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How to Choose a Family Business Consultant

There are many factors to consider when you are looking to find the kind of help that many business families eventually require. This usually arrives around the time that the family realizes that their leading generation will someday need to make way for the rising generation.

Most will have an inkling that they will need to do “something, someday”, long before they actually start to act upon those feelings, and that’s only natural.

 

Structural Issues

Often the impetus to act will come from a business advisor of some sort, like an accountant or a lawyer. In any inter-generational transfer, there are plenty of legal and structural issues that will need to be taken care of, for obvious reasons.

What remains less obvious to many, is that the legal and structural “paperwork” is only the beginning. These official documents deal mostly with the “what”, but very rarely get into the crucial details of the “how”.

If this is all news to you, there are dozens of other blog posts on this site that you can read to get my drift. For those who are already on board, I will now segue into the thrust of this post, about how to choose your family business consultant.

 

Don’t Allow Family Issues to Get Lost

Here are my Top 5 things to consider before deciding on who is best suited to helping you with these crucial matters:

 

  1.    Overlap of Business and Family

 Does the person that you are going to engage, to help lead your transition, truly understand that most of the key issues that you will be facing involve both the business AND your family?

A business focus without understanding the family issues is no better than a “family therapist” focus with no understanding of business and wealth.

 

  1. Business > Family       OR       Family > Business?

Do they come from a background where they naturally lean toward business solutions, or from one where family harmony is the driving force?

Which is more important to them, which is more important to you and your family, and is it the same for both? Should it be the same, or should there be a counter-balance? Some semblance of balance should not be overlooked.

There is no right or wrong here, but you need to comprehend this point.

 

  1.    Do they LISTEN, and to WHOM?

So many professionals who work with business families are used to taking orders form one PERSON (the boss) and the rest of the family are merely an afterthought.

When advising a business family, ideally the FAMILY is the client. That is a huge leap, and one that is never easy to make.

Some advisors don’t get this, and some can understand it in theory but find it impossible in practice. Beware the “yes man” advisor.

 

  1. Beware: “I have THE solution for YOU”

Recycling is great for your garbage, not so much for your family legacy. If your consultant arrives with lots of “ready-made” solutions that they have used with others in their experience, please ask LOTS of questions

Buying a suit off the rack is okay, but a plan for YOUR family’s legacy should be custom-made for YOUR family.

 

  1. There is no “Free Lunch”

Good professional advice is not free, and shouldn’t be either. Some providers, usually in the asset management space, will promise to do many things for their wealthy clients “for free”.

There is not necessarily anything wrong with this, IF you understand and accept the terms and conditons that go with that.

Buying based on “low price” is not recommended either, but understanding HOW advisors are compensated should not be overlooked.

 

IFEA “Seal of Approval”

In Canada, over the past several years a few hundred people have been through the multi-disciplinary Family Enterprise Advisor program and a couple of hundred have then gone on to become “FEA” designates.

As one of them, I have a certain bias, and look at the letters “FEA” as kind of a “seal of approval”.

The field is evolving and many professionals are trying to find ways to capitalize on the huge demographic wealth transfer that is now underway.

All FEA designates have been through a thorough program and a rigorous certification process.

Please do your homework, and choose well.

 

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Thanksgiving and Who Needs Whom More

Happy Thanksgiving, Canada

Sometimes these blog posts are inspired by the time of year, and so on this Canadian Thanksgiving weekend I will share some thoughts on gratitude.

But a whole post on being thankful is really not my style, so I will also try to tie in another idea that has been ruminating in my head lately.

Last year at this time, I came across a post on Twitter, the contents of which I have shared verbally with a number of people. It was from David Chilton, author of the Wealthy Barber. (If you ever have an opportunity to hear him speak, do yourself a favour and go).

 

Spotlight on Gratitude

He posted something along the lines of “If you are healthy and you live in Canada, every day is Thanksgiving”. Amen to that.

Gratitude is a subject that entire books have been devoted to, and I know many people who need to be reminded of just how good we have it sometimes.

We can easily slip into complaint mode too often, with what could best be described as “first world problems”.

 

Process vs Content, Process vs Event

Last week I wrote about process versus content (FamBiz Conflict: Resolve it or Manage it?) but there is another comparison with process that people in the family business and legacy space like to talk about too, and that’s process versus event. (see Striving for a Succession Non-Event)

My challenge is now to try to tie this in to the Thanksgiving theme in the hopes of adding some coherence to this post. Here goes.

 

Who Needs Whom More?

When you were born, you needed your parents more than they needed you. As you reach the end of your days, you will very likely need your children more than they need you.

There are exceptions of course, but please bear with me here. Life IS a journey, or a process, if you will. Somewhere along the way in life, the answer to the question “Who Needs Whom More” flips.

Your children need you more when they are young, you need your children more when you are old. But when does it flip? And does it “flip” quickly like a coin, or slowly, like turning around the proverbial oceanliner?

I daresay that it is much more of a process than an event.

 

You Reap what You Sow

When we were kids, my sisters and I were thankful for our parents, although I am not certain that we expressed it frequently enough. As they grew older, and we matured, I know that they became more thankful for us.

Ideally, gratitude is something that we learn from our parents, and then teach our children. Parenting, manners, how to behave, how we do things in our family; all are part of the legacy and heritage we pass along to following generations.

As any farmer will tell you, as you sow, so shall you reap.

 

Values versus Valuables

Family wealth succession can be very complex and involve lots of detailed transactions and documents concerning the family’s valuables.

But your true family legacy depends much more on passing on the values of your family.

I hope that gratitude is one of the values that my children have picked up from their parents, I know that I got most of my values from mine.

My kids are teenagers now, but I have been treating them as much as possible as if they are adults for a while now.

Trying not to tell them what to do, trying to make sure that “you’re not the boss of me” is not something that even remotely enters their minds.

 

Equals versus “One Up, One Down”

Am I doing this because I realize that someday I will need them more than they need me? Perhaps, subconsciously.

My point is that the longer it takes to turn around the answer to the “Who Needs Whom More” question, the better.

A relationship of equals, adult to adult, with nobody in the “one up” position, and nobody “one down” either.

 

It really never is “Too Late”

It’s never too late to try to make things better, and the outreach can come from either side.

This week I was reminded about the old saying that “the people you meet on the way up are the same ones you will meet on the way down”. I think it applies here too.

Please remember that, you will be thankful that you did.

 

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FamBiz Conflict: Resolve it or Manage it?

depositphotos_78072006_m-2015

In any family business, conflict can occur quite naturally, and often does. “Oh crap, now what?” is one of the thoughts that can often go through one’s mind when they first get wind of family members not getting along as hoped.

This subject is potentially huge, and not necessarily something that one can easily tackle in about 700-words, but there are a couple of points that I want to make here, while being far from exhaustive.

Entire books have literally been written on this subject, and one, called Deconstructing Conflict, came out recently and I read it this summer. I even reviewed it (with a five star rating) on Amazon.com, which was a first for me.

One key learning from the book is that because conflict occurs so naturally in family business, we should not try to resolve it, but just manage it.

The idea, as I understood it, is that if you try to resolve it, one of two things will likely occur:

  • You will spend a lifetime trying, and you are bound to be disappointed, or,
  • You will believe that the conflict has been resolved, but you will later learn that it was not truly resolved.

 

Let’s just resolve it

Well, I am not that skeptical, and I think that making an effort to try to resolve conflict is often worth it, and it certainly feels better than just acting as if you can’t ever get rid of it.

This week I attended a course that is part of the Third Party Neutral program in Ottawa at the CICR.

Interestingly, CICR stands for the Canadian Institute for Conflict Resolution. So clearly the people who named this organisation believe in the possiblity of resolution.

And there is also an entire field called ADR, which stands for “Alternative Dispute Resolution”, so there must be some hope of actually resolving conflicts.

Or maybe a “dispute” is just a subset of a conflict, and you can resolve a (minor) dispute, but not a (major) conflict?

Of course we can’t forget that family business situations are often ones in which truly resolving all conflicts can be next to impossible. So now what?

 

Process versus Content

Well conflict management skills and conflict resolution skills are really quite interchangeable, as you might well imagine.

There are a couple of things that I have picked up in my ADR training as well as these TPN courses that have really stuck with me.

The first is that there is a huge difference between Process and Content. Sounds obvious, I know, but something struck me this week that drove it home even further for me, and even scared me a bit too.

The neutrality aspect of facilitation and mediation (i.e. bringing in someone from the outside) was what drew me to this type of training when I entered the advisory side of the family legacy field, because I fully understood that an external, unbiased person was an absolute requirement to tackle any family conflict.

 

Is Process Enough?

I have learned and practised a number of techniques and processes, and filled my toolbox with ideas that I can use in a variety of difficult situations.

There is a lot of “art” to all of this, and the idea of “who I am” in this work, as opposed to “what I do”, is not lost on me either.

Now I want to share the scary part, but let’s just keep it between us, OK?

The scary part is that in order to help a business family work through their conflict(s), it is more important to know about conflict resolution and management processes than it is to know anything about family business.

In fact, there was one roleplay I did this week, in an area in which I had zero knowledge, and it was actually liberating to be ignorant. My lack of understanding of some issues helped me focus on the process only, without getting into the content.

Of course if you just want the conflict resolved or managed, conflict “process” people can help a lot.

If, however, you want to build a strong family base going forward, get someone who does conflict well, AND who understands family legacy.

 

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Updating your FamBiz Vocabulary

Families have been around seemingly forever, and some family businesses go back centuries, but the words we use to describe and discuss matters in the field continue to evolve.

Family business as a field of study is still in its first handful of decades, and interest in it continues to grow.

Today I want to add my personal take on a few of the more important concepts, while hopefully updating some definitions for 21st century realities.

After each, there is a link to a previous post in which the subject was also discussed in this space.

 

“Family Continuity”

Families typically hate discussing “succession planning”. Well, nobody wanted to buy “death insurance” either, so, “Life Insurance” was born, and has become an undeniable success.

So it shall hopefully be for “Continuity Planning” too. It is far more pleasant to think about, talk about, and plan what is going to “continue” (i.e. stay the same) than it is to plan for things “after I die”.

I use “Family Continuity” rather than “Business Continuity” because while the famiy and the business are intertwined, my preferred focus is on the family. I will leave the business continuity matters to other professionals, who are in abundant supply.

See: “Say Goodbye to Succession Planning”

 

“Enterprising Family”

Most family businesses start small, and as the business grows, more family members can become involved. Other lines of business may follow, as well as more of a focus on the family than on any one business. The family business morphs into a “Business Family”

As this Business Family attitude and behaviour takes hold, in another generation or so, if all goes well, there is a critical mass of assets and people to become what many aspire to be, a multi-generation Enterprising Family.

Many families dream of this, few will achieve it. But you can’t get there if you don’t understand this first.

See “Family Business” Versus “Family Wealth”

 

“Family Legacy”

There are many definitions of legacy. I like to think about it as “what will we be known for and remembered for”. I say “we” because I strongly feel that it takes a family, through multiple generations, to truly carry out a legacy.

See “Family Business HR – Human Resources, or Human Relations?”

 

“Family Alignment”

If you want the family legacy, getting the family aligned is a key. Getting them all aligned requires dialogue. Notice I did not say “monologue”?

Two-way conversations, over an extended period of time (months and years) to get everyone on the “same page”, are a must.

There are roles and responsibilities for everyone in an enterprising family, and the clearer these are, the better. But they cannot be dictated from above.

Family alignment must be developed from within.

See “Family Alignment”

 

“Family Continuity Blueprint”

One of the best ways to get everyone on the same page, is to literally get everything on one page.

I have developed a “Family Continuity BluePrint” to do just that. I have shared it on a limited basis with others working in this space, and the feedback is overwhelmingly positive.

It is my own derivation of the “Business Model Canvas”, designed just for enterprising families, who are concerned with building lasting continuity, to ensure their legacy.

See “Planning your Dreams and Dreaming about Plans”

 

“Multi-Disciplinary Fluency”

Of course any good plan will need qualified advisors to help set it up and to execute it. Combining family, business, and ownership means that it is unlikely that a one-size-fits-all advisor will be found.

Your best bet may be to find one person with the “multi-disciplinary fluency” to hold it all together (thanks to Dean Fowler for coining the term, and John A. Warnick for helping propogate it)

See “Take My Advice: Don’t Take My Advice”

 

“Trusted Advisors”

This overused term has almost become meaningless. If you don’t trust them, they should not be your advisor. If you are ever concerned that the advice they are giving you serves them more than you, that’s a huge red flag.

See “The Value of a Trusted Family Business Advisor”

 

Conclusion

Once you have made the decision that you are an enterprising family, and you want to work on family continuity, to ensure your legacy, that’s a big step.

Then it’s time to work on family alignment, using a BluePrint, to get everyone on the same page, literally. Getting help from advisors with multi-disciplinary fluency is key, and so is making sure that their first concern is your family, NOT selling you a product or pleasing their boss.

Ready to start?

 

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My Baby, My Heir

There is something about reflecting on the past and dreaming about the future that can get us excited. When we specifically involve our family members in these thoughts, it can be even more remarkable.

Now if only we could make sure that the past memories and future dreams were all positive!

We start worrying about our offspring before they’re born, and sometimes even before they’re conceived. But for simplicity’s sake, let’s say it all starts at birth.

We also worry about what will happen to them after we’re gone. Of course after we’ve passed away, there isn’t really much we can do about anything anymore.

For practical purposes, the moment a baby is born, they become a future heir, and upon the death of a parent, they become the true heir.

During the time when a parent and child are both alive, there are many stages that they go through as they move from “baby” to “heir”.

 

Not All Distinctions Are Clear

Unlike birth dates and death dates, the movement from one stage to the next is usually less clear. Let’s look at some examples.

When does one move from “baby” to toddler, to pre-schooler? Do these stages always last as long as we hoped, or are they too long, or too brief? Do the child and parent agree on when they moved from one stage to the next?

Some of the periods are quite clear, “high school student”, for example, or undergraduate in college, with specific start and end dates.

There are overarching periods too, like “dependent”, and that one can become a bit ambiguous too. Parents usually say they want their offspring to become independent, but sometimes their actions make it look like they’re unsure how to go about that.

If the family owns a business, there’s a whole new set of stages, like part-time employee, summer intern, full-time employee, whether starting in the mailroom, or otherwise.

Then there are other business roles, like manager, VP, leader, board member, owner, CFO, CEO. Some of the distinctions are clear, some overlap, some do not apply, and a whole bunch of others can be added too.

 

Business Roles, Family Roles

Outside the company there are even more important roles, even if they do not come with a business card and title.

We don’t like to think about the time when there will be a role reversal, and the child will become the caretaker, and the parent will be the dependent. It is, however a reality that most of us will face. And it might be sooner than we expect.

There is a natural progression to all of this, but it isn’t always smooth, and in fact it can be quite “lumpy”, not to mention bumpy.

If you are concerned about your multi-generation legacy, as I believe you should be, it makes sense for both generations to be on the same page, but often they are not.

I have done some gross over-simplification here as we have gone along, only looking at a one child, one parent scenario.

Yes, I know that things are usually even more complex, involving two parents, and multiple children. My point is that even the one-parent-one-child situation is rarely simple.

I thought about calling this post “From Baby to Heir, and Everything in Between”, but shortened it. I want to highlight that there is a fixed period of time, while both generations are alive, where you can both truly work on the relationship.

 

Natural Order of Things

The relationship will NATURALLY change, from dependent to caretaker, from child to former child. I like the word “offspring”, as it covers both, and hopefully gets the parents to stop thinking of adults in their 30’s, 40’s and 50’s as “kids”.

The parent goes from leader, in the “one up” position, through a period of “equal” adults, and then finally to dependent, or “one down”.

Not thinking about this doesn’t change it, it only delays your doing what needs to be done.

Are there some relationships in your family that are still stuck in a framework that is no longer suitable, and is unsustainable?

What are you going to do about it? These conversations need to happen, however difficult they are to get started.

 

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So Maybe it IS the Highway

Highway traffic in sunset, travel concept background

“It’s MY way, or the Highway”

That expression is familiar to most people, and if you have ever been around an old-fashioned founder of a family business, it may hit especially close to home.

It’s interesting to note that as recently as a few decades ago, the default reaction to someone making this exclamation has probably changed.

What I mean by that is that in the middle of the last century, a family business leader who demanded that everything be done their way would more often than not succeed in getting everyone to do as they pleased.

In the early decades of this century, however, I would venture to guess that more often than not, they will have difficulty in getting everyone to buy into the “MY way”. So much so that fewer people will even dare utter that phrase.

So what has changed? Well there are a whole bunch of societal changes that have been occurring over the past few decades and it is important to be aware of how they are affecting business families.

 

Two Kinds of Life Expectancy

People are living longer, and staying productive and healthy for many more years than in the past, and the typical business founder has some difficulty letting go. Decades ago, their offspring could join the family business with the expectation that they would get to a point where they would inherit the business while still young enough to get to do things their own way. Not so much today.

The other kind of life expectancy is a term that I coined here myself, just for this blog. When invited to join the family business, more and more Next Generation members are thinking hard about what they expect out of their life.

 

Education = Options

Many families who have successful businesses will encourage their children to get a great education, but while they are getting educated, they are also getting exposed to the world of opportunities that such an education affords them.

What often happens is that a number of great options become hard to resist. If the choice is to return to the family fold and fall in line with a parent’s, “My Way”, or to go out and forge your own path, well, at least one of those paths is usually more tempting.

It can be understandably disappointing for parents to discover that a business that they built “for the family” does not seem to have any interested “takers”.

Families with means encourage independence in their offspring, and then lament the fact that they are no longer able to interest their children in being involved and taking over.

 

No Magic Bullet

At the risk of disappointing readers expecting me to provide a magic bullet solution, “sorry”. But I will offer some words of advice just the same.

It is true that there are more and more good “highways” out there, and if your “former chidren” have found a career for which they have a passion, then that’s probably better than having them come work for you and hate Mondays.

Also, if you have built a sustainable company and do not have any heirs who want to work there, all is not lost. Have you thought about having the family continue to own the business, even after you retire, having it run by professional, non-related management?

If you want to be involved with your children and they have an entrepreneurial spirit that they inherited from their parents but they are not exactly enthralled by your business, have you thought about helping them get started in a business venture in a field that they are passionalte about?

These last two ideas, long term family ownership of the business and starting a new business with and for your kids, are just a couple of ways to avoid the old question of My Way OR the highway.

 

The Family > The Business

If you have an open mind, and some creativity, you can look for ways to do things “Our Way”, and try a few different highways.

When thinking about the next generation, I always encourage people to be a great parent first, and think about the business second. I hope you see the wisdom of that approach.

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Even if it’s Free, I Don’t Want it

No Money bag sign icon. Dollar USD currency symbol. Red prohibition sign. Stop symbol. Vector

A few weeks back, I was on the road with my teenage son for a week, attending a basketball camp in the US. We shared a hotel room, as we had in previous years when we made the same trip.

It made me think back to times in my life when I had travelled on business with my father, and we had shared a hotel room on occasion.

My Dad was quite a snorer, and his loudness sometimes kept me from getting a good night’s sleep.

I am a former loud snorer, but thanks to the C-PAP machine I’ve used for years now, I get a restful night of sleep, and so does anyone sleeping within earshot.

 

Talking in your Sleep

One morning I asked my son if he was sleeping OK, concerned that I might be keeping him awake despite the “snoring machine”, as we call it in our family.

No snoring issues were reported, but apparently I do talk in my sleep sometimes. One night, according to my “roommate”, I uttered, “Even if it’s free, I don’t want it”.

I could not deny having said that, because it sounds like just the kind of thing that I would say. Not only that, it also sounds like the kind of thing my Dad would have said too.

I had no recollection of whatever dream I was having when I said it, but it did strike me as something that would be worth exploring here. The concepts of “free stuff” and “getting what you want” apply to many family legacy topics.

 

Zero Dollars

The word “free” itself seems to be disappearing in the business context; I am constantly annoyed by radio commercials from mobile phone carriers offering the latest device for “Zero Dollars”. (So it’s not free?)

And just because something is free, or included, does that mean you should take it? Think about that free dessert that comes with your meal.

Providers of goods and services put lots of thought into how to price, market, and bundle their wares in order to maximize profits, and often what seems like a great deal at first becomes a little “less good” for the consumer upon deeper reflection.

 

But it’s FREE!

When you think about low-cost items like a meal or even a monthly phone plan, the stakes are not that high, so who cares, right?

But what about transferring your family’s wealth to the next generation, you know, investments, banking, life insurance, and legal and accounting services?

Unfortunately few families have even a basic understanding of how those who provide them with big-ticket services get paid at the end of the day.

When something seems “free”, it is usually worth asking a few questions. More than a few, if that is what it takes to truly understand the business relationship that is being considered, or that has being going on for some time already.

“Gee that insurance fella seems like a great guy, he’s been really helpful, AND, he never sends us a bill!” If you saw how much the insurance company paid him for selling you that policy, you would have a better understanding.

And then there’s, “The bank offered to take care of all this for us for nothing!”

 

You get what you pay for

This blog often contains useful ideas, and it is free, that doesn’t make it bad, does it? Well of course not, I put this stuff out there at no cost, because some of my readers do buy my services, and it helps me attract other paying clients, and so I do it for that reason.

If there is one hope that I have in this area it is for families to take a more active role in deciding what services they DO want and need, and for them to realize how all their advisors get paid.

And if you have different specialist advisors, please understand that having them collaborate may seem more expensive in the short run, but it makes so much more sense in the end.

It’s not free, but definitely worth it.

And if you paid someone to coordinate it all for you, that would likely pay for itself too!

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Putting the Consent into Consensus (Part II of II)

Family Business Consultant - Family Meeting Facilitation - Wealth manager

Writing this blog every weekend is truly cathartic for me, and I love doing it, but it offers its share of challenges too.

Last week’s post ended a bit abruptly for my liking, as I was trying to complete my point about consensus being impossible without consent, but realized that I was leaving too many important things unsaid.

Being my own editor and publisher has its advantages, though, so simply adding a “part 2 of 2” is an easy way out.

We left off looking at how getting the consent necessary for family consensus can be tricky and time consuming, but if you care about this subject at all, you probably already know that.

This week I want to add three key aspects to the ideas already put forth. They are: Offering an Informed Choice, We > Me, and Progress > Perfection.

 

Informed Choice

If I ask for your consent to do something minor, and you already trust me due to some prior common experience or interaction, chances are good that you will quickly go along.

If we change that from something minor to something major, it is more likely that you will take your time before consenting.

If we now add in some complexity to the equation, hesitation on your part will surely increase further.

As I wrote in 2014 in “The Importance of Offering an Informed Choice” very often families will have their lawyers draft extensive documents to formalize family structures, but the families never actually sign them. The most frequent reason noted is disagreement, but that usually masks a lack of true understanding.

If you want me to sign an agreement, you better make sure that I am comfortable doing so, and that means, first and foremost, that I acutally understand what I am agreeing to.

If I don’t feel informed or if I don’t feel like I had any choice, my reluctance will skyrocket.

 

We > Me

Now we are getting into a whole different area, but a doozy nonetheless.

As I covered last year in “Successful Planning: Who Should Be Involved?”, it is important for all stakeholders to have a say in matters.

Ideally, the family figures out what THEY want (They, plural!) and then “Once they know what they want to accomplish, they THEN engage the advisors to fine-tune the details of HOW they will write it up.

Somewhere along the way, everyone needs to come to the realisation that there is no “Me, or I” in family continuity, it is all about We.

If you don’t get past this one, well, good luck with building consensus.

 

Progress > Perfection 

This point is very much related to the conclusion of last week’s piece, in that all of the questions of building consensus for lasting inter-generational family continuity require patience, realistic expectations, and time.

As long as it is more “Two steps forward, one step back”, than “One step forward and two steps back”, consider it progress. If you are expecting perfection AND getting it done quickly, you are setting yourself up for disappointment.

It is not because your advisors are no good, or not trying hard enough, this stuff is complex AND important, and we are dealing with emotional subject matter.

Now, if you feel like you are blocked, it is high time you bring someone in from the outside to help bring some perspective and an unbiased viewpoint or to kickstart things forward again.

Last fall, as I wrote in “Understanding AND Agreement”, you need everyone to understand things, AND agree to them. If either is missing, there will be a problem.

 

Recap

Getting consensus is not easy and it takes time. People need to be fully informed of what the stakes are for them, and there needs to be an overall understanding that the WE of the family is more important that any one person’s stake.

Lastly, if you are hoping to wrap everything up quickly, you are surely fooling yourself. This is not a straightforward process, it never is. But you can get through it, and it is worth it in the end.

 

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Putting the Consent into Consensus (Part I of II)

Sometimes things that are right under our noses are the hardest to see. Few people are immune to this, although many act as if they are.

In the interest of leading by example, I usually cherish the opportunity to share things that strike me, but which seem so obvious in retrospect that I am actually nearly ashamed to admit them.

This week’s post is about how business families make decisions together. When the founder starts a business, it is not unusual for most decisions to be made in the six inches or so between the founder’s ears.

One of the “fun” parts of family businesses, and the business families who own and manage them, is that as the business makes its transition to the following generation, the number of decision-makers often increases.

And therein lie many of the major issues that these families face, as they wrestle with how the group of people who own and manage the business will decide together, communicate, and solve problems together, as the business and assets of the family move from one generation to the next.

With large groups of people, voting is frequently an option that gets explored, and is often adopted in one form or another. This works well in politics, sometimes.

In a family business, or in any family that co-owns and/or co-manages assets together, voting has a lot of potentially negative consequences. Advisors to families in these situations will usually recommend that the family work toward more of a consensus model instead.

Now we are getting back to my embarrassing admission. I always assumed that consensus meant a decision that everyone agreed to. While that is not completely wrong, it is far from being a good definition.

If I were explaining it to a kindergarten class, it might fly, but I usually deal with a crowd that is a little older, and better educated. Interestingly, my epiphany came on a college campus.

Ever since I began doing college campus tours with my son these past few months, I have heard many college admissions folks talk about what makes their institution unique.

We sat in on sessions at some small Pennsylvania colleges that have a Quaker tradition, and during one of these (Haverford, if I recall correctly) they spoke about the consensus method of decision-making on campus.

The presenter explained that consensus is working on finding a decision that everyone could and would consent to, even if it weren’t their first choice.

OMG, you mean consensus comes from consent?!? Aaaaaggghhhh! Had it really taken me 52 years to figure this out? Well, yes. But I am really glad that I did, and not just because I got a blog subject out of it.

The devil, of course, is in the details. It is all well and good for me to talk about how much better consensus decisions are, but if families don’t understand what is really involved in achieving them, how much good will come of it?

Interstingly, most of the conclusions I will now present are ones that re-occur frequently in my blogs and my discussions with families.

Here goes:

Simple vs Easy

Consensus is simple to explain, especially with my “revelation” that getting people’s consent is how it works. But simple does not equal easy, as in “easy to do”.

 

Happens by Itself, NOT

My oft-repeated “things don’t just happen by themselves” applies here too. It may be easy to get everyone to consent to the idea of making decisions by consensus, but that will often be the last decision on which consensus comes quickly.

 

Communication

A common thread in families where things run smoothly is good, frequent, clear, open communication. Enduring consensus is nearly impossible without it.

 

It Takes Time

Everyone always seems to be in a hurry. But good, lasting decisions take time. Time to talk, time to think, time to listen, time to reconsider, time to caucus, time to research, time to sleep on it, time to invite outside opinions.

The decisions that last generations are the ones that all stakeholders have consented to.

We will look into some of the details in Part II next week.

 

 

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I Can See CLEARLY Now…

Empty road with motion blur

…the rain is gone.

Jimmy Cliff was not an advisor to business families, but he certainly put his finger on one of the bigger issues that families are faced with as they try to figure out how to make sure that their legacy makes it to following generations.

It has nothing to do with making the rain stop, and everything to do with CLARITY.

This all sounds so simple, doesn’t it, that making things clear is what you need to do, and if and when you do that, the rest is easy. Well, as important as achieving clarity is, it is rarely easy. But it is an essential first step.

OK, so what are we talking about here? Maybe I need to be more clear. True enough, because I could be talking about a whole lot of different things here, right? Well, yes, and maybe I am.

We are talking about business families, or UHNW (Ultra High Net Worth) families, or legacy families, and we are talking about when they get to the important decisions that need to be made surrounding the passing of their wealth to their succeeding generations.

The senior generation and the rising generation each see things from their own point of view, and a good deal of what they each feel is important will often remain undiscussed.

Let’s now add in the professional advisors to the family, from the accountants and lawyers to the wealth managers, bankers, insurance people and tax specialists.

Each of these trusted specialists also tends to see things from their own professional perspective, and since each one is armed with their own specialist hammer, they will often see every family’s issue as being just their kind of nail.

All of the parties are well meaning, competent, and intent on arriving at the best possible result for the family, because they all know that while it is not easy to beat the odds, this family has just what it takes to pass on their wealth for many generations to come.

After listening to a variety of ideas from their trusted advisors and even the members of the rising generation of their family (who will play instrumental roles in seeing the plans through), the leading members of the family who must ultimately decide on various courses of action are often hesitant to act.

The finger pointing can now begin. The rising genration can point at their parents and blame them for not trusting their children, the lawyer can blame the accountant, the insurance person can blame the tax guy, and Mom can blame Dad.

All along, the missing ingredient was clarity.

Here are just a few of the items that were probably not made clear, either because everyone assumed the answers where understood and agreed upon, or because they required discussing issues that are just no fun to talk about.

  • What are the main goals for the family; to run a business together, to run a foundation together, to share use of the family real estate, to raise future stewards of the family legacy, or for everyone to do what they love and happily gather as a family at holiday time?
  • How important is it to minimize the amount of taxes that the family will have to fork over to the government when each person passes away?
  • Do the people who are expected to play key roles in carrying out the plans actually know what those plans are, understand those roles, and agree to carry them out?
  • Are there other family members who may be expecting to play certain roles who are being left out?
  • Is anyone being conveniently blind to poor relationships that exist, and hoping that when these people inherit assets that they are to manage together, they will magically become great business partners?

Now I never said that making these things clear was simple, and I guess after looking at these questions it is easy to understand why these things get overlooked in the name of action, any action.

But as professionals helping families, we have to do a better job of helping families “see all obstacles in their way”.

 

 

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