Family business has positives and negatives – our aim should be leverage the positives and seek to mitigate the negatives. One important distinguishing feature of family businesses is that they can embody a sense of purpose. The original purpose of the business founder may have been wealth creation. However, as the business evolves and additional family members join, it’s an opportunity for the family as a group to discuss and articulate their collective values and purpose, and then make them an essential part of the family business. Purpose and profit are not mutually exclusive; purpose must drive profitability. It need not be political either. While early thinking was that purpose of the corporation is to “maximise shareholder value”, more recently this has broadened into thinking about “stakeholders” which includes employees and society at large. This can be challenging for many corporations. But a business that is owned by a small group who are connected by familial ties are in a better position to both articulate their purpose, and take a long-term view in terms of how they manage and operate the business. That way, the business is just one piece of the family’s “social capital” that helps it achieve the broader family mission. Consider This: To what extent is your family business “values driven”? Has your family discussed and considered your shared purpose? and how that translates into how you use the family capital (both operating and non-operating assets)? Original articles: https://www.campdenfb.com/article/nine-principles-purpose-why-doing-good-good-family-business, https://www.entrepreneur.com/article/364853, https://www.forbes.com/sites/dennisjaffe/2021/02/24/from-shareholder-primacy-to-stakeholder-primacy-how-family-businesses-lead-the-way/?sh=c477f2321ede, https://www.rte.ie/brainstorm/2020/0623/1149060-family-business-ireland-coronavirus/, https://www.industryweek.com/leadership/article/21119925/does-your-family-business-have-what-it-takes-to-endure Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post The Purpose in Family Business appeared first on David Werdiger. Via https://davidwerdiger.com/2023/04/family-business-purpose/ Via https://davidwerdigertransitions.weebly.com/blog/the-purpose-in-family-business
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It’s a most quoted statistic – “just 13% of family businesses survive the third generation” – and it has finally been challenged. It comes from a single study of US manufacturing companies in the 1980s, and for some reason it has stuck and become almost axiomatic. But it is deeply flawed. Most importantly, it never compared family businesses to non-family businesses (family businesses on average do last longer), and it also never considered the reasons why those businesses did not continue. Besides, not all businesses are meant to last that long – among other things it’s a function of their industry and their ability to do regular strategic renewal (and for some family business, the latter is a huge challenge). The other issue is the conflation of this trope with the well-known “shirtsleeves to shirtsleeves” proverb. Enduring family business is not the same as enduring family wealth. Plenty of families have been able to parlay an operating business (which is usually how the wealth was created) into a healthy mix of diversified assets that can support the family for decades. So forget blanket generalisations about family businesses and focus on their unique attributes that are a mix of strengths and weaknesses. And view the proverb as a statement about the culture of wealth and how it affects those who created it, those born into it, and those well removed from its creation. Consider This: How do attitudes to wealth in your family differ between generations? How long do you think your business (or any business) ought to last? Further reading: https://hbr.org/2021/07/do-most-family-businesses-really-fail-by-the-third-generation, https://www.thinkadvisor.com/2021/05/25/what-wealth-really-means-to-4-different-generations/, https://www.forbes.com/sites/dennisjaffe/2021/04/28/how-family-business-leaders-make-room-for-new-generations-the-right-time-and-the-right-way/?sh=45833f283933, https://www.kiplinger.com/retirement/estate-planning/601798/how-to-help-your-family-wealth-last-for-generations, https://thriveglobal.com/stories/what-successful-family-businesses-do-to-survive-beyond-the-three-generation-curse/, Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post The 3-Generation-Trope appeared first on David Werdiger. Via https://davidwerdiger.com/2023/04/3-generation-trope/ Via https://davidwerdigertransitions.weebly.com/blog/the-3-generation-trope5804886 Research has shown that in HNW families, daughters were rarely encouraged nor received support to pursue entrepreneurship education. Entrepreneurial families often prepare their daughters and sons differently for their careers. Cultural factors and their associated gender biases may result in the problem being far more pronounced. Things are changing. Some 82 per cent of women from wealthy families expect to inherit substantial wealth over the next 20 years, but 41 per cent of women are currently not involved in family financial decision making. They need to start preparing themselves. The role of women within wealthy families is also shifting, in part due to the rising generation having a less traditional outlook on life. Family businesses are able to play a critical role in helping break glass ceilings that perpetuate gender roles. There are changes in the wind on the investment and advisor spaces too. Millennials and women value investment principles that have a positive impact on challenging issues. HNW women are often less confident about making family financial decisions, prompting the need for investment relationship dynamics to change. To remain competitive, advisors must consider a truly consultative approach; female advisors are well-suited for the job. Women – more of whom will control significant wealth over the next 10 years – prefer to work with female advisors. Consider This: Does your family treat male & female children differently? Are they given the same choices & opportunities within the family enterprise? Are there cultural or historical gender biases in your family? Is this a source of intergenerational conflict? Original articles: https://www.eurekalert.org/pub_releases/2021-06/uoo-gbi060721.php, https://www.greenqueen.com.hk/women-prefer-to-work-with-female-advisors-now-is-the-moment-for-esg-customisation/, https://www.forbesindia.com/article/bharatiya-vidya-bhavan039s-spjimr/addressing-the-novel-fault-lines-in-family-business/67115/1, https://www.jdsupra.com/legalnews/cracking-the-glass-ceiling-empowering-6627462/, https://www.campdenfb.com/article/how-raise-your-succession-game-next-gens-family-business, https://www.bnamericas.com/en/news/almost-25-of-family-businesses-have-a-female-presence-on-their-boards, https://www.wealthadviser.co/2020/12/15/293551/growing-financial-power-next-generation-wealthy-women-prompting-change-within Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post The future is female appeared first on David Werdiger. Via https://davidwerdiger.com/2023/04/future-female-2/ Via https://davidwerdigertransitions.weebly.com/blog/the-future-is-female3658499 Research has shown that 60 per cent of failed intergenerational family wealth transition are due to problems with trust or communication. Communication isn’t important in families. It is everything. If a family cannot communicate, it cannot function as a group. It’s that simple. What does poor communication look like? An absence or lack of communication (e.g. “it’s none of their business”, “they don’t need to know”, “we know what is best for them”) is patronising, infantilising, and leads to a loss of trust. There is often hesitance to discuss family wealth or estate planning with family members because of the conflict it might cause. But not discussing simply leaves the latent conflict to fester. Some cultures have a strong concept of strictly obeying the mature generation – this has the potential to create interpersonal and internal communication barriers. Negative, emotional, distracting and damaging interactions among family members can lead to the “Family Drama Vortex”. What does good communication look like? Creating a space where family members can ask and answer difficult questions like “What is our wealth for?”, “What is our family’s purpose?”, “What is our true value?”. To communicate effectively, we need to listen. This may sound like a platitude, but not everyone can do it, especially when talking to someone we think we know well, such as our children. A history of poor communication in a family means you have to work extra hard to regain trust and learn now to communicate well. To address toxic situations like the Family Drama Vortex, we must recognize that the drama and dysfunction are rooted in underdeveloped communication and interpersonal skills. Because communication is difficult, especially across generations and borders, it can help to have external guidance and facilitation. That is best coming from a specialist, and not necessarily the ‘default’ choice of lawyers and accountants. Consider This: How would you rate your own family’s ability to communicate? Are there some issues that “we don’t discuss” or that are shut down whenever they are raised? Further reading: https://sg.asiatatler.com/life/rise-and-fall-of-family-wealth-how-to-achieve-financial-longevity, https://www.coutts.com/insight-articles/news/2021/investments/speech-therapy–our-guide-to-talking-wealth-with-your-family.html, https://www.wealthadviser.co/2020/12/04/293097/asias-wealth-management-industry-needs-ready-itself-great-wealth-transfer, https://onwallstreet.financial-planning.com/opinion/how-to-keep-multigenerational-wealth-in-the-family, https://e.vnexpress.net/news/business/generation-gap-communication-a-concern-for-family-concerns-4106858.html, https://www.ft.com/content/825947e6-bf2d-11e9-9381-78bab8a70848, https://www.forbes.com/sites/forbescoachescouncil/2019/04/26/is-your-family-business-in-turmoil-the-solution-could-be-communication/#792eb2e525ec, https://www.clevelandjewishnews.com/features/special_sections/legal_affairs/succession-planning-big-part-of-family-businesses/article_6cd9a79e-45b6-11e9-ab20-ff24b4e7b8fd.html, https://www.wealthmanagement.com/high-net-worth/hardest-part-planning-hnw-families-hnw-families, https://www.marketwatch.com/story/breaking-the-taboo-how-to-prepare-your-heirs-for-your-death-2019-03-07 Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Is communication important? appeared first on David Werdiger. Via https://davidwerdiger.com/2023/04/communication-importance/ Via https://davidwerdigertransitions.weebly.com/blog/is-communication-important Not every entrepreneurship story is “rags to riches”. Many high-flying entrepreneurs came from from upper-middle-class families. While they don’t owe their success entirely to mom and dad, without their parents’ help, be it financial or otherwise, they may have never gotten their ventures off the ground. Research has shown that 75% of entrepreneurs from 48 countries said that their family was involved in starting their businesses. Family money and background plays a critical role when it comes to starting up a business. In some cases, it can provide a financial safety net in the case of failure. As much as economically, the family environment that has a big impact on the startup entrepreneur. Entrepreneurial behaviour is driven by families, not just family businesses. Families can act entrepreneurially together to create growth, and foster entrepreneurship and positive impact in society. This doesn’t happen by default. While the entrepreneurial spirit of the founder may be passed along to their children, the spirit and drive may dissipate in subsequent generations. Passing on the creativity and innovation of the founding generation across new generations is a challenge of the highest order In some families, the elders were able to build intergenerational bridges to their grandchildren by mentoring them as young entrepreneurs. The value created in doing that is far more than financial. Consider This: Does your family ‘remember’ the entrepreneurship of the founder(s)? What do you do to foster the continuity of the entrepreneurial spirit? (e.g. share stories? invest in entrepreneurial risk asset class? mentor rising generation entrepreneurs?) Original articles: https://www.forbes.com/sites/nextavenue/2021/04/22/im-turning-my-young-grandsons-into-entrepreneurs/?sh=37814eb51c0c, https://www.theguardian.com/business/2021/jan/31/small-business-entrepreneurs-success-parents, https://entrepreneurship.babson.edu/family-entrepreneurship-family-business/, https://www.entrepreneur.com/article/357381, https://www.forbes.com/sites/dennisjaffe/2020/05/05/preparing-for-deep-change-in-a-family-business/#7efb375a7942, https://www.fa-mag.com/news/russ-prince–the-downsides-of-being-a-rich-entrepreneur-55401.html Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Fostering Entrepreneurship appeared first on David Werdiger. Via https://davidwerdiger.com/2023/04/fostering-entrepreneurship-2/ Via https://davidwerdigertransitions.weebly.com/blog/fostering-entrepreneurship1573848 Unless your family business is a “mom & pop corner store” (which is more akin to owning a job than owning a business anyway), you will need to have a mix of ‘blood’ and ‘non-blood’ people working in it. As any business matures and grows, there becomes a need for professionalisation and systemisation. While owners may put a high value on the people in the business (especially family), the true value created in any business is through systems. A business that cannot function as well without family members is not worth very much to a potential buyer. Family or non-family CEO? That is a huge question for many family businesses, especially as the founder generation seeks to retire. Even if there is a family member who is willing and able, is that what is best for the business itself? For a non-family CEO to succeed in a family firm, they must understand the values of the family. The family also needs to be able to articulate those values to the CEO, and monitor their adherence in some way (which is by no means simple). The challenge for any incoming CEO of a family business is to maintain and respect the ingrained culture, and at the same time drive the business forward. It is important to create an atmosphere of inclusion and purpose, and ensure people outside of the family are also seen and heard. In larger business with many family members involved, possibly from multiple branches of the family and multiple generations, the kinship tensions are multiplied to a great degree. When family differences get in the way, it doesn’t necessarily make you a bad employee, or a bad child, sibling, or cousin. It’s important for family members to retain their own identity and not become overly subsumed within the family enterprise and its mission. Having people outside the family circle who can provide objective feedback – whether as advisors to the board or mentors to family employees – can be very helpful. Consider This: Does your family business have policies around how family members qualify for a position and their performance measured? Do you have a board with externals and/or mentors available so family members can have a forum to discuss issues of concern? Further reading: https://knowledge.insead.edu/family-business/why-family-ceos-outperform-their-non-family-predecessors-16601, https://www.institutionalinvestor.com/article/b1rnywtxhyr5kq/How-Family-Offices-Can-Strengthen-Next-Gen-Relationships, https://hub.jhu.edu/2021/04/27/dynamics-of-family-owned-businesses-phillip-phan/, https://www.smartbrief.com/original/2021/04/expanding-family-business-while-preserving-its-culture, https://www.forbes.com/sites/chriswestfall/2021/03/29/leaving-the-family-business-how-to-know-when-its-time-to-go/?sh=569aa4571e7e, https://www.thomasnet.com/insights/how-to-prepare-to-lead-your-multi-generational-family-business/, https://www.campdenfb.com/article/transfer-family-business-power-next-generation-effectively, https://www.dailyherald.com/business/20200716/6-tips-for-running-a-successful-family-business Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Family Business – blood non-blood appeared first on David Werdiger. Via https://davidwerdiger.com/2023/03/non-blood-family-in-business-2/ Via https://davidwerdigertransitions.weebly.com/blog/family-business-blood-non-blood6791938 Family is (hopefully) for life. If the family business starts to interfere negatively with the relationships in the family, then there is imbalance. Family businesses are challenging because of the overlapping of family, business and ownership (known as the “three circle model”). Researchers from Harvard have extended this into four “rooms” by adding in the board room. Because family members wear multiple hats, are in multiple circles, or sit in multiple rooms, they need an awareness of how those roles influence the decisions they need to make. Father or boss? Director or cousin? Manager or owner? It’s most important to be able to have open and trusting conversations about needs of the business and expectations of the family. Those are underpinned by the core values and the common values across both personal and professional life. Each successive generation should ask why they are in the business. Successful family businesses foster a sense of stewardship among all members of the family (no matter what their specific roles). Making multiple roles work requires setting boundaries between work time and family space. Conflict will happen, so rather than “fake harmony” (see previous article), the ability to communicate, deal with issues, and have “constructive conflict” is essential. Some kind of a conscious separation of ownership and management is very helpful. Avoid having “too many chefs in the kitchen”. Family members who work in the business should be recruited and evaluated with the same criteria as anyone else. And “don’t hire whom you can’t fire”. Consider This: Do family members involved in your family business understand the different hats they wear? Have you ever had to performance manage a family member employee? Do you have the governance structures to deal with conflict? Original articles: https://www.forbes.com/sites/forbescoachescouncil/2021/04/22/how-to-balance-a-family-business-with-family-values-13-tips/?sh=1e3380cc11c7, https://www.country-guide.ca/guide-life/family-business-handbook-how-to-build-and-sustain-a-successful-enduring-enterprise/, https://www.businessobserverfl.com/article/five-steps-every-family-business-should-take-for-a-successful-succession, https://economictimes.indiatimes.com/news/company/corporate-trends/how-can-family-businesses-keep-themselves-from-splitting-by-separating-ownership-and-management/articleshow/81427776.cms, https://www.jdsupra.com/legalnews/defining-and-documenting-roles-in-a-1032865/ Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Family Business Owners and Managers appeared first on David Werdiger. Via https://davidwerdiger.com/2023/03/owners-managers/ Via https://davidwerdigertransitions.weebly.com/blog/family-business-owners-and-managers Q. My child is not performing in their role in the family business / will use their inheritance to support a cause I despise / wants to take over / doesn’t want to take over / doesn’t want to do what I want. What can I do to bring them into line? A. Since time immemorial, parents have been trying to get their children to do what they want, or follow in their footsteps. Which specific method to use is often a function of the age of a child. When they are young, we can tell them what to do and they might listen. But as they move into their teens, this becomes more difficult. Indeed, during a rebellious period (which some children never outgrow), they are inclined to do the opposite of what parents want. The ‘stick’ works, but only for a very limited time. Using the stick (e.g. threatening to cut them out of an inheritance or other coercive tactics) on an adult is fraught with danger. While it may achieve the desired short-term result, the collateral relationship damage may be permanent. On the other hand, the ‘carrot’ can be akin to bribery, and also can send the wrong message to children about what is important. It’s worth looking outside the box at interest-based negotiation, and even acknowledging that your children are adults who may not make the same life choices as you! These may not result in getting the children to do what you want, but may well result in a healthy and positive family relationship. Consider This: (for parents) How has the way you try to get children to do what you want changed as they have grown up? (for children) how does the way your parents seek to get you to do their wishes make you feel? Original articles: https://www.dallasnews.com/timeless-in-texas/2023/01/29/a-royal-pain-in-the-arse-dealing-with-unruly-members-in-the-family-business/, https://www.wealthmanagement.com/opinions/disinheriting-family-members-different-political-beliefs Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Carrot, Stick, or …? appeared first on David Werdiger. Via https://davidwerdiger.com/2023/03/carrot-stick/ Via https://davidwerdigertransitions.weebly.com/blog/carrot-stick-or Transition Ready In the early days of my billing business, a prospective customer asked me: “what if I was hit by a bus?” This highlighted to me the dependence of the business on me, and I set about making the business “sale-ready”. That didn’t mean that I planned to sell it, rather that if I ever wanted to, I could, because the business would be worth as much without me as with me. That is my definition of a true asset. People have been talking about “the great wealth transition” for a long time, and for various reasons, these transitions are taking longer than expected. But not matter when the transition will actually happen, it is in the interests of a family to become “transition ready”. That means (a) the incumbent generation have clarity about what life looks like for them if and when they choose to retire, (b) the rising generation are ready, willing and able to step into positions of control within the family enterprise, and (c) the operating and non-operating assets of the family are well-governed and managed, and therefore the family has optionality regarding their future disposition. Being “transition ready” is a lot more than having a will and an estate plan with a lawyer. It needs communication across the family, and shared vision for the future. Thinking and talking about our mortality and plans for the future can be very confronting. Not talking about it leads to fragile family systems that can easily fall into conflict. Consider This: How “transition-ready” is your family? How might you measure that readiness for yourself, your children, and your assets? Further reading: https://www.forbes.com/sites/insights-northwestern-mutual/2022/12/06/5-steps-for-starting-a-legacy-conversation-with-your-family/?sh=f72b41c57aab, https://www.advisorhub.com/resources/failed-succession-plans-the-8-lessons-they-teach/, https://www.natlawreview.com/article/5-questions-you-should-be-asking-about-succession-planning-your-family-office, https://www.bizjournals.com/dayton/news/2021/04/07/preparing-for-what-s-next-after-the-sale.html, https://www.forbes.com/sites/forbesbusinesscouncil/2020/08/25/creating-momentum-in-your-succession-planning-process/#683513481b88, https://www.thestar.com.my/business/business-news/2019/03/16/family-businesses-in-msia-lack-succession-planning/ Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Transition Ready appeared first on David Werdiger. Via https://davidwerdiger.com/2023/03/transition-ready/ Via https://davidwerdigertransitions.weebly.com/blog/transition-ready Q: If the world’s two richest men cannot keep their wives happy, what hope do we have? A: No, that’s not a real question – it’s a meme that circulated following the news of the divorce of Bill & Melinda Gates. Many people with wealth realise that money can’t make a wife (or anyone) happy, but that doesn’t stop them trying. In business, sometimes we decide to “throwing money at a problem”. That means directing significant resources (financial and otherwise) towards solving the problem. In families, throwing money at a problem is taken more literally – directing liquidity to placate unhappy family members. The assumption is that it will “smooth things over”, but because it uses money as a proxy for the underlying problem, it doesn’t address the underlying problem. The best this response can hope to achieve is to kick the problem down the road, i.e. defer dealing with it or pretend it doesn’t exist. However, consider that (a) the problem is not solved, and (b) in the meantime, the underlying family issues can continue to fester and can actually become worse. Consider This: Have you “thrown money” at a difficult family situation? Why? What did you expect to happen as a result? What actually happened? Actionable Generational Wealth Succession For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there. #familyoffice #wealthmanagement #conflictresolution #strategicmanagement The post Wealth & Happiness appeared first on David Werdiger. Via https://davidwerdiger.com/2023/03/wealth-and-happiness-2/ Via https://davidwerdigertransitions.weebly.com/blog/wealth-happiness7121986 |