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Striving for the “All AND Nothing” Inheritance

Striving for the “All AND Nothing” Inheritance

So Much Better Than “All OR Nothing”

I’ve written around 500 blogs over the past decade, and sometimes I convince myself that I’ve shared all the gems I’ve ever heard, somewhere along the way.

And sometimes I find out I’ve missed some.

This past week, I was invited to be a guest on a podcast, and the host asked me for three to five things that all parents strive for as they imagine the inheritance they will leave.

I quickly recalled a nice blog post that dealt with three of them, The “Family HUG” We’re All Looking For, and then began to wonder which two others I could suggest as a good complement to those.

“Oh, I know”, I thought to myself, “let me find that blog about David York’s ‘All or Nothing’ concept!”.

As you may’ve guessed, I realized that I’ve yet to write that one, even though this nugget goes back a couple of years for me.

So, belatedly, here we go.

A Familiar Resource Once Again

Maybe it’s because I’ve shared York’s wisdom before, notably here: Great Expectations in Enterprising Families and Family Wealth Dynamite: One Stick or Two?, among others.

The “One or Stick Two” part of the dynamite one was probably what fooled me into thinking I’d already shared this week’s take-home message here.

Nevertheless, when you know of a thought leader like York, who shares good stuff regularly (and not just the same stuff over and over again), you know that you have someone worth paying continued attention to.

Just make sure you credit them for their ideas, and don’t try to claim them as your own; because this is a relatively small world, .

So, after all this build-up, I must be building up to something worthwhile, right?

They Can Handle It All

The first half of York’s two-part inheritance scenario is familiar to many.

Parents who have accumulated significant wealth will often worry about the capacity of their heirs to “handle” everything that they might possibly inherit.

As I wrote here, in Who Messes Up What, Or What Ruins Whom, they don’t want their offspring to screw up the wealth, and they also don’t want the wealth to screw up their family members.

Many professionals who advise such families have heard these concerns ad nauseam, to the point where an entire industry has sprung up to provide hundreds of structural “solutions” to this dilemma.

However, according to York (and other enlightened advisors), these parents should be working towards making sure that they have raised their offspring to be able to handle all of their wealth.

Wouldn’t it be nice to know that after you’re gone, the wealth you leave your heirs will be well taken care of, because you raised them to be capable stewards?

Sounds Great. Okay, What’s Part 2?

And, if you do prepare your offspring to be able to handle the wealth that you plan to leave them, there’s actually an important side effect.

Chances are good that those who’ve been raised this way would actually also do just fine if ever you decided to leave them nothing.

That’s the second part of this, in case you hadn’t already guessed it.

Everyone thinks wealth is all about the money, but it’s really all about the people. Wealth comes and goes, sometimes remarkably quickly, in families.

The difference is rarely about the size of the pile, it’s more about the people entrusted to look after it.

Preparing Them for Either Scenario Is the Same

What if you did leave them nothing?

Let’s be clear, this is not a suggestion that you not leave anything to your heirs, that’s not it at all.

People do that for various reasons, and some famous ultra-wealthy people have publicly stated their plans to leave modest sums to their progeny. That’s a whole other discussion, perhaps for another post.

My point is that raising your offspring to be self-sufficient and independent is something everyone should strive for, regardless of how much financial wealth is at stake.

If they’re prepared to receive nothing, they’ll also likely be prepared to handle everything.

Which One Should You Aim For?

This is a bit of a “chicken and egg” question, which makes it intriguing.

If you have significant wealth, being concerned that it’ll be too much to handle is normal, so parents sometimes resort to warning their children that they’ll get nothing.

Preparing them for nothing AND for everything will probably work out better.

Either that or preparing them for everything AND nothing.

Go for AND, not OR.

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How to Build a Family Dynasty

How to Build a Family Dynasty

Five Key Considerations

Once a family has accumulated a good deal of financial wealth, at some point, it becomes wise for them to shift their focus from making their proverbial pie bigger, to figuring out how to preserve the pie and transition it to future generations.

This is typically a bigger challenge than expected, and despite having access to high-caliber experts to assist them, families often stumble here.

Many speak of family legacy (including me), but this week I’m pivoting to a related concept, to answer another question, i.e. “How do you build a family dynasty?”

Here are five important things to consider when thinking about this complex subject.

1. Families Grow Exponentially

As soon you mention the word “dynasty”, my mind quickly goes into “multi-generation” mode as a basic assumption.

We’re usually talking about wealth creation that began with one generation and then continued through at least one or two more generations.

Something that creeps up on families trying to stay on top of this is simple math. 

As you add each generation of offspring, you’re adding people (or households, sometimes a simpler way to count) at an exponential or geometric rate.

If you take an example of three children per family, you go from one household to four, as the three leave the nest, and then if each of the three have three offspring, that’s already nine more.

I’ll stop the math there, but once you add that next generation, it quickly skyrockets.

2. Will the financial wealth grow at the same pace? 

That takes some work, and usually lots of luck too!

  • What Got You Rich Won’t Keep You Rich

Wealth is often created via an entrepreneurial venture that becomes a family business, or more recently by success in entertainment or sports, or having shares in a unicorn business that goes public.

Those occurrences do not typically happen or repeat often, and so the odds of them showing up in the same family again within another generation or two are low.

My point is, the skills that got you rich are not the same ones that will keep you rich. 

That realization doesn’t always come quickly to the one who caught lightning in a bottle and then believes they have some special power and invincibility.

3. It’s More About People Than Money

I know that almost everyone thinks it’s mostly about the money, but that isn’t typically where things go sour.

Having lots of money and then staying rich isn’t that difficult if you’re only trying to satisfy one person, or one household.

When you consider a family that’s growing exponentially (see #1, above), making sure there isn’t a revolution, as they work to stay wealthy and become a dynasty family, you begin to realize it’s the people that you need to pay attention to, even more so than the dollars.

4. Family Governance Is Key

Long time readers of my work won’t be surprised that this post is now pivoting towards a pontification about family governance, because that’s a hobby horse I ride quite regularly.

Every dynasty family will continually need to work on answering three main questions:

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

When people hear the term governance, in relation to family issues, they typically make an unpleasant face, and I get that. 

That’s when I share those three questions as my definition, which is easier for most to grasp.

5. The Work Is Never Done

Family governance itself has a few key characteristics that make it special.

  • It’s less about formal agreements, structures, and mechanisms
  • It’s more about informal agreements and ways of being together
  • You cannot simply buy it off the shelf from an expert
  • You need to co-create it as a family
  • It needs to evolve as the family and its needs evolve

For those reasons, plus the fact that each of the growing numbers of people also continues to evolve, this is never a “one and done” or “set it and forget it” situation.

Yes, there are some family dynasties around, but not that many.

If you look at them closely, you’ll probably see that they fully understand the points I’ve shared here.

Can it be done? Yes.  

Will it be easy? No. 

Is this for your family?

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Contrasting Transition Timelines: 15 minutes or 10 Years

Based on a True Story

When you spend a lot of time in the wonderful world of family enterprises, you hear all sorts of stories, many of them entertaining and sometimes even instructive.

This is a true story that I recently learned more details about, and thanks to the way the patriarch shared the details, it also includes a wonderful contrast that we can all learn from.

The setting is an annual awards evening for local family businesses, for which I had the privilege of acting as the MC.

I had also been part of the jury that evaluated the applications, interviewed the finalists, and selected the winning family.

Transition # 1 : From G1 to G2

Part of the celebration that evening involved viewing some fantastic videos that had been made this summer at the place of business of the three finalists, and included candid clips with every family member involved in each business.

So while we had learned a great deal from the applications and our evaluation interviews, there were some new nuggets of information that came out that evening.

Some of these came from the videos, while others were revealed during a fireside chat with one family member from each of the finalists.

It was during the video that the patriarch from the winning family shared that when his father, the business founder, brought him into the business decades ago, that whole transition lasted “about 15 minutes”.

Transition # 2 :  From G2 to G3 

So about a decade ago, when he began to think about the next generational transition, where he would be the one planning his exit rather than his entry, he was trying to think about the appropriate timeframe.

When some advisors told him that ideally such transitions happen over a ten-year period, he was dubious and could not imaging why it would ever take that long.

During his acceptance speech, he confessed that ten years was, in fact, a very appropriate amount of time to do things right.

It seems like both these transitions could actually be deemed “successful” though, so what’s there to learn here?

I’m glad you asked.

Short and Sweet – Yes, That CAN Work

Let’s start with why the first transition above actually worked, because there are a couple of key details one might miss.

The first one is that the founder had grown the business to the point where he was no longer able to handle it, and was beginning to feel overwhelmed and in need of help.

The second key is that once his son arrived and Dad recognized that he had greater ability to lead than his old man, Dad got out of his way.

This doesn’t typically happen, especially with business founders.  

I have a client in a similar situation and there’s another parallel between the situations that’s also worth mentioning.

The first generation built a relatively small business, so the next generation was taking over something that was actually quite simple.

In the case of the award winners and my client, the business is now way too big and complex to hand over quickly and easily.

Slow and Steady Wins More Races

Once the business achieves a certain size and complexity, there are a lot of things that need to be brought into consideration.

When you think about any large business out there, what are the chances that the best person to run it is actually a descendant of the founder?

So if you’ve decided that you’d like to have your offspring take over your business, eventually, then it’s usually better to give yourself a long runway.

Time moves pretty quickly, and it’s much better to be ready too early than too late.

There’s More Than One Transition

A big reason things take long is that you’re not simply handing someone the keys to the front door.

You need to transfer your know-how and knowledge, as well as your contacts.

The leadership that the new person in charge, or more likely the new people in charge, will require, does not shift very easily overnight.

You need to plan to transfer authority and responsibility as well, which are not as easy to do as you might think.

There’s likely some ownership that will be changing hands as well, and that alone will take some time and getting used to.

So if you have a choice, better plan for a ten-year transition, not 15 minutes.

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Balancing Governance and Culture in Family Enterprise

Developing the Leadership to Find the Right Mix

Colleagues sometimes ask me what it’s like to write a weekly blog post, typically wondering how I constantly find topics to write about.

I normally note that I only write once a week, and I get ideas much more often, so it becomes more about sifting and sorting than dreaming up subjects.

Quite often, like this week, an idea hits me between the eyes and I cannot put it down, and then the tough work begins as I try to figure out how best to share it with readers.

I’ve gotta say, this one could go any number of directions, because it’s so foundational to my work.

Thinking Out Loud, In Writing

Selfishly, I write in order to force myself to clarify my thinking, and would do so even if I didn’t make my writing public.

It’s my version of “thinking out loud”, which I’m known to do, but I do it in writing. It’s kind of my personal journal, open for viewing.

So what was it that “hit me” this time, that I’m about to share?

I’m taking a series of online courses through Coursera, and there was a video in which a presenter uttered a sentence that made me immediately hit pause and rewind.

I’ll spare you the details of the courses, but note that they’re in the area of Positive Psychology, a recent interest of mine.

I don’t have the verbatim quote, but got the five key words.

      “…the right mixture of governance, culture, and leadership…”

Whoa, some of these words are right up my alley, but I’ve never heard them put that way before.

He’s Speaking My Language

Regular readers know how often I write about governance, despite the fact that that word has less than positive connotations for many people.

I also write about leadership often enough, or maybe not often enough, since it’s so important in so many places, especially in enterprising families.

Culture isn’t a word I use much, but it’s also key, and never far from the subject either, even if I don’t use that word.

So while those three words caught my ear, it was the ones right before them, “the right mixture” that got me thinking.

As I considered the idea, I couldn’t help coming to the conclusion that governance and culture fit together nicely as different ways that people work together, formal and informal, but leadership seemed to stick out a bit.

Mixing Governance and Culture

Governance is mostly about the formal structures, procedures, and mechanisms that are put in place to make sure that things run well, and that there are actual written ways that remind us all how we have agreed we will act together.

Culture is more about the informal “that’s how we do things around here” that are almost never written anywhere, yet they’re typically even more powerful in guiding actions than the written rules are.

Finding the right mixture of those two elements, the formal and the informal, is where a lot of the magic happens, and I use the word magic because it’s something that we usually can’t explain and perhaps don’t even try to comprehend.

The Right Mixture Needs to Be Found

But that “right mixture” does need to be found, and it will often happen with trial and error.

It will also vary from one family to another, as well as from one decade or generation to another within the same family, depending on where they are in their evolution of working together, and who the key players are.

But it’s not as if there’s a dial that we move to the left or right to adjust to the right setting, it just sort of evolves.

How and Where Does Leadership Fit?

Maybe that’s where leadership fits in, after all?

Who moves the dial towards a need for more formality, or towards more informal discussions, with the goal of moving the entire family system to a more appropriate equilibrium?

That work can only be done by those who take on that leadership role.

Lest you think that such leadership roles are assigned, or given based on age or seniority, let me remind you that this is not the case, and when leadership is set by this “default” setting, sub-optimal results normally follow.

Someone needs to step up to these roles, and take them.

Is that you?

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Consensus Decisions for Families – 2 Basic Elements

How Are We Going to Make Decisions Together?

In this space we talk a lot about family governance, which I know is a term that turns some people off. In order to soften it, I typically follow up quite quickly to clarify what it means in practice.

The two major elements of governance are communications and decision-making. The way I normally phrase it is “How are you going to make decisions together?”

It’s normal for families to move from an autocratic decision-making style in one generation to a more democratic style in the next.

By far the best democratic style I know of, and what I always recommend families strive for, is consensus.

Last week I shared about the recent PPI RendeZoom, in What Colour Is Your Cape?

This week’s post was inspired by one very brief comment I noted from one of its breakout sessions, that gets to the heart of what consensus requires.

What You Can Learn When You Pay Attention

Conferences are a great chance to hear industry veterans share some of their wisdom with colleagues, and I got some of that from the PPI crowd as usual.

What I did not expect, however, was to hear a very useful synopsis of the two most fundamental ingredients of consensus, especially coming from the youngest person at the conference.

It was during the final set of breakout sessions, and I opted for the one dealing with teenage philanthropy, led by Sue Schwartzman. 

She brought along three members of the rising generation from families who’ve been part of her program over the years, including one current participant.

It was Friday afternoon and I was just glad to hear an interesting discussion, and that’s when I got my money quote.

 

               “Consensus Is All About Respect and Flexibility”

 

“Wait; What?”  

Did I just hear the best summary of what consensus requires from someone born in this century? The short answer is “YES”.

Short and sweet, direct and clear. How come I’d never heard anyone say it this succinctly before?

I’ve written about consensus before, notably in Putting the Consent into Consensus Part I and Part II, way back in 2016.

But this young woman, who shared with us how working with a group of other teens to make decisions about which projects they would fund had really hit the nail on the head.

 

The Missing Link or Ingredient

These aspiring teenage philanthropists were part of a program where they got to learn not only about philanthropy, but also on some key life skills around collaboration, and what it takes to do it well.

So often when I’m called in to work with family members, it can take a while to figure out just where they need to make some changes in how they relate to each other when it comes to their decision-making.

Thanks to this latest “A-Ha Moment”, I now have a new, simple “diagnostic” question that I’ll ask myself: 

 

                      What’s missing here, respect, or flexibility?

 

Based on experience, respect is almost always something intra-family groups could use more of, but inflexibility isn’t usually far away, for at least one family member.

 

An Iterative Work-In-Progress

As I write these words, I cannot help but think about the fact that these two key elements feed off each other and can be very much related.

As my respect increases for the others with whom I’m working to come to important decisions, so is the flexibility I’m likely to feel comfortable according to their ideas.

Likewise, as I hear new ideas that I’m willing to consider, I’ll feel more flexible towards them, and I almost cannot help then also having more respect for those who initiated these ideas.

This can be a fortuitous circle that then continues to “spiral up”, and that would be a good thing for most families. 

The counterpoint is that continued inflexibility can decrease respect, and vice-versa, too, resulting in a downward spiral.

 

A New Handle On and Old Problem

After writing over 400 blogs, my threshold for something of value isn’t very high; I’m only looking for one new insight for my toolkit.

I’ve now noted a simple new way to think about how families communicate around their decision-making, centered on the presence (or absence) of respect and flexibility.

And it came from a precocious teenager, so it has the added benefit of giving me a story to tell when I share it.

That’s plenty for me, I hope it’s useful to you too!

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Sibling Partnerships: Good, Bad, or Ugly

Examples of Each Type Abound

Anyone who has spent any time in the family enterprise world has surely encountered a variety of different versions of sibling partnerships.

Sometimes sibling groups come together and end up working so well together that people are rightfully impressed by the way they can combine into what appears to be a “1 + 1 + 1 = 10” arrangement. That’s good, and maybe even great.

Other times, things might start off on the right foot, but after some time, and typically after the previous generation has fully exited, they may be lucky to find themselves staying even, i.e., where 1 + 1 + 1 = 3.  If you were expecting at least a 5, then 3 feels pretty bad.

And of course when you read about disaster family business stories on the front page of the newspaper (remember those things?) well then it’s often more of a case of (1 + 1 + 1) X 0 = 0, or maybe even a negative number, or downright ugly.

Avoid Ugly, Strive for Good

I don’t want to spend too much time on the ugly version, except maybe to say that before things get ugly, they usually go through some “bad” on the way.

I’d rather share some ideas on what you want to look for when things begin to turn bad, and encourage folks to cut their losses well before they get to ugly.

Let’s talk about some examples of good, and look at what families are doing right, and concentrate on the positive.

I was recently privileged to serve on a committee charged with determining the winners of a competition that some family businesses have entered to choose an annual award winner to be announced this fall.

The three finalists all shared certain characteristics that made me think of this topic, and I think there are definitely some lessons worth sharing.

 

From Autocratic to Democratic Leadership

Family business literature typically talks about G1 being a one-person show, that hopefully moves on to a sibling partnership in G2, on the way to becoming a G3 “cousin consortium”.

The three FamBiz we judged were all past G2 and yet they were each currently involved in transitioning to a group of their offspring for the first time, since each of the past generational transitions were of the “father-to-one-son” variety.

Perhaps one of the secrets to FamBiz longevity is to avoid passing the company down to more than one child or branch (?)

The biggest change that occurs when going from one leader to a few is that autocratic decisions no longer typically work as well, and are usually not deemed acceptable by the other sibling partners.

Learning how to “make decisions together” is something I talk about a lot when discussing the importance of family governance.

 

Family Governance? Not Again!

“Oh boy, here he goes again”, I can almost hear some of you thinking. 

But once again discussing the three finalist business families we looked at, they had all been working on their family governance for at least a few years now, and each of them had done so with the help of at least one outside expert brought in specifically for that task.

If you are hoping for a “good” sibling partnership, one key is to begin working on your family governance, so that it has a chance to evolve while both generations are still involved.

While each generation learns how to deal with the transitions involved in moving from one to the next, the siblings in the rising generation also learn how to work together effectively, or at least that’s what’s hoped for.

 

Avoiding Bad Before It Gets Ugly

The key to avoiding ugly is to be able to recognize a situation that has a likelihood of turning bad. 

Sometimes families recognize that certain siblings will not likely mix well in a business context, and so they transition to one of their offspring and find other ways to treat the others. That’s one way to avoid “bad”.

But once a sibling partnership exists, as soon as things start to get sticky, there’s still a chance to avoid “ugly”, but it almost always involves getting some outside help to allow the important conversations to happen in a productive way.

See Getting Legal Advice for your FamBiz vs. Lawyering Up for more on ways to react before things get too far out of hand.

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Discovery, Contracting, and Designing Alliances with Families

Nice to Meet You; Let’s Start Working Together

Working with business families and their members is always interesting and rarely simple.

From the outside it looks relatively easy to get going with any family, but if you’ve ever been in a position to do this, you know how complex it all can be.

That’s what I want to look at this week, and I’ll contrast different terms that come from various professions and how they handle the beginnings of working relationships.

Bottom line, there is no simple standard way that these relationships work, although each practitioner will typically try to develop one or two ways that they prefer to construct such relationships.

 

Discovering What Makes a Family Tick

Upon being contacted by someone about working with a family, the fascinating work of finding out who’s who and how everyone relates to each other begins.

That work often continues for as long as the relationship exists, although much of it is “front loaded” and the learning curve at the outset is generally pretty steep.

I used to laugh when people who do this work would tell me that they start off by drawing a genogram or family diagram, but I don’t laugh anymore.

I find myself doing that very early on, because once you get the hang of it, you can’t go back to just taking notes ever again.

The process that many call “discovery” starts from the very first call or email, and for some it is a key step that they actually outline as part of their process, that begins after they’ve come to a formal agreement to work together.

 

The Contracting Stage

The formal agreement between the advisor and the family can be quite simple or very complex.

Whether it ends up being several pages long and executed with a signature or if it is more informal and mostly verbal, it does make sense to spend some time upfront in order to properly set expectations.

The Family Enterprise Advisor program (FEA) I completed years ago, where I had my calling to this work, spends a good deal of time on making sure those who complete the program truly understand how important the contracting stage is.

The program also encourages advisors to collaborate with other professionals in service of families, and much emphasis is placed on the contracting that is required between such advisor parties.

As things change during the relationship, it will often be necessary to revisit the question and get into re-contracting too.

 

Designing the Alliance

Where FEA’s talk about contracting, coaches who trained with CTI like I did talk about “designing the alliance” instead.

I like that language because it gets at a couple of very important aspects that might otherwise go unnoticed.

The idea of “design” speaks to the fact that it isn’t always the same, and there’s a need and desire to customize the relationship between the coach and client.

The “alliance” part is all about the fact that while there are two parties, and the coach and client become true allies and work together for the good of the client.

The client is not alone, and they are also expected to be quite active during the coaching process, in fact, they will be the ones who do most of the work.

 

One Person or the Whole Family

My favourite part of all of this is that when I got into this business of serving families, I always imagined only working with families as a group.

Much of the work I do is of course still done with entire families, but thanks to some of what I learned during my Bowen Family Systems Theory studies, I realized that one can make great strides for the whole family even when working with just one family leader.

The discovery is very different when you only hear about people and never meet them, but a relatively clear picture does emerge, albeit from a subjective view of the individual client.

In all cases it is important to get these relationships off on the right foot, and that means asking a lot of open ended questions and then doing a lot of listening.

Coaching one person or facilitating for a whole family require different but related skills. It’s fascinating work and if you are naturally curious about people it can be lots of fun too.

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Skills vs. Knowledge in Family Enterprises

Knowing “What to Do” Isn’t Enough

This week’s subject deals with some issues faced by every business, but we’ll be looking at their particular effect in family enterprises.

In addition, there’s an angle to this question that applies very much to advisors who serve business families and their members.  

In fact, the inspiration for this post comes from something directed specifically at those of us who serve families in this space.

Let’s see how far we can get in connecting all these elements.

Personal Connection to Stories About This

When I began planning to write about “knowledge vs. skills”, for some reason I flashed back to my Dad, and I want to share two very different ways this was really relevant in his life.

Dad was trained as an apprentice in Austria before immigrating to Canada in the 1950’s. He had not realized what an advantage that European training in “how to do” his work for the steel fabrication industry would give him a leg up when he got here.

There was a skills shortage in those post-war years in North America. Many knew what needed to be done, but we didn’t have enough skilled hands to do the work.

Much later in Dad’s life, he’d often make sure we took the time to distinguish the “what to do” from the “how to do it”. 

“Let’s figure out ‘what to do’ first, then we can figure out ‘how to do it’”.

Onboarding the Rising Generation Family Members

In lots of family businesses, the first generation who founded the business need to have the skill to pull off the important work to get the company off the ground.

A generation later, the questions of how and where to integrate the next generation into a company typically arise.  Naturally, there’s always more than one “right” way to do things in any particular situation.

Many families struggle, though, with whether or not to start their offspring “on the ground floor”, like working in the factory, or whether they can just saunter into an office job, because they were educated, and therefore arrive armed with lots of knowledge.

Some really interesting challenges can arise when one sibling ends up with skills useful to the operation and another is better educated and has lots of knowledge and they’re expected to get along well together and complement each other for the good of the business.

It’s great when it works, but fraught with negative consequences when they don’t get along.

What About Those Who Advise FamBiz?

A couple of weeks ago in When Being Wealthy Doesn’t Equal Having Money, I mentioned the work of someone I look up to in this space, Dr. Jim Grubman, and I’m going back to his well and wealth of experience in the field of serving enterprising families again here.

In a sense this post will serve only as a tease to further writing about the recently formed Ultra High Net Worth Institute, and their work, where I know Jim was involved in the creation of their new model, The Ten Domains of Family Wealth.

I first became aware of the UHNW Institute last year, and when I saw that they had created this new model to help understand all the important areas that wealthy families need to consider, I was hooked.

Great Knowledge, Yes.  Skills Also Required.

One of the points Grubman makes is that while knowledge is great, it is not sufficient, for those who wish to truly serve families well.

Many people know that families need to work on their governance and have family meetings, but knowing that doesn’t automatically make one the best person for a family to hire to help them with such matters.

And when merely knowledgeable people act as if they are also skilled, bad things can occur. Skills matter.

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Making Family Decisions: for Me, for Us, for Them

Who Are the Decisions Really FOR?

This week we’re delving into something that will hopefully hit close to home for some readers because we’ll get into some deep areas that might feel uncomfortable for some.

Founders of successful businesses often come from humble beginnings, and thanks to some great achievements, they go on to build enterprises that far exceed their initial expectations.

Having played an instrumental role in creating what has now become a family enterprise, it’s natural for them to wish to continue to exert maximum influence on things, now and well into the future.

 

Figuring Out What Needs to Come Next

Hopefully at some point these leaders realize that it makes sense to shift their focus from continuing to build their enterprise, to pondering how they will create their legacy by passing down what they’ve worked so hard to create.

See: Is your Continuity Planning “PAL” in Danger? for more on the fact that more wealth won’t guarantee a legacy.

The idea for this post comes from an interaction I accidentally had with a Zoom meeting participant a few weeks ago, that was then followed by the retirement announcement of a relatively young hockey player who spent a few seasons with my local team.

I’ll try to weave those stories into some useful and entertaining prose.

 

Can’t I Decide How to Leave this to my Kids?

So picture a webinar where both advisors to family businesses and members of business families are all participating, and where a case study is being shared.

The case involves a business where some of the offspring work in the business, while others do not, which is quite common.

The facilitators ask for comments, and some advisor from Montreal (guess who!) mentions that the son who is running the company may not love the fact that his siblings who aren’t employed by the company are set to inherit a share equal to his.

Soon afterwards, another participant jumps in and says that he wants to reply to my comment, saying “Can’t I decide who I want to leave my business to?”

Well, since the situation did not allow for me to respond to the man, here we are. Perhaps he will read this.

 

The Short Answer or the Longer Answer

Of course the man can decide to do whatever he wishes. But just because you can do something, that doesn’t mean you should.

I’m flashing back to the story about the rich old lady who bequeathed everything to her cat, or was that an urban legend?

When you own something, a company, a property, a stock portfolio, you have the right to decide who will own it after you die. People sign wills every day that lay out such directives.

But we’re talking about a family business here. Yes, it is quite simple to divide the ownership of the company by the number of offspring and leave each an equal share.

Perhaps it is too simple. It is certainly worth a bit more thought and ample discussion with the intended inheritors.

 

Hanging Up His Skates for the Sake of his Family

A week or so after that interaction on Zoom, I learned of the premature retirement of a hockey player who was forced to hang up his skates before he turned 30.

There are only so many concussions a brain can take before they affect one’s quality of life permanently.

“I’d play until I died”, he said, “If it were up to me”.

However, considering his wife and young children, he made the only reasonable choice that he could, for their sake.

 

More Wisdom at Half the Age

The business owner was certainly much older than the hockey player, but who is wiser?

The hockey player’s children are way too young for him to truly consult about his decision.  The business owner’s offspring are certainly old enough to warrant not only consideration, but also consultation, about important matters.

 

Me vs. Us vs. Them

When thinking about this subject, I believe there’s a certain progression at play.

We begin by thinking about ourselves first, i.e. “me”.

As we mature and our family comes into being, we shift into much more of an “us” mentality.

At some point, we need to become conscious of our own mortality, and then we need to shift again, with the ultimate unselfish shift, to thinking about “them”, in the eventual absence of “me”.

 

Post Script

I connected with the man on LinkedIn.

An email exchange followed.

A Zoom call was scheduled.

He cancelled the night before…

To be continued?

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Getting Legal Advice for your FamBiz vs. Lawyering Up

Plenty of Subtle Yet Important Differences

Working with members of business families often means crossing paths with other professionals who also advise their businesses along the way.  

One of the under-appreciated subtleties involved in such relationships comes when the person seeking the professional advice needs to also get personal advice, as opposed to simply seeking counsel for the good of the business.

These issues can get especially tricky when the professionals in question are attorneys, who have their own professional codes and standards regarding who their client really is.

These professionals are typically very aware of the differences and quite astute as to the ways that they need to be handled; it is often the clients themselves who sometimes blur the lines.

Let’s look at some of the situations where this can occur.

It Comes Down to “We” Versus “Me”

The simplest way to describe the different scenarios is to think about who needs the advice; is it the company or one of the people from the company.

Just to put a finer point on this, the vast majority of these cases involve the owners of the company, as opposed to those who are simply employees, although that can also certainly happen on occasion.

But when someone needs to clarify things from a legal perspective, it typically comes down to whether the advice is around how the company should do something, or what various owners’ rights are on a certain matter.

And those differences are rather stark, and need to be looked at not just on their merits, but also on the perception around how seeking that advice is seen by others.

Intra-Company Urinating Contests

There’s a huge difference between saying “I’m going to call our lawyer about…” and “I’m calling my lawyer!”

Is the person calling the lawyer “for me” or “for us”?

When things among co-owners of the same business become an “Us vs. Them” contest, watch out.

Let’s just look at a few types of situations I’ve been involved with in the past couple of years.

I had one coaching client, a woman from the second generation of a family, who now co-owned 1/3 of the company her father started, along with her two brothers.

When she expressed a reluctance to be alone in a room with one of them, I knew that this situation was beyond what coaching could help resolve, and I recommended that she engage a lawyer, for herself.

Dad and Brother Put On the Squeeze

More recently a man who was preparing to become a 50-50 owner, with his brother, of the company their father started, came to see me about helping them mediate some rough spots.

At our second meeting, I learned that both his brother and his father had recently done some things that gave me grave concern about their intentions.

I recommended that he “start looking for a lawyer”. 

As I explained to him, he needed to create a relationship with an attorney now, in advance, because it felt to me like he may, one day (perhaps soon) need to take some action, legally, vis-à-vis, his partners.

In both of these cases, I knew that the potential for me to have any impact was very limited, and I was better off stepping aside, and essentially saying “I’m outta here!”.

Mediation as a “Last Gasp Effort”

Another recent client family, involves a sibling group of four, who are now equal owners of what’s left of a business started decades ago by their late father.

With some siblings who worked most or all of their adult lives for the company and others who did so very intermittently, they’re now in a situation where the distrust outweighed the trust.

During my one-on-one meetings with each of them, every last one of them, at one point or another, mentioned that they were considering engaging their own lawyer.

In fact, it became clear to me that I was the last stop for them, and if things did not work out with me acting as their mediator, at least one of them would be hiring a lawyer.

In Case of Emergency, Break Glass

Being in a position where I feel like I’m almost a “last hope” comes with its challenges. 

But when the participants all know it too, and are aware of the stakes, they can become quite focused on working out a deal.

Because if one of them “lawyer’s up” the rest will need to as well.

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