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FamBiz: Management vs. Governance

FamBiz: Management vs. Governance

In a family business, there can often be confusion around the questions surrounding the management of the business, and the separate, but equally important area of its governance.

I see it in many places with family clients and this post will hopefully help clarify the differences.

 

Management = Day-to-Day

Management of the business starts with all of the day-to-day actions and decisions that it takes to keep the business running.

It’s about what you can see happening in many areas, and it usually involves all of the activities that are done by the vast majority of the employees.

The management of any business is all about the short-term execution of the company doing what the company has decided its business is.

 

Who Decided?

So in case you didn’t notice, the key word in the last sentence is “decided”. I purposely said that “the company decided”, but in reality it isn’t decided by “the company”.

There are people who “govern” the company and what it does, and then the managers of the company implement those decisions via their management functions.

But then that just begs the next question, which is, who gets to decide? And then there’s another level of that, which I‘ve already addressed here: “Who gets to decide who gets to decide?”

 

Corporations Are Easier

In contrast to a family business, if we look at a big corporation, things are pretty clear. The shareholders elect the board of directors, who decide who the management will be.

There are plenty of layers and checks and balances and there are formal structures and procedures in place to guide all of these decisions.

In a family business, well, usually, not so much.

 

Informal Governance

I used the word “formal” intentionally just there, because it reminds me of the expression I like to keep in mind:

“Formality is your Friend” 

I need to thank Ruth Steverlynck, one of the instructors in the Family Enterprise Advisor Program, for that expression. I’ve used it a lot and will continue to do so.

Family businesses often resist formality because they don’t want it to slow them down. Sometimes it’s simply the founder who has a preference for flying by the seat of his pants.

 

Governance sounds Formal

Regular readers will be familiar with my personal struggles with the word “governance”, and the fact that I have a sort of “love-hate” relationship with it.

It sounds almost TOO formal, to the point where it can actually scare people off.

I try to soften it by repeating that you don’t necessarily have to be overly formal, and that any governance you choose to put in place is best done incrementally.

 

Constitutional Crisis

I read a lot of stuff from the academic field of family business and I see people using the term “Family Constitution” a lot lately. A family constitution CAN be a great thing for a family to have.

BUT, and it’s a huge but, that shouldn’t be the place that you start the governance process.

In fact, I personally would probably never even mention the term “constitution” during my first year of working with a family.

 

Management Confusion

Sometimes company management acts as if they are also in charge of governance, because, well, frankly, they can.

But a family business is a complex system, involving not only the business, but also the family, and the ownership.

These interdependent systems are where some formality and definition of roles and responsibilities comes in.

In fact, the part about figuring out, deciding, and writing down who decides which questions is what governance is all about.

 

Clarity goes a Long Way

There can be lots of ambiguous situations in a family business, and when things aren’t clear, people step on each other’s toes a lot, which can create conflict.

It’s important to clarify which groups of people will be responsible for which decisions.

But sometimes that’s really hard to do.

It really needs to be “hashed out” as a group. Some “horse trading” and compromises may end up needing to happen too.

 

“Don’t Try This at Home”

What can happen is that families will try to work these things out by themselves and end up making things worse.

An independent person, who has no stake in the systems, can go a long way to making these discussions more productive, and more civil! It’s worth trying.

 

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The “Leader” Versus the “Boss”

The “Leader” Versus the “Boss”

If you go to any bookstore (almost seems quaint to imagine that these days) you will see lots of books on the subject of leadership.

You will find very few books on being “The Boss”, and any time the word “boss” is used, it’s usually in a negative sense.

I like to think that there’s been an evolution in the way organisations are managed over the past few decades, from one generation to the next.

The old fashioned “tell them what to do, and if they don’t do it, tell them again, only louder” seems like it was almost normal in the 70’s but today, well, not so much.

 

Family Business Version

The idea for this post came from a discussion with some members of a family business, who were talking about a relative of theirs whose management style they were less than enthralled with.

“He doesn’t want to be a leader, he just wants to be the boss”.

I really appreciated the phrasing used, as I had never heard those terms juxtaposed that way, and it was pretty clear what he was driving at.

 

A Picture is Worth 1000 Words

So I quickly put this idea into my “future blogs” file and let it simmer for a few weeks. This week I pulled it out and dusted it off, and then looked for a photo to accompany it on Shutterstock.

Lo and behold, I stumbled across more wisdom. There was a picture of something nondescript, along with these words:

A Boss says : “Go”

A Leader says: “Let’s Go”

This reminded me of a quote of mine that my social media team likes to send out on Twitter and LinkedIn, “Telling people what to do is actually one of the worst ways to get them to do something”.

 

Leading from the Front, or the Back?

The old style of leadership was almost always “from the front”, but then we started hearing and reading about “leading from behind”.

I like the symbolism of these words, because you can almost imagine a group of people and a leader positioned in a certain place, even though the physical positioning may never happen that way in real life.

Then there’s leading from the middle, which almost feels like it might be the best place, because that’s where you’re actually the closest to the greatest number of “followers”.

But I’m not even sure if leading from the middle is “a thing” or if I just made it up (?)

 

What’s the Issue, Anyway?

When we talk about this boss vs leader issue, what does it really boil down to?

If we just look at the family business scenario that inspired this post, it seems like it comes down to these two points:

  • Autocratic decision making
  • Brusk communication style

There are surely other things that cause dissatisfaction among the followers, but “fixing” just these two would go a long way to improving morale.

 

Generation to Generation

Earlier I mentioned the 70’s, and I’d guess that there were more autocratic bosses then than now. But there were surely some collaborative leaders then too.

Nowadays, there are more true “leaders”, but that doesn’t mean that there are no longer any “bosses” still around, just less of them.

Family Business Dilemmas

The family business version of this issue is of course more complex. Exits are not as simple and other family “baggage” can make it even trickier.

The flip side is that there are lots of leadership roles in a business family, and one of the biggest mistakes some families make is having the same person fill too many of these roles.

 

Three Circles, Three Systems, Three Leaders?

The Three Circle Model shows us that there are three systems at play in a family business: Family, Business, and Ownership.

Each system can and probably should have a “leader”, and it really doesn’t have to be the same person.

In fact, I recommend that families try to avoid having the same individual occupy more than one role.

Collective Responsibility

With different people assuming different leadership roles, the possibility of developing a sense of “collective responsibility” is heightened, and that’s a good thing.

In fact, getting all of the key people to understand that they truly are interdependent can go a long way to improving relationships.

Can this be learned? I sure believe so, but the right attitude is key!

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No, Dad, Coaching is NOT “Helping Losers”

No, Dad, Coaching is NOT “Helping Losers”

I’ve just begun a series of coaching courses that have been “right up my alley”, and the process has also triggered some memories and anecdotes about the coaching profession that I think are worth sharing here.

When I first learned about ORSC (Organisation and Relationship System Coaching) I was instantly intrigued and thought it might be the perfect place to hone some of my facilitation skills.

Working with families means that there are lots of “relationship systems” already in place, and there is both some art and some science behind knowing how best to work with them.

 

Flashback No. 1

So let’s start with my first flashback, which is the source of the title of this post. It touches on some of the misconceptions and general misunderstanding of what coaching is, and conversely, what it isn’t.

It was over a decade ago, and someone who respected my father as a businessman made the unfortunate mistake of asking for his opinion on a matter he knew little about.

My Dad deserved the respect for his business acumen, but his penchant for offering strong opinions on matters he knew very little about was also part of the deal.

A family member in his forties was thinking about coaching as a career change. This person could have / would have made a great coach, but never pursued it, thanks in part to being dissuaded by my Dad.

I learned of the discussion later from my Dad, who off-handedly mentioned that so-and-so was considering going into the business of “helping losers”.

 

A New “Profession” 

The coaching “profession” is still relatively new and misunderstood, although it feels to me that things are getting better slowly with time.

Something interesting I have noted in my work in the area of Bowen Family Systems Theory is that Dr. Murray Bowen was calling himself a “coach” since at least the 1960’s, which likely pre-dates much of the current coaching “industry”.

Unfortunately, many family leaders from the senior generation have a hard time grasping the idea of hiring a “coach”

I know of at least one family who missed out on hiring someone that I know would’ve helped them greatly, but the patriarch was not convinced, in large part because the person presented herself as a “coach”, and he couldn’t get past the fact that his family wasn’t a “hockey team”.

 

What should we call ourselves?

I touched on this last week in Providing Counsel to the Family Council, where I mentioned that I don’t like to call myself a consultant. So I use the term “Advisor”, but then I really don’t like to give “advice” per se.

One of the best words to describe the kind of assistance I provide is “guidance”, but calling myself a “guide” just feels a little too nebulous.

 

Tour Guide or Wilderness Guide

Let me play with the “guide” theme a bit here. I really don’t think the city tour guide at the front of the bus is a good analogy. However, a safari guide or wilderness guide might be a better fit.

When you go to a place where things are unfamiliar and potentially dangerous, you really shouldn’t go it alone.

I don’t think too many people just book a flight to Kenya, stop at the Hertz counter and drive into the jungle to find the lions.

 

A Safe Expedition

Working on your family alignment and governance also requires making sure that everyone feels safe and that nobody is ever in danger. You want to make sure that you have at least as many members in your party at the end of the trip as when you started.

In the cases where some members are no longer part of the journey, you want it to be because they chose to come home early or to go on a journey with a different route.

 

How about a FLAG?

Now I’ve added even more elements, i.e. alignment and governance, that people who do this kind of work like to talk about, which can also add to the variety of titles.

So a Family Legacy Alignment Guide could be shortened to FLAG. I’m not sure that one would resonate though.

I think I’ll stick with Family Legacy Advisor for now, while continuing the coaching courses, which are actually more about “facilitation”.

 

Moral of the story: All families are different, and so are the people they hire.

Also please see: Going Far? Go Together!

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Providing Counsel to the Family Council

Providing Counsel to the Family Council

I enjoy wordplay more than most, and this week I stumbled across something I probably should have addressed in this space already, but seemingly haven’t.

So by exploring the words “Counsel” and “Council”, which are homonyms, I get to touch on a couple areas that are important to me and to my practice.

 

Family Counsellor

My current business card identifies me as a “Family Legacy Advisor”, but I’m never sure what I should actually call myself.

I cover a few bases by adding “sub-titles”, (Facilitator, Coach, Mediator), but even then it never feels 100% “correct”.

I prefer “advisor” to “consultant”, but when I’m crossing the border I always say I’m a consultant, because it sounds more straightforward.

Somehow, “family counsellor” feels like an appropriate title for a role I really enjoy playing, although that could also be easily misconstrued.

 

Business Family versus Family Business

Regular readers know that I often note the difference between a “family business” and a “business family”, and I have a clear preference for which entity I prefer to serve.

I like to work in the “family” circle, serving the business family first and foremost, because the family side is usually “under-served” by outside professionals.

The business circle has plenty of outside help from lawyers and accountants, not to mention various other professional consultants.

“Business counsellor” would sound kind of funny, but “family counsellor” has an interesting ring to it.

 

Family Governance = Family Council

I’ve written quite a bit about family governance, and family meetings, and one of the most basic terms in this area is “Family Council”, but until now I haven’t used that term.

Governance can get a bad rap, and too often it scares people because it sounds way more formal than it needs to be in real life.

This week I attended an event for business families held at a local University family business center, where the topic was “family councils”. Actually, since it was in French, it was “Conseil de Famille”.

There were representatives of three local business families on a panel, and the moderator asked them questions about their family councils.

 

De-Mystifying Governance

I truly appreciated the family members who spoke in front of a group of strangers about personal subjects, and I applaud the organisers for trying to de-mystify the idea of having a family council as a basic element of family governance.

However, based on some of the questions during the Q & A, I think that plenty of attendees still didn’t “get it”.

Despite the fact that the panelists were very forthcoming, explaining the nuts and bolts of how often they meet, who gets invited, what they talk about, who sets the agenda and who runs the meetings, it felt like many were still mystified by the idea.

I think it’s likely because they couldn’t picture how it might work in their own family, and I wonder if the name “Family Council” is too formal, and scares people as much as the term governance does.

 

Evolutionary, Not Revolutionary

It shouldn’t be so formal though, especially at the outset. Just have a family meeting, and let it evolve from there.

The only “revolutionary” step is bringing in an outsider to facilitate the meetings. Everything else needs to simply be “evolutionary”.

The most important part is actually starting to set up regular meetings to talk about how the family is affected by the business.

 

A Seat at the Table

Yes, even those family members who don’t work in the business, or don’t own any of the business, do have questions and concerns about the business, because they are certainly affected by it.

Providing them a seat at the table, so that they can be heard, and so that they can ask questions, is simple and basic.

If you organize such a forum before you need to do so, it will all go so much more easily than if you wait until they demand such meetings.

 

Counseling the Family Council

Meeting even just once a year is fine to get you started. But please start before you feel like you need to.

Start slowly, start small, and evolve from there. Learn as you go, and look for progress, not for perfection.

Eventually, you’ll find a family counselor to come in and facilitate those meetings, and then you can officially call it a “Family Council”.

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Embracing Conflict in Family Business

Embracing Conflict in Family Business

Last week I mentioned the Family Firm Institute’s annual conference that I attended in Chicago in October, and how I came home with many weeks’ worth of blog material.

So today I’ll take one of the sessions that I enjoyed and build this post around it.

Here’s the title of the presentation in question:

 

“Can Embracing Conflict Spur Positive Change?”

Joe Astrachan and Carrie Hall were the presenters, and they based much of their discussion on a recent survey of some of the largest family businesses in the world.

Here is a link to their report.

Often when people like me get called into a business family, it’s because there’s something going on that could be described as “conflictual” in nature.

One of the first pieces of “good news” from the conflict is that it has heightened the sense that there’s a need to call in an outsider to help get the family to a better place.

Now, if that outsider is open-minded, well trained, and comfortable with a high conflict environment, then why couldn’t the conflct actually spur positive change?

What’s the Alternative?

Too often families will avoid conflict, or even any semblance of conflict, at all cost. Certain family cultures simply don’t “allow” any expressions of confrontation, negativity, or even challenges to authority.

Unfortunately, that often masks important differences that actually really NEED to be expressed, brought out, and dealt with.

One of the first pieces I recall reading about this, the one where you could say I had my “A-Ha moment” on this subject, was “The Invaluable Gift of Conflict”, by Matt Wesley.

 

Two Main Components

The presence of conflict, aside from it resulting in the arrival of an outsider to assist in moving the family forward, is also that visible conflict is preferable to simply having issues simmer quietly under the surface.

The consequences of unexpressed issues can be bitterness and dissatisfaction that lasts for years (decades?) before finally exploding. Unaddressed issues will often only get worse with time.

But the second “good news” aspect of conflict in a family business is the “energy” that it can create, and that energy can be harnessed, for “good”.

 

Stagnation and Apathy

One of the side effects of having people who are displeased in key positions (in the business or in the family, if not both) is that it can breed apathy and a feeling that things will never change, or that they’ll only change far in the future, and only when their perceived “problem person” is gone.

That apathy and feeling of resignation can turn into stagnation very quickly.

Conflict that erupts and becomes visible can be much healthier because at least you can see it and you’re forced into action to deal with it.

 

“One Story”

Back to the presentation by Astrachan and Hall.  The biggest “take home” message for me was their idea of creating “one story” for the family to tell.  Some background and context are necessary here.

They described a situation where there was a severe rift in a family, yet a couple of the branches of the family managed to come back together.

One of the keys to making it all work, was to come up with the “one story” that the family would tell (to themselves and to the world in general) about the business and the family history.

 

Singing from the Same Hymn Book

Any family business that has lasted more than a few decades will do well to compile and tell their story, if only for the “marketing” power that this can have.

When it comes time to “inculcate” younger members of the family into the business’s culture, these history lessons are pretty important too.

But in the case of a family “coming back together” after a rift, the part of the story dealing with the cause of the rift, and more importantly, the way the family overcame it, can be huge.

 

Positive Change

The presentation (and this blog) are about positive change, and getting the story straight can have more of a positive influence than many people will realize.

The first step may just be to learn to “embrace” the conflicts that you can actually see.

You can only get through difficulties when you actually put things “on the table”. And if you need outside help, then get some.

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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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Genetics, Luck, and Karma: Secrets to FamBiz Success

Genetics, Luck, and Karma: Secrets to FamBiz Success

People ask me where my blog ideas come from, because I find something different to write about each week. My answer: “anywhere and everywhere”.

This week it’s from watching Jeopardy, and one of Alex Trebek’s brief interviews with the contestants.

 

Top 5 of All Time

A bartender named Austin Rogers had a fantastic run recently, running up over $400,000 in winnings in just over two weeks, which placed him in the top 5 of all time Jeopardy winners.

After he had accumulated some sizeable winnings, Alex asked the likeable young man from New York to what he attributed the success he’d been having on the show.

His honest reply struck me as quite refreshing:

“Genetics, Luck, and Karma.”

 

Fits with Family Business Success Too

 I couldn’t help think how nicely these three elements fit with family business success too.

I realize this isn’t necessarily obvious, but hey, that’s why I write these blogs, to share my thoughts on just this kind of thing. Let’s take them one at a time.

 

Genetics

The family business angle fits pretty clearly with the genetics comment. “He sure seems to take after his Dad”.

Yes, indeed, we do inherit many traits from our parents, and in a thriving family business, the hope is usually that the next generation will have many of the same positive characteristics that made the parents successful.

Problems can arise though, when the children have different positive traits, and clashes can happen when the generations don’t see eye-to-eye on everything.

 

Luck

Luck is a bit harder to get agreement on. Successful people like to think that they alone are responsible for their company doing well, and in most cases that’s true, but it’s only part of the formula.

I can’t help think that luck has more influence on how things turn out than most people acknowledge.

Yes, I’m quite familiar with the expressions “You make your own luck” and “The harder I work, the luckier I seem to get”, and they resonate nicely with me too.

But, for every business person who blames failure on “bad luck”, there’s probably another who should be thanking “good luck” for their success.

 

Karma

If you think that luck was a difficult concept to grasp, let’s move on to karma, and try our luck there.

Let’s start with a quick Google search, which turned up this nugget:

          Karma (car-ma) is a word meaning the result of a person’s actions as well as the actions       themselves. It is a term about the cycle of cause and effect. According to the theory of Karma, what happens to a person, happens because they caused it with their actions.

That wasn’t exactly what I thought my search would turn up, but who the heck am I to argue with Google? That might not bring me good karma. (See what I did there?)

A lot of different things come to my mind when I think about karma. The “Golden Rule”, and “Do unto others” are a couple of them.

I also think about humility, and not acting like you’re better than everyone else, because that probably won’t create good karma.

 

Humble and Kind

The Karma idea made me flash back to a blog post from June 2016, Humble and Kind, in which I wrote:

And if you do start out humble and kind when you are young, how did you get that way? My guess is that most of it comes from your parents and the example they set.

When family businesses fall apart, it is usually in large part because of family conflict, so what happened to the humility and the kindness?

When I first thought about Karma and family business, I thought about in the ways that the business interacts with customers, suppliers, and competitors; you know, the outside interactions.

But now that I’ve re-read the excerpt from that blog, it makes me realize that the internal Karma, within the family, is probably even more important.

Teaching your children about karma brings good karma.

 

Something to Think About

Back to Austin, our Jeopardy contestant. He eventually lost a game and was dethroned, but his reaction seemed to fit with his penchant for keeping the karma gods happy.

He was last seen laughing and high-fiving the woman who beat him.

His luck might’ve run out, but his karma was going strong.

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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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