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On Governance and Budgets in Families and Elsewhere

Allocating Budgets Is Never Simple

When I sit down each week to compose something worthwhile for families facing challenges around their wealth transitions, my inspirations come from all sorts of directions.

This week, we’re taking our cue from the world stage, starting with how various governments face choices regarding where to deploy their resources, and then we’ll see if we can find some parallels to the realities faced by multi-generational families.

I know lots of people who’ve begun to minimize their consumption of news for the sake of their sanity, but the subjects I’ll touch on also happen to be evergreen and therefore ubiquitous, so don’t worry about following along.

Government and Governance, Ugh!

A dozen years ago when my first book, Shift your Family Business came out, I was happy that I chose the title “Governance, Ugh!” for chapter 9.

I wanted to underscore the fact that for most people, that word does not resonate well.

At the time I didn’t necessarily connect it with the more common word, “government”, which also has more negative connotations than positive ones.

When I ask my friend Mr. Google about the root word for government, its A.I. summary returns, in part, “… the act of directing, controlling, or steering a community”.

I like the fact that “directing” and “steering” are there, but also that sandwiched in between is the harsher “controlling”

Controlling the Flow of Funds

In the end there are final decisions that need to be made, and ultimately the buck needs to stop somewhere.

The world’s major governments are often caught in interesting dilemmas when they always seem to have plenty of money to spend on certain priorities like waging war, but never seem to have anything left to spend on feeding their hungriest people.

On a smaller scale more locally, whenever there’s talk about some new venue for a sports team, the argument “but what about our crumbling hospitals” is never far behind.

Decisions always involve choices, and it’s usually difficult to satisfy everybody.

So what does this look like in families?

When the Family Owns an Operating Company

As I was planning to write this piece, my initial idea was to focus on “family wealth” as opposed to “family business”, but then I happened to check my email one day and decided to touch on both.

I continue to read lots of content from all over the place in this ecosystem, and I don’t mind giving the occasional shout out to those who consistently put out good stuff.

So when I got the newsletter from Mercer Capital with the headline Capital Structure as a Reflection of Family Priorities I knew I wanted to include a link.

That piece looks at risk tolerance and control, long term vision and evolving stakeholder needs, as well as family dynamics and liquidity needs.

Somehow when decisions revolve around an operating business, decision making can be expected to be more, well, “business-like”.

Of course such expectations can quickly be dashed.

Family Wealth – “Post Liquidity Event”

Since more of my work now involves what I call “family circle” issues than business circle ones, we’ll now move over to how decisions around money and what it can be used for are made when the family’s wealth is mostly liquid.

See Huge Liquidity Events – Great News, Right?

Most wealthy grandparents will support some of their hard earned dollars going towards their grandchildren’s education, yet they may frown on Bobby III arriving at their house in a Lamborghini that was bought with those funds.

So maybe Bobby III should wait until the wealth creator has passed away before splurging.

The question of what is an appropriate use of a family’s wealth is ever-present, and there is not one right answer that suits every family.

Families need to work this out amongst themselves.

The older generation members naturally have more say, but eventually the family needs to hear everyone’s ideas around how these decisions will go.

Who Gets to Decide? – The Answer Evolves

Writing this conjured up memories of a long ago post (almost 9 years!) titled Who Gets to Decide Who Gets to Decide.

The generation in control will often tend to hang on to that authority as long as possible.

I typically encourage them to open things up slowly once their rising generation are adults, but I’m not always able to convince them as easily as I’d like.

Having them “practice” living with and managing wealth makes sense, even if they do sometimes end up spending some on things we’d prefer they didn’t.

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Your Family’s Continuity Journey: Progress or Paralysis?

What’s the Key Difference Maker?

Each week here we look at something related to the world of successful families and the challenges they face when attempting to ensure that their success will continue through their next generational transition.

While many people still use terms like “succession planning” and “wealth transfer”, I prefer “continuity” and “transition”, and I’ve written about these choices often here over the years.

I also like to refer to a family’s journey together because that is ultimately more important to their success than any “destination” they plan to reach.  See There Is No Destination

That journey can be filled with good progress in a positive direction, or it can sometimes get bogged down into some version of paralysis.

So this week I wanted to look at what the key difference is between those who continue to move forward and those who instead get stuck and feel paralyzed.

We Don’t Talk About the Important Stuff

Since around the time I wrote The Family Conversations You Know You Need to Have about a year and a half ago, whenever I speak about the work I do, I typically talk about helping families have important conversations.

Almost every family will acknowledge that these conversations should ideally be taking place, yet, left to themselves, they are unable to make progress.

And so when I heard a friend and colleague recently put it in a simple way that was new to me during a recent webinar, I knew I was onto something I needed to share here.

Like me, he is a big fan of the idea of good governance, and he shared the following quote: 

 

    “You can’t govern what you can’t talk about.”

(Thanks CY.)

Governance: Communication and Decision Making

The simplest definitions of governance usually mention communication and decision making.

When you add a bit more meat to that skeleton, you start to look at the key questions that surround those simple (yet not easy) concepts.

Some of these include the following:

  • WHAT subjects do we need to discuss?
  • WHEN are we going to talk about them?
  • WHERE are we going to do this?
  • WHO needs to be part of this?

As families figure this stuff out, in what normally becomes an evolving trial and error process, they can hopefully establish some sort of governance system.

Progress or Paralysis

I just hinted that this involves some “trial and error” for a reason.

Too many families believe that they can and should be able to figure all of this out in one sitting, rip off the band-aid, and move on to other, more interesting matters, like running the business or managing the wealth.

Unfortunately, attempts to do too much too fast are fraught with the risk of things breaking down and then the conversations stop and we are once again paralyzed.

When a family is able to convene and have some conversations, sharing information and viewpoints, and then come together again at a future meeting and continue to talk, progress is always possible.

Remember my wise colleague’s maxim that you cannot govern what you cannot talk about.

Back to the Family CRAP Again

A few months back in Ideas on Dealing with the Family CRAP, I introduced a mnemonic to help remember a key point, and it’s now time to dust it off because it is pertinent to this week’s topic.

Recall that I was suggesting that the secret to success is to Convene Regularly And Productively, i.e. C.R.A.P.

Convening just means coming together or bringing together for a meeting or activity, but it also doesn’t just happen by itself.

Meetings need to be planned and scheduled, agendas need to be prepared, a time and location need to be agreed to.

No, it isn’t rocket science, but it does take some intention and effort.

And the families who make these efforts will see the benefits over the long term.

Positive Peer Group Feedback

I recently shared my friend’s quote about not being able to govern something if you aren’t able to talk about it in yet another peer group setting.

It resonated very well and one member even thanked me for it as we were sharing our closing thoughts.

That feedback was a nudge for me to write about it here, and getting feedback from these posts is also something that feeds my desire to continue this weekly habit of mine.

Let’s keep families talking, so they won’t become paralyzed.

 

 

 

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On Sovereignty and Self-Righteousness in Families

Revisiting Some Downsides of “My Way”

Much of my work time is spent thinking and talking about supporting families through intergenerational transitions of one sort or another.

These families have achieved a certain level of wealth and success, and the hope is that these will both continue to serve their family well into future generations.

Many people underestimate the complexities involved when family relationships and financial wealth come together, and believe that some combination of creating more wealth and securing it in good structures will take care of things.

Regular readers and experienced colleagues will recognize the folly in those conclusions.

There are issues that may not show up on financial statements or legal documents but instead stand out on a genogram that can trip a family up along the way.

A Confluence of Meetings One Day

Sometimes my calendar ends up creating some unintentional sequences of events that happen to shine a light on a certain topic, and that’s what occurred one day recently.

In the morning, a colleague and I had an overdue catch up call with a client couple, during which we discussed where their family was still stuck in some patterns that weren’t working for them, and how we might assist in helping them break out of those.

Midday, I was a guest on a webinar with another advisor, where a number of topics were discussed relating to the responsibilities and the rights of rising generation family members.

Then late afternoon, I had a call with the matriarch of a client family I’ve been working with for a couple of years now, and some of the same issues from earlier were touched on once again.

The Strong Desire for Sovereignty

Thinking about all this had me flash back to a blog I wrote a couple of years ago, The Special Sovereignty of the G1.

Sovereignty, as we looked at back then, is about the “authority to self-govern” one’s life, or the life of one’s family.

Whereas the generation preparing to pass wealth down their generational tree typically wants to remain in control as long as possible and keep things together, the eventual recipients of that wealth often have a different viewpoint on those questions.

There can be a tug-of-war between these groups, while the younger members attempt to exercise their “rights” and the older ones want to first see proof of sufficient responsibility.

Managing these tensions can be difficult, thereby creating the need for non-family experts to sometimes assist in facilitating the necessary conversations to work through them

When Self-Righteousness Gets in the Way

Having been part of such conversations with various families over the years, I’m in a position to share from that experience both with family clients and with readers here each week.

Those meetings I had on that one day recently had a bit of a common thread running through them, and they involve a delicate matter that isn’t easy to bring up with clients.

It’s much easier for me to write about, hopefully in a way that gives me a better angle to raise the matter with clients!

The title of this post should make it obvious, while the fact that I’ve pushed this to the latter part of this blog hints at the difficulty in even naming it.

Let’s just say that if you hope to have a good relationship with your adult offspring, minimizing one’s self-righteousness is a great idea.

Your Superiority Complex Is Showing

It would be one thing if parents simply shared their thoughts about their progeny when meeting with me alone, in a venting sort of way.

This is part of the role that advisors play, allowing their leading generation clients to blow off steam and complain about other family members.

Believe me, it works in both directions, and listening to rising generation family members as they share frustrations with me about their parents is also part of my role.

But some of them barely hold back when we’re all meeting together, and it sometimes surprises me.

When parents act as if they’re morally superior to their offspring and the judgement can be felt in the room, everyone is uncomfortable.

Let’s Get Together! Sorry, We’re Busy

When those same parents later lament that the family doesn’t often spend time together, I’m sometimes left shaking my head.

You’ve achieved great wealth and success, and raised mature, responsible adults, try just enjoying it together, without the unnecessary and unwanted moral judgement.

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On Confidence, Trust, and Lessons from Translations

Bilingualism Can Teach Us Unexpected Lessons

Sometimes I take for granted how lucky I am to have been born in a place where speaking more than one language is the norm and not the exception.

Being the son of immigrants who had no choice but to learn new languages as teenagers is also part of my family context, so there was never an excuse either.

Long time readers may recall past blogs where I’ve featured interesting anecdotes that stem from the way similar words have different meanings in English and French, or how thinking about subjects in more than one language can reveal hidden gems of insight.

If you like that sort of thing, read on. Otherwise read on anyway, unless you’re afraid you might learn something new.

A Local Holiday Gathering of Peers

While 99% of the content I produce in this space is in English, I do speak French every day, because I live in the part of Canada where that’s the language of the majority, and because I can.

The cultural aspects of the language are not insignificant, and the realities of those whose first language and culture are French Canadian are quite different from most of the rest of North America.

While most of my peer network is not local, I maintain wonderful connections close to home as well, but mostly “en français”.

At a December gathering of this network, one veteran of this space was congratulating the organizers for bringing together professionals from various domains, so we could meet and develop connections with others who work with the same types of clients, i.e. enterprising families.

Confidence Means Trust in French

He noted that a key element that needs to be nurtured among professionals is “la confiance”, which, not surprisingly, translates into “confidence”.

And yes, when someone is confident, their message tends to land more positively.

But “confiance” is also the word that francophones use for “trust”, and that’s what he was referring to.

Lest anyone be unsure, I quickly jumped into the fray and asked him to clarify that he was in fact referring to the fact that professionals need to trust each other, and that being confident was not what he was suggesting.

He agreed and thanked me for the opportunity to clarify his point.

Flashback Moment for Me

As I write those words, I’m having a private flashback to my early days of writing these blogs, over a dozen years ago.

My kids were young teens at the time and as they saw their Dad writing a blog every weekend, they wondered, and asked, “who reads these?”, with some inherent teen skepticism.

My reply was that for now it was probably a limited number of people that would hopefully grow, but that I knew that nobody would ever hire me if they didn’t trust me, and that they could never trust me if they didn’t know me.

This remains why I continue to share my thinking here each week, writing from both my head and my heart, about the difficulties families face, as well as the challenges faced by the advisors who serve them.

You’ll note that the same “knowing someone before trusting them” dynamic also exists between professionals.

The Many Meanings of “Trust”

So we know the French word for trust is “confiance”, but what do they call a “trust”, that structure and entity that’s prevalent in our work, in the language of Molière?

I’m glad you asked.

Because a trust in French is a “fiducie”.

Well isn’t that interesting, the French name for a trust definitely conjures up some thoughts that also have their place in how professionals approach this work with families.

We need our clients to trust us, and wouldn’t it be nice if all of those who serve a family could act as fiduciaries.

The Trusted Fiduciary – Coming Full Circle

As professionals who serve families get to know one another, in the hopes of perhaps someday collaborating, understanding to what extent our colleagues are comfortable with a fiduciary standard can be enlightening.

I already know to what degree I hold my relationships with my clients dear, so before agreeing to work with others, I need to feel like their commitment will match mine.

I love it when they seem confident, but it’s only after I know that I can trust them that we can begin to work well together.

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Two Wrongs that Definitely Don’t Make a Right

Some Words to Avoid in Family Discussions

When asked about the work I do, I typically reply by referring to the kinds of families I deal with right up front, because that context is so important.

While just about every family could use some support in the areas I help out with, enterprising families are positioned to benefit the most, because there’s a lot more at stake.

I talk about the fact that these families always have subjects that they need to be discussing together, and that they all actually know very well that they should be devoting time and effort to such conversations.

Yet nonetheless, even though they’re all aware of the need to do this important work and to have these important conversations, left to themselves, they just aren’t able to make progress in this area.

Holding the Space and Showing the Way

A huge part of my role with families is to hold the space during the important regular meetings where these discussions take place.

Making everyone feel safe to express what they’re thinking, as well as what they’re feeling, is a large part of the role a facilitator plays.

It’s so important to have an outside, neutral person play the role of running such meetings, because anyone who actually has a stake in the outcome is automatically biased from the start.

The facilitator is in charge of the process, including who speaks when, and making sure that some of the quieter voices are heard.

See Bringing the Weather (And a Deck of Cards) and Diving into a Family System Without Making a Splash

But in addition to holding the space, there’s also the part about showing the way, or modelling the kinds of behaviour we’re looking for.

The Coaching Calls Between Meetings

Often much of the progress I help families make comes not during their time together, but instead during the one-on-one coaching calls we have between meetings.

These are great opportunities for me to connect with each member of the family so they see that I’m there for everyone, not just those “at the top” who are the ones who pay me.

It’s also a wonderful chance for me to talk to them about how they relate to one another, in a more discreet way.

“I appreciate the way you shared that with me, but is that how you plan to share it with so-and-so?”, I might ask.

“You Are Wrong”, and What That Also Means

So we’re finally getting to the subject I teased in the title, about the “wrongs”.

Sometimes in a family there are those who feel like their way to see something is the only way, and that any other viewpoint is therefore wrong.

The difficulty here is that such an attitude normally comes with decades of evidence that the person holding it has actually been “right” most of the time.

When I hear family leaders speak this way, this quickly becomes the first issue I need to address, but doing so in a one-on-one conversation goes over better than if I attempt it in a group setting.

When a family member hears that they’re “wrong”, it can land as “nobody cares what I think”.

“What’s Wrong with You?” – Also to Be Avoided

 The second wrong I want to throw into the mix is, thankfully, not that common, but it does still rear its head and must not be ignored.

Recall that when I work with families, we’re almost always trying to transition from a pretty autocratic, top-down, decision making environment, to a more democratic one, where everyone’s opinions and ideas can at least be heard.

When a discussion degenerates into anyone saying something like “What’s wrong with you?”, I know that I need to step in.

Two people need to be addressed in such cases, the one who spoke those words, and the one on the receiving end.

Handling the “Designated Difficult One”

Many families have a “black sheep” or “designated difficult one”, and that person can become the scapegoat for everything that’s not going the way the family leaders would like.

By the time I enter the system, such lines are usually drawn in indelible ink, making my job more difficult.

Coming from a coaching background that sees every person as naturally creative, resourceful, and whole, encouraging this person to engage can be a challenge, but one I don’t shirk.

Getting the family to understand that nobody is wrong, and nobody needs to be “fixed” is always my goal.

Please avoid accusations containing the word “wrong”.

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Connect with Family – Or DIE Trying

Striving for More of a “Family of Affinity”

It truly is a privilege to work with families as a resource as they face the challenges around transitioning their business or wealth to the next generation.

Seeing the entire family as my client makes this complex, as noted a couple of weeks ago in Remaining Equidistant and Neutral in Work with Families.

But as someone who’s now been doing this professionally for over a decade, it’s amazing to see just how many of these disparate families have some of the same underlying desires.

Almost every last one of them is striving to become more of what Jay Hughes calls a Family of Affinity.

At the same time, most have also discovered that pushing too hard to make this happen often backfires, as hinted at last week in Navigating the Sweet Spots of Life in the FamBiz.

So we’re going back there this week with some ideas on how to think about this to increase the family’s odds of success.

Yet Another Mnemonic to Consider

Regular and long time readers (thanks!) won’t be surprised to see that I’ll now share yet another mnemonic here, although with some negative connotations for a change.

Having already shared about “ATM”, “PACE”, “PAL”, “MEDAL” and “ACE”, I’m now introducing “DIE”, as teased in my title.

As families consider how to increase the amount of family connection, I invite them to think about Desire, Intention, and Effort, i.e. DIE.

For families to increase their connection, all three are necessary, and they also happen to line up in that order.

We’ve already kind of covered the first one, desire, by noting that almost all families really want to make sure that their family remains truly connected as much as possible.

Is the Desire Reciprocal, and How to Make It So

What almost always happens is that there is plenty of desire for connection from some members of the family, but that there are also some family members for whom that desire is much more muted.

At the same time, when those who have that desire are let’s say, “over-expressive” in that area, it can be a turn off for those who are looking for more independence from the family, as noted in the blog linked above.

Quick hint for those with extra desire: the only person you can control is yourself, not the others, so this is where thinking about “what can I do differently” should trump “how do I get them to change”.

Intention – Clarifying Why This Is Important

While desire is pretty much an internal feeling, we need to figure out ways that we want to deploy it on the exterior.

But we’re quickly back to the same conundrum we noted earlier, i.e. how we’re expressing the desire for connection and how a bit too much of that can backfire so easily.

It’s pretty easy to see how intention evolves from desire, but what I invite you to consider here is how your intention is being perceived by those you’re hoping to persuade.

Perhaps if the intention, the “why” behind the desire for more connection, were more clear to all, your efforts (we’re getting ahead of ourselves a bit!) would be better received.

Those “why’s” will also be easier to accept if everyone can clearly see what’s in it for them to play along in these attempts to increase family connection, as opposed to what’s in it for the instigators.

Not All Efforts Will Bear Fruit

Anyone reading this for tips will surely already have expended various efforts in this direction over the years.

Allow me to normalize that this is rarely simple, meaning that trial and error, as well as good timing, are usually required for success.

This may require several rounds of iteration; reigniting your own desire, refocusing your intention, and then making the next effort that you think might be fruitful.

Starting small and engaging with some of the family members may also be a trick to gain some momentum.

For parents hoping to engage all of their offspring, starting with those who are more amenable and getting them to enroll some enthusiasm from their siblings could be an avenue worth exploring.

Not Giving Up, but Not Doubling Down

I’ll close by reminding you that if improving connections within your family is important, having some sort of “family project” to keep everyone united in some way should be your goal, and you can’t ever give up!

Doubling down isn’t the way to go either, so pick your spots and try again later.

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Skills, Knowledge and Attitude for Work with Families

Distinctions Between Knowing What and Knowing How 

Writing about a niche subject like family business and wealth transition challenges on a weekly basis is bound to see me repeat some ideas, especially since I’ve been doing it every week for well over a decade.

Such is the case this week, and I almost ended up revisiting something I addressed in 2021 with way too much overlap, but caught myself in time to readjust this post.

As sometimes happens, witnessing someone share an idea in a new way just in time for me to incorporate it here was quite serendipitous.

So whereas I had initially thought about contrasting only skills and knowledge, adding in the concept of attitude will give my thoughts a fresher edge.

So let’s get going.

Knowledge Isn’t Enough

The main thrust of this piece was to be my highlighting that in order to work with families as a facilitator in the governance space, knowledge, i.e. “what to do”, is not enough.

Because this work is more about process than content, and more about relationships than structures, having the communication skills to guide a discussion is an absolute necessity.

The idea of writing about skills came to me recently when I saw a TV commercial encouraging young people to join the “skills trades”, in order to begin to tackle some of Canada’s economic headwinds like our housing shortage.

We can’t just “know” that we need more housing, we need people with the skills to build it.

And in order to get people to want to get those skills, we need to begin to change their attitudes towards those trades.

The Desire to Obtain Required Skills

Back to the matter at hand, working with families who want to transition their business or wealth to the next generation, knowing what they should do is only the first, small, issue.

Having the skills to engage with them so that they can have the important conversations amongst themselves on how best to do that, given their particular circumstances, is probably even more important.

Too often, very knowledgeable professionals have done a great job of helping these families put together the structures to hold and grow their wealth, with very little thought as to how the actual family members will need to interact with each other to make everything work.

I’m happy to relate that more and more of these experts are beginning to recognize the need to go deeper with these family clients, and are looking to level up their skills to engage with their client families in this way.

The attitude towards such skills is evolving in a good way.

Does Attitude Precede Skills?

Back in 2021 in Skills Vs. Knowledge in Family Enterprises, we looked at the idea that interpersonal skills are an important asset for advisors to work on if they hope to help families.

While many advisors worry about getting too personal with their clients, if you want to remain “sticky” with the families you serve, it becomes key to embrace the attitude that you need to show them that you care.

During a PPI thought leader call recently, David York, whose ideas I’ve shared here a number of times over the years, addressed this point.

He noted that while some advisors shy away from personal topics out of a fear for not wanting to become their client’s therapist, that’s not the best way to look at it.

“You don’t have to be their therapist to ask questions, to show that you care about them, to be their friend”, is how he put it.

Again, this begins with an attitudinal shift.

Practice, Practice, Practice

Like with so many skills, the more you practice, the better you get.

But it all starts with adopting the right attitude towards this work.

You don’t need to get to the point where you feel like someone’s therapist to ask them about their family members.

The knowledge that makes professionals able to serve business owners is what gets them to the table.

But developing the skills to have deeper conversations with their family clients is what makes them indispensable.

Adopting the mindset of being a caring friend is probably the simplest way to think about it and get started.

And then keep practising and it will come more naturally with time.

Skills can be learned and improvement can come rather quickly too.

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Replenishing Your Family’s ATM

Or Refreshing Your Views on What It Is

As yet another year is about to disappear into the past and we look out ahead at a fresh calendar ahead of us, I want to throw out one last idea that came to me a couple of months ago.

Regular readers know that I’m always looking for fresh ways to talk about the challenges that families face as they prepare for an upcoming generational transition of their business or wealth.

I pick up various ideas along the way, assemble them into some kind of memorable combination, and try to share them here on a weekly basis.

Along the way, more and more people have been picking up on my writings, so I continue to oblige you with my missives.

I’m immensely grateful for the positive feedback I get from these blogs, in case there’s any doubt about that.

What Are You Paying Attention To?

A couple of months back, in a context I’ve since forgotten, I heard someone mention that you can tell a lot about what is important to someone by trying to focus on where their attention is placed.

I work in the world of family wealth, and some people focus on the wealth part, while others, like me, prefer to focus on the family part.

More and more advisors to such families are recognizing the need to take a more holistic view and try to integrate both, with varying degrees of success.

But the families themselves are also susceptible to focusing too much on one to the detriment of the other.

The subtitle of my first book (SHIFT your Family Business) way back in 2014 was Stop working in your family business, Start working on your business family.

I hope you can see both contrasts I was making there (family vs business; working in vs working on).

Show Me Your Calendar and Bank Statements

On a related note, I’ve heard on more than one occasion the idea that if you want to know what’s important to someone, you can get a very good idea by looking in just two (or three) places.

“Show me your calendar” gets at the idea that if I can see where you spend your time and what kinds of things you’re doing with it, I will get a very good idea of your priorities.

Likewise, if I were to look at your bank statements and see where your money is going, that would also have lots of useful evidence.

If we add in your credit card statements (that’s #3) I bet I’d have a pretty clear picture of what you enjoy doing and what you hold dear.

Okay, so where’s all this going?

Attention, Time, Money – Your “ATM”

If you’ve been paying really close attention to what I teased in the title above, you’ll have noted that I was walking you through a mnemonic; ATM, for attention, time, money.

If you think I may have created the “Family ATM” idea as a false narrative to draw in readers who might wrongly assume I was going to write about parents who regularly feel the need to dole out cash to their kids, well, you may be onto something.

But of course the two ideas are far from mutually exclusive!

Families who pay attention to the messages that their parenting sends, and who spend their time educating their offspring about the value of money and about the family’s wealth, are less likely to feel like an “automated teller machine”.

Additionally, a family that spends a small part of their money on hiring outside help to deal with this subject are likely to feel even less solicited by “cash calls” from their rising generation.

 

Peppet’s M/L/F Ratio Revisited

Last year in How Can a Family Office Enrich You, I shared an idea from Scott Peppet that I love.

He talks about the ratio of time that family office people spend on what he calls their three main areas of focus, which he calls the M/L/F ratio.

Those letters stand for Money, Legal, and Family.

He contends that most family offices are around 70/20/10, and I think that’s the same ballpark I’d put them in too.

But he and I both agree that the Family number should be much higher.

The families themselves should also be monitoring their ATM’s.

Are you spending enough time considering all the human capital your family has to offer?

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Communicating Clearly – Verbs Matter

Common Understanding Depends on Clarity 

This week’s post may turn into a bit of a rant about the words that I’ve heard some people use in certain situations that make me shudder because I feel like they are unclear or badly chosen.

We’ll go through a few examples to set the stage and then hopefully move into some lessons for families and their advisors as they work together in preparation for an eventual transition from one generation to the next.

As it turned out, I heard a couple of these utterances in quick succession recently, and that put this on my radar.

It also made me think about how so often the key word that rubs me the wrong way is a verb.

Let’s jump in and see where this takes us.

Working with a Coach

For the first example, I need to begin with what I consider to be the proper verb.

I am a coach and I have a coach (as all good coaches do).

When I think about this kind of relationship, I always talk about “working with” a coach.

Imagine how my ears reacted when a was sitting in a room listening to a presentation and I heard someone mention that another person was “seeing a coach”!

Yikes; wait, what?

Clearly the person speaking is either confused or ill-informed.

You see a therapist or a psychologist or name another profession here, but you do not “see” a coach.

No disrespect to anyone who is seeing such a person, I don’t want to add to any stigma around that.

Perhaps if you are dating someone who happens to be a coach I will excuse it, but otherwise, NO.

Being Part of a Board

The next example comes from having heard someone mention that they sat on a board.

Having done my share of sitting on boards over the years, there was a lot more work being done than just the sitting.

I recognize that there are some boards where there are a bunch of people who do little more than sit, but I’ve never been part of one and likely wouldn’t stick around if that were the case.

I prefer to say that I am part of a board, and being part of one for several years recently was very rewarding for me and I learned a lot from it.

Yes, there are “seats” at a board table and they are led by a “chair”, but please, no sitting on boards for me.

Doing an MBA

The third example has been living inside of me for a few decades, since I did my MBA.

There was in fact plenty of “doing” during those two years.

My pet peeve version of this one is when I hear people talking about “getting” their MBA.

If you feel like you just “got” an MBA, as opposed to putting in the effort to “do” it, then it probably wasn’t worth it.

If I mention that I’m going to stop at the grocery store, my wife might ask me to “get some milk” (and I’ll typically reply “Yes, Dear”).

You don’t just pick an MBA up off the shelf.

Much like the sitting on the board, it’s all about the meaningful effort and lived experience.

The Family Enterprise Angle on All This

I noted off the top that this missive might seem like a bit of a rant and so far it probably comes across as such.

But I typically bring my thoughts together in a way that can be useful to families as they work on transitioning their business or wealth to the next generation, so allow me to attempt that now.

I encourage people who are part of an enterprising family to work with a coach, because the perspective they will gain from that will surely be worthwhile.

I also suggest that families put together some sort of board with independent (i.e. non-family) members, and hopefully one where there is more than just sitting going on.

It need not be a full fiduciary board, put at least a formal advisory board often makes sense.

Go Do an MBA

Finally, especially if your family still has an operating business, by all means consider doing your MBA.

Make sure you go to a school where there will be lots of “doing” involved, because that’s the part that makes all it worthwhile.

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When a Family Trip Becomes an ExpeditionWhen a Family Trip Becomes an Expedition

It’s Better to Prepare for the Long Haul

This week we’re going back to the world of metaphors, which is familiar territory for me and my regular readers.

The inspiration for this post comes from a recent peer group call, where one colleague had just returned from a trip to the base camp of Mount Everest.

The facilitator of the call said she couldn’t wait to hear about his trip, and he quickly corrected her saying that it was not a trip, but an expedition. 

The next voice on the call was mine, thanking him for the metaphor that I’d be turning into a blog post about family governance, and so here we are.

A Guided Family Governance Journey

Every week in this space we look at the challenges faced by families as they prepare to transition their “enterprise” from one generation to the next.

Note that the word “enterprise” in that sentence is shorthand for “business(es) and/or wealth and/or assets” owned together as a family.

As someone who enjoys working as a guide for such families on their governance journey, I’ve seen first hand how much of an expedition this work can turn into, which is much more involved than a simple “trip”.

I’ve written about this work as some sort of voyage on a few occasions, as well as the fact that my work ends up being a bit like that of a tour guide.

See: Progressing Up the Family Governance Mountain and Going Far? Go Together. I’ve also noted the guide aspect in Choosing your FamBiz Tour Guide.

Just What Are We Getting Ourselves Into?

Another important aspect to consider when thinking about this subject is that most families who embark on this work enter into it without a firm understanding of how involved it can become.

So while the advisor/facilitator may recognize that it can turn into a full-fledged expedition, we’re sometimes better off selling them on a simpler trip, lest we scare them away.

Of course at the outset, even the one guiding the family never really knows the extent and breadth of the work ahead of us all, but because we have experienced other versions of the journey with other families in the past, at least we have an idea of what it might look like.

If a family is only prepared for a trip, it’s best that they have engaged a guide who’s also experienced in expeditions, who can help level the family up and support them along the way.

More Than Just a Day at the Beach

Let’s take a look at this metaphor with the help of my good friend Mr. Google, to see how he can shed some light on the contrasts between a trip and an expedition.

The definition of “trip” is: an act of going to a place and returning; a journey or excursion, especially for pleasure.

For “expedition” we get: a journey or voyage undertaken by a group of people with a particular purpose, especially that of exploration, scientific research, or war.

I’ve got to admit, that last part about “war” threw me off a bit, although it certainly emphasizes the degree of difficulty or danger involved in an expedition versus a trip.

A Group Journey with a Purpose and Some Exploration

Let’s look at some of the words that resonate when considering the world of families preparing to transition from one generation to the next.

It certainly is all about the group as opposed to an individual.

There is indeed a particular purpose, although I can assure you that it is rarely completely clear to all family members, especially at the outset. 

The importance of making sure the purpose is clear to everyone cannot be overstated.

I really love the part about exploration, because when done properly, there is plenty for the family members to explore about each other as they develop their abilities to work together as they integrate the family’s wealth into their future lives.

Discerning the Next Steps of the Expedition

Families and their individual members make progress at different speeds, so the facilitators who guide them need to continuously try to gauge what they can handle next.

It’s also very difficult to plan too far ahead because you never know what is going to emerge next.

As they decide on what values they hold dear, that will affect how they see their vision and their mission.

All of these parts are intertwined and require flexibility and lots of repetition to keep everyone safe on the journey.

Choose your guide wisely.

 

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