There will be children who love the family business and those who do not

 A client told me that he was planning on giving his business to his 2 children who worked in the business, when his wife reminded him that they have 4 children. This illustrates a natural inclination to include the business as part of an equitable distribution of the estate. It’s important to remember in these situations that there is a difference between fair and equitable when it comes to succession planning. The “equitable” part takes into account that one child may be a school teacher and another an investment banker. The “fair” part comes about as the result of open and clear communication. Paraphrasing an ancient Chinese proverb: Starting this communication 20 years ago was not too early. Starting it today is not too late.

I recently had an opportunity to speak to first-generation family business owner from Brazil who asked how to decide which of his children would be the better choice to take over management of the business. I saw that he was not falling prey to the idea of primogeniture succession (the oldest assuming leadership regardless of business needs and individual abilities).

My response rested on a statement by Sam Johnson (former chairperson of S.C. Johnson & Son) that each generation needs to declare a vision for the business for themselves. If vision is a variable from generation to generation, the unchanging foundation of successful family enterprises is the values that the family and the individuals within it express through the medium of the business.

My recommendations to the Brazilian businessman were:

• That he and his family identify and discuss the values (those things that are important to them) they hold for themselves and that are important to the family in the context of the business.
• That with his children he undertake a family discussion of their five-to-ten-year vision for the business and what skills and leadership would be needed to achieve that vision.

I stressed that it is important that this conversation be a family effort. Also included should be his board of advisors or business mentors. To be done well this process may be expected to take from 6 to 24 months to complete.

The outcome should render an obvious choice and enable a smooth transition.

As you may realize, I am a fan of Seth Godin. His posting “Worthless (priceless)” rings of challenges and benefits (or perhaps the good, bad and ugly) inherent of family enterprises.

“We can transform a priceless thing into a worthless one. Mishandle it, disrespect it, break it, leave it out in the rain. The compromise of the moment, the urgency of now, the lack of a long view–it’s trivially easy to destroy things we think of as priceless.

But we can also transform the worthless into things valuable beyond measure. When we attach memories to something, it becomes worth treasuring. And when the tribe uses it to connect, we have a hard time imagining living without it.”

http://sethgodin.typepad.com/seths_blog/2014/09/worthless-priceless.html

…as though there won’t be afterwards. Sadly, I’ve heard this fear expressed all too often, and just as often the decision was made not to discuss any of the plans for the estate until after a death, so as to avoid discord. Upon hearing this, an image of an ostrich with its head in the sand leaps to mind. Aversion to conflict is a malady that can sink a family. While the legal structure of wealth transfer is the will and estate plan, the indispensible foundation is communication and trust, best built as early as possible. It’s here that a professional with expertise in family dynamics can add significant value.

Do the successful people “do what they love, or love what they do?” The former is external to who you are; the other is internal, meaning it’s a choice.

There is a parallel axiom in Zen philosophy: “Before Enlightenment chop wood carry water, after Enlightenment, chop wood carry water.” It’s a matter of finding satisfaction and taking strength from all that you do.

Because of the nature of family businesses, an attitude of “I don’t carry water” can be more prevalent than in a non-family business. It resonates with a perspective of “you give first.” We see it in world politics. Regrettable but true, as individually we have very little control over world events. But we do have control over our own thoughts and actions.

This attitude informs our reactions from time to time in all of our lives. You may be in a position in your family that you don’t like; and you may feel remorse about not having work you like. Oddly enough, the way out is to like the work you are doing. Quoting Seth Godin: “perhaps the more effective mantra for the entrepreneur, the linchpin and maker of change might be, “love what you do. If we can fall in love with serving people, creating value, solving problems, building valuable connections and doing work that matters, it makes it far more likely we’re going to do important work.” http://sethgodin.typepad.com/seths_blog/2014/08/turning-passion-on-its-head.html

Can you equate “loving what you do” with being happy? From my own experience, yes. You can choose to be happy in a less-than-ideal situation. But don’t believe me. Try it. Try it for 2 seconds, then 2 minutes, and then 2 hours. I guarantee, if you can do this for 2 seconds you can chose to be happy at any time in any situation, focusing on the value you provide others, the connections you have, and the people you serve.

Seth Godin recently asked the question “Is better possible?”. He assumed the answer was “yes” for everyone and then realized some people settled with “no.” (http://sethgodin.typepad.com/seths_blog/2014/07/is-better-possible.html).

Can there be “better” in a family from generation to generation? I think yes. Of course this begs the question as to what “better” is. I’m not, however, going to attempt to define “better” here, but rely upon the understanding that we all know it when we see it.

When speaking of a family business I would venture to say that “better” requires preparing your children to be better; and you would think there would be universal acceptance for this.

Like Godin, I too am surprised when I find situations where the opposite occurs, not so much in word but more in deed. My father once told me he felt his parents did not want him to be better than they were. The idea of that still befuddles me. Godin sees fear as the driving force here; and I do have some rudimentary understanding of what my immigrant grandparents may have been feeling.

The wonderful thing about the family enterprise is the potential for a creating a family legacy. The big questions I believe are:

• How do I create better human beings?
• What are the aspirations and strengths of others in my family that I can nurture and support?
• How does my family business value others?
• What does it mean to be multi-generational?

These questions are challenging to be sure, but they are of paramount importance. The business world is not an island. The family enterprise that meets these challenges, that answers “yes, better is possible” can become a powerful force for “better” within its own walls and far beyond.

While I have a great deal of respect for attorneys and financial advisors who are working with family businesses, one area where I see them consistently stop short in their work is in viewing the will and estate plan as instruments for resolving discord within the family.

Wills and estate plans provide the structure for succession. But they do not address family issues such as long-term sibling rivalries. Rather, they may even become the flash points for buried unrest.

Trust and communication however, provide a foundation for mutigenerational success, and these come from another set of skills.

A number of exit styles are found in family business leaders. Here are three that people may struggle with:

The Monarch

By definition the Monarch is the head of a family business that stays until forced out. Monarchs cannot stand the thought of handing control over the business they created to someone else, and usually will take the leadership position with them to the grave. Because of an inherent autocratic leadership style, once a Monarch dies, chaos generally follows. A successor is never properly trained because Monarchs feel that no one can be as good as they are.

The Ambassador

This style of leader helps the next generation learn the business first-hand and then eventually manage it. The ambassador then holds onto or assumes diplomatic or representational duties on behalf of the corporation, becoming a spokesman for the business and the new leadership after retiring from the top management position.

The Czar is a leader who helps the next generation through the whole transition process, and will do whatever it takes to get them prepared for the job. After Transition Czars retire they become coaches for the next generation. The Czar knows how to teach the leadership of the family and that of the business to maintain balance and harmony between them.

Who are you struggling with within? The Monarch, the Ambassador the Czar? Who are you?

Seth Godin recently wrote a post entitled, “Most Likely to Succeed,” and then stated that “what we are most likely to do is up to us, or otherwise most likely be invisible.” Is your family business most likely to:

• Create increasing wealth with each generation
• Evolve as the market place demands
• Have a culture of innovation that allows new family business enterprises past the original business model
• Support children in their unique skills and career desires whether they go into the family business or not.
• Pass on leadership based on skills and business needs, rather than age or gender
• Avoid the use of experts and advisory boards
• Be a center of influence
• Be recognized for the positive qualities attributed to family businesses
• Create a network of intergenerational family members supporting each other while building a legacy across multiple business enterprises
• Become invisible after 3 generations