, , , ,

Putting “Family” in the Family Office

Back in September in From Family Business to Family Office, I finished up by noting that I’d be writing about the family office space more frequently going forward.

I diligently followed that up four weeks later with another post on the topic, Family Office: “WHAT” vs. “HOW.  But that was more than two months ago, so this is slightly overdue.

Coincidentally, I just came across an article from a recent issue of The Economist on the subject, which I found interesting, called: How the 0.001% invest.

 

 

An Investment Vehicle

An important angle of that story is evident from their secondary title:

“The family offices through which the world’s

wealthiest 0.001% invest are a new force in

global finance that few have heard of”

The story makes the point that some of the giant family offices from around the world are making waves in the financial markets like never before, which is causing them to be talked about even more.

I typically don’t talk about the “0.001%” very much, on the assumption that they are already quite well served, and because they constitute a tiny fraction of people who could ever use my services.

 

Where is the Family?

I typically write about things that actually concern the families themselves, even though most people care only about their money.

The number of people who would bend over backwards to cater to the “super-rich” to manage their wealth is huge.

The number of people like me who want to be a resource to those families as they manage the family aspects of their intergenerational wealth transitions is comparatively tiny.

So it’s up to me to ask the question, then, “Where is the family in the family office?”

 

 

Family Members as Clients

Well if the story from the Economist is any indication, nobody really talks much about the family members themselves, preferring to concentrate on the family’s wealth, and ways to increase it.

This also happens to be where most of the professionals make their money, by helping the family office make money.

The members of the family, for whom all of this work is ostensibly being done, are rarely mentioned.  They are, though, the “clients” of the family office.

Because every family office is unique to the family it serves, it is hard to know how many of them actually have deeper levels of family involvement in the work the family office does.

 

 Meeting room for family

Values, Goals, Mission, Vision

Because many family offices come about as the result of liquidity events in family businesses, many of the same issues are often found there.  Some are simpler than those in an operating business, while others are more complex.

See: Huge Liquidity Events – Great News, Right?

Hopefully, the family office is not simply making investments based on maximizing returns, if those investments would go against the values of the family.

Ideally, the goals of the family would also be taken into consideration too, not to mention the family’s mission and vision.

This, of course, pre-supposes that the family has worked together to define their values and agree on the goals, mission and vision of the family.

I’d guess that very few family offices are currently benefitting from that kind of guidance from family clients who’ve done that important work.

 

 

Family Office as a Catalyst

Regular readers know that I like to harp on the importance of having someone “with a different last name” around the table at meetings.

It’s important for family meetings to run well, and so having a facilitator who is not a family member is the best way to go.

Someone from the family office could be well placed to handle such a role.

 

 

Multi-Family Office Opportunity

For large single-family offices (SFO) there’s really no excuse for not doing the important work of involving the family and preparing the rising generation.

For multi-family offices, (MFO) the idea of offering assistance with family meetings is an opportunity to differentiate their services from those who are strictly investment managers for high-end clients.

 

 

Check Before you Sign

This is not a new idea, of course.  Many firms tout their assistance with family matters on their websites and in their pitches to potential family clients.

There is, however, a huge variation in the service levels that different firms out there can offer their clients in this area, so if part of the reason you are looking into an MFO is for help with family dynamics, be sure to ask LOTS of questions first!

 

/by
, , ,

Celebrating the Global FamBiz Community

I’m writing this post from a park bench in London, the morning after the conclusion of the annual FFI Conference, (my fifth).

The Family Firm Institute has been around for a little over 30 years, and I feel privileged to be a part of its truly global community.

The word “community” created the most resonance while reflecting on an angle for this post-conference blog post.

 

Global in Scale

Here I was, a Canadian in London, checking in to the conference on Wednesday, where I meet Richard, from Australia. As we chat, Xavier from Spain arrives, so I introduce them.

How would I ever have made such a variety of connections if not for these annual trips during which I have built and nurtured this group of friendly colleagues?

From Washington in 2014, to London 2015, Miami 2016 and Chicago last year, I was back in London again.

Regular readers know that I also make an annual pilgrimage to Denver each summer for the PPI Rendez Vous, and also attend the FEX symposia closer to home.

But the global reach of FFI is unique.

 

Let Me Count the Countries

Over a dozen Canadians were there, most of whom I already knew. And because FFI was founded in the US and remains headquartered there, the American presence is quite significant. But its scope goes far beyond North America.

Just last night I was out throwing darts with a Venezuelan who now lives in Brazil, another Australian living in the UK, a couple of Norwegians and five American colleagues.

Others I met along the way hailed from South Africa, Denmark and Switzerland, plus too many European countries to count.
Word has it that 40 countries were represented in all.

Special mention goes out to Edvard, who told me that he and his colleagues have been using my Family Continuity BluePrint all over the Netherlands, after he saw me present it last year in Chicago.

 

 

So Much to Share

Along the way over the three days, so much great information was shared, and so many ideas were presented in the many breakout sessions.

It was a pleasure to join great friends and colleagues Natalie, Elle, and Mairi as we got to lead one session from the front of the room, as we celebrated the Practitioner’s Spectrum.

Our discussion was about the variety of styles we use as practitioners when working with clients, from Counselling and Coaching, to Facilitation and Mediation, to Mentoring and Consulting.

 

The Big Deal about Community

As I stated at the outset, I was thinking a lot about the aspect of community this week.

A few months ago, upon returning from Denver’s PPI conference in fact, I also wrote about that subject, in part, in Wanted: Purpose, Passion and Community.

And as I wrote there, a big part of community is that the people need to want to spend time together.

Towards the end of any of these meetings, discussion invariably moves to “so, how was this conference for you?”

My reply usually includes a favourable rating, adds a few minor complaints, and concludes with the fact that I wouldn’t want to miss it.

 

Building Something TogetherGroup of people walking with yellow background

Between FFI, PPI, and FEX, it feels like we’re on the front edge of a wave of progress and change.

The worlds of family business and family wealth are facing important challenges, as families do the work of transitioning their assets to succeeding generations.

I love coming together with others who work in these areas, to share ways that we can all do a better job. We all want to be reliable resources for these families who are trying to do things better.

It truly does feel like we are building something together, not just for our lifetimes, but for those who will succeed us.

 

 

Many Parallels

There are many parallels between us, and the business families we serve.

We come together regularly because we enjoy doing so, and we have a common cause we are working for, which will likely outlive us all.

Many of our family clients feel as if they are the only ones experiencing their family issues, which of course is false.

As practitioners, we can also feel a bit lonely at times.

Getting together with like-minded colleagues to share ideas and re-energize only makes sense for us as well.

Why not join us?

See you in Miami, October 23-25, 2019.

/by
, , ,

Family Office: “WHAT” vs. “HOW”

Family Office: “WHAT” vs. “HOW”

A few weeks ago, in From Family Business to Family Office, I mentioned that I’d start writing more about the family office world. Being a man of my word, here we are again.

I had a bit of an issue choosing my blog title, though.

I began by thinking about the idea of “Strategy” versus “Tactics” in the family office space.

But my bias is to try to stay away from “jargon” terms and use the simplest possible words, at least most of the time.

 

A Thousand Words

Of course when it came time to select a photo to go with this post, terms like “strategy” and “tactics” garnered more interesting search results from Shutterstock than “what” and “how”.

At the end of the proverbial day, though, whether we use the simple questions or the business jargon terms, we’re talking about the same issues.

Ten Years Flew By

The most important idea here is this:

You need to recognize the difference
between the strategy (the “what”)
and the tactics used to accomplish
that strategy’s goals (the “how”).

If you get nothing else out of reading this, my Dad would’ve been pleased. What does he have to do with this, you ask?

It has now been 10 years since he lost his final battle with cancer, and I cannot count the number of times his wise words have been summoned to the front burner of my brain.

“Let’s figure out what we’re trying to do first, and then we can figure out the best way to do it.”

 

Family business office

 

The Family Office (The “Who”)

A family office is typically composed of people, from one to a handful, or sometimes even dozens. (Key variables include the size of the family, the amount of wealth they control, and the level of complexity involved)

The employees of the family office should be working for the benefit of the family, and so they should be concentrating on the tactics, the “how”, and be less involved in the strategy.

Ideally, the strategy will have been worked out by the family, before the family office people get too far down the road of implementing the best tactics.

 

It’s Complicated

I used the term “ideally” because I know that this is often not the way it works in the real world.

But that typically isn’t the fault of those who work for the family office.

Much like the ideas I wrote about in FamBiz: Management vs. Governance, different groups of people have different roles that they should be playing.

When the people who are supposed to play those roles don’t play them, then others will invariably step in and assume those roles.

 

Benefits Come with Responsibilities

Families that have a family office (FO), or who are clients of a multi-family office (MFO), have set up this relationship so that the FO or MFO can serve the needs of the family.

The decision to go this route may have occurred last year or last century, and it may have been decided by this generation of family leaders or by their parents or grandparents.

The fact remains that it was done for the benefit of the family members.

And as we all know, with benefits come responsibilities.

Family business Work

Where Are We Going?

I’m going to take a guess and say that most readers are fine with what I’m saying here, but that they may be wondering what my point is.

So here’s where I’m going.

I think that relationships between families and their family offices tend to be out of balance, or off-kilter.

My anecdotal evidence suggests that family office employees often control not just the tactics, but much of the strategy too.

This can be mitigated when the FO includes family employees, but that can also make things worse.

 

Family Alignment: The Missing Link

As I stated above, this is not typically the “fault” of the family office, but usually that of the family.

They need to intentionally work at getting the entire family aligned together, in order to make the decisions that the family office should then be executing.

 

The WHAT, the HOW, and the WHO!

Getting a family aligned so that they can effectively drive the strategy of their family office does not just “happen”, all of a sudden, or all by itself.

It begins with the recognition that it is necessary for the long term good of the family and its legacy.

Recognize anyone?

See also: The Exponential Magic of Family Collaboration

 

/by
, , ,

From Family Business to Family Office

Welcome to a new theme here at Shift your Family Business, (the website). In some ways it’s long overdue, and in others, well, it’ll be more of the same.

 

I’ve begun to realize that I haven’t written nearly as much about the Family Office space as I have about Family Business.

 

Of course there’s a huge overlap of topics that suit both areas, and these have been covered here at length.

 

But for some reason, I get way more questions from families about operating their businesses than from those who’ve made the transition to managing and transitioning their wealth.

What’s the Difference?

If you stop anyone on the street and ask them what a family business is, everyone will give you some kind of answer that would score at least a few points on any grading key.

I daresay that if you asked “what’s a family office”, a lot more people would ask you to repeat the question, or would have only some vague idea of what you were asking about.

I consider myself to be pretty good at explaining complex things in simple terms, and this one is a big challenge.

In the simplest explanation, a family office is a formal structure set up by a family to manage the family’s wealth and everything that goes with it.

Family Business Office People Working
I’m Too Sexy for my Wealth

In the last decade or so, the term “family office” has been discovered and co-opted by many professionals who work in the area of wealth management.

I come across examples regularly that make me shake my head, where I see this very broad term used as a label to describe a very narrow service offering.

The image I have in my head is of a hot dog stand with a sign that says “smorgasbord”, where you can have your hot dog with mustard, or ketchup, or both!

OK, but where’s the rest of it?

Not for the Mass Affluent

Financial institutions typically like to attract the clients with the most wealth, and they also have products and services geared to lower levels of wealth too.

There are terms that get used in their industry to segment different wealth levels, and they kind of make my skin crawl when I hear them.

There are the “mass affluent” with “only” a few million dollars, then you get to HNW (high net worth) and eventually UHNW (ultra HNW!)

Who qualifies for what level of services varies over time and from one institution to the next.

Let’s just say that family offices have historically been for families in the upper reaches of society, and so anyone who markets their services as “family office” is trying to be seen as more “big time”.

That, and the hope that families will use their services because then they can talk about “their” family office at cocktail parties, I guess.

How Do They Get There?

Historically, family offices are set up once a family has achieved a certain level of liquid wealth, and/or a certain level of complexity.

Liquid wealth is money that can be quickly transferred from one asset to another, like cash, stocks and bonds.

Family operating businesses and real estate are usually considered “illiquid”.

The most common way a family arrives in the land of a family office is after a liquidity event, i.e. the sale of a family business.

See: Liquidity Events in a FamBiz: Pros and Cons Part 1 and Part 2

 

Custom Made Mystery

But every family is different, and so every family has different needs.

Most families are not 100% sure of what they need, and they have an over-abundance of providers who are trying to convince them that “I am your solution”.

There’s an expression in family office circles that “If you’ve seen one family office, you’ve seen ONE family office”.  There are no two the same, nor should there be.

Family Office

Demystifying Family Offices

From discussions with families, acquaintances, and peers, I realize that some demystification is overdue.

So look for more frequent posts on this fascinating subject in this space going forward.

 

Looking to get a head start?

– See chapter nine of my book

SHIFT your Family Business, (the BOOK),

Chapter 9: Towards a Family Office Mindset

  • See this article by Jaffe and Grubman

“Development Stages of a Single Family Office”

/0 Comments/by
, , ,

Great Nuggets from Denver

Great Nuggets from Denver

Regular readers of this blog know that there’s one annual event on my calendar that I look forward to more that most.

I just got back from Denver, where I spent most of the week trying to milk as much as possible out of the conferences put on by the Purposeful Planning Institute (PPI).

Rendez Vous is the one time each year that I “fill up” with great ideas and input from other members of my “tribe”.

Working with families on the difficult tasks of transitioning their wealth from one generation to the next can be lonely work for some, so getting together with others who do similar work is energizing.

 

One Nugget at a Time

This was my fifth time at Rendez Vous, and after each one in the past I’ve used this blog space to capture and share some of my thoughts and take-aways.

(There are links at the end to those posts if you’re interested.)

For 2018 I’m taking a “random” approach, sharing some nuggets from my notes from at least a dozen of the thought leader speakers and breakout session leaders.

Here goes…

 

– Difficult Subjects: 

From Emily Bouchard, two of the biggest subjects in everyone’s lives are also two of the most difficult to discuss: Money and Death.

This work involves both of them, so it’s no wonder that bridging those subjects with clients is difficult.

But that doesn’t mean we shouldn’t take up the challenge.

 

– Business Exits:

From John Brown, transitions usually involve owners exiting their business. But the owners want and need to exit on “their own terms”.

If we want to be useful to them, we need to recognize this, and focus clearly on “owner-centric” exit plans.

 

– Financial Transitions

From Susan Bradley, wealth transitions usually present a lot of confusion to those affected. Within that confusion also lies an opportunity.

Each person needs to “figure it out”, and that often necessitates time and help. If we want to help, we need to recognize that everyone figures it out at their own pace.

 

– New Vocabulary

As usual, John A. Warnick, the founder of PPI, had plenty to share with his tribe, including an update on the new vocabulary required to advance how we work with “Legacy Families and Families in Business”.

He’s working to compile, clarify and disseminate a primer on the words we use in this space, to improve our ability to work with such families more consistently.

 

– Five Voices

From Mark Hartnett, I now know about Giant Worldwide’s Five Voices tool, and that based on it, I’m a Connector, as well as a Nurturer.

And my nemesis is the Pioneer, perhaps because that was my Dad’s main voice.

 

– Don’t Try to “Change” Families

From Matt Wesley, I better understand the folly in trying to “change” any family.

Any attempts to “violently homogenize” a family to fit into a particular way of being is bound to fail.

 

– Book Club Benefits and Bird Language

 From Amanda Weitman, I learned that creating a simple “Book Club” within an organization can have benefits far beyond what anyone could ever had predicted in advance.

From Jon Young, I learned that those who master an understanding of bird language also discover the secrets to sensory integration.

 

– Appreciative Inquiry and the Importance of Voting

From Courtney Pullen, I learned how quickly one can go from “I have a problem” to “I AM the problem”, and how appreciative inquiry can help resolve that uncomfortable situation.

From Ian McDermott, I better understand the importance of how I “vote” with my Time, Money and Energy, and that “Trusted Advisors” become so when they “trust themselves”, making them “congruent”.

 

– Adult Development Levels

From Cathy Carroll, following up on Christine Wahl, I now realize that one can only properly advise others up to our own level of adult development.

 

– Purposeful Planning as a Career

From Michael Palumbos’ panel of industry veterans (Bradley and Pullen, plus Bruce DeBoskey and Kristin Keffeler) I know that we need to keep showing up “dynamically”, should avoid billing for our work by the hour, and not expect many referrals from lawyers or CPA’s.

 

– Last But Not Least, Jesus  

From David York, a perennial favourite PPI speaker, I know that Jesus is considered one of the greatest teachers of all time, yet, according to the bible, he asked many more questions than he answered.

And his most frequent question was “What are you looking for?”

If you’re looking for a tribe to support you in this kind of work, come join us in Denver next July.

 

 

My blog posts from previous Rendez Vous:

2017    Sharing Some Rocky Mountain Kool Aid

2016    Sweet Secluded Rendez-Vous 

2015    Rendez-Vous with a Purpose

2014    The Rising Generation in Family Business

/0 Comments/by
, , ,

Caring, Mattering and Meaning in Family Business

Caring, Mattering and Meaning in Family Business

This week I’m going to stay with my recent philosophical slant and write about three related subjects I’ve come across, that all deal with the human aspect of business families.

 

I Don’t Care How Much You Know 

I have some “go to” expressions that I’ve picked up over the years and I sometimes have a tendency to think that they’re universally known.

Then when I pull one out in conversation, I get a reaction that makes me realize how useful it really is.

I used one recently regarding the way experts are sometimes dismissed by their target clients as being too much of a “know-it-all”.

The expression I love for that is:

“They don’t care how much you know until they know how much you care”

 

Stakeholder Lives Matter

A few weeks later, I was reading the weekly newsletter of the Family Firm Institute, The Practitioner, which featured a piece aimed at trustees who serve on boards of directors, by Patricia Annino.

The following quote jumped out at me:

“Human nature tells us that if you can’t matter in a positive way, you will matter in a negative way because what is most important is to matter”.

I’m not sure that I ever heard it put that way before, but it really struck me.

The next sentence is also worth quoting, because I don’t think I could paraphrase it any better:

“Human nature also tells us that most people strive for recognition. Having voices heard and questions answered are critical to the ongoing dynamic.”

 

Part of the “One Big Happy Family”

Being part of a business family can be tricky at times.

There’s a group of people, with a common family bond, each with different interests, talents and abilities.

There are also lots of roles to play, in the business, in the family, and for some people, in both.

And at the end of the day, every single one of them

wants to, and even needs to, matter, in some way.

 

Purpose and Meaning

A few weeks ago I heard Kevin McCarthy, author of a number of books about “Purpose”, speak at a conference about family wealth.

He had a great quote right off the top of his presentation that struck me too. Here it is:

“The Enemy of Wealth is Meaninglessness”

Wow.

For some reason another expression that came to mind immediately was this one:

“The opposite of love is not hate, it’s apathy”

 

“Frenemies”?

I don’t know that I fully agree with the word “enemy” in McCarthy’s quote, but I know what he was getting at.

And that’s the fact that people without meaning will quickly destroy wealth, if they have access to it. So in that sense I guess “enemy” works.

But if we look at some opposites, would that make “meaningfulness” the “friend of wealth”?

I’m not sure I’d want to have to make the case for the correlation between meaning and wealth.

 

Wealth OR Meaning?

What happens if we look at the question of which one people would choose, if offered a meaningful life without wealth or a life of wealth without meaning.

I’m tempted to guess that many would quickly opt for the wealth without giving the question much thought.

I’m also inclined to think that many people who made that choice would soon regret it.

 

And For Your Offspring?

Sometimes things can be clearer to us if we remove ourselves from the equation, and instead ask what we would choose for our children instead.

So if you could offer your children a life with lots of meaning, or one with lots of financial wealth, which would you choose for them?

Of course, most people would hope that their kids would end up with both, but I think that too many people likely believe that if you have the financial wealth, the rest will take care of itself.

 

Not So Fast

I know for a fact that there are many members of families that are very comfortable financially who do not feel like they have a lot of meaning in their lives.

Those same people likely also don’t feel like they matter that much to their family.

And if that family has advisers who are great at their specialty, those family members likely don’t care how much they know.

Financial capital is always the biggest focus, but families should worry much more about their human capital.

/0 Comments/by
, , , , ,

Who Messes Up What, Or What Ruins Whom?

Who Messes Up What, Or What Ruins Whom?

This week’s post is one that I’ve been looking forward to writing for a few weeks now, ever since I had lunch with a colleague and relayed this story to her.

It was her reaction that made me realize how simple and yet how powerful it really is.

Considering that I’ve been writing this weekly blog for over five years now, I can’t believe that I haven’t written about this yet.

 

Credit Where It’s Due 

Before telling the story, I should note that I would love to give credit to the person who told the story when I first heard it, but I really have no clue who it was.

It would not surprise me to learn that it was during one of the weekly teleconferences of the Purposeful Planning Institute, because those calls have inspired many of these blogs.

In any event, it’s one of those stories that has probably been played out in various versions hundreds of times, all over the world.

So my version isn’t a true, “verbatim” recounting, but more like a parable.

 

I Worked Hard for All of This

A successful businessman is meeting with one of his trusted advisors, as he begins to think about how he’s going to deal with the considerable wealth he has built up.

He mentions how hard he’s had to work for what he now has, and then adds,

“And I don’t want my kids to screw it all up”.

This part of the story likely sounds pretty familiar to many professionals who work with clients who’ve built up large amounts of wealth.

It’s not unnatural for anyone to be concerned that the fruits of their labour might be squandered.

 

The Other Side of the Coin

Later in the discussion, likely in response to a question posed by the wise advisor, the man has a bit of an awakening, and says,

“But I don’t want all my wealth to screw up my kids, either”.

If you’ve read even a few of my blogs, you already know that this was the true “A-Ha” moment of the story for me.

 

The Bad News First

The bad news is that so many professionals who work for such wealthy clients are really only specialists in solving the first part of the problem.

Finding ways to create bulletproof structures to preserve wealth is nothing new for many specialists who pride themselves on how they can minimize taxes, and restrict how the wealth will be used by its intended beneficiaries.

Unfortunately, too many clients are too short-sighted to see that this will also produce many unwanted side effects for their family down the road.

 

Now the Good News  

The good news is that there are now more and more people who understand that only worrying about preparing the assets for the heirs leads to sub-optimal results.

And not only that but people are now also realizing that this is not a question of either worrying about preserving the wealth OR preserving the family and their relationships, it’s actually possible to do both.

 

It’s Not Either/Or, It’s Both/And

In fact, by concentrating on the second part, and making sure that the offspring will be prepared to receive the wealth, you will increase the chances that the family will be able to maintain and even grow the wealth in future generations.

I’m reminded of a blog I wrote a few years ago, Successful Planning: Who Should Be Involved?

It contains the profound quote,

“Plans that are about us, but don’t include us, are not for us”.

That is a verbatim quote, from a different context, but it fits perfectly here too.

 

FOR the Family, BY the Family

It starts with someone recognizing the importance of this. That could be a member of the family, or it could be a wise advisor.

Long-term planning at it’s best is truly long-term, i.e. inter-generational.

If that wealth is to serve multiple generations of a family, the sooner the members of the following generations get involved, the more likely they will be successful.

 

Efficient or Effective?

You could simply worry about the preservation of the wealth, and create rigid structures that are tax efficient and ensure that some wealth will be available for future generations.

That would certainly be more efficient.

But if you want your plan to be effective, get the

younger generation involved as early as you can.

You won’t regret it, and neither will they.

/0 Comments/by
,

Informal Authority in Family Business

Informal Authority in Family Business

I like writing about aspects of family business that sometimes get overlooked “in real life”.

Some subjects that you can learn about in business school work OK in most places, but somehow, when looking at a family business, things aren’t that way at all.

 

The Standard Org Chart

Nowhere is this more apparent than with a document that you’ll find in just about any company, the good old organization chart.

There are usually lots of rectangles, connected together by lines, and often looking a bit like a pyramid.

Simple enough, “this person is in charge of this department”, “these people report to this person”, “those department heads in turn report to this VP”, you know what I’m talking about.

 

The FamBiz Org Chart

A family business, especially early on in its lifespan, may not even have an org chart.

When someone finally insists on creating one, the founder may not like it and may even ignore it.

Eventually, as the company grows, they’ll reluctantly agree that one is needed. But that doesn’t necessarily mean that they’ll respect it.

 

Respect My Authority!

The person at the top of the chart will often simply prefer to rely on the fact that they’re at the top and therefore, everyone else is below them and in turn reports to them.

While this is often factually correct, the reporting lines at the lower levels are there for a reason, and employees come to expect that those lines will be respected.

When the owner or founder walks into a department and sees something they don’t like, it’s pretty hard for them to bite their tongue and seek out the person below them on the org chart to relay a message.

In order to “save time” they’ll usually give instructions that the lowly employee feels they have no choice but to follow.

 

Giving Up Formal Authority

The good news is that while this type of scenario is rather commonplace, it is often harmless.

That is, as long as the person who’s giving the instructions is still truly the top person in the company.

When leaders step back, whether formally retiring or just cutting back to let others build their leadership, this can get a bit trickier.

The employees who are given instructions to do something will ususally feel beholden to the oldest person, and do as they say.

But what if what they’re being told goes against what their “real boss” (according to the org chart) has told them?

 

Formalize the Authority

One of the things I like to suggest to family business clients is to formalize the authority.

What does that look like? Glad you asked.

When a business leader steps back or steps out, it is essential that the employees know who is now in charge.

There are several ways to do this, and it may be best to use more than one:

 

          – Leadership Handover Ceremony

A formal ceremony in front of the employees, during which the outgoing leader is thanked and acknowledged.

 

          – Bulletin Board or Newsletter

A written message posted on a company bulletin board and sent to employees via a regular newsletter publication.

 

          – A Simple Email to Employees

If there is no newsletter, an email explaining the changes at the top, with appropriate thanks and best wishes.

 

Culture and Leadership from the Top

The new leader needs to be able to put their cultural stamp on things, and it’s next to impossible for them to do so unless and until the former leader has officially stepped aside.

“Officially” is a big word, though, so it’s important that both parties, the one leaving and the one coming in, be part of any such announcement.

The more people who witness it, the better. This is why I have a strong preference for the ceremony.

 

Group Decision, for the Good of the Group

For all employees to be able to buy into the new reality, it needs to appear to be a joint decision, and not any sort of “coup” or forced take-over.

The outgoing leader will hopefully see this as “closure” and resist the temptation to return to a leading role.

If a support role can be identified for the outgoing leader, to still retain some presence (at a much lower official level) that can also be good.

 

Clarity is Key

Few things in any organization are more important that clarity. Clear lines of authority are a must.

/by
, ,

FamBiz: Management vs. Governance

FamBiz: Management vs. Governance

In a family business, there can often be confusion around the questions surrounding the management of the business, and the separate, but equally important area of its governance.

I see it in many places with family clients and this post will hopefully help clarify the differences.

 

Management = Day-to-Day

Management of the business starts with all of the day-to-day actions and decisions that it takes to keep the business running.

It’s about what you can see happening in many areas, and it usually involves all of the activities that are done by the vast majority of the employees.

The management of any business is all about the short-term execution of the company doing what the company has decided its business is.

 

Who Decided?

So in case you didn’t notice, the key word in the last sentence is “decided”. I purposely said that “the company decided”, but in reality it isn’t decided by “the company”.

There are people who “govern” the company and what it does, and then the managers of the company implement those decisions via their management functions.

But then that just begs the next question, which is, who gets to decide? And then there’s another level of that, which I‘ve already addressed here: “Who gets to decide who gets to decide?”

 

Corporations Are Easier

In contrast to a family business, if we look at a big corporation, things are pretty clear. The shareholders elect the board of directors, who decide who the management will be.

There are plenty of layers and checks and balances and there are formal structures and procedures in place to guide all of these decisions.

In a family business, well, usually, not so much.

 

Informal Governance

I used the word “formal” intentionally just there, because it reminds me of the expression I like to keep in mind:

“Formality is your Friend” 

I need to thank Ruth Steverlynck, one of the instructors in the Family Enterprise Advisor Program, for that expression. I’ve used it a lot and will continue to do so.

Family businesses often resist formality because they don’t want it to slow them down. Sometimes it’s simply the founder who has a preference for flying by the seat of his pants.

 

Governance sounds Formal

Regular readers will be familiar with my personal struggles with the word “governance”, and the fact that I have a sort of “love-hate” relationship with it.

It sounds almost TOO formal, to the point where it can actually scare people off.

I try to soften it by repeating that you don’t necessarily have to be overly formal, and that any governance you choose to put in place is best done incrementally.

 

Constitutional Crisis

I read a lot of stuff from the academic field of family business and I see people using the term “Family Constitution” a lot lately. A family constitution CAN be a great thing for a family to have.

BUT, and it’s a huge but, that shouldn’t be the place that you start the governance process.

In fact, I personally would probably never even mention the term “constitution” during my first year of working with a family.

 

Management Confusion

Sometimes company management acts as if they are also in charge of governance, because, well, frankly, they can.

But a family business is a complex system, involving not only the business, but also the family, and the ownership.

These interdependent systems are where some formality and definition of roles and responsibilities comes in.

In fact, the part about figuring out, deciding, and writing down who decides which questions is what governance is all about.

 

Clarity goes a Long Way

There can be lots of ambiguous situations in a family business, and when things aren’t clear, people step on each other’s toes a lot, which can create conflict.

It’s important to clarify which groups of people will be responsible for which decisions.

But sometimes that’s really hard to do.

It really needs to be “hashed out” as a group. Some “horse trading” and compromises may end up needing to happen too.

 

“Don’t Try This at Home”

What can happen is that families will try to work these things out by themselves and end up making things worse.

An independent person, who has no stake in the systems, can go a long way to making these discussions more productive, and more civil! It’s worth trying.

 

/by
, ,

Lessons Learned from Women in Family Business

Guest blog from Kim Harland – Thanks Kim!

Lessons Learned from Women in Family Business

Family businesses account for 50%–80% of all jobs in a majority of countries worldwide.[1] And it seems women are leading the way, doing far better in leadership and management positions in family businesses than those in the non-family business sector. For example, 80% of family-owned businesses have at least one female director whereas only 17.7% of companies in the FTSE 100 have female directors.[2]

To celebrate the key role women play in family businesses, we spoke to a number of leading ladies and asked them to share their advice on range of topics plus give you a few tips on how to apply them to your family business.

 

What makes family business successful?

Across the board, all the women we spoke to felt three important principles underpin family business success – communication, a clear family vision and trust.

According to Lea Boyce, a key advisor at Boyce Family Office (5th generation family business), family businesses also have a crucial competitive advantage over the corporate sector – their nimbleness.

“While non-family businesses are busy having layers of meetings, a family in business has made the decision, got family buy in, done the deal and moved onto the next opportunity. As a result, they are able to be more entrepreneurial,” she says.

Another factor vital to family business success is the induction process for the next generation of family owners. On this topic, Priyanka Gupta Zielinski (author and executive director at MPIL Steel Structures Ltd, a 2nd generation family business), has some important advice.

“As you bring your daughter or son into the business, remember that you are unsettling an existing framework – things will change and you have to be willing to let them. It is important to let your children make their own mistakes. Sometimes their screw-ups will be of enormous magnitude – but remember, at least the worst is happening while you’ve got their back,” she says. “Whenever possible, help your children calculate and mitigate the risk without taking away their sense of ownership of the project.”

 

Your family business check-up

  1. Do you have a formal structure to allow open and honest communication as a family group?
  2. Has your family group articulated and documented shared business and family goals?
  3. Are you harnessing the opportunities presented by your next generation?

What’s the biggest challenge for women in family business?
Many of the women we spoke to believe the greatest challenge they face in business is the struggle to be taken seriously.

Lea says when it comes to families, patriarchy remains the dominant world view so when clients encounter a matriarch running the business they find it very confronting and challenging.

Priyanka feels that even in 2017, there is still a lack of role models for women in business. But she has an interesting idea for change.

“What is needed is a community of feminist men in family businesses who help women along the way by challenging the opinions of other men,” she says.

 

Your family business check-up

  1. Look for role models within your own or other family businesses.
  2. Consider a mentor – it is always helpful to work with others who have been there before you.
  3. Keep in mind that many women in family businesses can draw great inspiration from the men in their lives – their fathers, brothers and husbands.


The benefit of hindsight.

Everyone loves a bit of hindsight and when asked what advice they would give to their 25- year-old selves, our interviewees provided some excellent food for thought.

Looking back, Sara Pantaleo – CEO of 2nd generation family business La Porchetta – has this counsel for young women.

“Fight for what you believe. Gender doesn’t matter so just go for it. Don’t be mediocre. Strive to achieve. I sometimes see amazing, intelligent young women just accept things and I think that’s quite sad.”

Finally, Corrina, a 6th generation member of the Oliver winemaking family, suggests reflecting on one’s partner to see how they can help – rather than hinder – your family business.

“Recognise the key role your husband plays in enabling you to succeed in business and life – with support, not competition or jealousy, and contributing his share to the family.”

 

Your family business check-up

  1. What can you learn from the elders in your family? Ask your older family members the same question we did – “What advice would you give to a 25-year-old version of yourself?’ You might be pleasantly surprised at the answers and what they can do for your business.

We hope you’ve enjoyed these Insights from a few prominent women in family businesses. We have recently published our “Women in Family Business E-book”. If you’d like to learn a bit more about what we do, head over to our website.

[1] Global Data Points, Family Firm Institute, http://www.ffi.org/?page=globaldatapoints, accessed 18/10/17

[2] Imperial College Business School, Leeds University Business School and Durham University Business School, http://www3.imperial.ac.uk/newsandeventspggrp/imperialcollege/newssummary/news_22-5-2013-12-0-36 , Accessed 4/10/17

/by