Growing More Than Just Growing Financial Assets

Across generations and across cultures, the sentiment is the same: family enterprises and family wealth often does not make it into the third and fourth generations. It doesn’t need to be that way.

Every family faces challenges to successful, long-term sustainable legacies.  For the countless strengths and opportunities giving family enterprises a competitive advantage, business families face unique challenges in setting up the enterprise and the family to be successful for generations to come. There is no magic checklist or fill-in-the blank formula, but there are things enterprising families can do:

·     As a family, write a family mission statement, complete with your family values and beliefs, and discuss what it means to see those values in action

·     Create an environment of open, clear, and direct communication

·     Define what wealth means to your family legacy

·     Record family stories through conversations with parents, grandparents, and other relatives either through audio, video or written word. You may decide to record the younger generation interviewing their senior family members

·     Develop clear policies and business norms for family members

·     Clearly define the roles and responsibilities in the enterprise

·     Have a plan, in writing, for the transition of the enterprise and assets to the next generation

·     Establish a fair and equitable exit strategy for those not interested

·     Help each family member internalize the vision for the family and the enterprise

Like it or not – everything you do and say contributes to or influences your legacy. Building a legacy is not a one-time event. Rather, it is a lifelong process that is influenced by, and also influences, family. A true family legacy is more than just the legal documents distributing your assets. In order to nurture the legacy, you must understand what your family legacy is. A legacy is formed by the sequences of actions that resemble one another and are lived out in each generation.  It is the repeated behaviors and actions that shape your family legacy.

Each family is special and unique. Each generation needs to adopt and add to the family legacy and definition of family wealth. The wealth of a family consists of more than simply the financial capital. Your family has special family intellectual wealth, family social wealth, family spiritual wealth, and a unique familyness.Engaging in a legacy dialogue should not create opposition in the family. Rather, it should be an opportunity to experience the free flow of thoughts between family members to build a congruence of thoughts that will unite the family and strengthen the business.

Your family’s legacy is too important to expect it to ‘just happen’. It is important to understand what questions to ask, appreciate the sensitivity of the issues and conversations, develop the ability to communicate with those impacted, and support more satisfied lives. To lose family harmony due to a lack of understanding does not help build a family legacy. A legacy of love, harmony, security, and enterprise success is the ultimate goal. As your business family focuses on the development of the family and the business, you need not travel this journey alone.

What makes legacy planning for success so difficult for so many business enterprises? Reasons families do nothing run the gamut: the senior generation fears letting go; the business is going well and it is too much fun to let go; the enterprise is struggling and the senior generation feels like they have to get it back on track; the senior generation’s belief that the rising generation is not ready or not interested; the senior generation’s indecision in choosing the next leader; the family wants to avoid difficult or awkward conversations; psychological and emotional connections to an identity connected to leading the family business. 

Avoidance, or doing nothing, can seem like the easiest option, but is only going to make things more difficult in the future (and probably frustrate the rising generation in the process). Preparing for any change in season takes planning, and preparing for succession is no different

A professional family business advisor can help the family and the enterprise function with discipline and forethought to ensure sustainability for future generations. A qualified advisor can bring clarity to issues, perspective based on experience, and unbiased relationships with family members.  In addition, an advisor can provide: unbiased input, strategic insight, give voice to family members, succession planning, and ask the difficult yet critical questions. A family business advisor is the constant thread throughout the process to help navigate the pitfalls, keep focused on the goals of the family, and help the family address the concerns of the various stakeholders.  Don’t do this alone.  Invite a family business advisor to help you navigate the journey.

It is not too late to get started. Doing nothing is not really an option. 

The legacy you leave is the life you lead. 

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Family Business Succession or Extinction

Most family businesses are just one step away from extinction. Sound harsh?  According to PWC, only 23% of family businesses have a robust, documented succession plan.

If family business leaders don’t intentionally infuse the family values, vision, and culture into successors, will the family business be sustainable? The importance of leadership for succession is required! If a key leadership role in your business was unexpectedly vacated by death, disability, or disqualification, who is ready to step up? Understanding the value of succession planning requires everyone to be more engaged.

Five factors play a significant role in working towards smooth succession:

1.    Build your bench:You can’t run a relay by yourself. Running a relay, like succession planning, requires the development of runners. Succession planning requires a family business to always have an eye on high potential leaders so they can develop them for future needs. Like training for a race, systematically developing successors also means systematically providing the right experiences to build the correct skill sets for the future.

2.    Make the transition seamless: When a succession plan is well-executed, and a smooth leadership transition occurs, the family and the business do not miss a step moving forward.  The baton is passed with ease. Making the transition seamless requires planning, preparation, and effective communication. Part of building a bench of talent is instilling in future leaders the cultural DNA of the organization, which will help provide continuity from exiting leader to successor during transitions.

3.    Cast the vision: The vision is the shared image of the family’s definition of success and what the family wants the business to be.  The vision provides a future orientation It points the direction for where you are going.

4.    Nurture the values: Every family has values. They may be spoken or unspoken. Some families live out their values more closely than others, but each family and business has a set of values. Though the world is ever changing, a family’s core values should be constant. It is who you are as a business family. Values are energizing, motivating, and inspiring. When people care passionately about something, they spur themselves to great achievements. The core values really are conscious motivators!

5.    Provide mentoring: A mentor to rising leaders will help the family business function with discipline and forethought to ensure sustainability for future generations. A mentor can help the family establish frameworks for succession, provide training, help with skill development, and foster reflective planning for the future.

As a family business, avoid extinction by focusing on these five factors for successful succession.

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