Enabling Next Generation Legacies: 35 Questions That Next Generation Members in Enterprising Families, written by two professors, is well-researched and has been endorsed by everybody who is anybody in the world of Family Business Centers across the globe. This book has more than 35 questions, more like a hundred. It would be useful as a reference book.
The book has four key sections:
- Family
- Ownership
- The Business
- Wealth
Family:
Sound simple but it isn’t. The first step is to make sure you all agree on who is family and who is not, what it means to be in this family and where you fit into the picture. The challenge for Next Gens is described as having to earn respect and legitimacy from not only the family but to stakeholders, suppliers, employees and customers.
There is a great discussion of the difference between good and bad conflict, whether it is destructive or productive. They suggest offsite retreats with the sole purpose of building family connections. There is a free online conflict instrument by Ritch Sorensen to learn your natural style and consider how to increase your range of styles. file:///C:/Users/Barb/Downloads/eix.org-download1-251-familybusiness.pdf
One fatal flaw for next gens is failure to understand why it is so challenging for older generations to let go of the reins. If you don’t understand the strong attachment, you won’t be able to lead a successful succession discussion.
Ownership
This section is jam packed with practical tools to strengthen and govern ownership. If you are having trouble being heard in your family, I recommend a deep dive into this section that covers shareholder agreements, distribution of dividends, assignments to the board and how your number one currency is credibility.
The key to success in ownership is simple. It must be active ownership which apparently does not come naturally but has to be learned and cultivated. All owners should feel a psychological connection to the family business. Active ownership doesn’t mean working for the business, it can take various forms including boards.
Family owner pitfalls include people feeling entitled to certain roles just because of ownership and not skill or merit based. Secondly, some Next Gens feel ashamed of inherited ownership. This is where governance comes in and owners deciding and stipulating when and how Next Gens will become active owners and if there will be a policy on skill and merit for selection of key positions. If you feel a bit sheepish about inheriting ownership, it may be worthwhile to consider if you really have the right skills and experience and if not, how you plan on getting there.
The Business
Many of the stories focus on situations where the senior generation just can’t or won’t let go. This is coupled with the senior generation’s lack of trust in Next Gens which presents itself as continually challenging new ideas and strategies. Earning trust is not an event, it is a continuous process. Here are a few of the most thought-provoking questions from this section:
- Does your family have a history of hiring qualified or unqualified family members?
- Who is responsible for deciding whether a family member is qualified to work in the business?
- How would you proceed if you had to fire a family member’s spouse?
Wealth
Family wealth is in this book goes beyond financial assets and includes the family’s social capital and networks, human capital from family members’ experience and competencies, and, cultural capital from the family’s intellect, communication and education. Many families focus only on financial wealth and as the authors state: financial wealth without purpose has little value.
One of the key findings in their research of Next Gens is the longing for more knowledge to chart their personal development paths. The question is do you see the family business as a blessing or a burden?
The research shows that there are many reasons why Next Gens feel apprehensive about entering the family business:
- Fear it may dominate their life in a negative way
- Desire not to replicate the lives of their parents
- If the mandate of the family business has any kind of stigma such as coal mining or plastics or in some extreme cases, unethical business practices
When it comes to money, how open are you at discussing family wealth and/or business worth? It’s recommended that you find good peers and a network of people where you can be frank and open.
Consider opening a family business office which the authors describe as a “business designed to manage wealth and other business interests for one or multiple family members.” Some of these offices also provide services such as tax planning, accounting, estate planning, IT, trust administration, governance and security.
Like all family business books, there is a section devoted to the power of bringing third party advisors to navigate the complexity and facilitate real change.
Barb is a family business advisor and owner of 22c Partners Inc. who lives in beautiful Victoria, BC, Canada. A professionally published author, Barb has done extensive consulting with corporate clients but also has worked with the actress Goldie Hawn and her board as well as working for the Royal Family of a European country who has holdings in Canada. This was a beautiful experience and one that stayed with me for years. She is a certified board Director and helps family business understand how corporate governance can be a game-changer to instill professional disciplines and ensure that the family business operates with the best of practices. She also has an MA in Human Resources.
