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My Notes from a Great Keynote

My Notes from a Great Keynote

The Family Firm Institute recently held its annual conference in Chicago, and the subjects covered were enough to fill out my blog calendar for the next few months. But today I’ll concentrate on just one session.

The main FFI conference wrapped up Friday, and then Saturday featured a one-day “research and education” session. I’d never stayed for the extra day before, but the lunchtime keynote alone made it well worth staying.

 

An Industry Pioneer

The speaker was none other than Craig Aronoff, one of the founders (in 1994) of the Family Business Consulting Group (FBCG) as well as a past President of FFI.

FBCG has been a leader in the field of family business advising and they are held in high esteem by just about everyone connected to this profession.

They’re a leading producer of great content as well, which actually brings me to the first of the three points Aronoff made that I want to share with you today.

 

Private Lessons

Aronoff noted that business families have different ways that they deal with their challenges, and that those who actually hire an outside family business consultant are just a small minority.

The ones who do hire such a specialist are in effect opting for “private lessons”, as he nicely put it.

You can learn to play a musical instrument in lots of different ways, especially with today’s technology. Some people will just go to Youtube and find some instructional videos, while others will hire a teacher to come to their home and offer private lessons. (My analogy, not his)

 

Market Penetration 

He went on to actually put some numbers out there, estimating that only somewhere between 2 and 4 percent of family businesses hire family business consultants.

I wouldn’t know where to begin to try to figure out what the number is, but given Aronoff’s experience in a leading position in the industry, I’m inclined to give his numbers plenty of credence.

If so few business families are reaching out and hiring specialists to give them “private lessons”, then what about the rest of the families?

 

What About Everybody Else?

I guess that the other 96-98% of families try to meet their challenges “on their own” and with help from their other professional advisors from various fields (law, accounting, tax, psychology).

I would hope that more and more of those families are at least benefiting from the ever-increasing amount of great content that is being created and shared in the burgeoning family business space.

When I entered this field, I reflected on how many families I could realistically work with directly during the next 25 years of my career, and I had trouble getting to triple digits.

But that only includes families for whom I would be their provider of the “private lessons”.

Between writing, speaking and teaching, I have the potential to be a resource to so many more families.

 

Values: Guide & Goals & Glue

One final note on my take-aways from what Aronoff talked about.

(I should also note that the main subject of his talk was research and its relevance to the field of family business, which I’ve decided to ignore in this blog, since it’s not my area of interest or expertise.)

He quickly mentioned the importance of values to family businesses. (Please see: FAMILY BUSINESS: HOW DO VALUES FIT IN? for my take on this issue).

He noted that from his perspective, values provide the 3 G’s:

The Guide, The Goals, and The Glue.

As a fan of anything that helps people understand and remember important concepts, I found this noteworthy.

 

The Glue and the Grease? 

I’ve had a blog idea about glue stuck in my head for a few years now, involving “Glue and Grease”, but I’ve yet to find the substance in nature or industry to complete the analogy.

What I try to bring to families who hire me is a bit of both; glue to help keep things together, but also grease that keeps things running smoothly.

Any engineers or creative types out there who think of a substance that fits this analogy can look forward to a hat-tip and shout out from me for sharing ideas for that blog.

I remain available for private lessons for select families, and I will continue to add and share content to this fascinating field.

Note: Last week this space featured its first ever Guest Blog. Unfortunately I was a less than perfect host for my guest, and when I posted her piece I accidentally dropped a few paragraphs in the middle of it.  It has now been corrected, and can be found here: Lessons Learned from Women in Family Business

(Sorry Kim!)

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Lessons Learned from Women in Family Business

Guest blog from Kim Harland – Thanks Kim!

Lessons Learned from Women in Family Business

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

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

 

What makes family business successful?

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

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

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

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

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

 

Your family business check-up

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

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

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

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

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

 

Your family business check-up

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


The benefit of hindsight.

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

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

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

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

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

 

Your family business check-up

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

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

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

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

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Family “WealthCo” Opportunity Knocks

Family “WealthCo” Opportunity Knocks

A couple of weeks ago I travelled to Toronto to attend a one-day investment conference aimed at Family Offices.

As someone who used to be interested in the nuts and bolts of investing my family’s investment assets, I used to attend a lot more of these events

I had a bit of a flashback as I listened to speakers talking about the future direction of the S&P500, and what the Fed was expected to do with interest rates.

But I let out more than one contented sigh of relief, as I also recognized that I have now found more interesting things to occupy both my mind and my time.

The Family Office aspect of the conference thankfully added some more interesting ideas to the agenda.

 

Liquid Assets

The first noteworthy take-home message that I got from the day came from the very first panel.

On stage were a number of investment specialists, all of whom are charged with providing investment vehicles and advice to a number of family offices and families of wealth.

Most “family offices” are formed after a “liquidity event”, in which a substantial business asset is sold by a family, creating a pool of capital available for investment in other assets.

 

The Family “WealthCo”

One panelist (whose name escapes me, otherwise I would happily credit him) noted that when he has a client who experiences such an event, he makes sure that they do not become complacent.

Too often (and I have seen this up close myself) when a family sells an operating company and winds up with a proverbial “pile of cash”, they think that things are now going to be so much easier.

They wrongly believe that they’ll be able to become “Do-It-Yourselfers” for much of what they’ll now need to manage.

The speaker related that he always insists that these client families realize that whereas they previously had an “OpCo” (operating company), they were now the proud owners of a “WealthCo”.

This WealthCo requires diligent leadership, qualified people, and formal procedures and governance, just like the OpCo did.

His message is worth keeping in mind, and I’ll certainly be using his term going forward.

 

Opportunistic Opportunities

During the same panel, I got another interesting “blog-worthy” tidbit, and this time the fact that I don’t recall the speaker’s name may be a plus.

Speaking without notes, someone was talking about evaluating opportunities, and used the adjective “opportunistic” and then searched for the right noun to complete the phrase.

He eventually ended up uttering the phrase “opportunistic opportunities”, to a mild chuckle. I note this not to make fun of someone on stage searching for the right word (been there, don’t that) but because his “expression” made me realize something important.

 

Not All Opportunities Are Created Equal

The point that was driven home for me is that not all “opportunities” that are presented to us are in fact “opportunistic”.

In fact, one of its biggest challenges a family “WealthCo” faces is the careful selection of which opportunities to pursue.

As someone who’s selected some very good opportunities over the years, I must grudgingly admit that I have made a number of poor choices too.

And if you think that you’re qualified to “cast the first stone” as the exception, then I must either congratulate you, call you a liar, or suggest you scan your memory bank again for some examples.

 

Diligence and Governance

Earlier I noted that a WealthCo requires procedures and governance, and I know that it’s tempting to really enjoy the newfound freedom that comes with putting liquid investable assets to work.

There can be a tendency to see many opportunities as being much more “opportunistic” than they really are at first glance.

You need to force yourself, as a family, to look at your family wealth as a “WealthCo”, that needs to be managed and governed in as serious and diligent a manner as you ran your former OpCo.

 

Think (and ACT) Like a Family Office

In my book, SHIFT your Family Business, Chapter 9 is called “Think Like a Family Office”. The WealthCo idea takes it a bit further, and actually suggests that you “Act Like a Family Office” too.

WealthCo is just another way of saying it. However you say it, just don’t get complacent with the newfound freedom liquidity brings.

Govern yourselves accordingly.

Next Week: I’m looking forward to the first ever Guest Blog post here next week. Kim Harland will be supplying a guest piece here, while one of my original blog posts will be going to her subscribers.

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5 Things you Need to Know: Purposeful Planning

Once again this week’s blog comes from a being an interested listener/participant on the weekly teleconference of the Purposeful Planning Institute.

The guest thought leader was Babetta von Albertini, who is a relatively new PPI Member, but who also heads up the Institute for Family Governance, which will have its 2nd annual conference in NYC in January 2018.

That these two groups fit together well should go without saying.  Purposeful Planning and Family Governance could almost be considered two sides of the same coin.

 

Case Studies

The title of the call was “How to Give Powers to Trust Beneficiaries” and during the first part, von Albertini covered the details of two actual case studies that she was involved in recently.

As I listened attentively, I had a bit of an “A-Ha” moment and I realized that Q&A time (where often the questions are replaced by comments) was fast approaching.

I jotted down a few notes about the cases she’d presented, and I concluded that she’d almost given a perfect definition of what Purposeful Planning is (or should be).

 

Jumping In

I was the first person to “Press 1” so I got the floor first (this isn’t unusual for me on many of these calls).

If you listen to the recording, you’ll note that my summary was well received by the host, the speaker, and subsequent participants.

This not only stroked my ego, but also inspired this blog post.

Without further ado, here are:

5 Things to Know about: Purposeful Planning

 

  1. High level, strategic planning

So many of the people who are “experts” in the field of estate planning or succession planning are actually specialists in certain “tactics” that are often employed in the process.

Purposeful planning takes things to a higher level, and looks at things from a bigger picture view, from a higher level.

It truly is a strategic exercise, and it involves the complex interaction of a variety of specialist fields.

 

  1. A team of experts, collaborating together

Because it is complex by nature, a truly strategic effort necessarily involves a variety of specialists.

But a bunch of experts who stay in their silos rarely makes for a great plan. The experts actually need to collaborate and work together to find the solutions that suit the family client.

 

  1. The family is at the center of everything

As I just alluded to, the client is the family, AND the client is at the center of everything. Purposeful planning looks first and foremost at the purpose of the wealth, which is to serve the family.

Too often, estate and succession planning are simply a compilation of tactics put together in a way that sounds great, in the same way that Giorgio Armani looks great on the mannequin in the store.

If it isn’t custom tailored for me, it probably won’t fit, and it will ultimately be uncomfortable and look silly on me.

But I will have paid a hefty price for it…

 

  1. Simplicity is valued over complexity 

The case studies that were discussed on the call also involved a very interesting key step along the way. There were many long legal documents, including a bunch of trusts, but there was also a painstaking review process of those.

The key step was a two-page summary that was prepared for each document, which laid out, in simple terms, what was included in the 60- or 80-page document.

That way, anyone and everyone could actually understand them and discuss them intelligently.

Wow, clarity and simplicity, what a novel concept!

 

  1. Beneficiaries are empowered 

One of the major concepts that I left for last but not least, is that part of the family-centric nature of purposeful planning actually strives to empower the next generation beneficiaries.

How many of us have heard of people who are “trust fund babies” who are actually severely hampered by their position as recipients of funds for little or no effort?

Purposeful planning tries to actually empower them to have a say and some control over their lives, and doesn’t treat them as less capable people who are simply entitled.

 

An Idea Whose Time Has Come

Members of PPI probably already “get” most of what I’ve written above, but sometimes we all need to be reminded of some of these things.

More than that, we need to grow the number of those who get it, and make this planning the rule rather than the exception.

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The Future of Family Business is _______________

The Future of Family Business is _______________

A few weeks ago I came across something that appeared to be a news item about family business, so naturally it caught my attention.

It turned out to be some survey results about family business issues, as well as a promo piece for an upcoming conference on the subject, in Australia, at which the survey results were to be released.

The headline read as follows:

         Survey Finds Longevity of Multi-Generational

                 Family Businesses is Under Threat

It certainly succeeded in piquing my interest, even though the headline was a tad alarming for my taste.

 

Hold Off on the Drama, Please

If that alarmist headline wasn’t enough, here is the opening sentence of the “Newswire” piece:

             Will multi-generational family businesses

                           be a thing of the past?

Oh brother. Can we hold off on some of the over-dramatic, end-of-the-world talk, please?

Family businesses have been around forever, and will continue to be one of the major forms of business ownership well into the future.

 

The Real Story

I’d like to relate some of my views on this subject, because the story isn’t “wrong” either. I just prefer to talk about in more realistic terms.

Building a successful business isn’t something that is easy to do. Keeping a business successful over a number of decades is not easy either.

People love to ring alarm bells about the “failure” to complete an inter-generational family business transition as if it should be a walk in the park.

 

Who Wants to Take Over?

The fact is, today, any offspring who may be qualified to take over the family business will likely have a whole host of other career opportunities to choose from.

If the qualified children choose something else to do with their lives, then you’re left with the less-qualified ones, and I don’t think I need to go into why that’s not exactly a great idea either, do I?

 

Hard Work and Complex Situations

Working in your family’s business can be fantastic, when things go well. There’s nothing like working together with the ones you love.

But, as great as things can be when things are heading in the right direction, when you hit a rough patch, things can take a big turn for the worse in a hurry.

The family relationships bring a whole lot more complexity to the situation, and that can be difficult to navigate.

 

The Right Ingredients

When someone we’ll call “Dad” builds a business and then decides it’s time to retire, what are the odds that the best person in the whole world to take over from him just happens to be one of his children?

The recipe for successful transitions calls for the right mix of ingredients if it’s going to be successful.

There needs to be at least one qualified AND interested successor. And don’t forget about the timing. You need someone to be “Ready, Willing, and Able”

(Please see: “Is ‘Ready, Willing and Able’ Enough?” for more on this.)

 

Better Options Abound

We always hear about how the world is getting smaller, and it’s never been truer than it is now.

Qualified successors have more options than ever before. Taking over the family business just doesn’t rise to the top of the list of career options for that many people.

 

Instill a Love of Business

One of my favourite ways of talking to families about this subject is for the parents to share their love of business with their kids.

I’m not talking specifically about Mom and Dad’s business, I’m talking about business in general.

If you can teach your kids how rewarding it can be to run your own business, and how to do it well, then maybe they can find something that THEY are passionate about, and you can help them start that kind of a venture.

 

Intrapreneurship 

I’m starting to hear a lot more about “Intrapreneurship”, which just happens to be a natural fit for family businesses that are faced with a situation where the rising generation wants to be in business for themselves, and not necessarily in the same business as their parents.

Please see: The Intrapreneurship Initiative for an innovative program put on by the Business Families Foundation.

They’re starting their third cohort in Montreal now, and will be launching in Toronto in 2018.

This just mght be THE best solution for many families. And hopefully we can all tone done the drama.

 

 

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5 Things you Need to Know: Family Alignment

5 Things you Need to Know: Family Alignment

This week it’s time for another installment of the “5 Things you need to know”, and the subject is one that I consider to be tremendously important: Family Alignment.

I’ve written about Family Alignment a number of times in the past, but I decided to attack it again just because it needs to be better understood.

Much of the content of this post comes from a “Quick Start Guide” (“white paper”) I wrote on the subject in 2016. If you want a broader and deeper look at Family Alignment, please feel free to read and share it.

Without further ado, here are:

5 Things you Need to Know: Family Alignment

 

  1. There are 2 Parts: “Intra” and “Inter”

The first thing to look at is making sure that the family members are aligned amongst themselves. I call that the “Intra” part.

I’m talking about general agreement on the family’s values and goals, along with the important questions regarding whether or not they really want to continue to work together.

Once you’ve answered that one, then there’s the all-important element of aligning the family with its external partners.

Here is where we want to make sure that the family is working with and investing in businesses that are aligned with the values and goals that everyone agreed on in the first part.

 

  1. Do the “Intra” BEFORE the “Inter”

It’s important to work on the “intra” part and make sure the key family members are all on board with each other first.

If you haven’t worked out what you all agree on, there will be issues that could derail things going forward.

The term “collective responsibility” is one I heard recently that conveys this well.

The family members need to develop a consensus that they are responsible to each other, and only then decide on what outside businesses, causes, investments and partnerships they’ll work on.

 

  1. Starting Down the Road to Governance

Governance is kind of a loaded word that I’ve written a lot about, and it still has some negative connotations when people hear it.

To me, family alignment and family governance go hand in hand. Working on getting a family aligned necessitates getting into the questions around family governance.

Working on family governance is a good thing, and it’s actually THE key to any family being able to successfully transition its wealth to the next generation.

It’s impossible to have an aligned family without some governance, and, by the same token, it’s impossible to institute governance in a family if there’s no alignment.

 

  1. It Takes a Lot of Time and Effort

Nobody ever said this stuff was going to be easy. It isn’t, and it takes lots of time and lots of effort.

You know those stats you always see about the high failure rates around intergenerational wealth transfer? This is why.

Most families aren’t willing to do the work required to make sure that family members figure out how they’re going to make decisions together, how they’re going to communicate clearly and regularly, and how they’re going to solve problems together.

I’m actually talking about a considerable amount of time, not just in terms of hours, but in terms of months and years too.

For a family to figure out all this stuff is actually a pretty big project. Those who undertake it seriously soon learn that it really is hard work, BUT, they usually see great progress quickly once they begin.

 

  1. Process is Much More Important than Content

Unfortunately family alignment isn’t something you can just buy off the shelf. It isn’t some piece of “content” that you can pay your lawyer and accountant for.

The process of figuring out the answers to all of the important questions, together, as a group of relatively equal family members, is the most important thing.

If the Smith family has a beautiful family mission statement and a 50-page family constitution, but they haven’t had a meeting in years because one half of the family isn’t speaking to other half, that’s nice content with zero process, and a disaster waiting to happen.

If the Jones family meets regularly, has great exchanges during which they work together to define and achieve goals as a group, even if they don’t have anything in writing, then they’ve got the process down nicely.

Which family will succeed in passing the wealth down?

The family that is aligned and has taken the steps to determine its governance will have better odds.

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You Look Concerned. Or Are You Just Confused?

You Look Concerned. Or Are You Just Confused?

This week I want to look at the question of clarity.

My premise is that when you can see things clearly, there are plenty of potential benefits, so taking the time to make sure that you are truly seeing things clearly is usually well worth it.

Family businesses are full of ambiguous situations that can often exist for years or even decades. Many roles and responsibilities are poorly defined, but somehow, sometimes almost miraculously, things still manage to get done.

Family businesses are notoriously resilient.

 

Communication Breakdown

One of the major challenges that most business families face is clear communication. It has always been that way, and probably always will be.

Of course each person has their own communication style, and some are simply better at it than others.

When I work with a family, I’ll often spend more time at the outset just working with them to make sure that they all really understand each other than on anything else.

I also believe that just about anyone can improve their communication abilities, if they want to. Part of my job is usually to make them understand why it’s worth their effort to do so.

 

It Starts at the Top – But…

We’ve all heard that everything important starts at the top. I agree with that, in general, but that doesn’t mean that if you aren’t the one at the top, there’s nothing you can do.

Communication is a two-way street. To me, that means that the “sender” and the “receiver” of any communication have a responsibility to make sure that the message was understood.

One of my favourite expressions is this one, is attributed to George Bernard Shaw:

“The biggest problem with communication is the illusion that it has taken place.”

 

Allow Me to Clarify

Now, in the interest of being “ultra” clear, I will try to make sure that everyone reading this understands what this means.

The biggest problem with communication is that very often the person who has spoken or written something truly believes that the person to whom they were speaking or writing actually received and understood the message as it was intended.

Unfortunately, far too often, in reality, the person either did not receive the message, or they got it, but didn’t understand it.

I personally drive my family members crazy sometimes with my obsession to handle my end of any communication. “Did you hear me? Could you please acknowledge that you understood?”

 

Getting Back to Confused Versus Concerned

The idea for this blog came from seeing someone’s face and trying to evaluate what was going on in their mind. I do this a lot, and you probably do too, even if it is only done subconsciously.

The particular situation isn’t important (and, truth be told, I don’t even recall what sparked it) but it struck me that sometimes people appear concerned about a situation, but if only they were less confused, they would end up less concerned.

 

Clear Up the Confusion

My “prescription” for many families is pretty much the same.

Clear up the confusion, the ambiguity, the “fog” and the uncertainty, and everyone will have less things about which to be “concerned”.

This is why families so often feel “stuck” in a situation and then due to inertia, they remain there.

It is usually only when something changes that they get propelled into action.

 

Shine a Light

Quite often what the family really needs is an additional perspective on things. Each person in the family is naturally preoccupied with their own situation, which they typically only see from their own viewpoint.

When they bring in a person from the outside, who can then shine the flashlight onto some of the areas of confusion and ambiguity, things get a bit more clear.

 

Shared Viewpoints

If the person with the flashlight is also skilled at facilitating a conversation around ways to determine a collective shared viewpoint that everyone can buy into, then they can really start to make progress.

The word “consternation” came up when I was thinking through this “confused vs concerned” idea. I wondered why the word “consterned” doesn’t exist. Maybe I just invented it.

So, if you are consterned with things going on in your family business, I suggest that you work on ways to clarify things first.

When things are clearer, you’ll have fewer things to be concerned about.

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The Dimmer Switch vs. the On/Off

The Dimmer Switch vs. the On/Off

This week I’m going to touch on a very big topic that I haven’t written nearly enough about. It’s also a subject that lots of families face, whether they have a business or not.

The idea came to me a couple of weeks ago while listening to the weekly teleconference of the Purposeful Planning Institute.

As I had stated in Huge Liquidity Events – Great News, Right?, there was going to be at least one other blog that came from that call.

The great nugget for this blog actually came from the Q & A at the end of the call. (Many Thanks to Matt Wesley of Merrill Lynch)

 

Having the “Money” Talk 

One of the call participants asked a question about helping their client families have the big talk about wealth.

You know how this goes. Wealthy parents talk to their advisors, the advisors strongly suggest that the parents begin to share information about their wealth with the kids, and the parents usually balk.

They understand that they should have the talk, but that doesn’t mean that they know how to do it.

 

The Dimmer Switch Analogy

The man who asked the question was looking for ways to help his clients begin the important stage of sharing information about the family’s wealth with their children.

The answer that came back was brilliant, and it is one that I plan on using. Parents often think about this “talk” as an all-or-nothing proposition. They shouldn’t!

It’s not a binary situation, where you go from complete “secrecy” to “full disclosure”.

It’s NOT a regular light switch, where the family was in the dark, and you flip the switch up and now everyone sees everything.

 

Time for your Pupils to Adjust

If you’ve ever gone to the movies during the day and you walk out into the daylight, you know that it takes time for your eyes to adjust.

In the same way, you really don’t want to “blind” your children with everything in one shot.

There is no need to quench their thirst for information with a firehose.

I like the dimmer switch analogy for a couple of reasons.

 

Shine a Little Light

I think the idea of “shining a little light” is the perfect antidote to the idea of “keeping them in the dark”.

And everyone knows what a dimmer switch is, and what it does. It allows you to control the amount of light.

So where should you begin?

 

Why Are We Here?

So let’s say you’ve decided that you can’t wait any longer and you need to talk about your wealth with the next generation of your family. Great. It’s not rocket science.

A frank and open way to get started is to tell them that you love them and that you care about them, now, and for the rest of their lives.

You could also share that you understand that if things go as they usually do, they will very likely outlive their parents, and that’s a good thing.

So, given that, there’s a lot of “stuff” that you have accumulated over the years and you need to begin to figure out what’s going to happen with it all after your gone.

 

One Step At a Time

The stage is now set. You have made them aware that you will be having some important discussions going forward.

And you control the dimmer switch, on both “how much” and “how fast” you’ll shed the light.

You don’t have to do it all today. Or even this week. Or this month. But preferably once you start, you do continue again sometime this year.

They may ask questions. That’s a good thing. You need to respond to all of their questions, but that doesn’t mean that you have to tell them everything they want to know.

Take your time. Turn that dimmer switch very slowly. But do turn it. And don’t turn it back the other way, although I’m not even sure if you can turn this metaphorical dimmer switch back towards darkness.

 

Dialogue > Monologue

You may have pictured yourself giving your family a speech about this subject. I strongly urge you NOT to look at it this way, or to act this way.

The “go slow” approach works well because you can adjust as you go. A dialogue, where you take the time to listen to their questions and concerns, is what you should be going for here.

 

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5 Things to Know: Asking for Help for a FamBiz

5 Things to Know: Asking for Help for a FamBiz

This week we’re back into the “5 Things to Know” series, and the topic comes from something that happened again recently, happens to others, and will surely happen in the future.

I’m talking about a member of a family business reaching out for help, and then backing off. So here are my 5 things on asking for help for your FamBiz.

  1. It’s Not Easy, or Even Simple

If you’ve read my stuff, you know that I make a distinction between what’s easy and what’s simple.

People who haven’t lived in a FamBiz often think that our issues are “easy” to deal with. My response is that the issues are usually “simple” (i.e. easy to explain) but rarely easy to actually handle properly.

For a family business member to reach out to an external resource is not easy or even simple.

Family businesses almost always have a culture of inward stuck-togetherness that looks down on asking for outside help

A lot of good stuff stems from that type of culture, but a reluctance to ask for help is one of its main drawbacks.

 

  1. It Takes Courage

Because of the family dynamic that “we’re all in this together”, if one member of the family is troubled by what’s going on inside the group, it takes plenty of courage to even think about bringing in an outsider to help.

It’s much safer to stay quiet and hope for the best. That’s why so often they wait until the “pain point” is so great that it becomes a choice between asking for help and simply walking away.

(Note I said “simply” walking away, not “easily”)

Some think that asking for help is a sign of weakness, but it’s really a sign of courage.

 

  1. It Starts and Ends with Trust

I will overuse the word “trust” here, I apologize in advance, but please trust me.

You need to trust your gut on this. When things are bad and there’s no reason to believe they’ll change, trust me, hope is not a strategy.

You already have folks you trust on the outside, so if they’re not the ones who can help, then ask them who they would trust.

When you first contact someone, do they seem trustworthy? Do they listen more than they talk? Do you have reason to believe that others trust them?

Finally, do you believe that they’ll be able to win the trust of your other family members? If not, you’ll probably need to start over.

You can “disqualify” people quickly if you don’t feel you can trust them, but unfortunately you can’t “qualify” someone very quickly.

 

  1. It’s Possibly the Most Important Move You’ll Make

It’s not easy, it takes courage, and it involves that nebulous thing called trust, but what’s the alternative? Is it really “walking away”?

One of the biggest issues in business families, and the main culprit in most FamBiz failures, is poor communication among the family members.

It’s normal for conflict to be present. You probably can’t “solve” all of the conflicts, but you can certainly try to understand them better, so you can manage them.

But that won’t likely happen, until you bring in someone from the outside to sit around the table with you: someone with a different last name.

 

  1. If You THINK You Should, You Probably Should

Timing is everything in life, so when should you reach out for help?

Well, if you’ve been thinking about it, if you can feel it in your gut, trust your gut. If you think you should, especially if you’re lying awake at night thinking about it, then it probably is time.

If you reach out to the right person, they’ll understand everything I’ve written here; how difficult it was for you to reach out, how much courage it took, that you’ll be on the lookout for clues on trustworthiness, and why this move could prove to be so important to your family.

If you reach out and then stop responding, the outsider should give you space but not cut off completely. They’ll “get” the fact that the timing may not be right.

They’ll recognize that you’re dealing with internal issues, and that you’ll occasionally make some progress on your own, and believe that an outsider won’t be necessary, or at least you hope so.

And they might even write a blog about it, and send it to you.

/by

Huge Liquidity Events – Great News, Right?

Huge Liquidity Events – Great News, Right?

This week’s blog topic comes from two unrelated news stories, that just happened to occur at the same time.

The first was seen by the whole world, as Hurricane Harvey hit the Houston area.

The second was more obscure, as a local Montreal family business was sold, for a “considerable sum”.

 

Liquidity for All!

Something that struck me about this hurricane was that storm damage from the wind was only minor, and the much bigger issue was the rain, causing flooding.

When the wind died down, the initial fear subsided, only to be reignited as the downpour of rain continued for several days.

In somewhat similar fashion, the family who had their big “liquidity event”, selling their business for a reported 10-figure amount, will likely have a two-phased reaction.

At first, once the documents were signed, there was likely relief and perhaps a bit of a dazed feeling, but all was probably pretty positive.

That’s normal, after months or years of work finally culminate in the actual sale.

 

And Now What?

The second generation of the family had been running the business for the past few decades, and there was some G3 involvement in management.

I don’t know any details about the size of the family or its complexity, but I do know that a sudden, large pile of liquid wealth certainly has the potential to magnify any issues

As I alluded to in Solid Wealth vs. Liquid Wealth, an operating business has a certain “untouchable permanence”, so family owners are more likely to be content with occasional distributions.

But when family wealth appears simply as a dollar sign followed by a long number, it seems so much easier to just carve up into pieces.

 

Two Possible Scenarios

These situations often unfold in one of two major ways.

Sometimes the family leaders are so focused on trying to consummate the deal, that there’s very little planning or preparation around what’ll happen next.

That can actually be a good thing. There really doesn’t need to be a huge rush to figure out what comes next, and thoughtful decisions are almost always better than rushed ones

Other families, depending on whose advice they’re heeding, will already have a whole slew of structures set up in advance of the liquidity event, and when the deal is signed, the resulting wealth simply gets re-allocated into these different structures and accounts in rather short order.

As much as I like to preach about the importance of planning, this may not be the best way, depending how much the family was involved.

 

Purpose, Values, Vision

I sure hope that before any irrevocable decisions were made, the family took the time to have a discussion around the purpose of the family’s wealth.

You know, some discussion around the family’s values around the wealth they’ve created, and an initial look forward to what the family’s vision of the future is? Yeah, that can be pretty important.

 

Destructive Powers

I often talk up the Purposeful Planning Institute and their weekly teleconferences, and this week provided a great quote that happens to fit perfectly.

The call featured one of my favourites. Matt Wesley of Merrill Lynch, and a couple of his colleagues, and it will be the subject of a future blog.

But the quote came from Wesley, who related a story about a patriarch who’d accumulated a large amount of wealth, and his preoccupation for the future.

“I don’t want my kids to destroy the wealth I worked so hard for”, he said. “But I really don’t want the wealth to destroy my kids”.

 

Greener Grass Syndrome

People living in areas struck by drought may have been jealous of the forecast for Texas and the rain they were expected to receive. “Wow, lucky them, we could sure use some rain around here”.

Likewise, those working in a family business, without access to the liquid wealth they wish they had, may also be jealous of the family that managed its business sale.

 

Time Will Tell

It remains to be seen if the family handles the windfall of liquid wealth in a productive way, or whether this event will sow the seeds of destruction that is so common for underprepared families.

Be careful what you wish for, you may get more of it than you can handle. And good luck!

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