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Kissing Your Sister: Playing for a Tie in FamBiz

As a lifelong sports fan, there’s been a phenomenon going on that I haven’t heard many people address. When I was a kid, a lot more games seemed to end in ties.

It was as a youngster that I first recall hearing the expression: “A tie is like kissing your sister”.  

As this subject came up as a potential blog post, it struck me that rule changes have been developed and implemented in some sports, notably hockey and soccer, to minimize the number of games that end with this seemingly “sub-optimal” result.

 

Is Family Business the Exception?

If ties are no longer considered something desirable in sports, maybe the world of family business could be the one place they’re still in vogue.  Let me explain.

Back in April, in Roles and Rules for Enterprising Families, I wrote about a presentation from the 2019 Institute for Family Governance Conference, which included an impressive 75-page slide deck.

In that blog, I intentionally chose to not focus on the great slide I noticed on page 50, because I was saving it for its very own post.

Here’s what the slide said:

 

A General Family Business Precept:

In a Family, if you play to Win, you Lose;

In a Family, if you play to Lose, you Lose;

In a Family, if you play to Tie, you Win

Richard Goldwater, MD

Boston, MA

I saw that slide in January, and months later it’s still with me, and rings even truer today.

 

Setting the Proper Context

Of course we need to think about this in the proper context, otherwise this statement can be dismissed as completely nonsensical, and that would be a shame. I think that there’s real wisdom here and I’d hate for it to get lost.

Dr. Goldwater is clearly talking about what goes on “intra-family” here.

Of course every family business, as a business competing with other businesses, should be playing to win, all the time, or else the business will not survive.

His thoughts on this subject are clearly directed at how members of a business family think about and deal with their interactions as members of the same team.

 

Misdirected Efforts

In essence, what I think he’s also talking about is how important it is to present a common front to the outside world, as a united team that is competing with other businesses, playing to win.

However, when some of the team members are busy expending efforts to win at some internal game that they are in effect playing against their siblings, parents, or cousins, then things can begin to fall apart rather quickly.

 

Sad to See in Real Life

Part of me wishes I could say that my only knowledge of these situations is theoretical, because it’s really sad to see things like this go on in the real world.

I have a coaching client who is fighting this kind of battle with their two siblings right now.

It’s so clear to everyone that there’s a power struggle going on.

And when I say “everyone”, I mean everyone.  

Employees see it, customers see it, suppliers see it, outsiders like bankers, accountants and lawyers see it.

brother kissing sister

Accidental Partnerships

The situation with my coaching client is one where the siblings are partners in a business together, but if they had started from scratch, these people would never have agreed to be business partners together.

They just ended up that way, accidentally.  Or, actually, through a lack of any real planning as their parents were transitioning out of the business.

 

Not Every Problem Has a Magic Solution

Unfortunately, there isn’t always a great way out of these situations.  

Various strategies are being looked at so that these partners can each end up in situations in which they are in control of their own destiny, and that their reliance on their sibling partners is minimized.  

We’ll see how it plays out, because there’s lots of complexity to manage, and the “parts” may be worth less than the “whole”.

 

Saving the Family Over the Business?

My bias, in situations like this, is to work on ways to “save” the family, even if that means making drastic changes to the business.

Some advisors prioritize the business.  I rarely do.

 

Kiss and Make Up

Getting back to the title of this post, maybe kissing your sister isn’t so bad?

And maybe it’s all part of a “kiss and make up” strategy.

But please recall that a tie can really be a win.

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Business Families: Looking for Glue and Grease

This week we’ll look at some characteristics of successful business families, with some analogies to hopefully make my case more compelling.

Longtime readers with great memories may recall that I’ve noted this “glue and grease” idea before.

In late 2017, in My Notes from a Great Keynote, I touched on this idea for the first time.

The keynote speech in question had mentioned that one of the benefits of clarifying a family’s values is that they provide some “glue” that is important in keeping a family united.

I added that in addition to keeping things together, it’s also important that things continue to run smoothly, so that “grease” is also a key element, in addition to glue.

 

My Kingdom for Some Greasy Glue?

At the end of that post, I asked if any readers could provide me with examples of substances that had qualities of both glue and grease, in the hopes that there would be some product that I could point to when talking about this subject.

Alas nobody come forward with any ideas, which was a bit disappointing, but certainly not surprising.

The idea has continued to simmer in the back of my head ever since.  I was determined to revisit this and so here we are.  I wish that I could claim that I had a “eureka” moment, but alas, I haven’t.

But I may be getting closer.  We’ll wrap up this post with that, but in the meantime, let’s talk about those important qualities for enterprising families.

 

“Family-Ness”: Finding Goldilocks

For any family hoping to succeed at keeping their wealth together over generations, they really need to have enough “family-ness” to keep everything and everyone together to a certain degree.

In the first generation or two of the building of the family wealth, this is usually much easier, since most of the family members will have grown up in the same household, or at least in close proximity to one another.

When you get to the third and fourth generations, it’s quite common for people and family branches to have spread out to different geographical locations, and even other countries.

When family members don’t see each other as regularly, it can get more difficult for everyone to feel like they’re still a part of the same family.

That’s why it’s necessary to ensure at least some recognition of this, along with the intention to make enough of a sustained effort to be sure that some family events are always on the calendar.

But can there be too much family-ness?

 

Krazy Glue is NOT Ideal

While many family members love spending time together, there’s always the possibility of having too much of a good thing.  There are limits.  I enjoy spending time with my family members, and I hope that they enjoy spending time with me. But I’m not sure that I’d invite them to stay with me for an extended period of time either.

Even siblings who get along famously can run into issues after they each get married and you throw the in-laws into the mix.

Trying to force the issue of family time can be worse than not having enough.

 

Grease: Communication and Flow

When people feel too stuck together, because the glue has hardened and now they can’t escape, new problems can arise.

As important as it is for everyone to feel comfortable to enter the family space, they need to also feel just as comfortable to exit.

While my grease analogy is certainly about lots of clear communication, including making sure all family members understand what the glue is that is keeping them together, it’s also about the flow of people into and out of the system, each according to their own comfort level.

Salad Dressing: My Little Eureka?

Salad Dressing: My Little Eureka?

The best analogy that I’ve managed to come up with for my glue and grease is salad dressing. I’m a huge Costco fan, and they always have a variety of salad kits, of which I’ve tried a handful.

When you open them up, some of the leafy greens typically find their way onto the counter.  Until you add the dressing and mix it in.

Then things hold together better. And when you add in the other ingredients, they all hang together nicely, while still sliding around freely.

Salad without any dressing is clearly missing something.

Likewise families need glue AND grease.

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FamBiz Conflict:  In PIECES for the Sake of PEACE?

Many advisors who work with business families have their own inherent biases.  This isn’t a big problem, especially when we recognize them and admit them openly when the situation warrants.

Personally, I love it when both a business AND the family behind it can remain together for the long haul, including through an intergenerational transition.  Of course, such transitions are a point where many family businesses face their longest odds, because it isn’t always easy (or even possible) to get everything “just right”, as one generation leaves the scene and another one follows in their place.

When the family and their advisors, recognize that it probably isn’t going to work, that’s when some key decisions need to be made.

Family or Business as Priority?

The main question that often arises, even if it’s seldom expressed this way, is whether they’re going to prioritize the business, or the family.

The outside professionals who are working with the business are much more likely to prioritize the survival of the business, even if it’s at the expense of the family.

The business is the “main entity” of concern, they’re business specialists first, their client is the business, that’s the circle that they understand the best, that’s who they invoice, that’s what they know.

In contrast, I work in the family circle, so my bias is always to find ways for the family to be the major priority, not the business.  In my view, the business is an asset, that happens to be owned by the family.  Assets can be bought and sold.  Family harmony?  That’s a very precious intangible asset, and you can’t buy it, especially when you really need it.

 

Who Needs a Monolith?

Thankfully, the era of one monolithic company is not as common as it was decades ago.  As noted a couple of weeks ago in “On Enterprising Families and Family Wealth”, it’s much more common these days for successful families to be involved in more than one enterprise.

In addition to diversifying the family’s financial risk into different industry sectors, another great benefit can be that there are more places for family members to excel in their own part of the overall family wealth spectrum.

Different Paths, Similar Destinations

Over the years we’ve all heard stories about the family with two kids and one store, who opened another store so that each of the siblings could have “their own”, or the brother who moved away to open a new location in a different territory.

Occasionally there would be a company that needed to be “split into pieces” to accomplish the same result, and it was this type of situation that I had in mind when conceiving this post, with the “pieces” and “peace” play on words.

These days it may be more likely to be one of the rising generation members becoming an “intrapreneur” and creating a start-up in a new industry but within the walls of the “mother house” company. Or it could be a family member pitching the “family bank” with an idea that needs funding, which could become the next key growth piece in the enterprising family’s wealth strategy.

It could be some family members looking at diversifying the family holdings into private equity or impact investing, or simply having those rising generation members who are so inclined, taking an active role in the family’s philanthropic initiatives, rather than remaining with other siblings or cousins in one of the businesses.

scrabble letters put together to form the world peace

Many Ways to Achieve Peace

Of course the bigger the enterprise the more places there are for people to assume roles that suit them, where they’re less likely to clash with other family members.

In cases where rival siblings feel “stuck” together in one place that’s beginning to feel “too small”, figuring out how to cut the entity into the right pieces can be a struggle.

But my bias will always be to work to find a way to get that done and keep the family harmony intact, even if the business has to “suffer” some consequences.

 

Thanksgiving and Christmas Dinners

It’s hard to put a value on family harmony, but I always like to think about important family gatherings and the fact that these are places and occasions where you need everyone to be comfortable coming together.

If working too closely together makes this impossible, please consider trying some of the ideas here.

 

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“Nose In, Fingers Out” for Family Business

“Nose In, Fingers Out” for Family Business

Today’s topic is one that I’ve been thinking about for a while, ever since I first saw it mentioned back in 2017.

If you Google “nose in, fingers out”, you’ll see that it has been used by a number of people, attesting to its usefulness in creating a mental image that most people can quickly grasp.

I need to give a hat tip to Larry Putterman for putting it on my radar screen first.

 

 

It’s All About Boundaries

A topic that arises often in business families is that of “boundaries”, and there are many reasons for that, and anyone who has ever worked with, or in, a family business knows what I’m talking about.

But while the “nose in, fingers out” idea is about boundaries, it is also a subtle way to discuss how boundary lines are not all necessarily a solid concrete wall, but perhaps just some steel slats.

Boundaries are important, but we need to think about, and talk about, what the boundaries are supposed to accomplish, if we are going to establish the optimal boundaries for our situation.

 

Boundaries

From CEO to Chairman

The area that Putterman specializes in is Boards of Directors, and in the family business context what he is most often referring to relates to a person who has decided to scale back their involvement as part of a transition.

The former leader of the operations of the business, likely the CEO, has decided to pass on the reins of the operations, but to stay involved in a lesser capacity, and not disappear altogether, at least not yet.

There are different ways to take these kinds of steps gradually, of course.  My father brought in a non-family President and stepped into the Chairman role, but kept the CEO title for himself for a while.

Quite often the biggest step is the one where the CEO mantle is relinquished, and only the Chairmanship is retained.

 

 

How Much Is Out, How Much Is In?

In a family business, an outgoing leader will (hopefully) get to the point where, for many reasons, it makes more sense to scale back their involvement, moving from day-to-day operations to more of an oversight role.

These kinds of transitions happen all the time.

But sometimes they work out well, and other times, well, they just create problems.

This is where the “nose in, fingers out” idea comes in.

 

 

What Is Permissable?

The devil, as they say, is always in the details.

The nose and the eyes go together, so you are allowed to look around and sniff around as much as you like.

As you would expect in an oversight role, continuing to observe whatever is going on in the company is allowed and even required.

Below the nose is the mouth, of course, and this is usually the first place that problems begin to arise.

 

 

The Mouth Can Be a Finger (?)

If the nose and eyes go together, does that mean the mouth does too?

Probably not.

Once you step back from the day-to-day to oversight, what you say to people, at least those who are involved in the daily operations, needs to be weighed very carefully.

Problems and confusion arise quite quickly when the old boss walks around and tells “his people” what to do.

In fact, it is at this point where the mouth has become tantamount to a finger.

 

 

Encouragement Yes, Direction No

When the ex-leader talks to the employees, care must be taken to limit their words to encouragement and not direction.

When they are in a board setting or discussing things with others involved in oversight only, then the mouth is once again an agent of the eyes.

 

Road directions in a desert

 

What About Other Family Members?

 

There is another area where the nose in, fingers out situation comes up in family business that I’d also like to touch on here.

It’s the one where family members who do not work in the business interact with others, often siblings, who do.

There are boundary issues here as well, as those who don’t work there have an information disadvantage that they usually need to overcome.

Sometimes their questions seem a little too much like fingers in, rather than just noses.

For those being questioned, the best defence for this is to try to be as transparent as possible, and to get out in front of any questions.

If you satisfy their noses, they will be less tempted to poke their fingers in.

 

 

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Don’t “Transfer” Family Wealth; “Transition” It

For years now we’ve been hearing about the huge multi-trillion dollar “wealth transfer” that’s occurring thanks to the demographics of the Western world.

As baby boomers age, there’s no escaping the new realities that this huge demographic shift is causing.  But hopefully, we can escape some of the negatives that might accompany it.

I believe that when we think about how a family’s wealth should move from one generation to the next, we shouldn’t be thinking about a transfer, we should be thinking about a transition instead.

 

 

Is It Just Semantics?

I’ll leave it to interested readers to Google these words in an attempt to parse all of their differences, and will instead concentrate on some simple and observable comparisons and contrasts.

The most fundamental aspect to consider is the time that something takes, from start to finish.

When I was a kid, one of my friends moved away because his Dad was transferred.  One day he was working in Montreal, then suddenly, he was transferred to Toronto.

He finished work on Friday in one place and started up his new job 500 kilometres away on Monday.

 

Wire The Funds

If you’ve ever wired funds somewhere you know that one day the money is in your account, and then the next it is not.

Somewhere during the day (usually at around 2 PM for some reason) the funds instantaneously go from one account to another.

They have been transferred. Boom.  Here one minute, gone the next. A single event has happened and is now complete.

When a family’s wealth, including the financial wealth and everything that comes with it, is transferred as a one-shot event, it can be a real shock to the system.

The word “shock” is rarely used as a positive in the area of family business or family wealth.

 

Arrow on wall

 

Slower, Smoother Transition

So what do I mean when I say “everything that comes with it”?

I actually wrote about a few of these details back in 2015, in Transition Planning: No Day at the Beach.

In that blog, I wrote about the transitions of management, leadership, and ownership.

Strictly speaking, a transfer typically deals with the ownership of the wealth.  When someone suddenly owns something, they are then usually expected to also manage it as well.

 

Ownership Is the Big One

One of the problems that can arise with intergenerational wealth is that the ownership sometimes goes from one individual to a group, who are often siblings.

This is where the questions surrounding management and leadership come in.

When more than one person now owns the wealth, how they will manage it, and who will take the lead are also questions that get put on the table.

If the word “governance” is suddenly coming to mind, congratulations, because that’s certainly where my mind is heading too.

 

Respect My Authority

Another related concept that doesn’t necessarily get discussed enough is that of authority.

With ownership of any asset comes certain authority, but it can depend on so many details.

And when you talk about authority, there is of course explicit authority and implicit authority, which do not always go hand in hand.  (Note to self: there’s a whole blog right there!)

Numbers and pie charts

Interdependent Wealth

The distinction between transfer and transition came up for me recently as I continue to make progress on my next book.

My working title is “Interdependent Wealth”, with a secondary title as follows:

How Family Systems Theory Illuminates Successful Intergenerational Wealth Transitions

That’s nine words in a secondary title, which feels like a lot, but I can assure you that a great deal of thought went into each and every choice that I made, right down to the final one, Transitions.

 

A Gradual Handover

It was during the choices I was making about these words that the whole transfer thing really hit me.

On a macro level, society is certainly witnessing a huge transfer of wealth.

But what’s more important to any family is what occurs on a micro level, and families should be concentrating on their wealth transition.

 

Event Versus Process

Bottom line, a transfer is more of an event, or one of many components or things that need to happen.  It is a tactic.

A transition is a process, it is the overall strategy required to make the right things happen, in the right way.

Focus on the whole transition, not just the transfer.

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5 Ways FamBiz Rising Gens Can Prepare

5 Ways FamBiz Rising Gens Can Prepare

People in and around family businesses everywhere spend lots of time worrying about the rising generation of the family, wondering if and when they’ll ever be “ready” to take over from their parents.

There are as many variations of the situation as there are families and businesses, but there are some things that many have in common.

Those who are not content to just “wait their turn” can do a lot more than simply “be patient”.

With that in mind, here are…

 

“5 Ways FamBiz Rising Gens Can Prepare”

 

  1. Get Mentored

A mentor is usually someone older than the mentee, typically by more than a decade (and often two or three decades older).

The most important detail for a rising generation family business mentor is that they NOT be the parent, or any family member who is ultimately their boss.

A mentor can be from within the company, or from an outside organization, and will have some life and career experience that can be shared, on an occasional basis, over lunch, coffee or by phone or Skype.

 

  1. Create and Lead a Project

Up-and-coming family members in a business often have difficulty carving out their own leadership abilities, separate from those of their parents.

Creating their own project, either within their department, or as something new and intrapreneurial, is a way for them to show that they are able to make something happen on their own.

Of course they need to do more than just conceive an idea, and actually lead the necessary steps to do the work and bring it to a stage where the project can be deemed an accomplishment.

 

  1. Work on Sibling Unity

Unless the person is an only child, they will need to continue to deal with their sibling relationships for many decades to come.

Whether their siblings are working in the business or not, and even if they seem to display no interest in the business, those relationships should not ever be taken for granted.

Especially when there are siblings who never work for the family company, it behooves the ones who do to continually over-communicate what’s going on.

This should be done as “matter-of-factly” as possible, and never as bragging about one’s accomplishments or complaining about how tough it is to work for the parents.

Siblings may not be part of the business circle, but they are always part of the family circle, and don’t forget that they’re likely long-term ownership circle partners too.

 

  1. Build Your Network

While it is very important to get to know the people from outside the company who currently deal with the leading generation, from bankers, to customers and suppliers, having their own network is also beneficial.

Joining peer groups and making sure that they develop connections in their own age group will pay dividends down the road.

When their turn comes to take the lead on things, they’ll want to be able to call on their own contacts and people that they trust, and these relationships take time to develop.

It’s never too early to begin to cultivate a network of people you know and can trust.

 

  1. Round Yourself Out

Most people come into the family business from a certain specialty like finance, accounting, or marketing.

It is great to have a big strength on which to build your career, but the higher up the organisational ladder you go, the more that you can be a “generalist”, the better.

So if they’re known for their skills in one particular area, it may be a good time to work on building some skills and getting experience in another area where they’re currently less strong.

Once they get to the top, they’ll need to be able to properly relate to everyone, from a position of strength.

 

And Don’t Do This

The five ideas above are some ways that they can begin to take important and useful steps to ensure an eventual smooth transition.

Here is what they probably want to avoid.

  • Complaining to anyone who’ll listen that the current leaders are hanging around too long.
  • Whining that nobody takes them seriously
  • Bad-mouthing key employees
  • Being a part of “the problem” rather than bringing solutions
  • Displaying work habits that make them appear entitled

There are plenty of positive things they can do while they wait, and that includes some of the ideas outlined above.

Good luck!

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Family Business Without the Drama

Family Business Without the Drama

This week I want to discuss a subject that sometimes shows up in family businesses, and that’s “drama”.

But unlike some things that come and go in one business family or another, drama seems to either be largely present or mostly absent, depending on the family.

Let me try that again for the sake of clarity.

I find that some family businesses function in “all drama, all the time” mode, while other families might wonder what I’m talking about when they read this because they don’t operate that way at all.

Let’s take a little dramatic side trip now and we’ll come back to family business after.

 

Eliminating the Wicked Witch

I recently attended a High School play and I witnessed some unexpected bonus drama that occurred in the audience.

It was a presentation of The Wizard of Oz in a very small theatre on a Friday evening.

There were a few young children and toddlers present, presumably to watch their older siblings and cousins perform.

Everything was going as planned until the Wicked Witch of the West arrived on stage.

The girl who played her was perfectly cast.

I know this for a fact, because she had told me personally “Hey Dad, how perfect, I get to be the Wicked Witch!”

 

Exit Theater Left

The Wicked Witch’s arrival on stage, with her booming voice, green face, and the stage presence that only a six-foot-tall actress could pull off was simply too much for some of the younger patrons.

Crying, squealing, mothers taking their kids out into the hall, just wow. The witch’s parents were in hysterics observing this scene.

Each time she reappeared on the stage, there was palpable anxiety in the audience. Thankfully, when Dorothy finally eliminated her, a more calm and serene mood was enjoyed by fans of all ages.

 

Who’s Your Witch?

There are different kinds of drama in family businesses, but one common version is a variation of the witch.

I’m talking about people in the business whose mere presence has everyone on edge.

Likewise, when they are absent, everyone knows it too, and they can actually relax and get their work done.

 

Who Needs an Antagonist?

While a play needs someone to act as an antagonist, a business does not.

I’ve used the word “drama” here, and also talked about the “anxiety” that is sometimes felt.

They are not exactly the same but surely related. You can have anxiety without drama, but I’m not sure that you can have drama without any anxiety.

My conclusion is therefore that minimizing drama in a workplace should be a desirable goal.

 

Workplace Versus Homefront

Note that I chose the word “workplace” just there.

Sometimes the drama needs to have an outlet, and my argument here is that efforts should be made to limit the drama in the workplace, for the sake of the people who are there to get their jobs done.

So am I saying that people should bottle things up at the office and then bring their drama home with them?

Well, I’m not sure that would be the best interpretation either.

 

Drama Kings and Queens

Those responsible for the drama are quite often the same people, and they often play their “roles” in predictable ways.

It can be very difficult to get them to change their ways. But once a drama queen, well, usually “always a drama queen”.

So now what?

Well, the only person you can actually control is the person you see in the mirror, and so that is naturally where I’m going to suggest you put your focus.

 

Respond, Don’t React

A couple of weeks back in Your Response is Your Responsibility, I suggested that you make every effort necessary to avoid reacting, and instead take a deep breath, pause, and offer a response instead.

Drama kings, at home or at work, enjoy the reactions their tactics elicit.

When denied the satisfaction of those reactions, they may slowly, eventually, begin to subside, if only just a little bit.

 

Don’t Fight Fire with Fire

While it’s sometimes very tempting to fight dramatic fire with dramatic fire, I think that these fires should be fought with water instead.

Let’s end with a quote from George Bernard Shaw that makes this point nicely:

“I learned long ago, never to wrestle with a pig.

You get dirty, and besides, the pig likes it.”

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Choosing Sides in a Family Business

Choosing Sides in a Family Business

I sometimes write about conflict management and resolution, because family businesses are rife with opportunities for clashes of personalities and ideas.

(See: Embracing Conflict in Family Business & FamBiz: Conflict is NOT an option)

But this post will be a bit different from others I’ve written in the past.

Today I want to get into a family conflict and ask readers which side they would choose in a fictitious war between two sides in a family.

 

The Guerrero Family

Vince and Walt Guerrero are the two oldest brothers in the family that owns a specialized factory in a mid-sized northern town.

Their father, Guillermo, started the business some 40 years ago and is preparing to retire, leaving the business to his four children.

Sabrina and Teresa, the two youngest siblings, used to work in the business as well, but both left because there was just too much conflict.

 

Vince’s Side or Walt’s Side?

Vince and Walt don’t exactly see eye-to-eye on many things, and each of them wants to be the new President when Dad finally retires.

Sabrina and Teresa get along very well with each other, and they both love their brothers equally, and the boys are constantly trying to get their sisters on their side of every issue.

Which side should they choose?

 

A Common Scenario

While the scenario I just described is actually quite typical, the question that I’m asking you is not.

Of course, there isn’t enough information to give a reasonable answer to the question, and I already spent a couple hundred words describing it.

It’s actually a really stupid question because I’m asking you to “choose sides” when there really aren’t any sides to choose!

 

Study Group Example

One way that this post is different from my usual format is that I usually start out by giving some context to the genesis of the post, but this time I’ve saved that for here, in the middle.

I’m part of a peer study group through the Family Firm Institute (FFI) and we had a meeting recently where some of us got together to discuss a variety of topics, including some real case examples we are dealing with.

 

Conflictual Family Drama

One group member spoke about two siblings who were always in confrontations and how the other family members were always trying to decide which one of them to support.

We have a long-term FFI member who acts as a mentor and moderator on our calls, and she made a statement that resonated with me, so I wrote it down, intending to use it for a blog.

Nancy said, “Oh, so they’re choosing sides when there really aren’t any sides to choose!”

“Bingo!”, I thought.

 

Whose Side Are You On?

The point Nancy was making (I think!) is that while the combatants are trying to make it about “my side” versus “his side”, anyone else who looks at it that way is falling into a trap.

Taking sides is usually a false choice.

Oh, I get that this happens in family businesses, and it still happens far too often.

Family members who work together or manage assets together won’t always see things the same way and will often try ot get others to come to their side of every argument, but that doesn’t mean the other family members need to oblige!

 

Interests versus Positions

If you’ve read even a little bit about negotiation, you’ve likely heard about the difference between “positions” and “interests”.

Fisher and Ury’s “Getting to Yes” was the first place I recall reading about this, and that was in the 1980’s, so this isn’t anything new.

If each side simply holds to their position, the negotiation will likely remain a zero-sum game, where any gain by one side is a loss for the other.

 

Digging Their Heels In

Sometimes in a negotiation, both sides really dig their heels in, usually because there’s some emotional aspect to the conflict that prevents them from letting go.

And yes, sometimes in family businesses people get into conflicts that are complicated by emotional issues.

 

Get Past their Positions

In order to have a better chance at a successful resolution, you need to get past their “positions” (My way / I’m right) and get to their interests.

Then, when you can find the common interests that both sides have, there’s something to work with.

Can the other family members avoid taking sides, and look for common interests instead?

I sure hope so!

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Ownership Stages In Family Business

Ownership Stages In Family Business

Readers may have noticed that the topic of “ownership” has been featured in this space more and more lately.

That’s no accident, because last summer when I wrote “Ownership: The Forgotten Circle of Family Business” I also vowed to give this subject a bit more prominence here.

 

The Simple Stage “Model”

Most people who work in the Family Business field are well versed in this “model” that looks at things in their simplest form as a family business goes from one generation to the next:

Sole Owner => Sibling Partnership => Cousin Consortium

There really isn’t anything new here, but it’s a good starting place to discuss how the ownership of a family business can get more complex as the business goes from one generation of owners to the next.

The verb I chose there, “can get” was very intentional on my part, because things do not necessarily get more complex, depending on the desires of the family and the plans that they make about how the actual ownership will be transitioned.

 

Does this Tree Need Pruning?

As I wrote last year in “Pruning the FamBiz Ownership Tree”, sometimes the difficulty in passing a business down through generations is complicated by something as simple as math.

I recently spoke with a second-generation member of a farm family, and their case facts make for an interesting example.

Mom and Dad had 4 children, and each one of them is now married and they each have 4 children of their own.

The family group is expanding at a geometric pace. Will the farm be able to match that growth? That’s the proverbial $64 million question.

 

Counting People and Households

The farm initially supported 6 people in one household. One generation later, that became 26 people in 5 households. So far the math is pretty simple but only in a textbook example do things remain that way.

Did I mention that the range of ages of the grandchildren (G3) varies from late 20’s to single digits?

The oldest G3 member already has children and yet their generational “equal” is still in grade school.

How are they going to work out all of that stuff?

 

Getting Good Help

I often write about the importance of getting help from outside the family to assist and guide any family through these difficult decisions.

Luckily, there are surely plenty of well-qualified lawyers and accountants out there who have crafted the types of agreements and structures that are required to work out these complex cases.

So is that my answer, to go out and talk to a lawyer or an accountant?

Not so fast, please!

 

What Exactly Are You Trying to Do?

Before you look to technical professionals to structure things and write up the agreements necessary to formalize things, don’t you think it makes sense to figure out what you’re trying to do first?

How will the four siblings in the example above work through the decisions surrounding the best way to structure things?

I’m going to assume that the four siblings won’t all necessarily agree with each other on every question right off the bat.

OK, so what if the one who is the de facto leader of the business were to simply get a lawyer to write it up his way?

Well, that might be efficient, but I’m willing to bet that some negative consequences would result, somewhere down the road.

 

Governance and Ownership

Who died and made him king? Maybe that isn’t just a rhetorical question; maybe before Dad passed away he did “anoint” his successor.

I don’t know enough about the specific case facts here, but they are not that important to the discussion.

My point is that the ownership of the business is a very important aspect to understand and work through in a thoughtful manner, but it is not sufficient by itself.

A family facing this type of situation actually needs more than just clear ownership, they also need to agree on governance.

 

How Will We Decide Things Together?

When people try to simplify governance, they usually mention communication, problem solving and decision-making.

I can’t really make it any simpler than the six-word question, “How will we decide things together?”

It’s a pretty short and simple question, but answering it is rarely short and simple.

And getting the right answer for your particular family is actually more important to work out than the more straightforward questions about ownership.

 

Please see: Family Governance, Aaaah!

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5 Things that Can De-Rail a Family Business

5 Things that Can De-Rail a Family Business

It’s been a few months since my last “5 Things” blog, so this might be overdue.

While I usually deal in positives because it’s my nature, this week we’re going to look at some potential pitfalls that many family businesses face.

Let’s get started.

 

  1. Assumptions

The word “assumptions” that I chose here might surprise some, but I wanted a word that stood on its own, without requiring a negating adjective.

So while I could have said “Poor Communications”, I chose instead to look at what IS there, as opposed to what is NOT.

The reason many families don’t think that they need to talk is because they actually assume that everyone else in the family knows what they are thinking, AND that everyone is in agreement.

That often turns out to be wishful thinking at best, and hides serious misunderstandings at its worst.

 

  1. Bad Timing

Another issue that can de-rail things is that family members from different generations will often have different views regarding timing.

I call it “bad timing” but it’s really about poor alignment of timing, different priorities around timing, and just plain waiting too long to get started on things that are important.

The rising generation needs to step into roles with a long runway so that they can learn while the elders are still there.

More often than not, the elders hang on way too long, telling themselves that the “kids aren’t ready yet”.

That usually has much more to do with their own sense of importance than anything else.

 

  1. “Us-against-the–World” Attitude

Business families are notorious for keeping things very close to the vest and having great difficulty trusting any outsiders.

They often think that they’re the only ones in the world who have family issues to contend with as they run their businesses.

They wrongly believe that everyone else is “out to get them” and have trouble trusting anyone who happens to have a different last name.

This can be harmful in terms of attracting good employees, qualified advisors, and of course eventually outside independent directors for their board.

 

  1. Jealousy and Superiority Complexes

You had to know that I’d eventually get to something in the area of sibling relationships, and here I’ve chosen to label it as jealousy.

When there’s a lack of harmony in sibling relationships, quite often it can be traced to some jealousy issues.

And even when one sibling isn’t really jealous, sparks can come from what I like to call someone’s “superiority complex”.

I’m not sure if that’s even a real term, but I like to use it as the opposite of the more familiar “inferiority complex”.

When a sibling occupies a leadership position in the business vis-à-vis their siblings, it brings about some potential difficulties, like jealousy, for example.

A humble sibling leader will face less issues with this, than one who boasts about his relative place with his generational peers.

 

  1. Stagnation

Family businesses can become stodgy and complacent with time and not quick enough to innovate. Lack of foresight and getting out in front of industry changes can become a problem.

This often accompanies the bad timing noted above, where the younger family members know that things need to change, but aren’t able to convince the current leaders that changes are needed to be profitable in the future.

 

Wait, Where’s “Conflict”?

Just guessing here, but I assume that some readers may be surprised that “Conflict” did not make my list.

It certainly isn’t because conflict doesn’t exist in business families, nor because I don’t think conflict needs to be addressed.

Of course conflict is an issue, and it exists in almost every family business. But, in and of itself, conflict won’t de-rail a family business.

Unresolvable conflict, due to an unwillingness to work on resolving it, can certainly be a huge risk.

Likewise, unexpressed conflict that lays beneath the surface for years or decades has certainly sunk more than one family business.

 

Manage the Conflicts, Look Out for the Other Five

Conflict can be healthy (see: Embracing Conflict in Family Business), so I suggest concentrating on the other five areas.

No. 3, only trusting insiders, can be the biggest one.

Regular, honest, open communication is the best antidote to all of these.

Recognizing everyone’s interdependence is probably the “magic bullet”, if there is one.

 

What keeps you up at night?

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