, more meticulous approach, I have no doubt that she would have run into different problems, and have only herself to blame.

 

Focus on the Process, Not the Content

 

She used different tools along the way, and will certainly need to deploy others going forward for optimal success.

Being proficient with the tools, and knowing when to use each, are more important than many realize.

 

Expectations vs Aspirations in the FamBiz

Expectations vs Aspirations in the FamBiz

This week we’re going back to an old standby of mine, the “this versus that” blog format, where we compare and contrast two words, kind of like many of us did in High School English class.

And naturally, we’ll look at the words in general first, and then move into how they play themselves out in the context of family business.

Of course I typically begin with a set-up around my inspiration for my posts, which I love to do to provide some background and context, which can sometimes be interesting, entertaining, and useful, and hopefully occasionally all three.

Here goes.

Meditation Phone Apps

For the past year and a half or so, I’ve become a regular meditator.  My streak on one of the meditation apps I have on my phone is over 500 straight days, which I sometimes find pretty remarkable.

I actually begin each day with at least 20 minutes on one or two apps that I use, and I feel like my day gets off to a good start.  I alluded to this back in Rocky Mountain High: Best Is Yet to Come.

I like the App called “10% Happier” for a number of reasons, not the least of which is the fact that creator Dan Harris has aimed it directly at people like myself.  He pulls no punches and states upfront that it’s “Meditation for Fidgety Skeptics”.  

Tell Me the Story So I’ll Believe 

I know that there are plenty of skeptics out there, including Harris himself.  I had first “met” him on his 10% Happier audiobook last summer. I only learned about the related app later from a colleague as we compared notes on meditation apps.

I want to side track onto Harris’ book because not only has he helped me understand meditation better, he actually inspired me in the way I approached the writing of my recent book, Interdependent Wealth: How Family Systems Theory Illuminates Successful Intergenerational Wealth Transitions.

In his book he spends a lot of time telling the story about how he learned about meditation, including all the ups and downs along the way.

I hope those who read my book will appreciate how this style of storytelling can add so much to a reader’s enjoyment of a book.

Context and Background in the App Too

Each meditation session on the app also has some background that gives context to the session. These are videos of Harris asking questions of the meditation expert.

It’s from one of those videos that this blog post’s inspiration arose. Joseph Goldstein, a meditation teacher widely featured on the app, talked about the difference between our expectations and our aspirations.

I knew immediately that there was a blog post in there!

Expectations: What We Believe Will Happen

Our expectations are essentially what we believe will happen, they’re what we “expect”.  They’re typically what we think will likely occur, say, on average; not the best result, not the worst either.

Aspirations: What We Hope Will Happen

In contrast, our aspirations are based more on our hopes, and what we would like to see happen; more of a best case scenario.

Goldstein states at one point that we “plan for the worst, and hope for the best”, so he and I may differ a bit on the expectations part (worst vs average) but that’s not the most important aspect, so we’ll leave that aside.

The Family Business Version – Whose Expectations?

In so many family businesses, including the one I grew up in, the biggest issue is often that one person often has great expectations, but not for their own self, but for their children.

There are plenty of people who are working in businesses who feel like they really never had much choice in the matter; it was simply expected of them, and so here they are.

Of course in some circumstances, the offspring joining the family business was truly not a choice, but a matter of survival.  I like to think that in the developed world, in this day and age, that doesn’t occur as often as it used to.

Human Capital – Maximizing Each Person’s Potential

Lately more families are starting to think about the term “Human Capital”, and how each person in a family can contribute what they do best, to the family’s wealth.

Usually when each person can live towards their own aspirations, they will be happier and more productive than those who are pursuing the expectations of their parents.

Is there an important conversation you need to have with a family member around this?

 

My Planning “Preposition Proposition”

My Planning “Preposition Proposition”

Choosing the best title for a blog post can be “hit and miss” at times, as I’ve learned over the past 350 weeks or so (!)

Today’s topic sounded a bit lame when I looked at my notes, so I kicked around some headline alternatives to add some punch.

On the surface, the main subject seems a bit basic, but it’s so important that I felt the need to address it again in this space. 

And I felt like I needed to try to find a way to make it stand out, hence the alliterative title I chose.

 

Lots of “Planning FOR” Going On

In the world of family wealth transition planning that I work in, much of the time and effort spent by both families and their professional advisors involves activities that would fit nicely under the heading of “Planning FOR”.

Parents go see their advisors to make plans for their eventual wealth transition to their children.  They then typically make plans FOR the wealth, FOR the children.

 

Is Planning FOR the Best Approach?

As a hint of where this is going, keep in mind my promised “preposition proposition”, and see if you can guess where I’m heading.

A few weeks back, my social media folks posted a blog on LinkedIn that I wrote in 2018, called “Family Governance: From Filaments to LED’s”.

One of the unexpected benefits of having another person write the text of those content re-posts on Twitter and LinkedIn is that the word choices they make are often better than those I would have made on my own, because they see things in my writing in new ways.

That post, which included a link to that blog, was neatly set-up and prefaced with the question: 

When planning for the next generation… shouldn’t you involve the next generation?”

 

LinkedIn: Where it’s Safe to Read the Comments

That question then elicited the following question, from Ian Marsh, with whom I often exchange comments on that platform: 

 

                    Marsh: “Planning for versus planning with?”

 

I replied that his simple reframe had likely inspired a future blog post, and alas, here we are.

 

Proposing a Preferred Preposition for Planning

So while planning FOR has been most people’s default approach to this important subject, I hereby propose a new preferred preposition.

The first order of business for every family should instead be, planning WITH.

This idea also conjures up other blog memories for me, because I’ve stated this viewpoint numerous times before, notably here, in 2015,

“Successful Planning: Who Should Be Involved?”

 

Hurricane Survivors, Meet Family Members

That post from four years ago featured a quote from the aftermath of Hurricane Katrina, that was painted on the outside of a damaged house that was partially under water.

It read: 

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

It seems that many government officials had been scrambling around to do things for those affected by the disaster, but had neglected to ask the survivors what they really needed, or involve them in any of the solutions.

If you still need me to draw the parallel with the way most families prepare their wealth transitions, I’ll suggest that you just try a bit harder.  It’s right there.

 

Too Much Hard Work

I’ve spoken about this subject with enough people to know that this message is typically met with great skepticism.

This is not for every family.  The vast majority of families do not have the complexity or level of wealth to warrant the work that goes into this type of “purposeful planning”.

But even for those families for whom this type of planning could be and should be done, there is still a great deal of hesitation to embrace this approach.

It is hard work.  It does take time and effort. And it takes leadership.  Most families are lacking in at least some of those.

 

What’s It Going to Take?

I know that my “preposition proposition” will feel a little too “out there” for most families, and like I said, I know this isn’t for every family.

And even if you, as a solitary person who is a member of a business family, would be interested in this, how would you ever get the other family members to “see the light”?

I wish that I had a simple, “silver bullet” answer to that, but I don’t, and I don’t think anyone else does either.

But if nobody starts talking about it with the others, you can be sure it won’t happen!

 

Conversation between family members

Conversations: Does “Uncomfortable” = “Productive”?

Conversations: Does “Uncomfortable” = “Productive”?

This week’s post was inspired by a recent Zoom call that I was on with a group of like-minded colleagues.  The group consists of people trained in Bowen Family Systems Theory (BFST), which became an interest of mine about five years ago.

Actually, I was more than just “interested” in BFST; I recently published a book about how it illuminates the field of intergenerational wealth transitions. (See Interdependent Wealth)

In the book, I also share my journey of learning and discovery of the fascinating world of BFST.

 

“Uncomfortable Conversations”

On that call, one colleague related a story about a recent meeting that she had had at her workplace, where some “uncomfortable conversations” took place.

She shared her reaction to the conversations, and how she was able to maintain objectivity towards the subject, not allowing her emotions to derail her thinking, thanks to her understanding of, and training in, Bowen Theory.

During the ensuing discussion, someone referred to that conversation, and dubbed it a “productive conversation”.

And suddenly in my head, there it was, “A-Ha!”, there’s definitely a blog post in this idea. 

I know that lots of business families face these issues around “tough” conversations all the time.

 

Of Productivity and Discomfort

In the example from above, that conversation was deemed uncomfortable, and also productive. My understanding of the productive aspect is that it likely resulted in an ability to move forward on some important matter(s).

If I frame this question around just the area of conversations, I might ask, “Does every productive conversation have to be uncomfortable?”

Or, turning it around, “Is every uncomfortable conversation productive?”

I think everyone would agree that the answer to both questions is a resounding “No”.

 

Avoiding the Tough Conversations

So if we’ve determined that “uncomfortable” and “productive” are simply two adjectives that can be used to describe conversations, and that even though there is some overlap of these groups, it is not a perfect overlap, what is this really about?

My guess is that it’s really about the fact that even though we know a conversation could be productive, it will often be avoided if it is expected to also be uncomfortable.

I know there’s no rocket science in that last sentence.

 

Necessary Conversations

In my notes to capture this as a blog topic that morning, I included the word “necessary”, because that word also came up for me as I considered the idea.

How many “necessary conversations” are being avoided, simply because they’re expected to be uncomfortable for someone?

Probably way too many to even begin to count.

 

Preparation and Culture

I want to share a few ways that we can have more productive conversations, that won’t necessarily be “comfortable”, but will at least be less “uncomfortable”.

First off, when people are prepared for a conversation, they can be more ready to hear things that they don’t always like to hear. When you can brace yourself before you fall, you won’t get hurt as badly as when you can’t.

Another important element that you can work on, is creating the proper culture for these conversations.  If you can be in the habit of creating a safe and supportive space, that can certainly help with the comfort issue.  

The more often you get together with people, raising some difficult issues and dealing with them positively, the more this can become a habit, and eventually part of your culture.

 

Make It a Regular Forum

In fact, one of the recommendations I typically make to families who say they really want to get serious about their planning for their eventual intergenerational wealth transition, is to begin to have regular family meetings.

These meetings don’t necessarily need to be held frequently (monthly or quarterly) but there should be at least one or two a year.

The important thing is to make sure that everyone knows that there will be an opportunity to have important conversations, around matters that will affect the whole family, over the very long term.

 

Start Slow, Add “Big” Topics Later

The initial few meetings can be used to get the attitude and culture right, hopefully dealing with simpler issues at the outset.

With time, some of the more sensitive topics will typically be added to the agenda, as people will have become used to working on important aspects around how things will evolve.

Hopefully, you can be productive, without being uncomfortable.

 

Family Getting together

“We’re Here to Improve, Not to Impress”

“We’re Here to Improve, Not to Impress”

Each week in this space I write about subjects relating to families who work together for their long term benefit.

This can be in a family business, a family office, a family foundation, or any combination of these and other scenarios.

But when individual family members work together on these matters, they aren’t always coming in with the same goals or attitudes.

 

Blogging About Enterprising Families

The idea for this particular post, which I used in the title, comes from a situation that has nothing to do with families at all, but rather from a real life experience of mine that I recently noted.

Of course I needed to find a way to take that message, tell that story as background, and then relate it to the world of enterprising families.

I’m pretty sure that I found a way to do it, but I will leave it to readers to evaluate my success.  

 

Coach Training Example

Those of you who also read my monthly newsletter (and care enough to pay attention to the details of my life that I sometimes relate therein) may know that I began a coaching certification program in April, with CTI.

During our very first session with our CPL (Certification Pod Leader), he made a statement that I wrote down and vowed to keep in mind throughout the program, and beyond.

He asked all nine of us to remember that we were there “to improve, NOT to impress”.

I’m pleased to report that it has stuck with me, and I’ve repeated it to myself, and others in our group, on a few occasions.

 

What About Family Members?

So where can we use this idea when working with family members? I’m glad you asked.

I think that the best way to begin to look at this, is to actually think about the expression in reverse.  Wait, what?

Well not really in reverse, but let’s think about the “here to impress” part of it first.

I have seen my share of family businesses, and in many of them, there are certain family members who expend a lot of effort and energy trying to impress others.

Now this might be fine if all these efforts were being made in order to impress outsiders, like customers, suppliers, bankers, etc.

But when they spend so much of their time and effort trying to impress their parents and their siblings, that always leaves me feeling at least slightly disappointed.

 

Poorly Focused Efforts

That disappointment arises mostly because it feels to me like many of these efforts would be better put to use for the common good of the family.

Instead, they often have at their core a need for certain family members to boost their own worth within their family.

When people feel the need to act this way, it is usually disappointing to me.  

But this isn’t about me, it’s about the families. So let’s look at it from their viewpoint.

 

How About Improving Together Instead?

Now I want to go back to the expression in the title, and examine the first part. “We’re here to improve”.

Imagine that instead of certain family members attempting to bolster their personal superiority over others, they would simply act first and foremost as team players, concerned with the success of the entire group.

Every group of people who work together, in whatever form, will have people with varying levels of abilities in different areas.

It is rare to find a group in which one single person is the best person in that group at every task they undertake.

 

Going Far, Going Together

As I wrote that last line, I flashed back to a blog from 2016, which remains one of my favourites.

Going Far? Go Together, was inspired by an African proverb that reads, 

“If you want to go FAST, go alone. If you want to go FAR, go together”

As someone who writes regularly about families who work together, and who has admitted repeatedly to having a “family first bias”, I hope you can see why this proverb is close to my heart.

 

Improving Together Impresses the Outsiders

When families can keep their focus on making things better for the whole group, they will actually end up impressing many outsiders.

While that may not be their goal (and probably shouldn’t be) it is a nice side effect.

Hopefully other families can then watch and learn!

 

Family Business in london

Everything Is Something

The post’s title is a three-word expression I heard from a colleague several months ago, and my goal is to turn it into something entertaining and useful for people who work with enterprising families.

Let’s set the context a bit.  I got this “everything is something” line from a colleague last October in London at the annual Family Firm Institute conference.

I’m pretty sure it took place at the reception for speakers and sponsors.  I’m not exactly sure what we were talking about but at one point my friend said “everything is something” and I gave her that look.

What look?  It’s a look that combines surprise, gratitude, and inspiration.  She had seen this look before, as she’s inspired at least one other previous blog post. (Thanks, MM!)

 

A Coaching Term (?)

After we got through the obligatory “Hmmm; I like that…  There’s a blog in there…”, she told me that this was an expression that her coach uses with her.

Now that I’m writing this, part of me wishes I’d asked her to expound on this and maybe give me an example from her coaching conversations for me to relate here.  But alas, I didn’t do that, since my mind was already beginning to think of some of the many possibilities the expression presents.

 

The Family Business Angle

As usual in this space, I now need to pivot my story into ways in which it applies to business families.  Even though the inspiration came at a conference for people who work with family firms, that doesn’t make this an obvious leap.

There was, however, a reason that this expression hit me square in the face.  It all comes down to the different perspectives that people in a family have when they think about and talk about their family situations around their business or their wealth.

Rather than starting with “everything”, to clarify what I meant, let’s look at a simpler example, like “any one thing” instead.

So, any one thing, be it a comment, a situation, an event, a payment, an email, a story, or whatever, that seems to one person to be “nothing”, or at least “nothing special or noteworthy”, has the potential to be “something”, and often “something really BIG” to another person.

 

Assumptions and Misunderstandings

Far too often in cases where family members interact with each other closely around important and sensitive subjects, the differing viewpoints of the different players are ripe for these sorts of misunderstandings.

Some of the biggest possible irritants occur when something seems so inoffensive and even irrelevant to one person, yet to another person it’s actually a huge deal.

When these things occur infrequently they can often blow over pretty quickly, but when they begin to pile up in rapid succession, look out.  There can be a cascading effect that can quickly erupt.

When I assume that something I did, said, or wrote is benign and inconsequential, yet the receiver or even another “bystander” views it much differently, often because of a simple misunderstanding, that can be sufficient to create a highly combustible pile of kindling.

 

Just Add a Spark

When there’s a lot of kindling, a simple spark can start a fire that can then turn into a raging inferno.  So if we continue with this analogy, there are two things to avoid: the kindling, and the spark.

The kindling is made up of misunderstandings or assumptions that have not been verified.

The way to avoid those things happening is to make sure that the communications channels are clear and used regularly.  You want to avoid having these things pile up.

 

Clear Things Up Regularly

Some families do this really well, getting together frequently and talking openly about important matters, even when some of them are sensitive.

Other families are less good at this, and I will usually encourage then to meet more frequently.

But then there is also the need to avoid those sparks we mentioned before.

 

High Anxiety and Possible Sparks

When things are going well, there’s a lower chance of sparks happening.  But when things are stressed, and anxiety is running high, sparks will typically occur more frequently.

My conclusion is that when things aren’t necessarily going perfectly well, then it’s even more important to communicate clearly and frequently, to clear up any misunderstandings.

Because in a family business, everything is potentially something.

guy riding a bike in ireland in the late afternoon

Riding a Bike: Assumptions and Promises

Readers who also get my monthly newsletter are possibly aware of a recent professional development program that I’ve signed on to in order to up my one-on-one coaching skills.

I’m now a little over month into the 6-month long professional coaching certification program with CTI, and loving every minute of it.

Included in the work, in addition to time spent coaching clients, is a regular weekly Zoom call with the other 8 coaches in my “pod”, with our course leader.

In preparation for our first call, we were asked to prepare a response to two queries about our expectations for the program.

What Are Your Assumptions?

The first thing we were to consider and expound on was our assumptions about the journey on which we were embarking.

Now my particular situation was quite a bit different from that of the average participant, because a long time had elapsed from when I took all of the prerequisite courses to when I began the certification program.

I completed those in 2014, and a five-year gap is far from standard.

So my response to the assumptions question was that it would be like riding a bike, meaning that despite the time lag, the coaching would all come back to me quite quickly.

 

What Promises Are You Making?

The next question was completely different, but I felt compelled to tie my answers together.

We were asked what promises we were making to ourselves about our participation in the program.

I thought about that one for a while, before being sparked into jotting down: “If I fall off my bike, I’ll get right back on and keep riding”.

I felt so clever in the moment, and I was pumped to share my answers the next day.

 

Change of Plans

Now imagine my disappointment when we actually began our introductory call and our leader went off script and asked two different questions instead!  Ah, crap!

I managed to answer his prompts on the spot, but my replies weren’t nearly as memorable as the ones I’d prepared.  Oh well.

But then, in my regular session with my own coach, Melissa, I relayed the story to her.

“Hmmm.  You seem excited about this subject.  Maybe there’s a blog in there for you?”

And here we are.

 

The Family Business Angle

You all know that I love to relate stories, and now the trick is to turn this into something worthwhile for families who are planning an eventual intergenerational wealth transition.

So let’s start with Assumptions and then move on to Promises.

 

Assumptions in an Enterprising Family

This part is actually pretty simple for me, because assumptions are at the heart of many of the key issues that families face.

In fact, a large part of the role that I play when working with families is to have them recognize the assumptions that they hardly even realize they are making.

Once they recognize them, they can start to deal with them.  And by deal with them, I mean that as a coach, I will challenge them to actually verify that their assumptions are in fact valid.

girl and guy riding a bike

My Kingdom for a Forum

The main reason that assumptions persist in not being “aired out” is that families don’t have a forum in which to have the important discussions necessary to clarify that everyone has a common view on important matters.

I talk a lot about the importance of family meetings, and the key is always to have a series of meetings, where the date of the next meeting is always set before the end of the current meeting.

Please See: 5 Things you Need to Know: Family Meetings

 

Promises in an Enterprising Family

The idea of promises in an enterprising family is a bit less clear to me.  Obviously when working with family, we often feel much closer to each other and there’s an inherent promise to do what is best for the group as opposed to ourselves.

But I think that my “take home message” on this should go along with what I wrote about assumptions.

While you are meeting and clarifying everyone’s assumptions about the future of your family enterprise, why not also make it a point to also enunciate the promises that you’re all making to each other?

 

Get Back On the Bike!

In closing, I recognize that some families start these meetings and then lose momentum.

To them my message is simple: Just get back on the bike and ride again!

 

Doing Better than the 4 D’s

Doing Better than the 4 D’s

This week I want to talk about the “4 D model” that I’ve heard David York speak about on a few occasions.

Now, lest you think that the word “model” is being used here in a positive sense, as in “a model that you should follow” or “role model”, please erase those thoughts immediately.

And furthermore, if you think that I’ll be arguing against York’s views, again, that ain’t it either.

York coined the term “4 D Model” to describe what has been going on for far too long, and we are in full agreement that there is a better way to go.

 

Background and Context

I first met David York in Denver a few years ago, at the annual Rendez Vous of the Purposeful Planning Institute (PPI).

Regular readers know that PPI is one of my absolute favourite organizations and that the Rendez Vous in July each year is the one gathering each year that I never miss.

I personally see York as one of the rising young stars in this field and love the way he conveys his important message.  This TED Talk of his is a great example.  His books are great too.

 

Traditional Estate Planning

York has long described the traditional “4 D Model” as follows:

Dump, Divide, Defer and Dissipate.

He’s also well aware that many of his estate planning attorney colleagues continue to follow this model.  Let’s look at the 4 D’s one by one.

DUMP

This is the part where the assets of the parents are transferred to their offspring upon death, usually after the second parent has died.   Little is done to transition any wealth while the parents are still alive, because that might require some real thought.

DIVIDE

This refers to the fact that upon death, those assets will be automatically divided equally between the offspring, regardless of any other circumstances, like ability, needs, etc.

DEFER

The deferring is mostly about trying to avoid paying any taxes until absolutely necessary.  So delaying any transfers of assets is part of that strategy too, because if you can’t avoid paying taxes, deferring them as far off into the future is the next best thing.

DISSIPATE

The final D is mostly about the results, as the family’s wealth dissipates after applying the first three D’s.

When the wealth has been treated in this way, with financial wealth as the sole issue of concern, and where no effort was ever made to involve those who would inherit it, it shouldn’t be surprising to learn that in many instances, that financial wealth will be handled by the inheritors in ways that could be described as sub-optimal at best.

 

More Purpose, Please

So far we’ve spent lots of time on how NOT to do the work necessary to transition wealth from one generation of a family to the next, and now it’s time to look at some positive moves a family could make to do a better job.

Notice that I said “moves a FAMILY could make” because ultimately the onus is on the family to do what is right for them.

Unfortunately, most families rely on outside experts to help them with this important work, and if a majority of advisors are stuck in the “old ways”, it can be very difficult for families to get the kind of help they really need.

Truck dumping grabbage

Involving More Parties – Inside and Outside

If the Four D model has survived this long, it’s largely because it’s very efficient.  It’s quick and relatively easy.

Making purposeful plans involves a lot more people so it naturally takes more time.

The first group of extra people are the other family members.  How can you make important plans for the next generation without involving them?

I don’t know, but most families have done it that way.

 

Multidisciplinary Advisors

The other group of extra people that need to be part of the solution are the advisors.

Every great plan will need to include input from a variety of outside specialists.  Ideally they will collaborate for the good of the family.

But most importantly, most of them should only be brought in after the family has figured out the most important questions around how they want the wealth to serve the following generations of the family, not before.

Rendez Vous 2019 will feature a breakout session featuring David York as well as one featuring Steve Legler and Joshua Nacht.  We all hope to see you there.

Roles and Rules for Enterprising Families

Back in January after the Institute for Family Governance’s third annual conference, I noted in Family Governance: One Step at a Time that that one day would end up being the source for a number of future blog posts.

I’ve officially lost count already, and here’s another one.

Its inspiration was the second presentation of the day, by John Ambrecht and Michael Whitty, entitled “Governance Structures that Actually Fit a Psychological Model of Human Behavior”.

Looking over their 75-page slide deck some 10 weeks later, there was a LOT of information in their talk.

 

From Roles to Rules ©

The psychological model they referred to is detailed in a 2004 paper that was published in the California Trusts and Estates Quarterly titled “FROM ROLES TO RULES©:† A NEW MODEL FOR MANAGING FAMILY DYNAMICS IN THE ESTATE PLANNING PROCESS”

I’ll leave it to the most curious readers to examine this in more depth, and I’ll simply talk about family business roles and the importance of eventually making rules that everyone needs to learn to abide by.

 

In the Beginning…

When family businesses start, things are usually rather informal, with few real rules and with poorly defined rules, if any.

As the business grows, the division of work necessitates that roles become clarified, and many family companies have some difficulty even with this roles component.

When that man tells me what to do, is he my boss, or is he my Dad?  (Of course the answer to that question is “Yes”)

Role Clarity and Making Rules

You may be thinking that in order to properly define each person’s role, making some rules around things would make a lot of sense. And I think you’d be correct.

While Ambrecht and Whitty suggest that there’s an evolution “from roles to rules”, they certainly don’t mean that you finish with roles completely and then arrive at the rules stage.

It’s more of a change in emphasis as the family business matures.

 

Formality is your Friend

Regular readers will recognize the expression “formality is your friend” as one I return to from time to time, and this is another such occasion.

Both roles, when they are well defined, and rules, when they are clear and are actually enforced, certainly help out with formality.

I hope that you noticed that I just added some conditions to both roles and rules there.

If the roles are poorly defined, they won’t do much good, and if the rules aren’t clear, or worse, if they aren’t enforced, it may be worse than not having any rules at all.

 

Rules Lead to Governance

Sticking with the formality, that feels like it fits really well with the rules idea.  And as a family makes more formal rules, they can (hopefully) eventually end up in the wonderful world of family governance.

Recall that this post began with a mention of a conference devoted to the subject of family governance.

As I wrote a couple of years ago in Family Governance, Aaaah!, my personal views and feelings around the “G-Word” have evolved.

Families will often have a negative view of governance because it sounds way more formal that what they are ready for and for what they think they need.  And they are often right about that.

 

How Are We Going To…..

When someone explains to them that family governance doesn’t have to be that complicated, and that it really involves answering three simple questions, people can get on board more easily.

Those questions are:

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

Three questions that can have some pretty long answers, agreed, but still only three categories to worry about.  And the third one is really mostly a repeat of the first one, but with an added emphasis on trickier situations.

 

Back to the Roles and the Rules

While governance feels like it’s more about rules, it is also very much about roles too.

All those decisions that need to be made will be made by people, and the bigger and more complex the family’s wealth becomes, the more important it is that they find ways to make those decisions in ways that satisfy the family group.

Business decisions can often appear much simpler than those that affect the family.  Please see The Unsung Role of Family Champions for more on key roles in enterprising families.

As families approach key generational transitions, it becomes especially important to pay close attention to these ideas.

 

Buildings and corporate offices

On Enterprising Families and Family Wealth

Today we’re going to look at a couple of subjects that have been brewing in my head for a while.

I’m going to combine some elements of vocabulary and evolution, which may sound a little more arcane than what I have in mind.  So let’s get going.

 

 

Family Business: Been Around Forever

We all recognize that family business has been around since the beginning of mankind.

Centuries ago, out of necessity, the family used to be even more of a “unit”.

As economies developed, they also became an “economic unit”, as it was natural for families and tribes to work together for their own advancement.

 

 

Business Families: More Recent

More recently, as society has evolved and as economies have advanced and matured, we’ve seen more and more “business families” emerge.

There often comes a time when the people leading a family business actually make a shift to thinking of themselves as more of a “business family” than simply a family business.

There are a couple of elements at play here:

  • Prioritizing the family over the business
  • Working ON the family, instead of IN the business

This shift usually comes only after certain success has been attained in the business that allows its leaders the luxury of time to make this shift.  (Many never make it this far.)

Lots of family businesses remain a family business forever, and of course still serve a great purpose for their members and for society.

See my 2014 book: SHIFT your Family Business: Stop working IN your Family Business, Start working ON your Business Family

 

 

Enter the Family Enterprise

Once a family achieves a certain amount of success with their business, all sorts of possibilities open up.

From growing the original business into more geographic locations, to vertical or horizontal integration, to developing completely new lines of business, the combinations and permutations are literally infinite.

The common thread is often a family, for whom all this wealth is being created.

When a family is involved in more than just its original business, the term “family enterprise” is often the one that describes them best.

This can also be the result of a liquidity event, where a major business is sold, and the proceeds are reinvested into other ventures.

It can be very important for a family to get to a point where they can view any of their businesses as simply another asset that the family owns.

 

Cartoon showing people standing on coins

Enterprising Families

We’re getting into vocabulary and semantics a bit, but there’s a good reason.

Finding the right label for something is often a key to getting members of a group to develop a common understanding of who they are, what they are doing, and where they are going.

I mentioned off the top that we’d be looking at evolution as well.  Let me expand on that now.

Just as a family can go from concentrating on one business during it’s family business stage, and then “evolve” into more of a business family, there can be a similar evolution to the enterprising stage.

These “stages” of evolution often take decades, and can coincide with generational transitions as well.

A recent edition of the FFI Practitioner highlighted a couple of case examples you may be interested in.

 

 

Family Firm Institute – Business or Wealth Focus?

In the same way that any family may evolve from one stage to the next, the organizations of professionals who serve enterprising families have also evolved.

The Family Firm Institute began over 30 years ago, and in the beginning their target was essentially family businesses.

In the intervening decades, they have also concerned themselves much more with family enterprises as a whole, including the world simply defined as “family wealth”.

 

 

Designations and Certifications

FFI now offers certifications in Family Business Advising and in Family Wealth Advising.

In Canada, FEX, through its FEA program, offers the designation “Family Enterprise Advisor”.  Thanks to their “later mover advantage”, they were able to use the more holistic term “family enterprise”, which became more current in this century.

The common thread through all of these is the existence of a family with enough wealth and complexity to worry about.

 

Different Labels, Similar Issues

Families evolve from one decade and generation to the next, and the industry that serves continues to get more sophisticated.

Working together, we are trying to get better results for families everywhere.

And those who can figure out the family dynamics usually make out best.