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Teach Your Children Well

Today, I want to try to tie together a couple of themes that occurred to me this week. I began the week in London Ontario, where I attended the Ivey Case Teaching Workshop at my alma mater.

Then after I got back to my office I came across an interesting report about how and when wealthy families handle information about their wealth. I found it alarming and really difficult to comprehend.

Back in the spring, I shared in this space that I had been bitten by the teaching bug. As part of being a student in the Family Enterprise Advisor Program, the return to the classroom had me feeling that I had more in common with the people at the front of the room than the people who were there to learn.

Having done my MBA in a “case school”, where business cases form the vast majority of the learning, I resolved that when I did get into teaching, my preferred instruction method would to use cases for most of the learning.

For the final day of the workshop they asked for a volunteer and I am so glad that I stepped up and lived the experience. It is interactive learning at its finest, where the teacher is more of a discussion facilitator than anything else. It is a really cool feeling to have a bunch of bright students all wanting to contribute, and just trying to coordinate it all in some meaningful way.

I loved it and I want to do more of it. And I will.

Now, on to the wealthy families report I came across. Here is a link:

http://familyofficenews.wordpress.com/2013/08/29/wealthy-parents-fear-kids-cant-handle-family-fortune/

Let me pull out the two most alarming stats from this survey. Only 42% of the over 700 respondents believe that their children are well prepared to handle their inheritance. About 20% believe their children should wait until they are 40 before the family fortune is disclosed.

Yes, you read that right, DISCLOSED. Not that they should wait until they are 40 to handle the “family fortune”, which would be interesting in its own right. But these people think it is normal and appropriate to keep their children in the dark for 40 years.

Okay, so just how does that work. You live a low-key lifestyle and pretend that you are just another upper-middle class family, I guess. And then one day, once your kids are finally “old enough”, you will let them in on the family secret. “Surprise! You are going to inherit tons of money some day!”

And they wonder why their children are not well prepared to handle the inheritance.

I get the “aversion to discuss wealth”, and I get the “not wanting to negatively impact their work ethic”, believe me I do. But there are other ways to take care of those issues.

It all comes down to open and honest communications. They are your children. You are their parents. You are a family. The parents are supposed to teach their children all the stuff that they don’t learn at school. This includes work ethic and how to handle money.

Back to the teaching workshop, I said it was interactive learning, with the teacher acting as a facilitator. I guess I didn’t realize it until I sat down to write this blog, but that is almost a description of my parenting style.

Thankfully I have a co-teacher called Mom, and the class size is only 2. But if our kids are not prepared to handle information about our family wealth until they are 40, then somebody will have screwed up somewhere, it in won’t be the kids.

 

Steve Legler “gets” business families.
 
He understands the issues that families face, as well as how each family member sees things from their own viewpoint.
 
He specializes in helping business families navigate the difficult areas where the family and the business overlap, by listening to each person’s concerns and ideas.  He then helps the family work together to bridge gaps by building common goals, based on their shared values and vision.
 
His background in family business, his experience running his own family office, along with his education and training in coaching, facilitation, and mediation, make him uniquely suited to the role of advising business families and families of wealth.
 
He is the author of Shift your Family Business (2014), he received his MBA from the Richard  Ivey School of Business (UWO, 1991), is a CFA Charterholder (CFA Institute, 2002), a Family Enterprise Advisor (IFEA 2014), and has received the ACFBA and CFWA accreditations (Family Firm Institute 2014-2015).
 
He prides himself on his ability to help families create the harmony they need to support the legacy they want. To learn how, start by signing up for his monthly newsletter and weekly blogs here.
Family Business Ownership Model

Three Circles + Seven Sectors = One A-Ha Moment

Over the past 8 months or so, I have taken on a renewed interest in family businesses and what makes them different and what makes them tick. I have enrolled in courses that do a great job of teaching what family business is all about and how and why they are special.

The courses have covered some in-depth ideas like having a family mission statement, holding regular family meetings, setting up a board of directors with non-family members, getting advisors from different fields to work together harmoniously, facilitating meetings and helping with conflict resolution.

But the single most important thing that I learned was right at the beginning of each course. And it is still the most powerful place to begin any discussion with a family businessperson. It is called the Three-Circle Model. It is SO simple, yet we kept coming back to it during the courses.

The Three-Circle Model (TCM) has only been around for twenty to twenty-five years or so. I am not sure who gets the credit for it, and I would not be surprised to learn that its exact origin is disputed. I recently read an artice from the 1980s that was still talking about family business from a “Two Systems” point of view, which leads me to believe that the TCM evolved afterwards.

(Note from 2016: Please see http://johndavis.com/three-circle-model-of-the-family-business-system/ for more on the origin of the model)

Without further ado, the 3 circles are, “Family”, “Business”, and “Ownership”. F-B-O, a simple Venn diagram of three overlapping circles.

The premise is this: Most people look at a family business as one thing, one entity, one system. But upon closer inspection, there is a LOT more going on there. So in the 80s they started to look at how the Family and the Business were different, and needed to be looked at separately. Later, it was determined that Ownership was also worth spinning out as its own circle.

So part 1 of my equation above in the title of this post is the TCM. What about the seven sectors? Glad you asked. When you draw the TCM as a Venn diagram, you get seven different sectors. Picture yourself asking a three-year-old with a box of Crayolas to colour each portion with a different crayon; they would need seven of them.

So why is this important to Family Businesses? Well mostly because the people who inhabit some of those sectors aren’t even part of the family business. Some of them are part of the Business Family!

People who are only in one circle (the 3 sectors without any overlap) will look at the family business much differently than those who are in one of the three sectors within a two-cirlce overlap.

And then there are those in the middle sector, who are part of the Family, who work in the Business, AND who are also part of Ownership. They often lament the fact that everyone else doesn’t see things the same way as they do!

People who inhabit different sectors will view things in different ways. It is only natural.

Once you learn to view any family business through the TCM, it is like turning on a floodlight. All of a sudden some things that were difficult to comprehend become more easily understood.

And then when you realize that the four sectors where there are overlaps are the ones you need to really concentrate on, you can start to make a lot of progress. I like to think of this as the “flashlight” stage.

The TCM was the floodlight that allowed us to see many things in a new way. Shining the flashlight into the nooks and crannies of the overlapping sectors will help uncover the key areas that will need to be monitored and worked on going forward.

For a visual perspective on all this, please visit my website: click here

Steve Legler “gets” business families.
 
He understands the issues that families face, as well as how each family member sees things from their own viewpoint.
 
He specializes in helping business families navigate the difficult areas where the family and the business overlap, by listening to each person’s concerns and ideas.  He then helps the family work together to bridge gaps by building common goals, based on their shared values and vision.
 
His background in family business, his experience running his own family office, along with his education and training in coaching, facilitation, and mediation, make him uniquely suited to the role of advising business families and families of wealth.
 
He is the author of Shift your Family Business (2014), he received his MBA from the Richard  Ivey School of Business (UWO, 1991), is a CFA Charterholder (CFA Institute, 2002), a Family Enterprise Advisor (IFEA 2014), and has received the ACFBA and CFWA accreditations (Family Firm Institute 2014-2015).
 
He prides himself on his ability to help families create the harmony they need to support the legacy they want. To learn how, start by signing up for his monthly newsletter and weekly blogs here.

 

 

 

Generational Shifts in Business Families

When we think of family businesses, many of us picture the Mom and Pop operation, or the hard-driven entrepreneur who spends long hours at work for the sake of his family. It certainly is a reality for a large number of traditional first generation (commonly called “G1”) companies.

As some of these grow, expand, and mature into what we would normally call SME’s (Small and Medium Enterprises), they become more of what we might call true family businesses in the sense that some members of G2 will often start to assume positions in the company.

The bigger the business gets and the more family members are involved, the more fun for everyone. Or that is the hope. Of course it does not always work out that way in the end.

There is an analogy that some use to describe how each generation differs as the business ages and goes from G1 to G2, and then from G2 to G3. I do not know the exact origin of it, but I learned it in the Family Enterprise Advisor program in which I am currently enrolled.

It is a sports analogy that goes like this. The G1 is a tennis player. Tennis is an individual sport, they are all alone, them against their opponent. They are responsible for their success or failure.

G2 is a different sport. Mom or Dad the tennis player is not what works best anymore, although many hope to find a son or daughter who is just like them to take over, believing that that is what is required. But now the game is basketball, a team sport with a few players playing, as a TEAM. And the leader is not even a player anymore, but the coach.

Playing tennis and coaching basketball are not that similar. When we go from G2 to G3, the analogy continues, we get to what is commonly called the “cousin consortium” stage, where there may be various branches of the family involved. The game changes once again.

Basketball has only five players on the court at a time. The G3 cousin consortium is soccer or football. There are a lot more moving parts that need to be coordinated if the team is going to succeed. Look at the sidelines at a football game, and you will see lots of coaches, with one head coach who must coordinate them all.

We are pretty far from the tennis player and the one-man show now. My Dad was the prototypical entrepreneur and I was very diferent from him. He worried about that and deep down I am sure he had his doubts about how I would be able to succeed him. In the end we sold our operating company and that was fine with me since I did not have the passion for that end of the business.

Generational differences show up in other ways as well. G1 may be more about growth and G2 may be more about maintaining the wealth. Or G1 may be more about growing slowly with little risk, and G2 prefers to pile on risk and grow too fast.

This week I was fortunate to be invited to attend a local gathering at which 3 local family businesses received awards for having successfully transitioned their businesses to another generation. I got to speak with a couple of people who were at the G2-G3 stage in their businesses.

I sensed that just by their presence at this event, they were much more in tune with what is involved in these transitions than those who are in G1 and preparing for G2. It is a lot of work and very complex, and the G3’s seemed to really appreciate how fortunate they were to be in the positions they are in.

Here is hoping that many others get to this stage as well.

Steve Legler “gets” business families.
 
He understands the issues that families face, as well as how each family member sees things from their own viewpoint.
 
He specializes in helping business families navigate the difficult areas where the family and the business overlap, by listening to each person’s concerns and ideas.  He then helps the family work together to bridge gaps by building common goals, based on their shared values and vision.
 
His background in family business, his experience running his own family office, along with his education and training in coaching, facilitation, and mediation, make him uniquely suited to the role of advising business families and families of wealth.
 
He is the author of Shift your Family Business (2014), he received his MBA from the Richard  Ivey School of Business (UWO, 1991), is a CFA Charterholder (CFA Institute, 2002), a Family Enterprise Advisor (IFEA 2014), and has received the ACFBA and CFWA accreditations (Family Firm Institute 2014-2015).
 
He prides himself on his ability to help families create the harmony they need to support the legacy they want. To learn how, start by signing up for his monthly newsletter and weekly blogs here.