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Serving Exceptional Families – Proceed Slowly

Not Every Family Needs “Full Service”

The past couple of weeks we’ve been looking at “connecting” with members of client families and then matching the solutions we have to these families.

All this made me consider one of the biggest questions that people often have for me when they learn about the kind of work I do.

The questions come in a variety of forms, but generally boil down to this: “Who ARE these families that actually do all of this governance stuff?”, along with “where do you find them?”.

If you stopped 100 random people on the street, you likely wouldn’t meet any people from such families, and very few would even have a personal connection to one.

However, if you shared the names of families who continually work on their governance, those names would be recognizable to most.

Are We “Exceptional”; Do We Even Want to Be?

Not every family is destined to be exceptional, and many don’t envision themselves as such either. 

For some families, just imagining themselves in this way is actually unnatural and even abhorrent.

Too often, though, professionals who serve families who’ve achieved a certain level of wealth creation begin to make assumptions about what these families should be doing to preserve that wealth.

Well crafted strategies to minimize taxes and keep financial wealth protected have become the go-to starting point for such families, because a whole industry of professionals exists to take care of these issues.

I’m always wary of situations where the tail ends up wagging the proverbial dog, and for me the “dog” is the family.

I prefer to help the family figure out what makes it exceptional and then plan for ways to grow and preserve that.

Once the family has set those priorities, by all means then let’s get the professionals involved to figure out the best strategies to employ to help accomplish that.

Many Varieties and Versions, and Ways to Make Progress

Some families will have an operating business that they wish to preserve, and finding ways to ensure that it continues to evolve and thrive with the economy, while still being owned by the family, might be their focus.

Others may have had a liquidity event, and are now searching for new opportunities, either through direct investing or philanthropy, or both, and incorporating the rising generation of their family into those projects will take center stage.

Still others may be searching for ways to recreate the entrepreneurial spirit and create a “family bank” that will allow their offspring and all of their human capital to thrive in their own ways.

There are so many possibilities, and the path chosen will vary from one family to the next.

No Two the Same = All ARE Exceptional

And because no two families are the same, they ‘re each potentially exceptional in their own right.

Too often, as advisors, we want to show how smart we are and we rush to get the family moving on our pet project for them, and that where we may be doing them a disservice, hurrying them into action.

A family is a system of many moving parts, and it takes time to engage all of those people properly, to the point where they even understand and believe that there may be a “family project” that will arise from the financial resources that have been created, by previous generation(s) of their family.

Vision, Mission, and Values Work

Some colleagues reading this will nod their heads and agree that helping the family identify its values and then figure out a vision and mission are great first steps, and in many ways I agree with them.

I’m advocating for more basic connection work in advance of those specific projects, which then become more clear with time. 

Discovery work with such families can take months before recognizing where we should actually begin to co-create a family project together.

Yes, the values need to be surfaced at some point, typically early on. But then the mission and vision need to be carefully considered in the context of where the family is now, and what its capacity is to undertake its first steps together in new ways.

An Iterative Process, More Journey than Destination

We’re talking about a family journey over the coming decades together, so there should be no rush to complete the plan in days or weeks.

It should be an iterative process; more about a journey than a destination.

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Matching Solutions to Each Client Family

Plenty of Sophisticated Sellers Out There

The family enterprise world continues to evolve and mature, and it feels like the supply side is way ahead of the demand side in most cases, and that’s not necessarily a good thing.

There really is no single reason for this, nor anyone at whom we need to point the finger of blame, it just seems to be that way.

With time and a bit of effort, and a bit more evolution and focus on what’s right for each particular family client, this is already beginning to change, albeit ever so slowly.

Let’s jump in and look at the problem I’ve dubbed “solutions in search of families”.

The “I Have a Hammer” Syndrome

The simplest version of the issue is that many solution providers are pretty much a “one-trick pony”.

If I go to the barber shop and ask them if I need a haircut, unless I got one there the day before, I can already guess the answer I’ll get.

Likewise, if a family leader who knows that they need to do “something” goes to see a lawyer, they’ll be offered a legal solution; if they start with an accountant, they’ll be offered an accounting solution, and so on.

For the simplest family cases, this is all “plenty good enough”.

For families with more complex situations, though, this is where we can end up with the tail wagging the proverbial dog.

Interdisciplinary Work Towards Custom Solutions

I have long been a fan of families working with a variety of different specialist experts in order to come up with a custom solution for their particular needs.

While it might seem expensive to involve so many highly compensated experts in such planning, the synergies the family gets almost always far outweigh the additional time and cost they absorb on the front end.

The field of such experts continues to evolve in this direction, as professionals learn to work together in the best interests of the families they serve.

As the pendulum continues to swing in this direction, I recently had lunch with a colleague, after which I had a bit of an “A-Ha” moment.

And it had little to do with the fact that I had just eaten the most expensive soup I’ve ever had. (Yes, it was delicious.)

Everything Is Available; Everything is Affordable

I’d been invited to lunch by a colleague from a large multi-family office (MFO) to discuss ways that I might be a resource to them and to the families they serve.

My original title for this post was “Beware Solutions in Search of Families”, because I had the “I have a hammer, so everything looks like a nail” idea in my head.

But the lunch with my MFO friend revealed another version of the challenge, so I rejigged the title to “Matching Solutions to Each Client Family”, because our discussion revealed a different challenge.

I heard about clients who could afford any and every possible “solution”, but for whom the “problem” to be solved had yet to be clearly identified.

I also heard about a firm that was positioned to be the resource to supply and/or coordinate each solution as needed, but, despite having their shelves fully stocked with great stuff, felt at a loss to figure out where to begin.

Crawl Before You Walk, Walk Before You Run

It became clear to me as I digested my soup and my seabass that both the supply side and the demand side of this equation, despite having met and decided that they were a good fit, were still at a bit of a loss to figure out the first steps.

Admittedly, I was hearing about some relatively new potential clients of this MFO, which for me is always the most interesting time, because there’s so much to discover.

My mind works on a much slower timeframe than most (thanks, Dad).

My advice was to proceed slowly, one step at a time.

You want to run with it, but you should walk first, and perhaps even crawl before that.

Taking Time to Properly Connect, First

If this has a familiar ring to something you read here recently, kudos for paying close attention.

Just last week, in Relationships Support Structure, What Supports Relationships, I wrote:

 

            “If you are privileged to work with families,

      and you want to solidify your relationships with them,

             it is well worth spending time and effort 

                on your deeper connection with them.”

 

I recognize that many advisors don’t feel like they have that luxury of time to build this connection.

My suggestion is to find the time, because it’s usually worth it.

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Relationships Support Structure; What Supports Relationships?

You Need to Look Beneath the Surface

Much of the work that is done to preserve wealth so that it can be transitioned to subsequent generations of a family involves creating complex structures.

These structures, which are often put in place by highly compensated experts with years of training, are frequently a necessary component of such successful transitions; they are rarely, if ever, sufficient, in and of themselves.

There are plenty of other blogs on this site that I’ve written over the years that make this point, so that aspect of this week’s post is not new.

Here’s arecent example that comes to mind: When Structural Solutions Aren’t Sufficient.

In order for the structures to properly do the work that they’re designed to do, it is necessary for the right human relationships to be in place to support them.

The structures alone will not cut it, at least not in the long run. 

Please note, this is the hill upon which I am prepared to die, for the record.

 

The 2014 Tent Analogy

Years ago I came up with an analogy to reinforce the notion that there’s often something that’s not easily seen that helps support a visible and useful structure, and I wrote about it here: Creating the Family Business Legacy You Want.

That was admittedly an ambitious title for a blog about a tent, but I think it shows how my writing has evolved!

The crux of it was that we all see the shell of a tent, which is what provides shelter when camping, but without the poles, ropes, and pegs, the shell alone is actually pretty useless.

 

So What, In Turn, Supports the Relationships?

So I told you earlier what was not new, and we just reviewed the structure part and how it must be supported by the family relationships, so now let’s move on to what is new this week.

The question of the week this time is, what supports the relationships?

Apologies to those for whom this is a no-brainer, but I had an “A-Ha moment” about this, so I assume there might be one for some readers too.

                    In order to be strong enough to do the work

                      they’re supposed to do, the relationships 

                         need to be supported by connection.

The A-Ha moment, for those who want to actually hear it, can be heard in this podcast I hosted last year: Let’s Talk Family Enterprise – Episode 26: Advice That Sticks

If you go to the “20:39” mark (or -12:24), my “Wow” is actually audible. (Thanks to Dr. Moira Somers for leading me there)

 

Connection – The Prerequisite to Being Heard

So if the secret to sustainable relationships is connection, there are a few different ways we can look at this.

Let’s start with being heard, i.e. making sure that what you want others to know about you is actually coming through all the way to what they hear, and perhaps more importantly, how they hear it.

It feels to me like this has a lot to do with being authentic and perhaps more than just a little bit vulnerable.

Somehow, when you let that side of you come through, what you say will likely be “felt” and not just heard.

 

Connection – The Prerequisite to Hearing Others

But what about the other side of this equation, the one about hearing others, where does connection come into play?

Here curiosity and empathy are key, and the first thing to realize is that not everyone scores high on these elements.

As a listener, you need to be able to take the time to truly listen to people to feel what they are relating to you, not as someone who has a solution to sell them, but as someone who is curious about them, and who’s trying to feel what they’re feeling.

Please resist the temptation to offer your pithy, simplistic solutions that you’ve rehearsed for this occasion.

 

Connection: A Two-Way Street

As we’ve just seen, the idea of connection isn’t a one-way street, but a two-way, back and forth, with a yin and a yang.

If you are privileged to work with families, and you want to solidify your relationships with them, it is well worth spending time and effort on your deeper connection with them.

And I hope that at least some of you noted the other nuance here, which is that you do not have “a connection” with a family, but as many connections as there are members of the family!

So you probably have lots of work to do.

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Striving for the “All AND Nothing” Inheritance

Striving for the “All AND Nothing” Inheritance

So Much Better Than “All OR Nothing”

I’ve written around 500 blogs over the past decade, and sometimes I convince myself that I’ve shared all the gems I’ve ever heard, somewhere along the way.

And sometimes I find out I’ve missed some.

This past week, I was invited to be a guest on a podcast, and the host asked me for three to five things that all parents strive for as they imagine the inheritance they will leave.

I quickly recalled a nice blog post that dealt with three of them, The “Family HUG” We’re All Looking For, and then began to wonder which two others I could suggest as a good complement to those.

“Oh, I know”, I thought to myself, “let me find that blog about David York’s ‘All or Nothing’ concept!”.

As you may’ve guessed, I realized that I’ve yet to write that one, even though this nugget goes back a couple of years for me.

So, belatedly, here we go.

A Familiar Resource Once Again

Maybe it’s because I’ve shared York’s wisdom before, notably here: Great Expectations in Enterprising Families and Family Wealth Dynamite: One Stick or Two?, among others.

The “One or Stick Two” part of the dynamite one was probably what fooled me into thinking I’d already shared this week’s take-home message here.

Nevertheless, when you know of a thought leader like York, who shares good stuff regularly (and not just the same stuff over and over again), you know that you have someone worth paying continued attention to.

Just make sure you credit them for their ideas, and don’t try to claim them as your own; because this is a relatively small world, .

So, after all this build-up, I must be building up to something worthwhile, right?

They Can Handle It All

The first half of York’s two-part inheritance scenario is familiar to many.

Parents who have accumulated significant wealth will often worry about the capacity of their heirs to “handle” everything that they might possibly inherit.

As I wrote here, in Who Messes Up What, Or What Ruins Whom, they don’t want their offspring to screw up the wealth, and they also don’t want the wealth to screw up their family members.

Many professionals who advise such families have heard these concerns ad nauseam, to the point where an entire industry has sprung up to provide hundreds of structural “solutions” to this dilemma.

However, according to York (and other enlightened advisors), these parents should be working towards making sure that they have raised their offspring to be able to handle all of their wealth.

Wouldn’t it be nice to know that after you’re gone, the wealth you leave your heirs will be well taken care of, because you raised them to be capable stewards?

Sounds Great. Okay, What’s Part 2?

And, if you do prepare your offspring to be able to handle the wealth that you plan to leave them, there’s actually an important side effect.

Chances are good that those who’ve been raised this way would actually also do just fine if ever you decided to leave them nothing.

That’s the second part of this, in case you hadn’t already guessed it.

Everyone thinks wealth is all about the money, but it’s really all about the people. Wealth comes and goes, sometimes remarkably quickly, in families.

The difference is rarely about the size of the pile, it’s more about the people entrusted to look after it.

Preparing Them for Either Scenario Is the Same

What if you did leave them nothing?

Let’s be clear, this is not a suggestion that you not leave anything to your heirs, that’s not it at all.

People do that for various reasons, and some famous ultra-wealthy people have publicly stated their plans to leave modest sums to their progeny. That’s a whole other discussion, perhaps for another post.

My point is that raising your offspring to be self-sufficient and independent is something everyone should strive for, regardless of how much financial wealth is at stake.

If they’re prepared to receive nothing, they’ll also likely be prepared to handle everything.

Which One Should You Aim For?

This is a bit of a “chicken and egg” question, which makes it intriguing.

If you have significant wealth, being concerned that it’ll be too much to handle is normal, so parents sometimes resort to warning their children that they’ll get nothing.

Preparing them for nothing AND for everything will probably work out better.

Either that or preparing them for everything AND nothing.

Go for AND, not OR.

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How to Build a Family Dynasty

How to Build a Family Dynasty

Five Key Considerations

Once a family has accumulated a good deal of financial wealth, at some point, it becomes wise for them to shift their focus from making their proverbial pie bigger, to figuring out how to preserve the pie and transition it to future generations.

This is typically a bigger challenge than expected, and despite having access to high-caliber experts to assist them, families often stumble here.

Many speak of family legacy (including me), but this week I’m pivoting to a related concept, to answer another question, i.e. “How do you build a family dynasty?”

Here are five important things to consider when thinking about this complex subject.

1. Families Grow Exponentially

As soon you mention the word “dynasty”, my mind quickly goes into “multi-generation” mode as a basic assumption.

We’re usually talking about wealth creation that began with one generation and then continued through at least one or two more generations.

Something that creeps up on families trying to stay on top of this is simple math. 

As you add each generation of offspring, you’re adding people (or households, sometimes a simpler way to count) at an exponential or geometric rate.

If you take an example of three children per family, you go from one household to four, as the three leave the nest, and then if each of the three have three offspring, that’s already nine more.

I’ll stop the math there, but once you add that next generation, it quickly skyrockets.

2. Will the financial wealth grow at the same pace? 

That takes some work, and usually lots of luck too!

  • What Got You Rich Won’t Keep You Rich

Wealth is often created via an entrepreneurial venture that becomes a family business, or more recently by success in entertainment or sports, or having shares in a unicorn business that goes public.

Those occurrences do not typically happen or repeat often, and so the odds of them showing up in the same family again within another generation or two are low.

My point is, the skills that got you rich are not the same ones that will keep you rich. 

That realization doesn’t always come quickly to the one who caught lightning in a bottle and then believes they have some special power and invincibility.

3. It’s More About People Than Money

I know that almost everyone thinks it’s mostly about the money, but that isn’t typically where things go sour.

Having lots of money and then staying rich isn’t that difficult if you’re only trying to satisfy one person, or one household.

When you consider a family that’s growing exponentially (see #1, above), making sure there isn’t a revolution, as they work to stay wealthy and become a dynasty family, you begin to realize it’s the people that you need to pay attention to, even more so than the dollars.

4. Family Governance Is Key

Long time readers of my work won’t be surprised that this post is now pivoting towards a pontification about family governance, because that’s a hobby horse I ride quite regularly.

Every dynasty family will continually need to work on answering three main questions:

  • How are we going to make decisions together?
  • How are we going to communicate effectively?
  • How are we going to solve problems together?

When people hear the term governance, in relation to family issues, they typically make an unpleasant face, and I get that. 

That’s when I share those three questions as my definition, which is easier for most to grasp.

5. The Work Is Never Done

Family governance itself has a few key characteristics that make it special.

  • It’s less about formal agreements, structures, and mechanisms
  • It’s more about informal agreements and ways of being together
  • You cannot simply buy it off the shelf from an expert
  • You need to co-create it as a family
  • It needs to evolve as the family and its needs evolve

For those reasons, plus the fact that each of the growing numbers of people also continues to evolve, this is never a “one and done” or “set it and forget it” situation.

Yes, there are some family dynasties around, but not that many.

If you look at them closely, you’ll probably see that they fully understand the points I’ve shared here.

Can it be done? Yes.  

Will it be easy? No. 

Is this for your family?

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The Complex Contexts of Family Enterprises

It’s Never Simple and Everyone Has Their Own View

One aspect of working with enterprising families that I truly love is the fact that situations are rarely simple, and typically quite complex.

I’ve long known that my ability to see complex systems and then simplify them, so that they’re understandable to others, is a strength of mine and probably part of my attraction to this work.

I’m equally enamored with the fact that each person in a family is living their own life and personal reality, so they all arrive from a different context when they come together.

This week we’re going to look at the intersection of complexity and context, and see what we can discover.

(And yes, I realize “complex” and “context” don’t rhyme, but they are pretty close.)

Another Blog Born During a Group Zoom Call

Regular readers know that I’m a huge fan of group Zoom calls, mostly with like-minded colleagues, in one form or another.

These meetings are often where blog ideas come from, and this one is no exception. 

I’m usually quick to credit the person who stimulated the idea, but this time it was actually me.

I will tip my hat to DG, who was moderating the call, because it was his asking each participant for a couple of closing thoughts that forced my brain to come up with something pithy to wrap up with.

It was then that I came up with the fact that this work is always complex, and that when we learn about it from a new context, we often gain new insights into everything.

Back to the Intersection of the Two

It always takes a long time to try to understand any family, and when they have a business or significant wealth that they own together, there’s a whole new aspect that needs to be considered.

Each person has their family relationships plus a whole other layer that most other families don’t ever think about.

But one of the ways I like to get a handle on what’s going on is to spend a lot of time one-on-one with each family member, so that I can learn about them, and especially about the roles that they play in the larger family system.The Complex Contexts of Family Enterprises

Over the years of doing this type of work I never thought of this “discovery” process as trying to understand each person’s “context” but that’s actually a big part of it, and I will keep it top of mind going forward.

In order for me to be a valuable resource to a family, I need to be able to understand things that they themselves do not.

Big Picture View and a Long Timeframe

The fact that I’m naturally curious is part of what makes this come easily to me, but so is thinking about things with a long timeframe.

A family will typically be trying to find ways to stay together for a long time in the future, and that’s something that they need to continuously work on.

But in order to look far ahead, I spend a lot of time asking about the past, because that is actually known, whereas the future is not.

I try to understand how things got to be where they are today, because that offers a number of windows into what might be going on under the surface.

But it isn’t just the timeframe that’s important, it’s also taking a big picture view, from the proverbial 30,000 feet level.

Trusting You Enough to Open Up

The toughest part of this work for some people is getting family members to trust you enough so that they will truly open up to you and tell you things that help you fit all the pieces of the puzzle together.

I’ve never claimed to be the most handsome guy around, but there must be something about my face that makes people feel comfortable sharing their deepest thoughts with me.

Of course I also work very hard to try to make sure that they never have a reason to lose that trust, but I am still often surprised at how much people share with me right from our first meeting.

These people are living in a complex situation, and if I can get a handle on their context, I can help them see things in ways that help them all make progress together.

And that’s good enough for me.

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Lessons from a Family Facilitation Fail

It’s So Much Easier Working with Other Families

Sometimes in my day-to-day, non-work life, things happen that contain lessons for my work life.

Some recent events fall into that category, and I’ve been thinking about the right way to share the experience here, but I need to set some context first.

I share real stories, as close to what happened as possible, but I also modify details for privacy reasons, including people’s names, to protect the innocent (and the guilty!)

Only the Good Die Young

After a long battle with cancer, my brother-in-law, “Jason” passed away a couple of months ago, in his early 60’s.

Jason was the brother I never had, and someone I learned a lot from, especially as I think about his way of being. Alas, only the good die young.

His passing left a void that will be difficult to fill, because he was a leader and master of ceremonies for every occasion, including my wedding almost thirty years ago.

The memorial activities that my sister and their family organized required someone to step up and play the role that the dearly departed would otherwise have naturally stepped into.

Jason being unavailable, Steve was called on to facilitate.

I was honoured to play any useful role for the family.

The US Memorial – As Planned

My sister’s family moved to the US in the 1990’s, when the parents were in their early 30’s, with a toddler, a newborn, and another to follow.

One single memorial just would not work, especially with travel restrictions due to Covid, and many mourners on both sides of the Canada-U.S. border.

So they began with an American memorial on one Saturday, attended mostly by local friends of the family, and where I knew only a small fraction of the 120 plus people who showed up.

The following Saturday would be back in Montreal, where much more of the family could easily attend.

I offered to MC and handle the microphone at the restaurant, and clarified how I hoped to run the event with my nieces and nephew, and they quickly agreed with my ideas.

Everyone followed my instructions and requests regarding acceptable time for sharing stories and it all flowed seamlessly.

The Canadian Funeral and Reception – NOT the Same

The following Saturday, we began with a church service, with a reception planned at a nearby restaurant to follow.

A huge crowd came to the church, and there was no way the reception could accommodate even a quarter of them, so an announcement was needed to dissuade many from following along.

I was conscripted for this “simple” task, which I apparently finessed, since we ended up with a “Goldilocks” number of people at the reception. At least that request worked.

I checked with the family and we agreed that the formula from last week worked, so we’d just do it again.

I announced that we’d stop the music every 15 minutes or so, and then a couple of people who wanted to share stories would each have 2 minutes with the microphone, just like last week.

Your Family’s Respect Is Different

This crowd, however, was very different from last week’s.

Many of those who wanted to speak were relatives of mine.

Cousin “Keith” started off by reading his speech that took about 10 minutes, way over my “allotted time limit”.

Before I could get the music going again and attempt to re-establish my “rules”, his brother “Roger” came up an read his tribute, and it was even longer.

Things were not going as we planned, and the family facilitation fail was on.

These people had their own ideas, and they weren’t about to take orders from me. 

Oh well….

Reading the Room – What Needed to Happen, Happened

As it turned out, what needed to happen, happened.  When families gather, you need an agenda and a plan, and you need to be ready to chuck them in the garbage and go with the flow.

Read the room and adjust on the fly.

The big lesson for me was one that I could have, and perhaps should have, foreseen.

It’s really, really, really difficult to facilitate your own family members, they just don’t see you the same way and respect the “rules” that you put in place.

I’ve seen it before and likely will again, but at least I’ll probably see it coming.

Rest in peace Jason. And thanks for one last facilitation lesson.

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As Easy as 1 – 3 – 2 ; Wait, What?

Figuring Out the Best Order for Your Family Succession

There are many blogs on my website that discuss the way some family enterprises transition from one generation of leadership to the next, and most of them refer to the fact that this transition is typically from “autocratic” to “democratic” in nature.

This week I want to look a bit more into detail around the steps that a family might want to take to accomplish such a transition in a smooth way.

With a hat tip to a colleague in one of the study groups I’m in, once again, (thanks DT) this is a concept that struck me right away as “blog-worthy”.

How to Go from One Leader to Two

“Dave” was talking about a family where Dad was preparing two of his offspring to eventually take over his business, and it seems that Dad was thinking about the transition as a future event that would take place.

In Dad’s mind, I’m surmising, he would finish work one Friday as the head of the company and on the following Monday morning his two rising generation family members would walk in and be co-leaders of the business and succeed him.

This isn’t altogether surprising to learn, because so many business leaders imagine things in this way, which looks at a transition like this as an event, or a transfer, or a transaction.

But when transitions like this are done well, they are handled more as a process, not a singular event.

A Transition Implies an Overlap Period

So if we’re considering a transition process, that implies a period of time during which there’s shared leadership, and this leadership can and should be divided among the members of both generations.

As Dad considers which of his responsibilities he needs to begin to give up first, he can consult his two partners and together they can decide which of the successors is best suited to pick up which of these new tasks.

Some time later, when he’s ready to back away from another area that he’s been handling, they can reconvene, and maybe this one will be better suited for the other incoming leader.

Finding Peaceful Co-Existence

The idea I’m trying to get across here is that all of the family members can learn what a peaceful co-existence needs to look like.

As Dave put it, instead of going from 1 leader to 2 leaders, why not go from 1 leader to 3 leaders, and then when Dad is ready to fully exit the scene, then they can go to 2.

Admittedly, going from 1 to 2 sounds simpler, but it’s definitely not easier to pull off.

Sometimes, the best way to go from 1 to 2 is actually to pass through 3 on the way. This would be one of those times.

And, recognizing what’s required to work with a goal of peaceful co-existence is the main part of my argument.

Proving That Democracy Works

I always try to imaging a scenario that might play out, where Dad is now out of the picture and the siblings run into a conflict and they immediately throw their hands up and say that they can’t work together, because this is a situation where a one-person leadership model is required.

If, however, they could look back at the period during which they were functioning as a 3-person leadership team, they’d likely approach things differently.

They would have practised the skills necessary to co-create their decisions.

But if they’d gone straight from 1 leader to 2, then they’d be set up for a tug-of-war from the start.

The Actual Numbers Aren’t Important

I hope you recognize that the numbers aren’t what’s important here, but the concept.

You might be going from 2 leaders (say Mom and Dad) to 3, with three offspring planning to take over. In that case, the numbers might be from 2 to 5 to 3. The key is the overlap and getting used to the peaceful co-existence part.

The other key learning here is that a transition is not an event, it’s a process, and that process has stages.

Picture a relay race, and notice that the baton isn’t instantaneously thrown from one runner to the next, but handed off, which includes a period of time during which both runners are holding it.

Please don’t neglect that period, because it’s probably the key to a successful transition

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How Do Wealthy Families STAY Wealthy?

Getting Rich Is Actually the Easy Part

There seem to be way more wealthy people around these days, and a lot more striving to join their ranks every day.

So many of those who have “arrived” in the land of wealth are satisfied that they have now made it, and assume that all their problems will disappear.

When you have a family, though, and you begin to ponder the transition of that wealth to the younger generation of your family, things get tricky.

Can it really be that getting rich was the easy part?

Concentrating on Financial Wealth – Like Everyone Else

When a family becomes wealthy, via a family business, working for a company that goes public, or via stardom in entertainment or sports, there’s often a nice period of adaptation where the newfound abundance of financial wealth solves so many problems, so it’s all viewed as a plus.

At some point, which could be months, years, or decades later, everyone realizes that there’s probably enough money to do whatever we want, and this is when the various views, needs, and wants of the different family members start to rise to the surface.

How will the family make the decisions around the deployment of the financial wealth?

How will the family members communicate about the wealth and how it will be saved, grown, spent, invested, given away, and transitioned for future generations?

How will the family members solve problems together, when they arise, without resorting to legal remedies?

The Other, Non-Financial, Capital of Families

This is where it’s good to look at the other kinds of capital that the family also has, and can try to develop, in order to help figure out answers to the tough questions we just raised around the financial wealth.

Let’s take a look at the family’s Intellectual, Human, and Social capital, and see how the financial capital can be used in ways to support those, and determine if looking at things from this angle might provide some useful viewpoints.

Intellectual Capital – Between Your Ears

The first other type of capital we often think of is intellectual, as in the things that you know and have learned.

My grandfather used to say that anything that you can put between your two ears, nobody can ever take away from you. Having had almost every possession of his taken away, he knew what he was talking about.

Most people think of formal education as their intellectual capital, and it is often a big part of it and the simplest example, but there can be more to it, of course.

Human Capital – More About Your Soul

When we switch to looking at human capital, that’s a lot more about your soul. Your humanity includes what you care about, what you pay attention to, and how you relate to other people.

It also includes health and mental well-being, how you communicate and solve problems with others, and your general ability to get along with others in all situations.

The way you communicate with others and demonstrate respect for others also falls in this category.

Social Capital – Where the Family’s Heart Is

My favourite form of non-financial capital is social capital, and when looking at families, it can really come to the forefront.

The problem is, making it one of the family’s strongest forms of capital isn’t usually simple and easy, and it takes a lot of work.

When talking about how wealthy families stay wealthy, all three of these are important, and social capital is where they all come together and become part of what the outside world will often see.

They all combine into a family’s legacy, and you will likely note that those families who have stayed wealthy through a few generations, almost always have a legacy component that we can see, respect, and relate to.

It’s About Much More Than Money

I’ve written about some of this already, notably in Is Your Continuity PAL in Danger, as well as in When Your Greatest Desire Is Also Your Greatest Fear.

Research shows that when families lose their financial fortunes, the reasons have less to do with events relating to the financial elements of their wealth.

Families usually fail to stay wealthy because the family falls apart, because they haven’t been properly prepared to inherit their wealth, and they haven’t learned to work together to maintain it.

So the key to maintaining a family’s financial capital lies in developing the other kinds of capital, not being ultra-focused on the money.

There’s help for that, you know…

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“Clifford” Isn’t Ready for the Company’s Board

What Does It Take to Play a Key Role in a FamBiz?

A few weeks back in Hey, the Expert Is Here! (Uh Oh…) I hinted that this post would soon be coming, as its genesis stems from the same virtual study group call that gave rise to that blog.

That missive dealt with the difficulties advisors sometimes face when working with families, who look to us to have simple, expert solutions to their complex challenges.

This week we’ll look at how family members sometimes have expectations for roles in a family business that are not well aligned with the reality of the situation.

I’ll share some insightful ideas while suggesting ways to avoid those misalignments by having some important conversations from an early age.

 

The Robinson Family and the “Scholastic” Case 

Our study group occasionally uses a real life case as a basis for discussion, typically from a real family client of one of the members.

This time though, we took one from some recent headlines, involving the death of the CEO of Scholastic Corp., a book publishing giant responsible for some well-known series, including Harry Potter and Clifford the Big Red Dog.

When family business stories make headlines, it’s often for the wrong reasons, and this one does qualify, thanks to some of the decisions Richard Robinson made when writing his will, followed by his unexpected death, albeit at the age of 84.

The case supplied our group of “experts” with plenty of fodder for discussion. One of the members of the group (Ok, it was me!) couldn’t resist poking fun at one of the CEO’s sons, who was quoted in the Wall Street Journal story about the case.

 

Dressing Up as Clifford the Big Red Dog

The young man seemed to think he was in line for a position on the company’s Board of Directors, even though his most noteworthy contribution to date was having donned the Clifford costume for some promotional events.

That’s when someone suggested the headline I used for this post (thanks KH).  

No, he isn’t likely ready to join the Board.  But what made him think that he should be?

It’s hard to know for sure, but one thing was clear from the story, and that’s that very little communication about roles in the company of any sort ever took place between the CEO father and his sons.

He did communicate a great deal with his mistress who worked for him and who inherited most of his assets, though, which is what gave this story so much press attention.

 

Aligning Expectations and Preparation

I’ve written a lot on alignment and expectations, but very little specifically on preparation.

For rising generation family members who aspire to some role (or roles) in the family enterprise, preparation is a must.

It is not, however, as simple as one might believe.

In decades past, “go get an MBA” was a quick and simple way to prepare, and that’s still typically a valid step to be taken, depending on the desired and expected role.

Wise families now realize that there are important roles to be played not only in the business, but also in the family and ownership circles.

 

Preparation and Leadership – Who Can Do What

The whole question of preparation also drags along with it another key element, and that’s leadership.

That MBA may be the best way to prepare for a key role in running the business, as it has over the past few decades.

But other roles also require leaders, and preparing for such roles takes time and intention, and a recognition and acknowledgement that such roles are worth developing.

Leadership roles in the family clearly require different skills and abilities from those in the business.

Ownership roles are different still, although there are always overlaps.

 

Pushing AND Pulling Are Required

Regardless of what type of role you’re looking at, there needs to be action on both ends, i.e. pushing and pulling.

The rising generation needs to make the effort to push their way in, while the leading generation also needs to make the effort to pull them along.

Needless to say, this requires coordination, which means that communication needs to be clear and frequent.

 

It’s Never Too Early to Begin

So young Mr. Robinson, while removing the Clifford costume, could’ve asked his Dad about what roles might be available to him in the business some day.

And Dad also might’ve asked his son if he thought that some day he might want to play a larger role in the company.

It’s never too early to start.

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