Author Archives: Rick Raymond

07/7/17

Wealth Transfer And Human Capital

This week I am continuing to present ideas and passages from Maps for Men: A Guide for Fathers and Sons and Family Businesses by father and son authors Edgell and Thomas Pyles.

On page 186, the Pyles’ reference Family Wealth: Keeping It in the Family by attorney and family business consultant James E. Hughes Jr. According to Hughes, the top reason for failure of transferring wealth across three generations “is that family leaders concentrate on the family’s financial capital to the exclusion of its human and intellectual capital.”

The Pyles’ go on to present results of a study by Dr. Dennis T. Jaffe with Wise Counsel Research. The researchers identified a set of seven core qualities common among families whose net worth exceeds $200 million who, through at least three generations, have successfully transitioned their wealth. Among these: Active development of human capital.

When it’s so important, why is this core quality so often neglected? The Pyles’ research shows that the reasons are primarily psychological. Loss of trust, lack of communication exact a high price. Building relationships among family members; accepting weaknesses, developing strengths, encouraging ambitions, imparting values is essential for transitioning “talent” capital through the next generation, and thus ensuring the successful transitioning of monetary wealth as well.

The Pyles’ issue a warning: “Considerable creative and constructive effort can be directed at crafting sophisticated trust documents, elegant business plans, and family constitutions, but the keys to implementation are locked up in the family psychology.”

06/23/17

Maps For Men—A GPS For Fathers And Sons

In my previous newsletter and blog post I referenced one of the most important books on my family enterprise bookshelf: Maps for Men: A Guide for Fathers and Sons and Family Businesses, authored by Edgell and Thomas Pyles—father and son.

The Pyles’ argue that for a family business to be successful fathers and sons must consistently confront sensitive situations and implement crucial decisions—both financial and emotional—in a forthright manner. They believe there is no room for passivity or neglect.

Early in the book the authors acknowledge their deliberate exclusion of mothers and daughters from their discussions—a point of contention which has been raised when I have spoken to others about their book. They write that they have a “deep appreciation for the heroine’s journey, the role of the mother in the family and the leadership provided by women in the business world.” They also recognize their concepts with regard to men may parallel a woman’s journey. However, their work is directed toward helping men understand their relational and generational issues.

The authors define their purpose for the book—set up a framework to help fathers and sons understand and solve their personal and professional issues, improve their communication and decision-making skills and achieve a leadership advantage in growing and managing a family company. Their premise—the way fathers and sons live their lives will be decisive for how the business turns out.

06/9/17

I Have Been Fired Twice By My Father.

No, not me.

Rather this is an opening line I often use when introducing what I do professionally. The original statement was made by a student in a class on entrepreneurship I was teaching at New York University.

The student had related that his father had been saying he wanted to retire soon. The student’s response to this was to increase his own involvement in the business, proposing ideas for expansion and operations efficiency—areas his father struggled with. The student’s father resisted all of his suggestions and told his son in so many words: “Just do what I tell you to do. When you are in charge, then you can do what you want.” When the young man persisted in his bid for increased involvement, his father issued an ultimatum: “My way or the highway.”

Dynamics like these are not uncommon in family businesses, where a son or daughter is pushing to have relevancy; significance; to make a difference, and having their ideas rejected. When their aspirations are interpreted by incumbent leadership as irritants, or threats, an invitation to ‘hit the highway’ becomes an obvious solution.

The foundations of these dynamics are not simple, and solutions may involve psychological intervention to address deep-rooted conflicts. Apart from that, or perhaps in conjunction with it, taking deliberate steps to open lines of communication can be very helpful, providing for honest and constructive conversation about such important considerations as:

  • Values and vision for the business and family
  • Possibilities for the business under the leadership of the next generation
  • Policies and procedures for next-generation family members wanting to enter the family business
  • Areas of the business the next generation may be given ownership or uninterrupted control of
  • Goals of individual family members for themselves and for the family today and ten years from now

It is important to recognize that multigenerational success in a family business is not a random occurrence, but something that requires the guidance of the older generation. In their book, MAPS for Men: A Guide for Fathers and Sons and Family Businesses, Edgell Franklin and Thomas Edward Pyles point out that, “Research on the correlation of success in family business shows that a positive relationship between a father and son represents a strategic advantage.”[1]

I believe this finding is relevant to a positive relationship between any parent and child.

[1] Edgell Franklin Pyles, Thomas Edward Pyles (2016). MAPS for Men: A Guide for Fathers and Sons and Family Businesses. Bloomington, IN: WestBow Press.

05/26/17

Facebook Leadership—Triad For Success

“In a relationship as critical as the one at the top, how do you create open lines of communication, respect differences and grow the business together?[1]“

In his article Sheryl Sandberg Shares the Key to Creating Chemistry at the Top, Zillow Group CEO Spencer Rascoff asks this question. He is probing into the secret of the successful collaboration between Facebook’s “oddest couple” leadership team—Sheryl Sandberg and Mark Zuckerberg. The answers he elicited hit the nail on the head for me when considering what’s needed for growing a successful family enterprise: “carve out time to communicate; prioritize the relationship; find a partner who shares your values.”

The ultimate management challenge for a family business is to open communications.

Without functioning lines of communication a palpable underground of misunderstandings, resentments, personality conflicts, will ripple through the family and the business impacting their workings and the bottom line.

Family meetings and staff meetings held on a regular basis provide groundwork for clearing problems before they build up. Between senior executives, the importance of maintaining constant communication cannot be stressed enough. Lack of strong partnership at the top can seriously hinder an organization’s ability to live its values and fulfill its mission.

Prioritizing relationships is another challenge for family businesses.

 This key point is easily overlooked because of the familiarity born into the family. When everyone grew up with everyone else it’s hard to see beyond personalities and personal histories. But for good or for ill, quality of relationships impacts the prosperity of both business and family.

Shared values lie at the very foundation of family enterprises.

The nature of the business and its mission may change with a changing external marketplace; values are the bedrock that underlies longevity. Again from Spencer Rascoff: “If you don’t have a shared language of values in an organization, it won’t work.”

The success of Facebook cannot be denied. Implementing its executives’ triad of ingredients for success—communication, relationship and values—can help family businesses achieve their own success, now and into the future.

[1] All quotes in this article from: Sheryl Sandberg Shares the Key to Creating Chemistry at the Top, accessible online at: https://www.linkedin.com/pulse/facebooks-sheryl-sandberg-shares-key-creating-top-spencer-rascoff

05/10/17

Innovation—The Surprise Factor

In The Economy of Cities, Jane Jacobs tells the story of 3M. The company started as a supplier of processed sand to metal manufacturers. As an offshoot of their core business, they decided to manufacture sandpaper. And they failed. The adhesive they developed just did not work to stick the sand o the paper. But they did not give up.

And surprise!—Their continued experiments with adhesives eventually led to the development of a whole line of tapes—including  that office staple, Scotch Tape—and much more.

A friend told me about a conversation with a master ceramic artist at this year’s Smithsonian Craft Fair. The artist said that often when he opens his kiln to remove the fired piece; it is not what he expected. He finds instead a beautiful surprise!

So innovation, with its inevitable process of trial and error, should not, and importantly, must not be feared. And it’s also no use to insist on finding what you initially are looking for. The secret: be open to surprise!!

04/29/17

Innovation—The Fail Factor

Nothing stays the same. Things find fresh avenues of growth and prosper or become stagnant and fail. This is certainly true of family-led enterprises. As a family business continues from generation to generation, significant social and economic changes can nullify what had been their core business. A culture of innovation is needed to ensure continued multigenerational success.

Two things are sure about innovation. One: It is necessary for long-term survival. Two: it is prone to initial failure.

Innovation undertaken when beset by hostility, by doubts; under pressure to succeed; under fear or failure, situates the whole process on unstable ground.

In Failing Forward: Turning Mistakes into Stepping Stones for Success, author John C. Maxwell writes: “To succeed you have to be open to problems. You have to be open to failure.” He presents examples throughout his book of many well-known people who failed—on average more than once—before succeeding.

As it goes in entrepreneurship, so it goes with innovation. The message: don’t be afraid.

04/14/17

Soft On People, Tough On Ideas

On March 31, 2017, in his New York Times Corner Office column, Adam Bryant published: Jessie Woolley-Wilson on Creating Benevolent Friction at Work, a condensed version of his interview with Jessie Woolley-Wilson, C.E.O. of Dream Box Learning, a provider of math-education software.

Through Bryant’s article, we learn about how language and cultural differences within her diverse family influenced Woolley-Wilson’s leadership style. Speaking about their frequent dinnertime arguments she says: “What I realized was that they were very engaged in discussions about the economy or about what was going on in different countries. I was witnessing the best part of “benevolent friction” — to be hard on ideas but soft on people — because there was a lot of love and hope about the future.”[1]

Woolley-Wilson sees “benevolent friction” as a positive thing within a work community: “if you don’t have pressure on the carbon, you never get to the diamond. You can still be very respectful, and assume everybody has a spark, but we have to subject our ideas to the toughest scrutiny because our work is important.”[2]

In a start-up company, she says: “you don’t know what tomorrow will bring, so you have to be constantly learning and be adaptive with your colleagues. You might think you have a role to play, but you have to listen and be responsive to your colleagues for the team to really win.”[3]

Friction is an inevitable part of all family businesses. And here too, it can change its negative aspect to a positive.

Like start-ups, family-businesses traverse uncharted territory. And Woolley-Wilson’s leadership style provides invaluable guidance. Perhaps more challenging to implement given the dynamics inherent in family businesses, embracing the friction between family members— and colleagues—with love and listening allows you to be hard on ideas and soft on people – thereby allowing them to become productive elements in the family enterprise.

 

[1] Bryant, A. (2017) Jessie Woolley-Wilson on Creating Benevolent Friction at Work. The New York Times. Available at: https://www.nytimes.com/2017/03/31/business/jessie-woolley-wilson-dreambox-learning.html?rref=collection%2Fcolumn%2Fcorner-office&action=click&contentCollection=business&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=collection&_r=0)

[2] Ibid.

[3] Ibid.

04/9/17

A Sense Of Gratitude By Any Means

One of my more important life exercises is a nightly examination of my day, starting with recognition of what I am grateful for–both large and small. So when “Want to Give Like a Rockefeller? Be Rich in Gratitude” appeared on April 1st in the New York Times Personal Business Column, it resonated personally.

The article is a brief history of the life, values and accomplishments of David Rockefeller, who died March 20, 2017 at the age of 101. It reads as a success story in the transmission of family values, high ideals and deeply felt attitudes: responsibility, humility, generosity, pride in the family legacy and one of the most important— a sense of gratitude.

“Among the values David passed down to his children was his profound gratitude,” said Lukas Haynes, executive director of the David Rockefeller Fund. “He expressed gratitude for what he inherited from his father and grandfather and his opportunity to carry it forward.”[1]

Of course few families have the wealth of the Rockefellers. But wealth is not a prerequisite for gratitude. For myself, I am grateful each day to be sharing of my unique abilities in ways that matters to others –and for the opportunities to carry this forward.

Defined as a “the quality of being thankful; readiness to show appreciation for and to return kindness.”[2] It is an attitude that can be cultivated. Recognizing and developing a sense of gratitude for what you have in your life day to day has been shown to have a positive impact on your relationships, your health and even on your brain. According to Dr. Emiliana Simon-Thomas, science director of the Greater Good Science Center:

“In studies, after eight weeks of practice, brain scans of individuals who practice gratitude have stronger brain structure for social cognition and empathy, as well as the part of the brain that processes reward.”[3]

Clearly their inherited sense of gratitude has been a significant factor in the success, longevity and vitality of the heirs of David Rockefeller, and therefore may be seen as an attitude worth emulating for family businesses along the way to their own future.

[1] https://www.nytimes.com/2017/03/31/your-money/david-rockefeller-philanthropy.html
[1] http://www.businessinsider.com/why-extremely-successful-people-swear-by-this-5-minute-daily-habit-2015-11
[1] Ibid.

04/1/17

Why You Want Gravity in Your Family Business

Many decades have passed since Isaac Newton set forth his law of universal gravitation that states, in part, that every mass attracts every other mass in the universe, and since Albert Einstein published his theory of general relativity revealing a view of gravity where mass influences the dynamic shape of space-time.

But gravity isn’t only about physics anymore–it’s a key element in the long-term success of family enterprises.

Perhaps first used by Claudio Fernández-Aráoz, Senior Adviser for the global executive search firm, Egon Zehnder, the term “family gravity” describes what makes successful family businesses different from non-family businesses. According to Fernández-Aráoz, while family firms need the same operational governance structures as non-family enterprises, they also must nurture what makes them special as family enterprises.

Different than leadership, to have “family gravity” means there is at least one and as many as three family members who are—like the sun at the center of our solar system—at the center of the family organization. “These people personify the corporate identity and align differing interests around clearly defined values and a common vision… And they have strong personalities that draw talented people into their orbits and keep them there.”1  This central group focuses on a long view of the future “on the next generation, not the next quarter.”2

Like the gravity of physics, this center of “family gravity” has properties that attract—in this case the ingredients for success—and the weight to influence shape and form—in this case the dynamics and legacy of the family and the business as they travel into their future.
 
For a conversation about the gravity in your family enterprise contact me by email at rickraymond@thefamilybusinessleader.com. To talk please call: 212-777-0083.

1 Fernández-Aráoz, C.F., Iqbal, S., Jörg Ritter, J. Leadership Lessons from Great Family Businesses. Harvard Business review. Available at https://hbr.org/2015/04/leadership-lessons-from-great-family-businesses

2 Ibid.

03/24/17

Accident and Intention

A young family business—first or second generation—in which the family’s next generation have begun to find their places, has reached a point where two possible paths to becoming a multi-generational enterprise emerge. The incumbent generation can either let things play out willy-nilly—without any plan as to what the business may look like in the future—and perhaps, quite by accident, become multigenerational. Or they can begin with intention.

Intention sets the stage and gets the wheels turning. The thinking starts with what’s possible for the family and the business under future generations.

Starting with intention the current leadership can set their sights on a long-term vision: wealth creation across generations, and a legacy. With this in mind they can then draw upon centuries of knowledge and documented experiences from those families that have created successful multigenerational family enterprises.

To pave a surer path to multi-generational success, start with intention.