11: Borrowed from your Grandchildren

In a time of crisis, as Family Enterprise Advisors (FEAs) we work hard to be the valuable and trusted resource to our client families. In his latest work, Borrowed from your Grandchildren, Dennis Jaffe reports on a research project where he interviewed family members from 100 global business families who had succeeded over more than three generations. The book shares their stories of continual reinvention and renewal, and how they responded to vast changes in their family and business worlds.

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Let’s talk family enterprise explores global ideas, concepts and models that help family enterprise advisors better serve their family clients, brought to you by the family enterprise exchange.

Hello, and welcome to another episode of The let’s talk family enterprise podcast. My name is Steve Legler. And I’m excited to be your guest host once again. Today we’re going to be talking about successful multi generational family enterprises and what we can learn from them, especially as we now face some unprecedented times. Our guest today is Dennis Jaffe, whose latest book came out recently called borrowed from your grandchildren, the evolution of 100 year family enterprises. I’ve known Dennis for about six or seven years now and our paths continued across at various conferences several times each year. We’ve got a lot of ground to cover today. So let’s say hi to Dennis and kick things off. Dennis, thank you for joining us today. Welcome to the let’s talk family enterprise podcast. Glad

to be here. Glad to be here.

Dennis. I mentioned your book off the top borrowed from your grandchildren. What were you trying to do with with this book? I know you’ve released a number of books over the years. What were you trying to do with with this this borrowed from your grandchildren book?

Well, this book is part of a major project and a research team that has been interviewing families all over the world 100 Large families that have succeeded and thrive past their third generation. And it’s a project that I’ve been thinking about and when I retired from teaching and I had a lot of time on my hands I was able to travel and meet and talk to the 100 families that we that we interview. So I wanted to do a couple of things. First of all, most of the literature and stories that people have about families are either how bad they are and kind of you know media loves stories of families feuding and fighting and suing each other and things like that. And I wanted to you know, look at families that were successful. I think it’d be studied dysfunctional families forever you’ll never learn what a healthy family is like. And so I wanted to look at successful families. And the other thing is, is that there are a lot of things that consultants do and advisors do. And we’re told this is a good thing to do set up a family council have a family constitution, and there really hadn’t been any studies about how do these things work. And when you set them up, you you have immediate feedback, but the real usefulness of them is over time. So I wanted to look at families that were evolving over time, not just one time, but the evolution of families and so I decided to take third generation and older families and have them look back so a third generation family could look back and say we did this in the first generation. We did this in the second generation and they can also look at the effects of things. So I wanted to study successful families I wanted to have and the other the other thing that I wanted to do in this research is not present statistics, but to present stories. Every family is unique. And while in the book I kind of talked about the different themes that we discovered. There were wonderful stories of families and every family kind of pursues these things in a different way. And so what I wanted to do is collect the stories. So in the book from the 100 families, there’s probably, you know, 150 or 200 stories from these families where they actually talk about how they do things. So it’s not just what they do, but how do they do them. If they have a family council or they have, you know, they’ve evolved family meetings, how do they what do they do, how what do they like and and I was able to get stories from all kinds of families, large mega families that are been around for many generations and and how they got to be where they were and successful.

So it’s anything but a theoretical book. This is this is a book where you spent years with you and colleagues going out and finding real live examples and talking to people about what worked for them. Right and

this is what we call qualitative research and narrative research is it’s it’s theory building. I didn’t come in with a theory I didn’t want to prove this approve that. I wanted to hear the stories and out of the stories have emerged some themes. So there are themes that come up from all these families, hearing them that that emerged but they weren’t. It wasn’t a model that I I started out trying to prove.

So there were a bunch of things that you kept seeing in different places that many of these successful families had in common and those became the themes and those became the things that that you wrote more about.

And it just I just want to say so, study 100 families, all kinds of different cultures, all kinds of different places. That they that they came from. And the very fact that there was some themes that came out that really emerged from the experiences of most of these families is kind of incredible. So the themes that we got from these families, were not just, you know, little, little things, but but really, you know, commonalities that are worldwide.

So one of the things that that I was when looking through the book just now was talking about telling the story of the family business, and I want to relate that to what we’re going through now. So so there’s a crisis going on. That is affecting every family, every business, every person, and a lot of people are worrying what is this going to do to our business? What is this going to do to our family, people who happen to be in a family business? It’s an interesting time for them because for some of these 100 year businesses, I’m I’m presuming that most of them had been through some sort of crisis or other if not more than one. And so what can we as advisors to family business how can we help our family business clients when trying to help them through this this troubling time that we can use some of the things that you’ve learned to share with them? Well, for

many businesses, the current crisis is is kind of an unprecedented challenge, something that we’ve never faced before and never even intended to face. The families in the study. Each one talks about at one of the things that I asked is, what’s the greatest crisis that you had and these families have had enormous crises. They’ve some a couple of families had their businesses nationalized, they were kicked out of countries, they were displaced by war. There were all kinds of tragedies and what what characterizes these families is they have a culture that enables them to approach the crisis in a in a kind of a direct way and move through it. One of the things that families talk about is they they can’t anticipate what the crisis is going to be, but they can set up a structure that allows the family to change. And and I think that when we we all know from our own families and from families that we see their families have a very hard time changing. And I think even more so successful families have a hard time changing because they they’ve they’ve had so much success that they begin to feel that that gee, they must be doing the right thing. So let’s just continue. So families I think get stuck because they say well, we’re doing something great. All we have to do is continue and we’ll just kind of kind of coast on forever. And the reality is is they they they’re doing things really great. They’re they’re doing well and then something happens and the family has to reinvent themselves. The family is there to study the 100 families, all of them talk about the need to continually reinvent and and redefine who they were. And, you know, so this is where the literature and what I found begins to diverge because in the early first days of the family business field we learned that well what the family has to do is they started as a family business and it’s what we call family first. And then they have to evolve into a professional business where things are rational, and it’s business first and we have good business practices. And this is true but when you create a professional business and you hire non family advisors, you don’t necessarily get people that are ready to change and innovate. And so the families in the study talked about the need not just to develop a a strong business and and a good good business structure, but they also had to be innovative and resilient and reinvent themselves. Weird energy from reinvention, this this is the insight. Where did the energy come from to reinvent ourselves and where are these what these family talked about is the energy for change came from the younger generation. The younger generation had different experiences they were travel they were better educated by and large than their parents and the younger generation when they were listened to. And included in the families thinking were the source of of new ideas of innovations of new businesses, kind of values and important, important things that the business did and all of the families talked about how their next generation isn’t just people that continue things but people that invent new ways for the business to act.

So the businesses have to adapt to in order to survive over decades and decades and many generations the businesses cannot just stay the same. They need to continually adapt to new realities. And the thing that I like about what you said because I was going to ask you about this is how often does that pivot to something new come from a rising generation perspective? of new people, younger people sort of say seeing their future more clearly than their parents does. And having the energy and the ideas to pursue something new and it sounds like you’re saying it was common to too many or most of these businesses that you studied

right there next generation. I mean, the parents aren’t quite honestly, they want to see the future but they’re not going to be there. And they don’t really know what it is. They like doing things the way they’ve always done it. So the new energy comes from the new generation and and they are the ones who, you know, have to have to invent new things. And so the families that that allow the next generation to be creative, that listen to them. The families, you know, do things like one of the things that families do what’s called a Family Bank, where the family invests in ideas for the next generation and some of these ideas are money making ideas, but other ideas are our social enterprises and you know, kind of social impact ventures where the family is giving back to the community. So the families are the innovation, energy from the families is more often than not coming from the younger generation, and what I think characterizes less successful families. is they don’t have a real way of listening to the next generation or they kind of say, shut up. You’re, you’re rich, just enjoy it. I’m going to take care of things and they don’t really invite them to become part of it. Whereas these families that are successful, over generations really have an active way to educate and support and encourage and recruit the next generation to be to develop themselves and to develop their skills, but then to use them for the family.

So it’s a real it’s kind of the trick seems to be in the in the older generations, openness and receptivity to involving and listening to and including and engaging the younger people that that has proved to be for all these families that the businesses that have lasted 100 years. You’ve seen that over and over and I know that we you know when when we advisors, talk to our family business clients, we’re typically dealing with the leading generation and they think they have all the answers and they are complaining to us about the fact that their kids aren’t ready and will never be ready. But in fact, it’s that attitude that will almost guarantee that they won’t be ready and it’s the families that are more open to inviting and soliciting and developing the younger generation that have the best chance for success.

Exactly. It’s like the older generation sees things in their own way. For example, one family that I that I worked with, the older generation was saying that’s what you said. It’s like well, we’ve got we’ve got you know, some two, three family members working in the business and one of them was really talented and, and really was showing a lot of capability. And his father said, Well, he’s in the business but but I don’t think he’s ready. And I don’t think he really doesn’t have the right skills to be a leader. And I asked him what what are you seeing what is what what are you seeing that might convinces you that he’s not a good leader? And I said, Well, he’s he’s too friendly with his team. And he really asks them their opinions and he and he works alongside them. And he’s, he’s just, he’s just not having enough authority. And when you look at that, that’s a great example of how the different cultures the older generation, he saw the that the the leader is someone who is decisive and who makes decisions and who doesn’t have to listen to anybody and just goes his own way, whereas the new way is to be more collaborative. And this father did not really understand that, that that was a perfectly valid and probably a better way to be a leader, right? He had to learn to allow his son to run his division then have a huge business, his own way and, and to develop a different kind of leadership. And so part of the evolution of resiliency is the older generation, not just stepping aside, but the older generation being aware that their solutions, even though they work great in their generation, are not the solutions for the future. And so there’s a what I call a mutual respect, where the younger generation respects that the older generation has some experience and some wisdom. But that doesn’t mean that they don’t have any themselves. So there’s a real sense of give and take and experiment and, and allowing things to happen in these generative families.

And you know, Dennis, you’re going right to an area that I was one hoping this would go and that is how can we as advisors to these kinds of families, be a useful resource to these clients of ours in ways that they might not ask for specifically or expect from us? But I’m just thinking of it. Of the the example you just gave is is this this leader saw his one of his children in a certain way. And by somebody asking him the right questions and pose, you know, showing him certain things from a different viewpoint. They were able to see that this person had some qualities that that maybe dad wasn’t noticing, and I’m thinking that you know, if we are working with various generations within the family, for those of us who were privileged to be able to work with the parents and the children. One of the biggest things we can do sometimes is to I don’t want to I don’t know if I should say advocate or champion for but at least help expose the positives of the rising generation so that so that the parents are more open to hearing about what they’re, you know, they might be sitting on on a pile of gold with their human capital beneath them, but if they’re not open to recognizing it, it’s not going to serve them very well.

And I think in terms of your say, Well, what can advisors do? One of the things that I think advisors do that are helpful is to slow these families down and stop the older generation from thinking they have to decide everything and and shifting to a kind of engagement where people are not trying to make decisions and not trying to argue their points but where they they’re really spending time together. Thinking and exploring different possibilities. So you know, sometimes the advisor has to tell the older generation Well, let’s, let’s listen for, for example, a lot of advice a lot of I’ve had a lot of older generation people call and say hey, I want to I have to figure out which one of my kids is going to be the successor. And that’s a common thing that we hear. Yeah. And when you look at the 100 year families, you see that, that that that question is so wrong in so many ways. First of all, why does he have to decide that and and what’s his urgency? Second of all, the question I always ask is, well, have you talked to your kids about what they think? And in in a number of this stories of these families, for example, they talk about how the older generation that fought at a certain image that one of them would lead the business and the next generation got together and they decided for themselves well we want to create a collaborative team. And one of us may be will be the will be the, you know, kind of the titular CEO, but we really work together as a team of three. And this is not what the parent thinks about. So when someone says I need for you to help me make a decision, you have to challenge it. Say, Well, why why what’s what’s your hurry? Why do you have to do this? Why is there do you think there’s one successor in families in the third and fourth generation? They talked about the leadership and they rarely mean one leader, one one family, for example, or was in the fifth generation and a, they talked about their governance and they say in the next generation, we have 17 positions that we have to fill. So for example, there isn’t one leader, there is some body to be the leader of the Family Foundation. There are board members for the foundation. There are board members for their operating business, there is a board Investment Group for their family office. There are positions to help the family do family gatherings, Family Education, these are positions on the family council. So all together, there are all kinds of leadership functions that evolve in the family and the older generation is really the only one who thinks that somehow naming one leader in the family is what it’s all about. And the the family’s second third generation, they look at leadership as a function is something that the family does together, not something that one person does.

And I think that’s really an area again, getting back to what advisors can do is sometimes if these messages the kinds of things you are talking about, are coming from the children to their parents, they aren’t heard necessarily as loudly or as clearly or to be coming with as much wisdom as if some high priced consultant came in and told them you know, maybe you should be thinking of that. So I think I think we can we can offer that to our client families as well. And so you’re thinking about slowing down, I’m trying to and I understand the part about slowing down. I’m trying to tie it in with the current reality of what we’re going through. And there are people running around like their hair is on fire because they are doubly busy because of this pandemic. But then there are the other people who have been forced to slow down and does that make this kind of an opportune time for for some of these more family related discussions and decisions for family businesses.

Well, I wrote the book before the pandemic right. At the end of it I said, well, well the the, my conclusions were the the 21st century is a is a unique time in the world. And that and that there is incredible upheaval ahead of us and institutions are failing, and things that were never questioned or being questioned. And the family because of its continuity and its legacy can really be a force for innovation. Now looking at the pandemic, families have been cooped up, but but when we talk about a business family, we talk about not one household. But but you know, when there’s three or four generations, there’s dozens of households and so they have to be in touch with each other. And a lot of them are using, you know platforms, educational platforms and social media platforms and zoom to connect and talk to each other. So there’s all the things that families are dealing with in in the immediate crisis. But I think that every family is going to have to get together as they emerge from the crisis. And that’s not an event. That’s the next year or so, of all of our lives. We’re going to emerge and the world is going to be different. Cities are going to look different businesses are going to be operating differently. challenges that we didn’t know about. We’ll have to be dealing with supply challenges, manufacturing challenges, health challenges, financial liquidity challenges, and every family is going to have to get together and create a new plan. And the first thing is, is the family has to get together and talk about the expectations that people have that are no longer true. For example, you know, having a great income from even a successful business a lot of families are going to have to say, hey, we don’t have any income to distribute to the family this year. We have to reinvest in the business. Businesses are going to have to are going to be going to be challenged. Families are going to have to say well, what do we want? To do together? Do we want to continue this business? Shall we sell this business? And they’ll begin to say, what do we value what’s important to us? And how can we do what’s important to us and in the world? The way it is right now? And what is what is the next generation? I have kids and grandkids that are growing up? And and a lot of their career plants are shifting, and I think they’re going to continue to shift kids today don’t even know whether they’re going to be able to go to college, physically and then that in the next in the next year. So everybody’s lives are changing, and the families can get together and talk about how they can help each other support each other not just financially but how can they help each other get through this. And so I think we’re going to have a lot of emergence discussions in families and and this is going to be a source of employment for consultants and advisors to help families and families are going to really want to have to rethink who they are and what they do.

Yeah, and one of the things I noticed, looking through your book just before was, you talk about a values based culture and now you’re talking about the family because of this pandemic, being forced into more of a self examination of of what they can do and what they want to do together, presumably based on the values that have gotten them here. But one of the expressions of those values in the new world order that we’re going to see it so in some ways, this pandemic is sort of a reset or a test of some of these things, and it’s reminding me of of our friend Jim Grubman was on a we had a webinar through FTX just a couple of weeks ago, and he mentioned that he thought this, what’s going on now is become kind of like a test of, of people’s family governance. And they are realizing that some of the things they were taking for granted and assuming are now being questioned. And it is forcing them to re examine that and I think you just echoed very much the same thing. This will be a time for people to kind of relook at and read jig, and maybe restart certain things and for people like us who are the ones who work with them. It could be the best time in a long time to have a receptive audience in these families that now can no longer keep telling us come back next year because I’m not ready to talk about this yet. Well, those are stuff going on that is forcing a lot of discussions that people were probably putting off for a while

and it’s a challenge because a lot of those discussions may not for the next, you know for the foreseeable future, be face to face. So we probably can’t have a face to face family meeting until the year 2021, which means that there’s going to be a lot of virtual exchanges a lot of you know kind of, you know, different ways of communicating where people have to learn new things, how many people have learned who never been on social media or on to a you know, kind of an online, you know, chat room have learned about that in the last two months. So So

for anyone out there who is thinking that this meeting over Zoom is just a fad, and they can’t wait to get back to meeting face to face. I’m not sure we’ll ever get back to all the meetings being face to face. And so my if my mother who’s 82 can do a zoom call with us. I’m sure you can all learn it too.

So I mean, there’s an opportunity here but again, we’re going to come out of the pandemic and it didn’t the environmental crisis didn’t go away. The global you know, global instability didn’t go away. The collapse of social institutions that we’ve depended on, didn’t go away. So we’re going to come out of the pandemic and probably just evolve into another another set of crises to overcome so this is going to be I don’t as an older person right now. I don’t envy the young the way when I was young. I think older people envy young people and look to their future. It’s like what a wonderful future you have. Now I kind of tend to gulp and say gods, you know, kids. What a challenging future.

I hope you guys will do a better job solving all this stuff that we’ve left you with.

Right? Well, they are. You know, I mean, our kids are making us aware that you know, we have some responsibility. We created these problems and but we’re not going to be around to solve them. So that’s the situation of the next generation, right in a family business.

We’ve set them up for that. And then hopefully some younger family business leaders are going to emerge from this with a lot of the answers and help their families through a lot of these important pivots. And a lot of these adaptations, and if we can if we as advisors can help the parents to let their kids have a little bit more rope and use some of their initiative and some of their ideas. We’re probably doing them a big favor. Exactly. Exactly. Dennis, this has been great. Unfortunately, we’re getting to the end of our time together. So I’ve got my final two requests before we wrap up as I asked all our guests, so the first one is a book recommendation. And then the other one is one piece of advice from an advisor to other advisors. So let’s start with with the book recommendation.

Well show in this time of the pandemic, one of the things that families with kids are experiencing is everybody in the household all living together. And so, my good friend, Madeline Levine, who is a psychologist who wrote a wonderful book a few years ago called the price of privilege about the challenges of being a privilege Kitt has just written a new book called Ready or not preparing our children for a uncertain future. And this book is just come out and it just came out again the day the week before the pandemic shutdown. And it’s really a kind of a guide for parents in how to raise resilient children and a lot of her thoughts are also about how to be a resilient family. So Madeline the beans ready or not

ready or not by Madeline Levine. We’ll put that information on the Show page. And then last but not least one piece of advice from an advisor to other advisors.

Well, the challenge that I personally I’m seeing in my work right now is how to be positive and optimistic in such a way as you’re not in denial of the realities. So in in terms of the realities, things are pretty challenging, and some things are pretty grim. And some things are pretty difficult. And I think but as an advisor, we can’t just say gee, I give up I don’t know what we can do. You have to be positive. So the challenge, I think for an advisor is to be give a positive sense to the family and help them remain positive and move forward without denying the reality and the complexity of problems.

There’s a real finding the balance in that, like we want to be glass half full type people, but if we come off too pollyannish nobody’s gonna listen to us. So that’s, that’s great. We need to all be cognizant of that at all times. That really flew by as usual as I always say that Dennis, thank you so much for joining us and sharing your expertise and your with our audience. Well, thank

you, Steve, for putting this thing together and creating such a wonderful forum for so many people to be able to speak and share their ideas.

Thank you. And so listeners if you haven’t already subscribed, please do so make sure you never miss any of these monthly episodes. And so with that, thanks again for joining us. I’m Steve Legler. And we’ll see

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