Providing Clarity Can Bring Change of All Kinds

One of the aspects that I love about my practice serving enterprising families is the variety of situations I get exposed to.

And sometimes the way things flow from one day to the next brings up interesting juxtapositions that kind of make me shake my head.

This happened again recently, and it made me realize that I wanted to share something about that here, but I needed a way to tie the cases together in a semi-coherent fashion.

So I landed on providing clarity, and we’ll see if I can turn this recent set of circumstances into something useful and entertaining.

Good and Ugly Versions (Also Sometimes Bad)

With apologies to Clint Eastwood and the movie title from back in the ‘60’s, we’re only looking at two scenarios I’m currently dealing with, so there is no “bad” version, just “good” and “ugly”.

Working with family members who own a business or assets together can bring me into situations with lots of promise for helping them achieve even greater things, and these are always fun to get involved with.

Other times, I get called in when things are going off the rails a bit (or a lot), which sometimes has me trying to help them avoid the worst outcomes. 

As you might imagine, these types of clients are not as much fun to work with.

As a self-confessed “life-long-learner”, I look at such cases as a learning laboratory for me, and a chance to work on different skills, like mediation.

The Swiss-Army Knife Approach

When I think about why some client situations seem attractive to me, part of what sometimes gets me interested is that chance to try to add value in cases where the outcome may not be rosy.

Such cases cause me to stretch and learn, and add more tools to my tool chest, or more prongs to the Swiss-Army knife that I sometimes like to think of myself as.

So let’s get into some of the details of my recent schedule, which saw me with the “Sanders” family on Thursday, followed by the “Fletcher” brothers case Friday.

The situations are about as far apart as they can be for people in my line of work, and I pride myself on being comfortable in either scenario.

Optimizing the Post-Liquidity Family Office

“Rob Sanders” contacted me last fall, after hearing about me from someone he trusted.  

Their family had begun some work on their “Family Office project” a while back, but the firm they used wasn’t able to continue to guide them on their journey.

After speaking with him and learning about the situation, I realized that this was a case where my partners at Blackwood Family Enterprise Services would be able to create a more detailed and durable solution in line with what the client was looking for.

We entered into a full “discovery project” with all family members, culminating in an all-day, in-person family meeting, which took place on a recent Thursday at an airport hotel of a large Canadian city.

By the end of the day, every family member had a great deal more clarity of what the family was trying to do, and how each family member could play a part.

We set the stage for some follow-on guidance that we can continue to provide the family going forward.

Keeping Things On the Rails a Bit Longer

After a fun and productive day with the Sanders family, I drove less than an hour and spent the night in another hotel, wondering how different the following day with members of the Fletcher family would be.

A month or so back in The “Plan A” FamBiz Transition Mirage, we looked at how so many families wrongly assume that passing down equal ownership and management responsibility to the next gen will work out well.

The Fletchers are a textbook case, and when two siblings can’t even speak to each other, it makes it difficult to run a company together.

When you layer in other complex family dynamics, things can go south in a hurry.

The clarity that I’m trying to help bring to them is that what they’ve attempted to do isn’t working.

I’m also trying to help them clarify what options they have ahead of them to minimize the damage that they may be doing to their family and their business.

Unfortunately, sometimes avoiding the ugly is about the best we can do.

Only in the Dictionary, Nowhere Else

This week we’re returning to some territory that’s been covered here before, but is so important that I want to underscore it again, with some new insights.

Almost a decade ago I first shared some thoughts on this subject in Understanding AND Agreement, noting that it’s important for both to be present, even though in many family enterprise situations you can have one but not the other.

In the intervening years, as I’ve been involved in and exposed to many more real world family scenarios, I’ve become more convinced that the only place agreement should come before understanding is in the dictionary.

Otherwise, the potential for chaos is high.

A Simple Example, Thanks to My Dad

My late father gets a shout out here every once in a while, and it’s usually positive, but not always.

See: No Dad, Coaching Is NOT “Helping Losers”.

Some of his teachings are indelible though, and this one is the perfect simple example about the importance of understanding before agreement.

“Work out all of the details first, and THEN agree to the price, otherwise you’ll end up in an argument”, he repeated many times.

Let me break this down, as it relates to a specific scenario where two parties are trying to agree to buy and sell something to one another.

Let’s take a house as our example. If we agree that I will pay you $500,000, but we haven’t yet defined all the terms and conditions, we’ll only end up with arguments later.

Exaggerating to make my point, imagine if, I thought it was clear that all the furniture was included, and that you’d move out in 10 days, and that I’d pay you $10,000 per year for the next 50 years.

Based on those terms, I’m sure you’d insist on revisiting the agreed price, or more likely kibosh the whole deal.

The Family Project Case Example

Regular readers may recall that I serve as a team project advisor for some participants in the Family Enterprise Advisor program of FEC.

See When Sudden Health Issues Threaten Transitions for another recent post about this.

A team I worked with recently came to the same conclusions about the importance of understanding before agreement quite readily.

Here’s an excerpt from a note I wrote to myself when I recognized their inspiration for this post:

“We need to make sure everyone understands what is owned, how it’s owned, who manages what, who is expected to own and manage after, etc., before they can agree to the new scenario”

One of the biggest thrills I get in that project advisor role is seeing teams “get it”, i.e., seeing them grasp the real world part of what they’ve been learning about working with families, “in theory” during their course work together.

There’s nothing like dealing with real people trying to work through their challenges to help you “feel” your way to such breakthrough learning.

It Still Happens Far Too Frequently

A key takeaway reported after following that program is how important it is to work together as an interdisciplinary team of advisors, because no one person can serve all of a family’s needs.

In fact, much of the work of a project team just involves all of the team members coming to a common understanding of the family’s current reality.

When you try to provide solutions before you understand where the family is, never mind where they’re trying to go together, you’re often just adding to the confusion and complexity.

There really is no substitute for actually speaking with all the family members to figure out if they all understand things the same way, because in reality, that’s almost never the case.

Slowing the Family Down Is Hard

When I’m engaged by a family to work with them, it’s not unusual for them to want to make some quick progress.

One of the hardest aspects of this work is making the family slow down so that all family members can come to the same understanding of where they are, so that we can then co-create the future together.

Family leaders from the “NowGen” usually have a good idea of what they want, and assume that the “NextGens” should just agree to Mom and Dad’s plans.

That internal family desire for quick agreement runs counter to what I’m espousing here, so getting them to slow down so everyone understands, first, is a common obstacle, but well worth trying to work through.

Can We Please Spend a Bit More Time on the Exit?

Part of what I enjoy so much about sharing my musings with readers in this space is that I get to bring together ideas from lots of sources and try to combine them in interesting ways every week.

This time we’re going to start with an idea I got from a new colleague, bring in some previous posts, and then incorporate some other ideas that I happened upon on LinkedIn.

Along the way, we’ll bring in various metaphors, and hopefully give everyone some new ideas around how we think about transitions from one generation to the next in a family enterprise context.

Building a Business, and then Exiting It

Let’s start by explaining the numbers in the title of this post. During a recent peer group meeting, a new colleague who happens to be a financial planner, shared an expression that’s become common parlance in his field.

“We typically mention that a business owner usually spends 60,000 to 80,000 hours building their business. But then when it comes time to transfer it, they usually spend between 8 and 10 hours on that.”

Well let’s just say that I’d never heard anyone frame it this way, so I jotted it down and knew that I’d soon be expounding upon this idea here.

This particular peer group is for those who work with family enterprises and family wealth, and this new member of the group has long worked with non-family business people, so a straight sale to an outside party is what he was mostly referring to.

So let’s look at this from a family business viewpoint.

Ten Years or Fifteen Minutes?

One of my first thoughts when I heard the 60,000 to 10 ratio was a blog I wrote about three years ago, Contrasting Transition Timelines – 15 Minutes or 10 Years.

That line was from an acceptance speech for a Family Enterprise of the Year Award, where the recipient related the story about how, decades earlier, his father took only about 15 minutes to transfer the business to him, so he found it hard to believe when professional advisors would tell him that a good transition can take 10 years.

The moral of the story is that he now understands and agrees with the ten years, and that his father’s quick exit was pretty much a unicorn event.

The fifteen-minute version has the senior generation leader exit quickly, while the ten-year plan creates and allows for a period of shared leadership.

The Escalator Analogy

I also thought about an analogy I like and have written about, the one about the escalator.

See The Crowded Escalator Problem in Families

When someone is riding an escalator and they’re approaching the top (or bottom), they need to get off, and not step backwards.

In the case of the shared leadership period, it’s important for the parties to stay a safe distance apart, but you don’t need to wait for someone to disembark before getting on, because many people can ride together.

Congestion, Cohabitation, Turbulence

At the outset I mentioned some LinkedIn posts that I came upon as I was preparing to write this post.

A colleague had written something about a period of shared leadership as a “Période de Congestion” (this was in French) and I recognized that labeling it that way wouldn’t likely encourage families to work this way.

“Congestion” is often used here in referring to traffic jams and such, so I thought maybe “cohabitation” could work better.

As our comments went back and forth, she added that “turbulence” is also a term that gets used to describe this period. (Merci Martine!).

I suppose that just because it doesn’t sound lovely is not a reason to discount it, in fact I completely encourage it in almost every situation.

Learning to manage it well is the trick, of course.

Yes, It’s Messy. And It’s Necessary

For family enterprises, and for situations where there’s no operating business, but there is significant wealth and assets that are owned together with family, it’s important to make sure that what you are setting up is a transition, not a simple transfer.

See Don’t Transfer Family Wealth, Transition It

The time period where the leadership transitions will be messy at times, and that’s expected and completely normal.

And it is so necessary to make sure that the knowledge, skill, relationships, leadership and confidence are all moved down from one generation to the next.

We’re talking months and years, not minutes and hours.

Stop Kicking the Can Down the Road

When speaking about the kind of work I do with families, the way I explain myself is always evolving.

When I got into this a little over a decade ago, much of what I said had to do with how I was hoping to have a positive impact on client families, but it was more theoretical then.

As I have now served many families, the vocabulary and expressions I use today are based on the experience I’ve gained over the years, and are more refined.

As I use certain expressions with prospects, clients, and colleagues, I’m always conscious of their reactions, so I can see what lands well and what resonates best.

I’ve recently been using a bit of a one-two punch that I’m starting to really like, and so that’s where we’ll be going this week.

Having Important Conversations with Family

The first of those punches is to simply note the fact that families really just need to learn to have conversations with each other.

The idea of speaking together, regularly, about subjects that are important to their future, is actually relatively easy for people to grasp.

When you contrast that with not speaking, not sharing, not setting expectations, not asking questions, not learning to agree on how you want things to play out, it isn’t difficult to get people’s heads nodding.

So the first part of my explanation of the work I do is all about noting that families should be having more conversations about their future, especially as it relates to the ownership and management of their wealth.

More silence and secrecy is not what the doctor ordered.

This Isn’t a Surprise to Anyone

So if the first punch is about simply getting families to have more conversations, what’s the second punch?

I’m glad you asked.

After mentioning that conversations among family members is the key, I now always follow up with the fact that these families already know that they should be talking about these subjects.

“Every single one of these families already knows that they should be doing this”, I typically say.

And that of course begs the question about why they aren’t doing this, if they already know that they should?

Well, I also know that I should exercise more and eat less, and yet here we are.

Really? I Never Thought of That!

I can promise you that when speaking with family members about the importance of having more discussions about such matters, I have yet to have a response like “Really, we should be talking about this?”, or “Hmmm, I never thought of that”.

Everyone knows that such conversations would be useful to have, and yet what so often happens is that the leading generation frets about how to have such discussions productively, while the rising generation’s questions about their roles and expectations continue to go unanswered.

The simplest answers as to why families don’t have such conversations are that they don’t know how to start them, and that they fear they will not go well.

Many times it’s partly because such conversations were in fact attempted, but for any number of reasons, things did not go well, so any ideas of restarting the process are met with serious “second thoughts”.

An Unbiased Non-Family Facilitator to the Rescue

My Dad called a family meeting in 1985. It was not well received, as he decided to run it himself, and not to engage an unbiased non-family facilitator.

Our next family meeting did not occur until 2006, and that was only in response to his cancer diagnosis.

These meetings can get into some deep subjects, and families typically don’t have a lot of experience in handling such topics on their own.

A huge part of what a facilitator brings is to take charge of the process and make sure that everyone feels safe, so that everyone can feel heard.

This can take a few meetings to achieve, but a good facilitator will normalize this fact and accompany the family on their journey, at whatever speed and pace makes sense for them.

Strive for Progress, Not for Perfection

It takes time for families to learn how to be together while addressing important topics around the future of their wealth.

It can also take a while for them to recognize that they can in fact make progress on this journey.

A facilitator helps with all of this.

The End Result of a Great Wealth Transition

This week we’re looking at a subject from a bit of a different angle, as I’ve decided to share my thoughts on a recent book that I want readers to be aware of.

As an avid learner, I consume my share of reading material every year, but occasions where I dedicate an entire blog post to one particular book have been pretty rare.

Well, Dr. Tom Deans has just published his third book, The Happy Inheritor, and based on the sales of his previous efforts, I expect that many people will read it, if they haven’t already.

I’ve been a fan of Deans’ work since I met him over a decade ago, and we’ve shared thoughts and conversations over the years, as we both toil in the field of family wealth transitions, and are both proud Canadians.

Feeling Compelled to Write and Share

Deans recently told me that he had not planned to write a third book, but then he seized upon a subject that he felt that he couldn’t let go of.

As an author and public speaker, he kept meeting people from wealthy families who were failing to follow what to him were some pretty straightforward recommendations when planning their wealth transfers.

Some great clues as to what to expect from the book come right from the front cover, where the secondary title reads “How successful families prepare heirs and transfer wealth”.

The fact that we both agree on the need to prepare heirs shouldn’t come as much of a surprise to my regular readers.

But there’s another line on the book’s cover that may seem a bit further afield from my writings, to wit, “Many people transfer family wealth with great care and joy, while others use it to control and destroy”.

While I can write provocatively at times, that’s a line I would not have come up with on my own.

Regular Family Meetings

If I had to boil the book’s message down to one statement, it would be something like this:

The best way to ensure a happy inheritance is to make sure that the whole family meets together regularly to discuss their wealth transfer plan, “with kindness, care and joy” (quote from the back cover).

My regular readers will recognize this recommendation, as it is something I’ve repeated here in various ways over the decade plus I’ve been sharing my thoughts on this overall subject.

While some families hope that they can accomplish a lot by having one single big meeting, where they download the leading generation’s “instructions” as a monologue, Deans seems to agree that a series of regular forums, where ideas are discussed between generations, is a more durable solution.

Beware the Covert Narcissist – Hiding in Plain Sight

I would be remiss in sharing my thoughts on The Happy Inheritor if I skipped over a very important secondary theme that Deans tackles throughout the book.

I already hinted at it above, and it’s all about the fact that in some families, there are some figures who are actually working towards a more nefarious goal, and enjoy using their wealth to “control and destroy”.

He spends a good portion of the book detailing these “covert narcissists” that exist in many families, and the fact that these people are often hard to detect because they always come off as nice and agreeable.

These people always say nice things and seem very friendly, yet they quietly go about trying to control everything and everyone in harmful ways.

These folks don’t exist in every family, thankfully, but they are more prevalent than you might imagine, and they can completely kibosh wealth planning for their family.

Understanding Appropriate Expectations

When you get right down to it, planning for the intergenerational transition of wealth in a family comes down to everyone understanding what’s expected.

As I wrote in Striving for the All AND Nothing Inheritance, most parents would be thrilled to know that they could leave all of their considerable wealth to their offspring without worrying whether or not they could handle it, while at the same time understanding that even if they left their next generation with nothing, that would also turn out alright.

The best way to make sure that appropriate expectations are met, is to talk about them together on a regular basis, in structured family meetings, ideally with the help of an independent facilitator.