33: Let’s Talk Family Enterprise Podcast Episode #33

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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 family enterprise Canada. All views Information and opinions expressed during this podcast are solely those of individuals involved and do not necessarily represent those a family enterprise Canada.

0:26
Hello, and welcome to another episode of The let’s talk family enterprise podcast. My name is Steve Legler. And it’s great being your host once again. Today we’re going to be talking about a subject that’s never too far away when dealing with family enterprises. And that’s conflict. As advisors who work with enterprising families. We seem to always either hear about conflicts in our client families, or we witness extreme efforts to conceal or deny its existence. Our guest today is the author of a recent book about the subject called harnessing conflict, how family businesses can survive and thrive. I’ve gotten to know Nicole garden recently was truly impressed with her book, and I was surprised to notice that this podcast had not yet dealt directly with the subject of conflict and family business. So it’s high time we start to talk about it now. Nicole is a fellow FAA. She’s based in Vancouver where she’s a lawyer and a mediator runs a Trust Company and has many letters after her name, which is something I identify with as well. We’ve got plenty of ground to cover today. So let’s say hi to our guest and kick things off Nicole garden. Thanks for joining us today. Welcome to the let’s talk family enterprise podcast. Hi, Steve,

1:39
thank you very much for inviting me to join. You know,

1:42
I really loved your book because it started right away. With an example of a family business in Canada where there was a lot of conflict a couple of years ago, the Stronach family. And as you told me last week, that’s that was a family that was in the news as you were doing your master’s degree for which you were writing this research paper that then turned into the book. But then you mentioned there’s another family in Canada who’s been making more headlines recently the Roger’s family and I guess you’ve you’ve done some work on researching and writing about them as well. That’s right. So what can we learn? I mean, I always say that when when family businesses make it you know, into the newspapers, it’s usually not for a good reason. And I guess we all saw the Rogers stuff a few months ago is what what can we learn from, from the fact that they’re bad news made it into the press?

2:36
Right? I think we need to remember that family businesses are the largest in Canada, and I believe the largest contributor to our GDP. And so there’s, there’s an incredible prevalence of family business and so the, you know, really high net worth families that end up in the news. You know, sometimes we can tease people that have privilege, and particularly when they’re, you know, in high profile litigation, but the lessons that we learned from them can actually directly apply to the many many family businesses the firm the backbone of our communities, our economies, our families, and I think the biggest thing we can learn is, you know, whether it’s the Stronach group or Rogers communication, or, you know, a local family business that’s employing people in a regular family is that conflict management and resolution is a space for relationships within the family and within the business can continuously evolve, strengthen and improve. And it doesn’t necessarily have to be a negative thing. Conflict can actually be a source of great change and movement. It just depends on how it’s managed. Okay, well,

3:51
I love that because not only I mentioned the title of your book, harnessing conflict, and then chapter one is called a motor for change. I mean, I teach this in my open where I said, either we see the conflict, or people are trying to deny its existence. So is it all it feels almost like there’s a Goldilocks spot that you don’t want to have no conflict because there probably is some that if you if you’re ignoring it, and you don’t want to have it on the front page of the paper, but there’s a lot of stuff a lot of area in between, where families might be having just the right amount of conflict, but how do they manage it? Is that on point

4:29
I think that sounds exactly on point. So I think people have a view of conflict that maybe it’s destructive or something to be avoided or something that is shameful or a flaw but in fact, conflict is an inherent part of the human experience. And you know if you’re not having some conflict, I question if you’re even really alive, right? So I think it’s about how you manage that inevitable conflict. So, you know, conflict, which is inevitable part of humanity is an apparent or latent opposition between two or more parties that results from differences, whether real or imagined, like that would be a classic definition. And then it just depends on how its managed and whether you’re proactive and you can use it for constructive change, or if you allow it to fester. And then become destructive. And one thing FTAs can learn is is different methodologies and ways to assist a family to work through it in a positive way such that they can move forward as a business as a family and then on a meta level, how that can benefit the economy as a whole.

5:41
So you know, I was gonna get into the question of how can we as MBAs, as family enterprise advisors, people who work with business families, and I know a lot of us have our own bias and our own fear of conflict and, and not wanting to trend in areas where we aren’t really experts and, and so we might actually walk in there. And if we have an avoidant family and we’re conflict avoidant, we might not get to the point where we’re actually useful to this family. So how do we how do we start to overcome that and help them realize what you’re saying is that that conflict is natural and normal, and it actually can be harmless.

6:25
I think you can start with normalizing it, and basically stating how prevalent it is and how normal it is. And in fact, if you don’t have any conflict, you’re probably not moving forward in any way. And then I think the other thing is helping the family move through it in a constructive way. So, you know, in terms of like the stages of conflict, like there’s sort of stage one where there’s a potential or latent sort of opposition or incompatibility. And, you know, it’s either a communication issue, there’s a structural issue, maybe in the way the business is set up that’s creating that conflict, or maybe there’s personal variables between the parties. And so I think the first thing is a cognition of it. So acknowledging it, you know, stating the elephant in the room, and then working the parties through to how to address it. So people have different ways of addressing conflict. So, you know, there’s competing, there’s collaborative, there’s compromising there’s avoiding there’s accommodation. So the idea is to try to do it in a in a collaborative way where the parties can work together to use open and transparent communication and work through it and that way you can attempt to help the family move through in a positive way towards increase your performance, rather than you know, be destructive and potentially damage relationships damaged business brand or, you know, particularly in a succession type situation you can damage even the existence of the business right so, I think normalizing naming it and then helping the family work through it in a constructive way.

8:12
You know, what’s coming up for me is actually I love the normalizing part because often families even when their the conflict is very small. Sometimes they think that they’re the worst family around and then it’s I always love to give examples of other families I’ve worked with where it’s been like much more extreme and then they almost feel better just realizing that but the other part is, is acknowledging it kind of early and maybe nipping it in the bud and helping them to realize that. Yes, there’s something there. So let’s go in and talk about it as opposed to let’s avoid it and wait another year or two until it’s twice the size. Is there. Is there something in there where where we as advisors, where we might actually have an important person in the family’s ear to where we can actually get them to start to take action or look at the conflict. That’s something that they probably should get into figuring out and dealing with now.

9:12
I think we’re taught this is FTAs. So a lot of this is about good. Governance. And, you know, the big thing is, you know, keep talking, open, transparent, accurate, safe communication. So I think in terms of good governance, it doesn’t I think sometimes people get intimidated by the org charts and the family charters and you know the things that in very sophisticated businesses, but I think if we keep it simple, helping the family structure, at least at minimum, an annual meeting, and you know, you can decide which circle is in the meeting if it’s the Family Circle the ownership circle or the business circle, but having at least one annual structured meeting with an agenda to raise issues and facilitate communication. And then, you know, the other big governance thing that we’re taught is, is some kind of crystallization of values like whether it’s a charter or a constitution, but thinking like what are the things that unite us? What are the fundamental values that we have as a family who makes us unique? Because if you think about conflict, conflict can be either integrative or distributive, so and they’re not good or bad. They’re just different kinds. So a distributive conflict is, is say you’re buying a car from someone, and you know, you go into the car lot, and you’re negotiating with the salesperson that is a distributive win lose type of scenario because you don’t have a long term relationship. With that person. So you’re going to utilize techniques like anchoring and other strategies to maximize your gains, but a family businesses and integrative can conflict which is you have very, very important mutual interests, which is, you know, family unity, the individual by being or the family members, the long term health of the business. And so if you have a family charter, or some kind of set of values, when things get tough, you can really focus on those mutual issues or mutual interests and from that, that gives you constructive and positive ways through the conflict rather than it being distributive or a zero sum or when loose.

11:30
Okay, you said zero sum. That’s a note that I just made the way I never heard or don’t remember, the integrative verse, versus distributive and then so the distributive is the zero sum game. So we have this pie and we’re going to split it between us. And then once that’s gone, it’s done. So it’s the buying the car, or whatever, the one shot deal, but in the family, I guess one of the things we can do is to remind the family that there is no one shot deal in a family. But this is for today. It’s for this month, this quarter this year, this decade, this whole generation of our family. And I guess working on the values, as you were talking about is one way to help bring everyone like back down to Ground Zero and start to discuss the things of why they’re in business together in the first place. Is that where you’re trying to point us towards is to get the families talking about some of the more basic things that bring them together.

12:32
So that’s exactly right. So one of the seminal books on negotiation is getting to yes. And the idea is focus on what your mutual interests are. Because if when you focus on that, you can actually create a bigger pie just like you mentioned the pie so rather than, you know who gets the biggest piece you can actually grow the pie through creative strategies and hopefully, come up with a solution and another framework to think about is game theory. So there is a seminal book by an author named James Carr’s called the infinite game and what he talks about is the difference between finite or infinite games. So an example might be like a weekly poker game. And, you know, in the poker game, the finite game is who’s going to win that individual poker game, but the infinite game is likely the long term friendships are the people so maybe they’re lifelong friends, and the infinite game is maintaining those friendships and, and so, in a family business context, the finite game may be you know, dominating vertical in a market or coming out with a new technology, or it could be those business objectives. But the infinite game is to keep the family business going. Right. So maintaining those relationships and i The other thing I just want to say about success is, you know, as MBAs we’re often taught the shirt sleeves to shirt sleeves and, and how adverse The stats are in terms of business succession between the first second and third generation. But I think the other thing in terms of an infinite game is trends, generational wealth, and so thinking about what success looks like for this family, because maybe it is to bring that business down multiple generations, but success in terms of trans generational wealth, may be selling the business and it can be using those resources to maximize wealth for the family, and that’s the broader wealth. Which is, you know, human intellectual, emotional social value. And, and so, I think in terms of that individual family, it’s crystallizing what success looks like for them, and maybe it is the infinite game of maintaining that business. But maybe it is if they’re having a lot of conflict, and it’s not working, maybe successes is selling the business or exiting from it in some way, and maintaining the infinite game of the family in terms of their trend, transgenerational wealth and wealth in a more global way rather than just pure finances.

15:16
Well, I love that Nicole because you’re talking about the bias that a lot of people have who are just simple business advisors to a family business and they will look at the survival of the business as the key determining factor that’s going to keep their relationship going with this family business but you’re talking about changing that lens and looking more at the family. And yeah, we all know those. Those stats about family business survival are not great, but they’re also not very well done and researched and reported, because they don’t take into account families who have done exactly what you’re saying. Get rid of the business and keep the wealth and do something else elsewhere. That might look like a failure from the business’s point of view, but from the family point of view, that’s something that is actually more of a success. And so part of it is I guess, as advisors, we need to change the hat that we’re wearing when we are looking at this and look more at the family itself than the business is that is that part of what you’re trying to point us towards?

16:20
I agree, but then we all know our three circle model and sometimes that ownership circle gets ignored which is I find humorous because they have all the power right? So I think it’s thinking globally integrative you know, collaboratively creatively and that we’ve got the Family Circle the business circle, the ownership circle, and how can we serve the whole system, rather than just constituent parts?

16:48
You know, I’m looking at the title of this. So we were supposed to talk about conflict and we haven’t really talked that much about conflict. I’ve been staring this more towards how us as advisors, how do we build families, but when there is conflict, there’s some transformative types of conflict that can actually help us as advisors to come in and, and see something and guide the family towards kind of a win win that they might not otherwise have noticed. Does that make sense?

17:20
And exactly makes sense. And so I think, I think in terms of conflict management, or when it inevitably happens, how it’s resolved, and you can create, you know, greater results I can so I think the family that I talked about in the book as the Stronach family so I I think a lot of people might be familiar with that because it was in the news. So one of the things that happens when very wealthy people sue each other you know, for good and for bad court documents are are fully accessible. So one of the things that I was able to do was actually access the affidavits and the exhibits and things like that and similarly with the Rogers disappeared, so you can get a lot of incredibly rich and interesting detail and I just want to say you know, also not taking ourselves too seriously like some of the some of the facts of these conflicts. are really entertaining. Like one of the interesting things was of Frank Stronach, I think which was, you know, the ultimate sort of visionary entrepreneur and, and one of the hilarious things that they had referenced in the affidavits was there was questions about spending and there is accusations on either side, but I did find it very entertaining that one of Frank’s senior the dad who started this business from his garage and auto parts was he built a $30 million 470/8 ton steel and bronze statue of Pegasus and in the Gulfstream Park and not only that he built to and another one was in storage somewhere in China and and I think if that’s a symbol of vision, and maybe also the flip side, maybe some concerning spending so that was a very entertaining fact. But I mean, he Frank sued his daughter, which was, you know, clinically, you know, great love and regard and clearly she was the apple of his eye and is appointed successor and then the virulence and the anger that came out of that litigation. So I think you know, it’s Valentine’s Day that the recording this Steve, but I think opposite of love isn’t hate, it’s it’s having no emotion. So clearly, there was a lot of regard there. But, you know, he sued her for, you know, half a billion dollars and she countersued and it was very messy and probably quite embarrassing for the family. But the resolution on the other side of it probably was a good one, which was Frank seemed to have this great love of organic farming and, and he ended up taking the agricultural assets. And Brenda was able to take the race track assets and so they were able to actually structure that business probably in a way where they each took the assets that they really loved and probably had a vision for and so the results was was probably a good one. Is just they probably would have, of course would have liked to have avoided the destructive relationship conflict and the embarrassment and the expense for the business of that very public litigation. Well,

20:33
that’s the beauty of this being able to learn from a story is if you are dealing with clients where they are even considering suing each other you can you can bring up this case and say, Do you realize that once this gets into the court system, with the affidavits, all this stuff becomes public, so you really want to try to get them to avoid that. But then it’s funny how there was like a silence for a long time where nobody heard anything. Obviously there was more going on behind the scenes where they were able to come up with this resolution that really was a win win. And what often happens is it’s really about control. And if there’s enough there to separate what the family owns into different spheres of control. I think that’s often the where where you can find resolution is to give everyone’s a win for themselves, so that they’re not stepping on the other person’s toes. Is that makes sense.

21:32
So that really makes sense and that leads us to the Rogers dispute, which, which was fundamentally about control. So Ted Rogers put a lot of thought into succession and governance. And, you know, I think the two things that seemed to be really important to him were the family being in control of Rogers, and they own of this billion dollar publicly traded company like 97% of the voting shares. So the family and control and secondly, one person being in charge, so again, because they sued each other and it was all affidavits. And interestingly, enough, the registered Records Office of Rogers is in British Columbia, even though they’re largely Toronto based. So, you know, as a BC practicing lawyer, I was just able to pull it right from the registry, which is the neat thing so so one of the interesting things is the Rogers controlled trust is actually a well So Ted, actually when he part of his estate plan, he had something like seven or eight wells, and the Rogers controlled trust is actually a well so the the trustee is actually Scotia trust. I was able to look at the well. And then he had a board of people which was family members, but also I think, trusted advisors and lieutenants, and the board, voted on one person who then was the person that votes the shares and so Ted put his son Edward Rogers in control. And but he said I’m gonna put him in control but then the board can vote to vote this person out. And you know, what’s interesting is clearly his mom, Loretta, his sister, Martha, and his sister Melissa, we’re not too happy, wanted Edward out, but there was other people on the Rogers controlled trust. Board, who I think had been dad’s lieutenants who basically kept him in power. So you know, it was interesting because the litigation was actually about a very distinct issue, which was can one person with a consent resolution change the board of a publicly traded company, and in fact, under BC corporate law, the answer was yes. So judge Fitzpatrick said he was able to do it, but, you know, I think my guests not knowing the parties, personally, but having read all the affidavits, my guess there was Ted Rogers had clearly solidified control, but I think there was two my guess is there was two issues, which was number one, if you read through, it appears that there was a lack of regular transparent communication. And I also wonder if Ted maybe pick the round horse because there’s a daughter, Melinda, who apparently was most like Ted and she’s sort of the one with the NBA and apparently, she was the really outgoing, sort of type A person and she wasn’t picked it was Everett Rogers. And I wonder if, if the his the person he picked was maybe the wrong person, but I mean, not knowing the parties we don’t know. But certainly, I mean, the communication between the family was very poor and resulted in a very public and embarrassing litigation, and then the metal a regulatory oversight of the shot takeover. So I mean, the conflict very adverse, not just personally but potentially to the business. I mean, they had two competing boards of a multibillion dollar publicly traded company in the middle of a fallen regulatory hearing over their takeover shock communication. So it couldn’t have been more embarrassing or awkward.

25:20
This case brings up the point that as you said, the communication was not sufficient. And too often, patriarchs will write a will the way they think they want to see things done after they’re not around anymore. Make sure it’s all locked down with the lawyers and never discuss it with the family members or never have any input and I think that’s probably one of the biggest instigators for family conflict is secrecy or not having shared what the plans are, and it feels like that really was what happened here.

25:54
And parents so and so one of the so the entertaining piece of this one is the sister Martha’s quite a tweeter.

26:03
Okay.

26:05
So the youngest daughter Martha has a Twitter account and she was basically live tweeting this whole debacle and like she does not hold back from you. So one of her tweets and I got in front of me 11:18am On October 24. She tweets the old guards who puppeteer AED and you just can’t let go are led by Phil and and Alan Horne. So those are two long, long time, I guess business colleagues of Ted Rogers that are on the Rogers controlled trust. My father trusted to do the right thing and would have fired them in a heartbeat for making his biggest fear reality money power and control a gun to their heads. Hashtag old guard down. I mean, I mean, this is the sister of Edward Rogers like it was remarkable and you know about the communication on October on October 27. She tweets Loretta Rodgers that’s mum says Son misled her on Rogers CEO Joe Natales performance. No one’s ever accused him of telling the truth. I’m no lawyer. Can anyone explain how predicating upon seniors as an elder abuse? So I mean, it really was messy and I only had Christmas dinner together after this but

27:27
that’s a lot of dirty laundry to be aired. And I guess hopefully we can we can learn from this when we talk to our families and say, you know, this is these are the things we want to avoid. And so how do we avoid them? How do you start this communication? How important is it to share the plans that you’ve made with the family members for whom you have made those plans to get out front of these things so that you don’t end up having to clean up the mess?

27:59
And I would just say in terms of tips for FTAs because conflicts are dynamic rather than static. And you know, you have to be very nimble and there’s no no of course not a one size fits all. And because of the dynamic nature of the disputes, you know, your conflict management strategies have to be flexible to allow for the method that’s going to work depending on the changing nature of different perceptions of the conflict sources. And so I mean, it takes years and years of course, to build up that wisdom and that unconscious competence, but I think you know, as an FDA advisor, I think when you’re recognizing destructive conflict is starting to brew is it’s a really good idea to bring in a conflict resolution specialist to really help that family work through it. And, you know, there’s different ways, you know, when the inevitable conflict happens, you know, what are ways to resolve it? And, I mean, we all sort of know what the main things are. So of course, there’s negotiation, there’s mediation, there’s something called conciliation which is a third party person that sort of Kundu, shuttle negotiation between the parties. You can do mediation, you can do mediation arbitration, which is a hybrid method. You know, arbitration is basically private court, like you hire a judge. Effectively, and then that person can make a binding decision and that can many high net worth, in particular families choose arbitration to keep this kind of embarrassing conflict. Oh, and then then there’s traditional adjudication like the head and Rogers, where a judge decided that Edward had the power to change the board. And in fact, he completely changed the burden of this publicly traded company. So I think whatever the preferred method is, lies and generally if you can have collaborative or cooperative forms of intervention if possible,

29:58
so as FBAs when we talk to our family clients, and we know or we realize that there’s something going on, I think, I guess what you’re saying is one of the main things we can do is suggest first of all that they deal with it before it gets out of hand, and to then be able to bring in or refer other people that can help them get a handle on it and get out front of it. And not wait till the horses left the barn. Exactly.

30:23
And one more fun fact, to leave you with is so there was a lot of analogies in the media the Rogers dispute between the Rogers issues in succession and as turf is truly stranger than fiction. So there’s this website called cameo where you can pay actors to do funny messages. And Brian Cox is the lead actor of succession. He plays Logan Roy, he actually was paid by Edward Roger’s wife to do a voice thing where he in music. He said congratulations for basically getting rid of Joe Natali, who was the CEO and I think it was meant to be a practical joke or a gag, but in fact, it was in the globe. And mail. So you know, truth is stranger than fiction. And sometimes these disputes can be quite colorful and you know, we can pick fine up people that have incredible privilege and wealth because I think they can take it but we can take these lessons and the entertaining parts of it and use those as examples as FTAs of the families that we work with and it’s like, here’s something that worked. Here’s something maybe not to do what

31:37
I always talk about that show succession Yes, watch it for the entertainment but don’t think it’s a how to kind of a show. They what they’re doing. Hey, Nicole, this has been fun and interesting. And I want to thank you for being here today. Unfortunately, we’re getting to the end of our time together. So as usual, I’ve got two questions to wrap up. First one is a book recommendation, something that you’ve read, that you’d like others to know about. And then that famous one piece of advice from one advisor to other advisors. So have you got a book you can recommend for our listeners?

32:10
So I do so I read a book last year that I loved, loved, loved, and it’s called 4000 weeks and it’s by Oliver Berkman. And it’s a productivity book, but it’s sort of an anti or a contrarian view. So it has been messages sort of your life out is never going to happen. And that most of our anxieties come from the fact that and as I’m just going to read a little quote from him, every moment of our existence is shot through with finitude or a nagging sense that we might be wasting what little time we have. And so his message so he’s, he’s English and I highly recommend the audiobook because he’s hilariously self deprecating and funny period. But what he basically says is like you’re never gonna get it all done or get your life perfectly together. But this realization counter intuitively helps with solace, focus and motivation, because once you’ve sort of accepted you’re never going to get it all done. You’re never going to do everything that you want. You can just take that acceptance and direct your energy through the few handful of meaningful things you’re able to do like what is possible to do here right now. So I highly recommend that book and particularly the audio version if you’re walking the dog or doing the dishes. And that’s my book recommendations.

33:31
Awesome. I love the audio books for the long drive to the cottage. So that’s the book well, we’ll put a link to that in the in the show notes. And then finally, the one piece of advice.

33:42
So my one piece of advice is keep talking, whatever fancy strategies or mechanisms or governance you put in place at the end of the day, nothing beats regular open and transparent communication in terms of preventing and then managing inevitable conflict.

33:59
Awesome, wonderful. Well, the time flew by quickly as it always does, Nicole, thanks again for joining us and sharing your expertise with our audience. Thank you so much for having me. listeners. If you haven’t already subscribed, please do so make sure you never miss any of these monthly episodes. Thanks again for joining us. I’m Steve Legler. Until next time,

34:24
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