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New Labels for Three Circles with Similar Results

Family-Business-Ownership Has Its Limits

The ecosystem of professionals who work with enterprising families is naturally quite diverse, as this work has become more interdisciplinary than ever before.

This week we’re going to look at some of the models these experts use to think about and explain the complexity involved in doing this work well.

My exposure to this began with the venerable Three Circle Model from Tagiuri and Davis, which I first wrote about here in Three Circles + Seven Sectors = One A-Ha Moment.

If you check the date on that post, you’ll see that it’s now over a decade old, so it stands to reason that some of my views on this have evolved in the intervening years.

From the Family Office World

Let’s start with something I’ve seen a couple of times now from some thought leaders from the family office space.

I’ve heard about the “MLF ratio”, as in the percentage of the time spent by those who work for the family office that’s spent in each of three key areas.

It seems many family offices have a ratio of about 70 / 20 / 10.

What does that mean?

That 70% of people’s time is spent on the Money, another 20% on Legal matters, and then a final 10% is spent on the Family.

Those I’ve heard talk about this are typically in favour of finding ways to increase the Family number, to at least double or triple where it typically falls.

From the Trustee World

I recently saw a similar triumvirate that I think stemmed from the world of trustees for wealthy families.

This one looks at Assets, Documents, and Relationships.

 

The assets are what the family owns, the documents are the legal papers that explain who owns what (and who’s allowed to do what), and oh, yeah, let’s not forget that there are a group of family members that are being served here!

And isn’t it always the problems in the relationships of those family members where most of the problems arise?

Again, I think that those who speak about this trio are those who are in favour of finding ways to increase some of the thinking about the relationship questions on the front end of decisions, as opposed to having to then clean up a mess that resulted in poorly thought out “documents”.

From Other Family Wealth Experts

I also recall hearing someone recently noting that heirs don’t only inherit wealth, they also inherit structures.

So if we wanted to turn this into a three-point model, it might be “heirs, wealth, structures”.

Once again, we look at the wealth/assets/money/business (what) as one leg of the stool, the family/relationships/heirs (who) as another, and then the legal/ownership/documents/structures (how) as the third.

Doing Away with the Circles?

At this point, we can even do away with the circles, for the sake of simplicity.

What the Three Circle Model does so nicely is to highlight the overlaps for some of the people, because in the family business world from which it emerged, the issues caused by family-employees and family-owners versus family members who are neither (or both) are often front and center.

But as a family’s wealth increases and the portion from an operating business decreases, these other ways of looking at things often make more sense.

Who and What Aren’t Enough

The one thing that doesn’t change is that more often than not, the balance of time and effort is way off from what it should be.

Regular readers won’t be surprised to hear that I think that too much focus is put on the money, the business, the wealth, the assets, while too little focus is put on the family, the relationships, the heirs, and all things related to the human capital.

Likewise, those in charge of the documents, the structures, the legal arrangements, the ownership (beneficial and otherwise) are given far more attention than they deserve.

In its simplest terms, it boils down to Who gets What.

It is very important that all of this be spelled out properly, especially when so much is at stake.

However, there are a couple of other questions that shouldn’t be forgotten along the way.

Let’s start with some WHY questions:

  • Why are we doing it this way?
  • Why don’t we involve our heirs?

And let’s add a big HOW question:

  • How is all this actually going to work, with our family?
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Enjoying Many Finales While Avoiding “Finally!”

Fun with Similar Words, Part Umpteen

My wife and I were recently back in “full house” mode for a few days, as both our recent college graduate offspring decided to grace us with their presence at the same time.

I always enjoy the mental stimulation of this family time, as our similar-yet-different senses of humour get reacquainted and combine for many laughs.

One evening they indulged me as I shared highlights of a recent episode of America’s Got Talent that I’d seen, whereupon I realized that the word “finale” has a number of possible meanings.

Add in the fact that I often intentionally mispronounce that word as “finally” (for humorous effect) and you now have the genesis of this post.

Let’s see if I can turn this all into something useful for those in the family wealth transition ecosystem.

At Least Three Types of Finales

As I zipped through the recording of the episode, I stopped on a few acts I thought were worth sharing, including one that featured a really nice visual finale that we enjoyed.

So there’s the first type of finale, the end of a particular act, the last few seconds of a performance that lasted a couple of minutes.

We then watched parts of a couple of other acts from the 2-hour episode, before finally watching the last performance, which was the finale of that episode.

Imagine all the attempts at using every possible “double entendre”, feigning ignorance of what someone meant, sarcasm, and every other kind of dig we could employ to try to confuse, frustrate, or otherwise get a laugh from our family trio.

Of course we even brought up the idea that in a few weeks we could watch the “finals” of the competition, which would then be another kind of finale.

So we already had a finale of a performance, of an episode, and of a season. 

The Journeys, Not Just the Destinations

As I attempt to turn this family time into a blog post, the various time frames, and the fact that they each had an endpoint, were where my mind went.

It made me think about each finale as an endpoint, or destination.

As I wrote in There Is No Destination, I like to focus more on the journey instead.

In fact, after every finale, there’s always something else about to begin.

Bringing this to the overarching subject of this blog, the idea of family continuity, and transitioning an enterprise to the next generation of one’s family, let’s think about this as it pertains to the views of the “NowGen” and the “NextGen” of a family.

Back to the Long Game and the Arcs of Life

As noted last week in Stepwise Planning for Family Enterprise Transition Work, you can only plan so far ahead in this work, because each step depends on how the previous one turned out.

It’s almost like there’s a never-ending series of finales, each followed by another round of what’s next.

The trick is to periodically take the time to reflect on how these steps fit together when looked at from the very long term, “arc of life”, viewpoint.

Family wealth transitions are intergenerational by definition, so it certainly behooves us to look at them from that lens.

Many people have difficulty “going there”, mostly because it forces them to think about how things will look in a world “post me”, i.e. after my final finale. (You know, “if I die” as opposed to “when I die”).

But you can only get so far if you don’t consider that view.

Don’t Set Yourself Up for “Finally!”

Let’s wrap with a look at a couple of versions of “finally” that you’ll want to avoid.

First, please don’t look at “estate planning” and “succession planning” as events, that involve putting ideas and decisions to paper as an item on a to-do list.

Too many people do this work, along with outside experts, and once they sign the documents, they exhale and say “finally”, that’s done.

It’s a process, not an event, and you’re never done.

Second, please make sure not to set things up in a way that creates the conditions for your heirs to quietly and subconsciously root for your demise.

Too many people put themselves in a position where the lives of their offspring will be much better after their passing, as opposed to during their lives.

You really don’t want your death to create a “finally!!!” reaction from them. 

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Stepwise Planning for Family Enterprise Transition Work

You Can Only Plan So Far Ahead

This week we’re looking at the reality faced by those of us who work with groups of family members as part of our role in guiding families through the challenges they face when transitioning their family assets to the next generation.

For those who simply advise a family leader (or couple) it’s typically much simpler. You give them your best ideas and advice, a few tips on sharing information within their family group, wish them luck, and you’re done. 

Of course, what happens next, when they in turn speak with their family members, is that they’re met with questions, resistance, quizzical looks, rolling of eyes, and all manner of uncertainty. Things often grind to a halt or spin out of control from there.

Some families are wise and lucky enough to find and enlist the help of skilled outsiders who know what questions to expect and can help guide the family forward, at least by one more next step.

That “one step at a time” aspect is what I want to share more about now.

 

More Peer Group Benefits 

Let’s put some context around how this topic became top of mind for me recently.

As noted in Meta Views on Sharing with Peers and Families I participate in a few regular meetings with peers, where we share ideas and stories about how we work with families.

A recent call had someone sharing a live case that they’re involved with, and the dozen or so others on the screen provided them with all sorts of ideas that they might pursue with the family we’d discussed.

And Some Sports Analogies Too

My mind kept churning after the call, and I couldn’t help thinking that even though this advisor now had a handful of great ideas that they might pursue with the family at their next meeting, it would be next to impossible for them to lay out a long term plan for how to implement these great ideas.

While every advisor and family leader may have some idea around the best approach to take as a family recognizes the need to begin to have regular meetings and to create some semblance of governance, it’s difficult to lay out Step A, Step B, and Step C, in order.

Trying to carve it in stone from the get go is NOT recommended.

You can only realistically plan Step A, and you need to keep B, C, D, etc. on the back burner (or in your back pocket), until they can all, as a family, see what works, what gets traction, and what the family is ready for.

As a fan of sports analogies (see Formula 1 Racing and Working with 1% Families) the next morning I tuned into a soccer match….

Tic-Tac-Toe Just as They Planned

The FA Cup game began with a pass all the way back to the goalkeeper, who fired the ball downfield in what seemed like a set play.

Surely this couldn’t turn directly into a scoring opportunity as they’d drawn it up in the locker room. There are too many moving parts on the field. Or so I thought.

A mere 16 seconds later, the ball was in the back of the net, and I wondered if maybe I was wrong. The play involved about 4 or 5 players, and the 4 or 5 steps all worked out in order, seemingly exactly as planned.

Playing the Very Long Game

As I tried to process what I just saw, it finally came to me. The score in the game was 1-nil, but there were still 89 minutes to go (at a minimum).

They managed to put a few exact steps together and successfully attained one step along the way to victory, but the rest of the game was played with more of the typical “fits and starts” that sports fans are accustomed to seeing.

Similarly, when working with a family on an intergenerational transition, you’re playing an even longer long game, measured in years and decades, not seconds and minutes.

As advisors or coaches who work with families, sometimes we can draw up a nice sequence of moves that work out, but it’s much more important to know how to guide the family through the ups and downs of the whole season.

Having family members learn how to play nicely together as a team is always key, so time spent on that is never wasted.

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Stop Assuming the Worst – Using the MGI Method

A Simple Adjustment Makes a Big Difference

There’s an expression that I’ve found myself using more and more recently when speaking with people, but I don’t think I’ve used it in writing that often.

When I talk about the principles behind much of the work that I do with families, as I try to guide them to prepare for the transition of their business or their wealth to the next generation, I often marvel that things are actually quite simple.

“None of this is rocket science!”, I typically state as some point.

Regular readers may recall that I also like to remind everyone that “simple” is not the same as “easy”.

So this week I want to share a concept that is far from rocket science, that is relatively easy to explain, and that while not necessarily easy to do at first, does get easier with practice.

I’ve been trying it myself since I learned it and can attest to its usefulness.

A Book Recommendation from a Podcast

For the past few years I’ve been serving as one of the hosts of the Let’s Talk Family Enterprise podcast, which continues to be a labour of love for me.

(My Dad used to say “There are only two reasons to do something: Love or Money”. Mystery resolved for the curious.)

One of the standard requests we have for each guest at the end of every episode is for a book recommendation, and I’ve been nicely surprised by most of the responses.

I’ve ordered many of them based on the suggestions of my guests, and enjoyed the vast majority.

And so it was with episode 45 when I spoke with Kristin Keffeler about her book, The Myth of the Silver Spoon, and the book she recommended, Good Inside, by Dr. Becky Kennedy.

I ordered that audiobook from Audible, and listened to it during a car trip.

While I only have one take-away as I reflect back on it, it’s a major one, and it’s the subject of this post, which I’m finally getting to!

People Generally Are Good Inside

The premise of the book is that, generally speaking, people ARE good inside. It can be easy to forget that from time to time, especially when we’re dealing with our own family members.

What the author then suggests is to adopt the MGI method, in order to minimize our over-reactions to situations, especially when we still don’t have all the information around something that has occurred.

And when you think about it, when we first learn about anything, we almost never have all of the information, we typically only have our own, quickly arrived at, perspective.

Kennedy suggests learning to always defer to the Most Generous Interpretation of what you learned.

That’s the MGI, and it sits at the other end of the continuum most of us default to, which is to ascribe the worst imaginable view of what has happened, usually basing this on some assumptions, many of which turn out to be wrong!

Examples in our Own Families

There are many everyday occurrences this applies to, so there are plenty of opportunities to learn to put this into practice.

Years ago I began a daily meditation practice, which continues today, and it has made a similar difference to my stress levels.

Say I come into the kitchen and I see someone left some dishes in the sink. I could simply get angry inside and assume some forgetfulness or laziness on the part of whoever left them there.

Or, I could apply the most generous interpretation to what I see, and say to myself that the culprit got distracted or was in a huge hurry.

If I send a text to a family member and then notice hours later that I am still waiting for a reply, I could assume that they are purposely ignoring me and waiting to reply in order to make me angry.

Or, I could use the MGI method, and tell myself that they must be very busy, and maybe my text arrived at a very inopportune time for them.

Making a Habit of This Practice

It’s a simple mind trick that can become a habit, and that’s the secret to making it work for you.

Any single time you do it is almost irrelevant, like meditating once, or going for a jog once a year.

But as you do this more and more, it can help in keeping you calm.

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On Discernment and Resourcefulness for Family Clients

Key Success Factors for Working on Family Transitions

When I stated sharing my thoughts in this blog over a decade ago, I decided to write a weekly post and figured I’d see how long I could keep that up.

Well, I’m still going, and often people ask how I come up with fresh material 52 times a year. One answer is that I recognize that nothing is truly original and subjects come up in different forms and contexts, which allows me to repeat certain themes.

This week I’m combining the ideas of discernment and resourcefulness, both of which I wrote about in 2018, in separate posts.

Let’s jump right in.

Patrick Lencioni Fan Club?

I’m a fan of the writings of Patrick Lencioni, and if you’ve never heard of him, you’re missing out on something. He’s not everyone’s cup of tea, but I love the way he brings clarity and simplicity to his work.

His latest book, the Six Types of Working Genius, is where the concept of Discernment jumped off the page at me again.

I highly recommend the book but will cut to the chase here and focus on the fact that Discernment is one of the types of genius, and it also happens to be in my personal top 2 (along with Engagement).

Discernment is the ability to see the big picture of what’s going on and then to divine what needs to be done as a next step.

See Questions of Discernment in Family Business for my initial thoughts on this in 2018.

Where Are We in This Transition Journey?

When a family is working on transitioning their wealth from one generation to the next, it is truly a journey, and not an event.

There’s also a whole heck of a lot of complexity going on, and a number of interested parties, all of whom see things in their own personal way.

This is why it is sometimes useful to engage an unbiased outsider to guide the family on this journey.

If that person is also skilled in the area of Discernment, I hope that you can understand why this would be a plus.

Bringing the Right Resources to Bear

Now let’s look at the resourcefulness question, and see how it ties into serving families.

The first thing one needs to recognize is that any one person quickly hits a limit in what they can provide, by themselves, to a large, diverse and complex family.

Knowing what other services and resources are out there that can be woven into how we serve families is often the key to our continuing to be able to add value as the family evolves and moves forward.

Let’s look at a handful that I’ve used or incorporated into my client work over the years.

See also: The 3 R’s: Finding a Responsive, Reliable, Resource

Outside Platforms and Services for Families

  • I’m working with some families using the MTM 360 platform that has been instrumental in getting them started holding regular family meetings.
  • I recently used the Family Enterprise Assessment Tool (FEAT), which was very helpful in clarifying what my client family needed to work on next.
  • I’m just starting down the road with a family where we’re looking at using the Assess Next Gen tool as a way to plan the next steps in the eventual exit of the G1 parents from the business.
  • I’m also a big fan of the Values Edge Toolkit and have used it a few times to help families discern, understand, and follow through on the values that they all have in common.
  • Last but not least, I’ve been looking at bringing another client family into working with the Tamarind Learning wealth education platform.

All of these are potentially useful for families at one time or another, and it also helps that I know the people who’ve worked hard to develop these resources, so that I have confidence when introducing them.

Weaving It All into the Family’s Timeline

Back to discernment, a big part of doing this work well is involving the family leaders and working together to figure out the answer to this key question: 

                         What does this family need now?

Many of these tools have only been created in the past decade, and others have had major revamps and improvements recently.

This ecosystem continues to evolve, enabling professionals to serve complex families in more productive and useful ways than ever.

Naturally, if you’re curious about any of these and want to talk about how they might be a fit for your family or one that you serve, please hit me up and let’s talk.

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Meta Views on Sharing with Peers and Families

Learning by Sharing, and Sharing our Learnings

Ever since I had my calling to work with families facing the challenges of transitioning their business to the next generation, I’ve found a wonderful kinship with others who work at guiding families towards this same goal.

The ecosystem surrounding such families continues to evolve and mature, as professionals from various fields of origin continue to find themselves in situations where collaborating together is an essential ingredient for getting the best results for the families who engage us.

Various peer groups have sprung up over the years, and as someone who’s been working mostly solo, I find it hard to resist joining them, so that I can continue to learn and share what I’ve been learning.

Having just returned from the annual in-person gathering of one such group, this topic is fresh and top-of-mind for me, and I want to share some of the perspectives I came home with.

A Wicked Case of “Groucho Marx Syndrome”

I was invited to join this particular group just before the pandemic, and even though most of its members have a certain professional status that I lack, I feel like my contributions are welcomed.

When I set aside my “why would I want to be part of a group that would have me as a member?” I can actually appreciate all that we bring to each other as a group of like-minded peers.

During a quick discussion with a small group a one point, someone mentioned the “container” that we provide for each other to pour our shared experiences into.

Another added that we understand ourselves better in relation to the group as we do this.

As individuals who often find themselves as the only non-family person in a room during the toughest parts of our job, this work can be lonely at times, and sharing with others who’ve experienced the same thing is cathartic and allows for personal and professional growth.

A More Recent Example

My involvement with a different organisation has me in the middle of launching another peer group, this one involving members who serve families from a variety of different professions of origin.

It will be interesting to see how this one evolves, and what we will each get out of the experience.

It’s always best to approach such situations with an open mind and an attitude of abundance, as opposed to arriving with a closed mind and a scarcity view of the world.

Thankfully those folks typically self-select out of such opportunities.

What About the META Part?

One of the most fascinating aspects of the work that goes into the organisation, launch, and maintenance of such groups (and make no mistake, it does take work) is how everything we learn in these efforts is applicable to so much of what we do with the families we serve.

The things we do to successfully engage with and learn from peers is almost perfectly transferable to the work that families require assistance with.

As peers who share with each other, we learn about ways that families can and should share.

As we co-create ways that we are going to govern our groups, we learn about ways that we can guide families as they develop their family governance policies.

As we share leadership in our groups, we learn about how to make co-leadership and co-creation work well in the families we serve.

As we facilitate our sessions with each other, we learn what makes some methods work better than others, and we practice new ways of being with each other, which helps us when we do so with families.

The Constant Challenges of Engagement and Alignment

All such peer groups face similar challenges, from their launch, through their evolution and into their maintenance stages. Eventually, things typically stagnate at some point, and a fresh look and new focus with some changes in leadership is often required.

Again, there are strong parallels to the work we do with families.

As I wrote back in 2020 in Family Engagement and Family Alignment – Chicken and Egg families need to constantly work on keeping all family members engaged, and working on their “alignment” is frequently required.

Likewise, when there are challenges keeping them aligned, working on their engagement is helpful.

From now on whenever anyone asks me why I choose to get involved in so many of these peer groups, I’ll just refer them to this post.

 

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The “Bookends” View of Family Life

Following Up On the Escalator Post

It’s been a few years since I’ve written a two-part blog post, and when I used to occasionally do that, it was planned as such in advance, when I recognized ahead of time that I was treating a longer topic.

This one wasn’t planned at all, and so this follow-up to last week’s The Crowded Escalator Problem in Family Planning is a bit of a surprise, even to me!

After completing that piece, it stayed with me, and I realized that I left a lot unsaid in that post.

I hope you’ll agree that it was worth revisiting this other view, the one at the beginning of the escalator ride, in contrast to the end.

With the escalator providing a metaphor for the ride through life for family members, I hope you’re ready to grab onto the handrail now.

Mixing Bookends with Escalators?

OK, so let’s get the mixed metaphor out of the way; I love to dabble in metaphors and so occasionally I end up putting a couple together, Frankenstein-style, that seem a bit incongruous, and that’s the case here.

I hope you’ll excuse that bit of inelegance, because I’m not sure there’s a better way to think of the view I’m talking about here.

Last week, we dealt with the difficulty that some senior family members have in recognizing that the time had come for them to disembark from the escalator they’d been riding for decades, as it pertained to their leadership role in the family enterprise.

The key is to distinguish that role, the one they play leading a business, from their other roles, the one of family member, and whatever role they continue to play in ownership.

The Training Period Takes Time – It’s a Process

Those in the rising generation need time to learn how to assume the roles they’ll be expected to play in the future, so from their perspective, they usually can’t wait to get started.

Too often, though, they have to wait, sometimes way longer than needed, to get into positions where they can practice and learn.

And here comes the A-Ha that I had, after finishing up last week’s piece.

It’s a lot like when your children are young, and they want to help out, say, in the kitchen.

When you’re in a hurry, it will always be faster for you to decline the offer of help and do everything yourself.

Showing them, helping them, fixing their mistakes, cleaning up their messes, Aaaaaarrrrggghhhh, it’s all so time-consuming.

And, if you never slow down and do that, they’ll never learn.

You actually did it, back then, and so later in life, you need to remember to do it again.  

Hence the bookends.

Back to the “We” Versus “Me” Angle 

Last week I ended off noting the difference between taking the “Me” view of things rather than the “We” angle.

It is very much that here again, but it’s also a lot more.

It’s about the arc of time, and learning to look at it from a much longer viewpoint. In the life cycle of a family, the longer the viewpoint you take, the simpler everything becomes.

If you look at today, or next week, or this quarter, doing the Me thing, in the short term, will always win.

But when you think about where things will be (and NEED to be) in five or ten years, the We almost always takes over.

Switching Over to the Diaper Story

I’ll wrap up by switching to a completely different issue, but that still deals with people at the extreme stages of life.

I want to talk about diapers. More specifically, the two people involved in the changing of the diaper.

Let’s call them the “diaperer”, i.e. the one doing the changing of the diaper, along with all the duties that brings with it, and the “diaperee”, i.e. the one for whom that diaper has been doing the heavy lifting.

Early on in the lives of the rising generation family members, the kids are the diaperees, and their parents are the diaperers.

At the other end of the escalator, a role reversal naturally occurs.

Hopefully, the former diaperees will be able to pay someone else to become their parents’ diaperers, but I think you get my drift.

In many family roles, we end up taking turns.

Like with bookends, you end up facing the other way at the other end.

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The Crowded Escalator Problem in Families

It Gets Dangerous When People Won’t Disembark

When going about one’s business in society, there are some unwritten rules that people follow that ensure the smooth and safe flow of people.

Some of these are based on laws that are written and enforced, but many are simply based on custom.

Driving a car is largely based on laws, with a few customs sprinkled in, and these are usually formally taught to those who wish to be licensed to drive.

How we walk through airports, shopping malls, and other public spaces is usually way less formal, and is something we learn from our parents, who are concerned for our safety and try to teach us how to function in society.

One such basic practice is to always get off an escalator when you get to the top (or bottom), and not to step backwards just to stay on.

Stretching the Metaphor for All It’s Worth

I may have used more words than necessary to set up my metaphor, but I’m glad that I was able to incorporate the part about how such customs of behaviour in society are typically taught to us from a young age by other family members.

In my work with intergenerational families, it’s always interesting to note how the proverbial apples don’t fall very far from the tree.

Yet there are some things that the leading generation sometimes does that don’t serve the family well, which are then learned by their successors, much to the dismay of the generation that then has to follow them.

Failing to disembark from the escalator, and not getting out of the way of those who are behind you, is a problem that we see far too often.

It’s not safe for anyone, and the repercussions are far-reaching.

Examples Abound – Let’s Look as Some

A couple of months back, in Starting Family Discussions Late – 5 Considerations I shared a real-life story about a large family in the town where I was visiting relatives.

The matriarch had recently passed away, which brought with it a hope that some of the uncertainty facing the rising generations might soon be clarified.

What I didn’t get very deep into then, and what I hope to address here, is the follow-on effects that such lack of clarity can have on the subsequent generations of these families.

When those in their 80’s and 90’s still haven’t ended their ride on the proverbial escalator, those behind them in their 60’s aren’t able to begin to make their own plans, which then stifles the ability of their offspring to figure out where they fit into things.

You now end up with people in the prime of their lives and careers, in their 30’s and 40’s, who are unable to make key decisions around whether or not they have a future in the family enterprise.

A Recent Extreme Tale

I recently made a presentation about legacy planning to an industry group in the center of the universe (Canadian readers all know I’m referring to Toronto).

During the Q & A, an attendee shared their story, which I will now relate here, while disguising some facts for privacy.

The G1 founder is in his late 90’s and still very much in charge of all major decisions, including many day-to-day ones.

Unfortunately, the G2 heir apparent passed away recently, reinforcing the founder’s perceived need to stick around even longer.

The G3 person who attended my session, who’s trying to run the company with a sibling (and both see things very differently, by the way) now has to deal with a meddling founder grandfather, a mother who suddenly holds a large ownership share despite never having been involved in the business, and a sibling equal.

When this person’s offspring, who are hitting their prime working years, ask their parent to try to paint a picture of their future in this family enterprise, how can they do anything but shrug their shoulders and say, “we’ll see…”?

Moving from a “Me Focus” to a “We Focus”

I’m often too indirect in my writing referring to the importance of “having important discussions”.

I now want to highlight that talk is insufficient, and that action has to occur.

A key action that needs to happen is for senior family leaders to get off the damn escalator.

They need to move from focusing on ME to doing what’s best for WE.

Hopefully some will recognize themselves and act.

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A More Important Type of “A.I.” for Family Enterprises

Probably Not as Big a Deal as Artificial Intelligence

A couple of months back, my wife took an extended work trip that had me alone in the house with just our two cats to take care of. 

I decided that it was an opportune time to clear out our freezer, which had begun to accumulate a variety of odds and ends that were too good to throw away, yet wouldn’t keep forever.

I keep an email folder of blog ideas that bears some similarities to such a home appliance, and lately I’ve decided to look behind some of the recent additions to see if there isn’t something I put in there a while ago that just might be right to serve up now.

Such is the case with this week’s post, which is all about Appreciative Inquiry, which I’ve seen labelled as “A.i.”, not to be confused with the now ubiquitous “A.I.” (Artificial Intelligence, for the uninitiated)

In my work with enterprising families, appreciative inquiry will likely be the more important A.I., at least in the short term, although this prediction risks looking foolish and out of date some day.

So What Is Appreciative Inquiry?

Rather than trying to reinvent the wheel, I’ve decided to share an introductory sentence from this piece I saved last summer, by Regina Koetters.

“Appreciative inquiry (Ai) focuses on what’s working well, why it’s working well, and how to replicate and build upon it. 

Developed by Dr. David Cooperrider and Dr. Ron Fry at Case Western University three decades ago, this approach has been validated by extensive research as an effective means of developing people, spurring innovation, and scaling companies.”

I hope that you can see why I like the idea of using Appreciative Inquiry with business families, where too often there can be a tendency to focus on the negative.

Positive Psychology Strikes Again

This is not brand new territory for me, as I’ve touched on some angles that come from the world of positive psychology before, notably in What Colour Is Your Cape?

Keeping one’s focus on what’s going well can be so important in setting the right tone with everyone we interact with.

It’s as much a “default mindset” as anything else, in my view, and can truly be a difference maker in so many settings.

And, it doesn’t come naturally to most people.

Maybe that’s why it’s so refreshing when you experience it.

Generative Questions and Positive Framing

Family businesses do a lot of things right in order to be successful, so sometimes when we are invited into them to be helpful, it can be a natural reaction to try to fix what’s not working.

But as my UK colleague Ken McCracken likes to say, they have some natural advantages that they’re already using, so it’s usually better to look at what they’re doing right.

(Listen to the podcast I did with Ken as my guest.)

The biggest thing to remember is to ask what are called “generative questions” and do so with “positive framing”.

These generative questions come from a place of real curiosity and a desire to learn when listening to the answers.

The constant search for more positive ways to look at things works better when the questions are asked in this way, as opposed to questions that contain judgement.

There are literally books written about this topic and also courses you can take to get better at this.

Hopefully this blog post will encourage more people to consider this methodology in the family enterprise space.

Not to Be Confused with Other Kinds of A.I. 

Off the top, I tried to make a humorous point about the other kind of “A.I.” that we keep hearing about in popular culture these days.

I also realize that there are even more things that go by the initials “A.I.”, including one I wrote about recently in No Beef with this Family Resemblance.

I imagine that in some family farming businesses there might be a reliance on the Artificial Insemination practices that I got to learn about thanks to my Dad’s post-retirement adventures in cattle breeding.

But for most family enterprises, and for the advisors that work with them, I think that Appreciative Inquiry is an idea whose time has come, and that more people should be looking into.

The questions we ask and the way we ask them are the basis for the good conversations we have, that create and sustain our most important relationships.

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Unpacking How Families Plan for Transitions

Please Stop Calling it a “TRANSFER”

Many families know that they should be planning for the eventual transition of their wealth or business to the next generation, but they avoid the issue for as long as they can.

This is unfortunate, and causes all sorts of problems the longer they delay things. The longer you wait the less good options you have available to you.

They put these important discussions off because they’re usually looking at this the wrong way, in my estimation.

Too often, they’re thinking about a “transfer”.

They really need to learn to consider this as a transition, or, better yet, a series of transitions.

A Process Versus an Event

I’ve tackled some of this here before, like back in 2018, in Don’t Transfer Family Wealth, Transition It.

One idea I shared then was that transfer is a word that’s often associated with a one-time event that takes place, whereby something is in one place at point A, and then “whoosh”, there’s a transfer, and now it’s at point B.

Transfers are typically pretty instantaneous.

The way a family looks at its enterprises and wealth, though, and how it should best move from one generation to the next, should be much more gradual, and needs to be planned that way.

But what about the “unpacking” that I teased, and the “series of transitions” I already mentioned? I’m glad you asked.

When you get right down to it, there are actually at least four parts to this complex question.

A Simplified Example

Because this gets messy as you add more people, I’ll use the simplest possible example, where only one parent owns and manages everything at the start of the example, and eventually only one of their offspring will own and manage it all.

You can imagine that if we have both parents and a sibling group, like many real-world examples, it gets hairier quickly, but I’m trying to demonstrate that even the simplest cases are more involved than they first appear to be.

My goal is to break this down into bite-sized steps, because the elders who put these discussions off just may be more willing to engage with the ideas in this piecemeal way.

Level 1 – Management of the Assets

One key element that needs to move from one generation to the next is the management of the business or the assets. We’re talking about the day-to-day oversight of whatever the business does in terms of operations or how it’s wealth is invested.

Non-family employees or outside professionals are also very likely involved in some aspects of this management and those people take their instructions and cues from someone who’s part of the family. At some point the rising generation person will need to learn how to handle this part of things.

This is sometimes the first thing that gets transitioned, as the younger person learns on the job, starts to get involved in things, and eventually becomes the person in charge of managing the day-to-day activities.

Level 2 – Leadership Roles

One level up from the management we find leadership, which has us moving away from the simpler day-to-day of management, but now looks at some of the higher level choices that need to be made.

Hiring and firing of employees and choices of advisors are a couple of elements that come into play here.

The junior family member eventually needs to be able to take over these roles as well, but not necessarily at the same time as they assume the management roles above.

Level 3 – Power and Authority

Even after the senior person has transitioned out of their management and leadership roles, they may still continue to exercise power and authority over many of the decisions. That sometimes only comes years after ceding the first two.

Level 4 – Ownership

Finally, there’s the legal ownership that needs to transition. This can take place all at once, or gradually, which is what I typically recommend, whenever possible. Portions of ownership can be transitioned as some of the other transitions are progressing.

 

Planning It This Way, AND Executing It Too

These four layers can and should be separated into these components when planning for transitions, and also when executing them.

An overlapping of responsibilities between both generations is a good thing, because these elements are rarely mastered in a day.

Hopefully this breakdown will help some families get moving.

The earlier you begin, the more good choices you have.

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