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Efficient Vs. Effective Continuity Planning

This week we’re talking about Continuity Planning, which regular readers will recognize as the newer and preferred term for what many formerly called “succession planning”.

Too many still use the old term, but I’m doing my part to change the vocabulary, to change the conversations.

 

Efficiency: Let’s Get This Done

My bias is pretty clear, I find that far too many people look at continuity planning as something they’d rather not spend too much time on.

Especially for families who are running an operating company, which will normally have more than its share of fires to extinguish on a regular basis, taking time away from these urgent matters is typically a low priority.

It’s no surprise then, that when these families finally do agree to spend some time on the less urgent matter of continuity planning, their focus is usually on getting it over with as quickly as possible.

But just because something isn’t urgent,

that doesn’t mean it isn’t important.

 

Effectiveness: Let’s Get This Right

In contrast to focusing on getting something over with, some families rightfully prefer to concentrate on making sure that their efforts produce a positive result.

A quick Google search of the word “effective” reveals this: “successful in producing a desired or intended result”

This sounds like a much more worthwhile goal to pursue when a family undertakes this important work.

So why do so many families NOT get this right? Let’s go through some of the main obstacles.

A sign saying Effective & Efficient

Time & Cost

We’ve already mentioned that doing this right takes time, and we all know that “time is money”.

Furthermore, in order to make sure that your continuity planning will “produce the desired result” you’ll need to involve more people and “their” time too.

Many of those people will be family members, while others will be professional experts, again making time and cost factors that could stand in the way.

 

Professional Bias

I don’t love harping on colleagues who work in this space because ideally, I’ll work along with them to get the family to co-create the best plans for their circumstances and needs.

But so many of the experts that families rely on have their own biases that they have rightly developed over their careers.

You probably wouldn’t want to work with a lawyer who didn’t already have some pretty good ideas about how you could best go about creating your plan.

But that doesn’t mean that you should just turn the whole thing over to them either.  Or blindly follow all of their suggestions.

 

Touchy Subjects

The very idea of continuity planning necessarily brings up subjects that most people try to avoid.  We’re talking about death, money, and who will be put in charge of what.  Pretty heavy stuff, to be sure.

Of course, you could just be very efficient, draw up the plans you think are best and let the chips fall where they may.

But that seems so “20th Century” to me.  There are ways that will give you a far better chance of success.

These involve getting the people who will be affected by your decisions together and making them part of the process to make sure that your “intended result” actually has a good chance of working out as planned.

 

How Do We Do That?

It really needs to begin by figuring out, as a family, what that “intended result” could look like.

This can’t be done in a vacuum, and it can’t be done in one meeting.  There really needs to be a series of meetings, involving both generations of the family.

See: Successful Planning: Who Should Be Involved

 

What If Our Plans Are Already Made?

Now you may be thinking, “it’s too late for us, our plans are already made”.  Well, not so fast!

Do all the family members who will be affected by those plans know what’s coming?  If so, congrats, go to the head of the class.

For the other 90% of you, that would be a great next step.

See: Pre-Mediated Planning? Sounds Good To Me

 

The “Intended Result”

The final destination, or the intended result, should not be something that is dictated by the leading generation.

It needs to be based on the family’s values and their vision for the future.

That will take time to work out, but it will be well worth the effort.

If doing this important work means that you need to bring in an objective outsider to help facilitate the discussions, do it.

 

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On Enterprising Families and Family Wealth

Today we’re going to look at a couple of subjects that have been brewing in my head for a while.

I’m going to combine some elements of vocabulary and evolution, which may sound a little more arcane than what I have in mind.  So let’s get going.

 

 

Family Business: Been Around Forever

We all recognize that family business has been around since the beginning of mankind.

Centuries ago, out of necessity, the family used to be even more of a “unit”.

As economies developed, they also became an “economic unit”, as it was natural for families and tribes to work together for their own advancement.

 

 

Business Families: More Recent

More recently, as society has evolved and as economies have advanced and matured, we’ve seen more and more “business families” emerge.

There often comes a time when the people leading a family business actually make a shift to thinking of themselves as more of a “business family” than simply a family business.

There are a couple of elements at play here:

  • Prioritizing the family over the business
  • Working ON the family, instead of IN the business

This shift usually comes only after certain success has been attained in the business that allows its leaders the luxury of time to make this shift.  (Many never make it this far.)

Lots of family businesses remain a family business forever, and of course still serve a great purpose for their members and for society.

See my 2014 book: SHIFT your Family Business: Stop working IN your Family Business, Start working ON your Business Family

 

 

Enter the Family Enterprise

Once a family achieves a certain amount of success with their business, all sorts of possibilities open up.

From growing the original business into more geographic locations, to vertical or horizontal integration, to developing completely new lines of business, the combinations and permutations are literally infinite.

The common thread is often a family, for whom all this wealth is being created.

When a family is involved in more than just its original business, the term “family enterprise” is often the one that describes them best.

This can also be the result of a liquidity event, where a major business is sold, and the proceeds are reinvested into other ventures.

It can be very important for a family to get to a point where they can view any of their businesses as simply another asset that the family owns.

 

Cartoon showing people standing on coins

Enterprising Families

We’re getting into vocabulary and semantics a bit, but there’s a good reason.

Finding the right label for something is often a key to getting members of a group to develop a common understanding of who they are, what they are doing, and where they are going.

I mentioned off the top that we’d be looking at evolution as well.  Let me expand on that now.

Just as a family can go from concentrating on one business during it’s family business stage, and then “evolve” into more of a business family, there can be a similar evolution to the enterprising stage.

These “stages” of evolution often take decades, and can coincide with generational transitions as well.

A recent edition of the FFI Practitioner highlighted a couple of case examples you may be interested in.

 

 

Family Firm Institute – Business or Wealth Focus?

In the same way that any family may evolve from one stage to the next, the organizations of professionals who serve enterprising families have also evolved.

The Family Firm Institute began over 30 years ago, and in the beginning their target was essentially family businesses.

In the intervening decades, they have also concerned themselves much more with family enterprises as a whole, including the world simply defined as “family wealth”.

 

 

Designations and Certifications

FFI now offers certifications in Family Business Advising and in Family Wealth Advising.

In Canada, FEX, through its FEA program, offers the designation “Family Enterprise Advisor”.  Thanks to their “later mover advantage”, they were able to use the more holistic term “family enterprise”, which became more current in this century.

The common thread through all of these is the existence of a family with enough wealth and complexity to worry about.

 

Different Labels, Similar Issues

Families evolve from one decade and generation to the next, and the industry that serves continues to get more sophisticated.

Working together, we are trying to get better results for families everywhere.

And those who can figure out the family dynamics usually make out best.

 

 

 

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Family Wealth Dynamite: One Stick or Two?

A few weeks ago in Family Governance: One Step at a Time I noted that the Institute for Family Governance’s 3rd annual conference would end up inspiring at least a handful of future blog posts.

So here we are with the first of those.

It comes from the presentation by David York, who was making his first visit to IFG.  I was already familiar with York’s work from his books and his past presentations at the annual Rendez Vous of the Purposeful Planning Institute.

I find York to be one of the more compelling speakers in the family wealth space, and you can see for yourself by checking out one of his TED talks, “A new way to think about inheritance”.

 

Estate-Planning Assumptions

At IFG he talked about some of the important assumptions that estate-planning attorneys typically make that should be questioned.

One of the main ones is that if transferring some wealth to the next generation is good, then transferring more wealth is better.

I think it’s perfectly understandable that most people make that assumption, because most of the time it makes sense.

But “most of the time” is not the same as “all of the time”, and that was York’s point.

 

A Dynamite Analogy

His analogy to explain this resonated with me so strongly that it became the inspiration for this blog post.

York stated that for some parents, handing down a huge chunk of wealth to their children can feel like giving them a lit stick of dynamite.

And, because of the prevalence of the “more is better” assumption, by the time all the technical specialists do their thing to maximize the size of the proverbial pie, instead of simply handing over one lit stick of dynamite, they can look forward to handing their kids two of them!

 

Parental Desires Meet Professional Customs

Part of the problem stems from the fact that most professionals have fallen into the same habits of treating their wealthy family clients in a homogeneous way.

For families that fall into a certain range of financial wealth, say the “seven figures” area, this would normally be sufficient.

But once you get into “eight figures”, and on up into nine and ten, those same rules just can’t be applied the same way.

Those parental fears about dynamite are real, but that doesn’t necessarily make them easy to discuss.

See video:  How Much is Too Much?

 

Family Wealth Dynamite: One Stick or Two?

Focus on Financial Wealth

The real issue is that so many of the family’s advisors focus solely on their financial wealth.  It’s easy to see and to count, and it is pretty important.  But it isn’t the only thing that the family cares about.

Sometimes the family leaders have an inkling that they should be trying to work on some of the family dynamics issues, but their advisors typically aren’t well versed in those issues and so the focus continues to be on the size of the pie.

One of my favourite ways of talking about this is the simple equation that I wrote about a couple of years ago, in Is Your Continuity Planning PAL in Danger?

The equation is this:

 

People + Assets = Legacy

If you don’t include any planning around the people, and you only figure out what to do with the assets, you are missing out.

 

 

Family Office: Problem or Solution?

I’ve started to write more about Family Offices here, so let’s look at how things look from their point of view.

Is a family office part of the problem, or are they part of the solution.  The answer, of course, is, “it depends”.

If the family office is mostly about financial wealth management, it is likely part of the problem, since it will be focused on producing more sticks of dynamite.

If, however, the family office also helps the family with their governance, their values and vision, and family alignment, then they can be a big part of the solution.

 

 

Human Capital

This all comes down to looking at those inheritors in terms of their human capital.

As York noted, most families would love it if their rising generation would be able to do just fine even if they did not inherit a single dollar from their parents.

And, he went on, those same parents would also love it if they had so much confidence in their children that they wouldn’t fear leaving them everything.

Is there anyone in your circle of advisors helping with those issues?

 

 

 

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How Advisors Serve FamBiz – Let Me Count the Ways

A typical blog post for me begins with some context about its genesis, and this one will be no different.

A few weeks back in NYC at the IFG Conference, it was at the lunch session, where we had signed up for table discussions with like-minded attendees.

I had pre-selected the table for “Family Enterprise Advising & Role of Consultants”.  I was one of the first to arrive at the table with my lunch, so I sat down at a nearly empty table that was about to fill up.

 

Interesting Neighbours

Within minutes, who should sit to my left but Dennis Jaffe, who had been assigned the role of discussion facilitator?

If you’re at all interested in the subjects that I write about and you don’t know Dennis Jaffe, he’s one of our true thought leaders, he’s worked with families around the world, and his writings are required reading.

A woman then sat to my right but realized that she was in the wrong place, and as soon as she got up to relocate, another woman I had not yet met took her place.

 

And Another Thought Leader

Someone welcomed her, saying “Hi Covie” and I quickly realized that I was now sitting next to Coventry Edwards-Pitt, whose books I have also read.

In fact, a few months back, she had sent me a signed and dedicated copy of her latest book, AGED Healthy Wealthy and Wise, for a client of mine, even though we had never met (it’s great to have friends in this business to hook you up!)

Many business cards were exchanged around the table and a lively discussion soon began.

Although we had all selected the same affinity table, it quickly became clear that we all worked with families in different ways.

 

Coaching Versus Facilitation

Someone noted that sometimes we need to tell clients things they don’t want to hear, and that on occasion, that can get you fired by the client.

Another person at our table who was an executive coach had some difficulty relating to this, and I think that had a lot to do with the fact that he works with individual clients, and he takes plenty of time to assess the coach-client fit before each engagement.

Facilitators, on the other hand, need to “please” everyone, because there are lots of people who might want to fire them.

 

Graduating Clients?

While we did not get into this that day, I’ve had interesting discussions with other colleagues around whether or not we “graduate” clients, i.e. work with them until they no longer need us, and can work out their family governance without us.

There are different views on this, but getting families to become self-sufficient is certainly a laudable goal for many of us.

 

Practitioners Spectrum

We all recognize that every family is different, and that they also change over time.  The same can be said of their advisors.

At last fall’s FFI Conference in London, I was part of a group of four colleagues who held a breakout session on what we dubbed the “Practitioners Spectrum” that looked at this in some detail.

We broke attendees into 6 groups, depending on how they normally saw their work with family clients.

We ran the gamut from Counselling and Mediation to Consulting and Facilitation, and then to Mentoring and Coaching.

 

Getting the Timing Right

And because families are always changing, timing is a constant issue.  Add in the fact that the work we do with families is best done when it is not urgent (not to be confused with unimportant!) people who work with enterprising families are often frustrated by delays that are out of our control.

We regularly need to compete for time with people who are very busy working in their businesses, putting out proverbial fires.

 

Serendipity

In the end, the match between a family business and their advisors can often come down to serendipity, which has long been one of my favourite concepts.

I’m reminded of a blog I wrote a few months back, Genetics, Luck, and Karma: Secrets to FamBiz Success because sometimes you just don’t know why certain things click.

But if you play your cards right, and recognize that what goes around, comes around, you will do alright.

Reminds me of another favourite saying:

 

“The harder I work, the luckier I get.”

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The Unsung Role of Family Champions

This week I’m introducing a subject I first heard about a few years ago, but that has recently been put back on my “front burner”.

I first heard about the concept of a “Family Champion” about five years ago, which would’ve been right around the time that Joshua Nacht was completing his PhD on the subject.

Nacht’s supervisor was Dennis Jaffe, who is quite well known in the circles of the Family Firm Institute (FFI) and the Purposeful Planning Institute (PPI), both of which I was then just discovering.

 

Like a “Product Champion”?

Decades ago I recall coming across the idea of a “product champion”, while reading some business books.

As I recall, the concept was that you needed to have one really interested and motivated person who really cared about the development of a new product within a company, if it was to have any hope of succeeding.

Later in my career, when our family’s business had successfully licensed one of our patented products to a large company to manufacture and sell in the US, we learned about the importance of a champion, the hard way.

 

Champ Doesn’t Work Here Anymore

The company we licensed was acquired within the first year of our agreement, and both the VP and product manager we had been dealing with soon left for greener pastures.

Our agreement “survived” the acquisition, but without a “product champion” around anymore, the product we were expecting them to make and sell (and pay us a royalty on) soon became their 99th priority.

We ended up cancelling the agreement shortly thereafter.

From that point on, the idea of a “champion”, as someone who cares about something and who will assume a leadership role in making sure things happen, became seared in my memory.

Family Circle Issues and Governance

When we think about a family business, we can safely assume that in the business “circle”, there are a number of champions around, whether they be for a product or a project.

The role is actually most often actually part of someone’s job, and something that someone is specifically paid for.  In fact, if they do it well, they may even get a nice bonus.

But every family business has another key circle, the family circle, where things are often much less clear.

Anyone who reads my blog regularly, knows that I always bring things back to the family and how tricky it can be to make sense of things there.

 

Trophys

 

Momentum and Making Things Happen

Because it isn’t normally part of anyone’s “job”, making sure that things get taken care of in the family circle requires someone to be an instigator and a leader, and this person is often referred to as a “Family Champion”.

Joshua Nacht, who now works with the Family Business Consulting Group, has recently updated some of his PhD work and released a book entitled Family Champions and Champion Families.

In the book, he gives some great examples of who these champions are and the roles that they play.

 

 

The 100-Year Family Businesses Project

I asked Nacht how he came up with the idea for his PhD and he explained that Jaffe was his PhD supervisor.

Because Jaffe had recently launched a years-long project of finding and interviewing 100 family businesses that had each lasted a minimum of 100 years, he employed some of his students to conduct many of the interviews for him.

It was after doing a number of these in-depth interviews that Nacht and Jaffe realized that one of the keys to family business survival was to have someone who is interested, motivated, and capable of making sure that the family circle was never neglected in favour of the business circle.

 

 

Advisors Supporting the Family Champion

As an advisor who typically works with families who are beginning to work on family alignment and family governance, I am always on the lookout for those family members who are most open to the ideas that I bring.

The family champion role is often a lonely one, because many family members are preoccupied with their own lives and those of their nuclear family, rather than that of the extended family.

Outside advisors who learn to team with family champions, the ones with whom their messages resonate the most, are best positioned to create a lasting impact for the family, by supporting one another’s efforts.

 

 

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Family Governance – Do It Yourself?

For enterprising families to remain successful over generations, they will eventually need to begin to take their family governance seriously.

As a family grows, and as their wealth becomes more complex, they need to figure out how they will address important questions relating to ways they’ll make decisions together, how they’ll communicate, and how they’ll solve problems as a group.

The very idea of going down this road can be frightening for some, but it doesn’t have to be.

 

 

A Bank Slogan to the Rescue

The idea for this post came a few months ago when I was in the lobby of a downtown office building, which also housed a large branch of one of Canada’s major banks.

While killing time because I was early for my meeting, I was looking around and I noticed a banner for one of the bank’s investment services.

It read:

“Invest FOR yourself, not BY yourself”

Hmmm, I thought, that’s pretty straightforward and quite clear messaging.  It also happens to apply, in a way, to my ideas around family governance.

 

FOR the Family, BY the Family

If you’re familiar with my writing, you likely already know that when it comes to family governance, I believe it really needs to be done “For the family, by the family”.

But, I never said it needed to be done by the family, by themselves!

In fact, I can think of a number of reasons why a family shouldn’t turn the development of their governance procedures into a complete “Do It Yourself” project.

Let’s take a look at a few of them.

 

sunset and a lighthouse

 

Get on Track, Stay on Track

Developing governance systems is actually quite a project.  And, it’s often a project that really isn’t anyone’s “job”.

Sure, getting started and keeping it going often falls to one or two key people, but it’s never the only thing that they have to worry about.

Hiring someone to guide you in this project means you also have someone who will keep things on track, because it’s really pretty easy to let things slide if nobody is making sure that things are continuing to evolve on a more-or-less regular basis.

 

 

Third Party Neutral

Establishing family governance naturally involves getting a number of people together to discuss many important details.

Even though the people are related, that doesn’t necessarily mean that they’ll always agree on everything.  Discussions can get personal at times, and that’s another reason to bring in an outsider.

A trained facilitator will also bring an objective, neutral viewpoint that just isn’t there when the only people around the table are family members.

 

 

Things Don’t Happen By Themselves

An expression that I use frequently is “things don’t just happen by themselves”.

I guess I already covered this in my first point, but it bears repeating.

An outsider who comes in with a mandate to make things happen is more likely to help the family persist, even in times when they begin to feel like they’re not making progress quickly enough.

 

 

Hire the Expertise You Need

Enterprising families usually have a wide variety of human capital to draw from, as many family members have useful talents that help the family continue to be successful.

However, it’s pretty rare for a family to have exactly the expertise required to lead the development and implementation of their governance procedures.

The good news is that there are people who know what needs to be done and can be brought in as the important resource that the family needs.

 

 

Architect, Contractor, Decorator

When you bring in such an advisor, you’re looking for someone who is partially an “architect” to get the design right, but also partially a “general contractor” who will help build it.

As things progress, continuing on my building analogy, you will also want to benefit from that person’s expertise and experience as kind of a “decorator” who helps the fine-tuning as well.

 

 

Guidance and Facilitation

Ultimately, you will need someone who can provide the guidance you need as well as the facilitation required to get the family to come up with the systems themselves.

Ideally the family will co-create their governance.  You cannot just “buy” your governance from a consultant, although that doesn’t mean that there aren’t people who will try to sell it to you.

I suppose you could “save time” and buy it, but most family members won’t buy into a system if they weren’t part of creating it. It just won’t stick.

 

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Ikigai: A “Four-Circle Model” of Human Capital

This week we’re going to look at an interesting model that I came across last year, and talk about how it might apply to enterprising families.

When I first saw it, I mistakenly thought that it was already quite well known, but it doesn’t seem to be.

At the FFI conference last fall in London, one of the presenters had it on a Powerpoint slide and asked how many people were familiar with it.  With dozens of people in the room, I was one of less than a handful of people to raise my hand.

The model comes from Japan and is called Ikigai, and the sub-title of the graphic I found calls it “A Japanese concept meaning ‘A reason for being’”.

Ikigai: A “Four-Circle Model” of Human Capital

Pretty Heady Stuff

I guess that makes it seem like pretty heady (and potentially “heavy”) stuff, but I promise not to go too far afield here.

As usual, I want to look at how things affect families, whether they run a business, have a family office or are simply part of the “ultra-high-net-worth” set, and are concerned with raising their offspring to have meaningful lives.

For most parents, few things are more important than raising our children, with the long-term goal of having them turn out to be well adjusted and happy.

Some adopt a pretty laissez-faire attitude towards their offspring’s career goals, while others are quite directive.

 

What You Love, What You’re Good At

The old standards of “do what you love” and “find something that you’re good at” are still as pertinent as ever when we try to guide our children as they make choices while they’re coming of age.

Of course there are a number of other considerations that also come into play, and the Ikigai brings up a couple of them.

Some people will look at the other dimensions and quickly agree that they are also important, but my point here today is that they don’t necessarily apply equally to everyone.

 

Show Me The Money

In addition to loving what you do and being good at it, for most people it’s also important to get paid for their work, so finding something that you can be well paid for is often very important as well.

Notice that I said “often”, and not always, because I’m not talking about “most people”.

Families that have already succeeded at accumulating significant wealth can prove to be important exceptions here.

 

What the World Needs

Personally, I’ve seen other models that noted the three aspects we’ve already covered, but the one “new” or added dimension is the one where you also consider “what the world needs” in the mix.

This seems to fit quite nicely with the way many Millennials are typically portrayed.

More than ever, it seems that many in the younger generation truly care more about the collective than they do about increasing their own riches.

So in some cases, people may find it more compelling to look for careers where they feel like they are making a positive impact on the world, as a higher priority than making a lot of money.

 

Different Generation, Different Drivers

Trying to find something that checks all four boxes may seem like a low-percentage game.

That doesn’t mean that it can’t be done or that it isn’t worth trying though.

Plenty of people have done well and lived very rewarding lives while only really “succeeding” in a couple of the four areas, thank you very much.

Many parents have sacrificed a lot and worked at jobs that they never loved but needed to do to provide for their families, with the hope that someday, their kids could have a better life.

 

The Resource Generation Set

I recently came across an organization that’s attracting many young people from financially wealthy families who want to make a difference in the world.

They call themselves Resource Generation, and appear to want to help create a world with more equitable social justice.

I’m sure that those who are involved must have some very interesting dinner conversations with their families.

It appears that there are indeed some people who are more concerned with the way the world works and less concerned with making money, because they already have plenty.

And I think that the Ikigai model can go a long way in helping families discuss these important subjects together.

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Family Governance: One Step at a Time

Writing this blog every week allows me to share my thoughts on subjects relating to enterprising families and wealth continuity, and to talk about some of the best conferences I attend in this field.

There is a relatively new event on the calendar that is quickly becoming a favourite of mine, the Institute for Family Governance’s conference.  This one-day event in NYC has taken place in late January the past 3 years, and will be back again in 2020.

And it is great fodder for this blog! 

After IFG in 2017, I wrote Family Governance, Aaaah, and then last year Realistic Family Governance Goals. But this year, in addition to this piece, I’ll be following up with at least a handful of posts inspired by the conference.

 

 

Real World Experiences

As I wrote on their feedback survey, the highlight for me was the fact that there were so many examples of real families and what they have been doing in the area of family governance.

Of course there were presentations by practitioners who work with wealthy multigeneration families, but there were also plenty of people from families who shared their stories.

Now family governance is of course a niche, which I know based on some of the blank stares that I get from many people when I talk about the kind of work that I do.

The US Customs agent who asked me why I was going to New York sort of shook his head and tried not to laugh when I said the I was heading to a conference on family governance.

So the more we can get practitioners and families to share their experiences, about what real families have done and continue to do, the better for all of us who serve this field.

 

Frames of family pictures hanging on a wall of a house

Time, Work, Practice, Leadership

There was a panel in the afternoon where one participant talked about an important decision his family made years ago when they hired a well-known family business consultant.

There were some such consultants in the audience of course, and you can imagine how all of our heads were nodding along.

But there was something else this man said that I noted, because it echoes a message that I find myself repeating a lot.

It didn’t seem to be a prepared or rehearsed remark either, just a genuine reflection about family governance in general.

I quickly jotted down the four main words that he mentioned when talking about his family’s governance efforts.

“This takes time, it takes work, it takes practice, and it takes leadership”

 

 

Doesn’t Just “Happen”

One of the ways I usually put it is to say that this stuff doesn’t just “happen” by itself.

One of the words I often add is “intention”, because being intentional is one way to describe it.

But the four words that he used really rang true, probably because he seemed to be saying them from his heart and literally from the top of his head, not on some prepared slide for a presentation.

 

 

Time and Work

 

Family governance does indeed take a lot of time, both in terms of manhours and in terms of months and years.  That’s why I always urge people to start before they feel like they really need to; it’s almost never too early.

The amount of work involved is often more that the family expects at the outset.  I’m sure that most advisors who work with families have had the experience where some family members start to feel governance “fatigue” at times.

 

 

Practice and Leadership

While time and work are common elements that may discourage families from implementing governance, practice and leadership are part of a different category.

Practice may not always make perfect, but his point was that you do get better at it as you do more of it.  Working with family members isn’t always easy, and we need to do it repeatedly to get better at it.

That leaves leadership, which is also required.  I would add that if there is only one leader who cares about it, the family likely won’t get very far.

If I were to change one thing in the quote I might swap out the word “leadership” and insert “leaders”, just to emphasize that it’s not a one-person job.

But of course we all recognize that good family governance must involve many family members, right?

 

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Family Offices and Impact Investing: A Great Fit

This week we’ll look at a couple of subjects that have been written about a lot over the past few years.

I’ve written about the family office space recently, and promised to write about more often.  Impact investing, on the other hand, I’ve not written about, yet.

It’s interesting that more people are beginning to realize that family offices and impact investing actually go together like peanut butter and jelly, or ham and cheese.

I’m not claiming to have unearthed anything new here, but want to comment on some aspects of this combination that give it so much potential.

 

 

Millennials on the Mind

Let’s start with the premise that many family offices are essentially investment vehicles for wealth that is owned by a family.

Let’s add in the fact that these families want to keep their wealth in the family, and that much of that wealth is often liquid wealth, which can be invested in a wide variety of asset classes.

And finally, let’s not forget that when the wealth (eventually) gets transitioned to the rising generation of the family, there are likely going to be some millennials involved.

If you Google “millennials impact investing” you will get all sorts of hits.

Much of the mindset that impact investors bring to the table overlaps almost perfectly with everything that I’ve ever read about millennials.

 

 

Family Engagement

Anyone who works with wealthy families knows that a key obstacle to successful wealth transitions has always been the difficulty in getting and maintaining the engagement of the younger generation of the family.

It’s only natural for young people to want to find their own way in the world, to explore and develop their own passions, and follow their own dreams.

Their parents, who are currently stewarding the family’s wealth, and who may have been involved in creating and growing it, often become anxious when their offspring do not show any interest in these efforts.

 

family Business office

Generational Priorities Converge

So for families who have liquid capital to invest in different asset classes, it isn’t much of a stretch to begin to look at investments in companies or funds that look to make a positive impact in an environmental and/or social fashion.

Impact investing is about making money first and foremost, just not at any cost.  If younger family members can identify potential investments that satisfy both a social benefit along with an opportunity to make a financial profit, it should be a no-brainer to consider such opportunities.

I’m thinking about this from the point of view of a family that is trying to find ways to combine what is important to all generations of the family.

For a family office to look seriously at impact investing even takes into account future generations, including young children and those who aren’t yet born.

 

 

Like Philanthropy, But Different

Some people confuse impact investing with philanthropy, so let’s address the comparison here.

Philanthropy is another way that some wealthy families use to bring the family together and help prepare the rising generation.  Working together on a family foundation is a nice way to learn financial literacy and how to work together with others.

Families who understand and teach their younger generations the importance of giving back to their community have realized that there are lots of win-wins here.

But impact investing is different, because it’s actually about finding ways to invest money for profit, not just out of a sense of charity.

It just isn’t about profit without regard to side effects and unwanted consequences.

 

 

Who Gets to Decide?

Of course it’s easy to say that family offices should take impact investing seriously and start doing it.  It’s another to figure out how to do it, including asking the questions around “who gets to decide?”

We’ve looked at “what” to do (impact investing) and we’ve explored a bit of the “why”, (because of the engagement of all generations), but that still leaves a lot of the “how” questions.

A few weeks back, in Putting “Family” in the Family Office, I noted:

 

Ideally, the goals of the family would also

be taken into consideration too, not to

mention the family’s mission and vision

 

Impact investing needs to be driven by the family’s vision to really succeed.

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Global FamBiz Students Compete for Glory

The University of Vermont recently held the 6th edition of their Global Family Enterprise Case Competition(FECC) in Burlington.

It was great to see this fantastic event back on the calendar after a one-year hiatus as they awaited completion of their brand new digs.

I was privileged to be back to serve on a couple of judging panels, a role I had enjoyed at 3 of their previous competitions (2014, 2015, 2016).

 

Truly Global Reach

I was scheduled to judge on Thursday and Friday, but because Burlington Vermont is only about an hour and a half from home, I decided to head down in time to catch the first round on Wednesday afternoon.

There were 13 teams in the undergraduate division and 12 graduate teams.  They had been drawn into divisions Wednesday morning.

As it happened, the “FFI Division” consisted of four teams from outside North America: China, Guatemala, the Philippines and Spain.

I decided to spend the afternoon watching that division because of its diversity.

Let’s just say that I was quite impressed with the caliber of presentations, even before considering the fact that most of them were working in their second or third language.

universities participating in Global family business competition

Tell It To The Judge

On Thursday my work truly began.  I was the lead judge of my panel, and as it turned out, I was also the oldest of the four judges, probably by at least a decade and a half.

We saw presentations by undergraduate teams from Canada, USA and Mexico.

Our task was to rank the four teams in order after we had seen them all present and survive our Q & A period.

As luck would have it, all four judges came up with the same rankings so our deliberations were quick.  This allowed us plenty of time to provide what we hoped would be useful feedback for the teams.

We also spent some time on allocating our six stars (points) for best presenters from the teams that we saw.  There were lots of worthy candidates to choose from.

 

 

Disagreements Happen Too

On Friday, the judging panels were mixed up again and I ended up with 3 new people on my panel, and I was no longer the lead judge.

We were in a graduate division, and the teams we saw were from Canada, USA, Germany and Sweden.

When it came time to determine our rankings, unlike the previous day, the four of us were all over the map.  There were three teams who received a top rank, including one that had received a fourth-place vote as well.

This deliberation wasn’t as simple as the previous day’s.

 

 study rooms for students at a university

Not Much Difference

Family business cases, whether in real life or as captured by those who write cases for University classes and case competitions, are always very subjective.

By “subjective” I mean that every person can interpret everything they read, see, and hear according to their own personal filters, experiences and understanding.

When the teams completed their 20-minute presentations, we had a 10-minute Q & A to probe for more depth and clarification.

We got to hear a lot in that half hour, but considering these cases were based on real-life situations that had decades of history behind them, we were really only scratching the surface.

In the end, the difference between first and fourth was not very large on either day that I judged.

 

 

Better Every Year

From the first time I attended FECC until this year’s edition, things have been getting better every year.

Likewise the field of family business as a subject that Universities teach is also advancing, and the profession of advising business families continues to move in positive directions.

If this blog post is starting to sound like it’s coming from a big fan, then you’re reading it correctly.  If it also sounds like I am angling for an invitation to return as a judge next year, that’s also a strong possibility.

 

 

And the Winners Are

On Saturday night the winners were announced.

Congratulations to the undergraduate winners, from Carleton University in Ottawa, Canada.

In the graduate category, the winning team was from the University of Adelaide in Australia.

Click here for all final results.

And the whole University of Vermont crew deserves kudos once again for a fantastic job of creating and hosting this unique event.

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