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Family Governance: One Step at a Time

Family Governance: One Step at a Time

Writing this blog every week allows me to share my thoughts on subjects relating to enterprising families and wealth continuity, and to talk about some of the best conferences I attend in this field.

There is a relatively new event on the calendar that is quickly becoming a favourite of mine, the Institute for Family Governance’s conference.  This one-day event in NYC has taken place in late January the past 3 years, and will be back again in 2020.

And it is great fodder for this blog! 

After IFG in 2017, I wrote Family Governance, Aaaah, and then last year Realistic Family Governance Goals. But this year, in addition to this piece, I’ll be following up with at least a handful of posts inspired by the conference.

 

 

Real World Experiences

As I wrote on their feedback survey, the highlight for me was the fact that there were so many examples of real families and what they have been doing in the area of family governance.

Of course there were presentations by practitioners who work with wealthy multigeneration families, but there were also plenty of people from families who shared their stories.

Now family governance is of course a niche, which I know based on some of the blank stares that I get from many people when I talk about the kind of work that I do.

The US Customs agent who asked me why I was going to New York sort of shook his head and tried not to laugh when I said the I was heading to a conference on family governance.

So the more we can get practitioners and families to share their experiences, about what real families have done and continue to do, the better for all of us who serve this field.

 

Frames of family pictures hanging on a wall of a house

Time, Work, Practice, Leadership

There was a panel in the afternoon where one participant talked about an important decision his family made years ago when they hired a well-known family business consultant.

There were some such consultants in the audience of course, and you can imagine how all of our heads were nodding along.

But there was something else this man said that I noted, because it echoes a message that I find myself repeating a lot.

It didn’t seem to be a prepared or rehearsed remark either, just a genuine reflection about family governance in general.

I quickly jotted down the four main words that he mentioned when talking about his family’s governance efforts.

“This takes time, it takes work, it takes practice, and it takes leadership

 

 

Doesn’t Just “Happen”

One of the ways I usually put it is to say that this stuff doesn’t just “happen” by itself.

One of the words I often add is “intention”, because being intentional is one way to describe it.

But the four words that he used really rang true, probably because he seemed to be saying them from his heart and literally from the top of his head, not on some prepared slide for a presentation.

 

 

Time and Work

 

Family governance does indeed take a lot of time, both in terms of manhours and in terms of months and years.  That’s why I always urge people to start before they feel like they really need to; it’s almost never too early.

The amount of work involved is often more that the family expects at the outset.  I’m sure that most advisors who work with families have had the experience where some family members start to feel governance “fatigue” at times.

 

 

Practice and Leadership

While time and work are common elements that may discourage families from implementing governance, practice and leadership are part of a different category.

Practice may not always make perfect, but his point was that you do get better at it as you do more of it.  Working with family members isn’t always easy, and we need to do it repeatedly to get better at it.

That leaves leadership, which is also required.  I would add that if there is only one leader who cares about it, the family likely won’t get very far.

If I were to change one thing in the quote I might swap out the word “leadership” and insert “leaders”, just to emphasize that it’s not a one-person job.

But of course we all recognize that good family governance must involve many family members, right?

 

Evolution within a family

The Evolution of Family Governance

Lately, I’m becoming enamoured with the term “Family Governance”, as some regular readers may have noticed.

In fact, I wrote a post just a few weeks ago relating to this subject, “Family Governance: From Filaments to LED’s”.

The subject has undergone an evolution of sorts in my mind.

I’m looking at it in new ways as I learn more, work with more families, and adapt my thinking to the ways other related subjects also continuously evolve.

 

The Family Governance “Field”

 

I’m not sure if we’re yet at the point where we can say that Family Governance has evolved into its own “field”, but I know we’re moving in that direction.

In fact, the field, as it stands, also feels like it is evolving in its own right.

If you’re interested in it, or even curious, please join me in New York City in January for the 3rd annual conference of the Institute for Family Governance.

I’ve attended the two previous editions, and my blog on the 2018 version can be found here: Realistic Family Governance Goals.”

 

How to Make Family Governance “Stick”

So in terms of the evolution of family governance, we’ve already got the fact that the term has been growing on me and evolving in my mind, and the fact that the field is also evolving.

But the main point of this post that I’d like to make is how important it is for Family Governance to evolve within a family, if it is to have any chance of “sticking”.

Yet as more people discuss a certain topic and it seems like it’s growing legs and becoming “a thing”, there are always some who try to figure out how to sell the idea to others, with a view towards making money at it.

I supposed that’s to be expected, much as I mentioned last week when we discussed the family office space and the “business opportunity” problem there.

 

FOR the Family, BY the family

From my perspective and experience, when governance is thrust upon a family, either by one family leader from above, or by “experts” from outside, it is likely doomed to failure.

My go-to expression for this is “FOR the family, BY the family”.

Notice that I did not say for the family by one family member, or even for the family by experts chosen by the family.

You cannot buy governance off the shelf; it is not a product.  Of course, that doesn’t mean that there aren’t people who will try to sell it to you.

The Evolution of Family Governance

No Stone Tablets

Any family that’s interested in successfully transitioning their wealth from one generation of their family to the next will need to invest some time and effort into developing the governance structures and systems that will help them achieve that goal.

Unfortunately, there’s no set of “stone tablets” that Moses is going to arrive with, listing the Ten Commandments of family governance.

I hear you, “OK, Steve, so it needs to evolve. But from where, and how???”

 

Start with a Family Meeting

 

You really need to call a family meeting and throw the subject on the table.

Someone from the leading generation, (usually “Dad”) has to call everyone together and make it clear that they want to make sure that the family will be prepared to eventually take over the family wealth in all its forms.

They should explain that they’d like to ensure the smoothest transition possible and that this is the beginning of a series of regular meetings that will be used to establish the “who, what, when, where and how” all that will happen.

The first meeting needn’t be long, because family members will need time to adjust to this news.

But please don’t leave until the next meeting has been scheduled for a couple of months down the road.

 

Start Where You Are

Governance is all about three major questions:

  • How will we make decisions together?
  • How will we communicate?
  • How will we solve problems together?

Don’t expect the answers to just materialize without any work.

 

The Good News?

The good news here is that just figuring out where to begin and how to start the governance process, so that you can see how it all evolves, is the best way to ensure that it will actually work.

It’s a PROCESS, and how you get there is even more important than where you get to!

Get moving, keep going, and watch the evolution.