01/13/17

Pathways of Ownership Distribution

It’s not uncommon for a family to pass on ownership of their business equally among all their children. When this second generation passes on their shares these may again flow equally among their children—the family’s third generation. According to this approach, the two siblings in the second generation will each receive ownership of fifty percent of the business. Then, for example, if one of these siblings has two children, and the other has three children, the two children of the first sibling will each inherit twenty-five percent of the business, and the three children of the other sibling will each inherit sixteen percent of the business. In legal terms this distribution by equal shares is known as per stirpes.

Alternatively, each of the third-generation children might receive an equal percentage of the business; in law this is known as per-capita distribution. In the example above each of the five, third-generation offspring would inherit twenty percent of the business.

According to Susan R. Schoenfeld, CEO of Wealth Legacy Advisors, neither approach is inherently fair or unfair—each family should decide for itself.

01/6/17

Family-Business Structure—Three Circles

Establishment of smoothly working interrelationships among the business family, business ownership and business management is one of the challenges as well as strengths of a family business. In the first generation these groups invariably have all the same players. But as generations pass the picture can become significantly more complex. To help with visualizing the interdependence of the three overlapping groups, or subsystems, comprising the family-business system, Renato Tagiuri and John Davis developed an organizing framework in simple graphic terms (below).

Microsoft Word - Three Circle Graphic.docx

Their Three-Circle Model provides a basis for understanding the seven interest groups that emerge, each with its own legitimate perspectives, dynamics and goals. The long-term success of the business depends on their independent functioning, interdependent relationships and mutual support.

 

 

12/30/16

Familiness–At Work and At Rest

Familiness in family businesses: The nature or set of resources of the family in business contributing to its competitive edge including its culture, reputation, degree of confidence, level of communication, entrepreneurial spirit, management and decisions making capabilities, trust between individuals and interest groups, shared beliefs, commitment, flexibility, creativity and innovation. (Adapted from Family Business wiki, http://www.familybusinesswiki.org/Familiness)

Familiness and the winter holiday season: That time in which we pause from our business activities and the routines of our ordinary daily lives to be in community with friends and family, to eat a bit more and perhaps sleep a bit more, to recall the fantasies we learned as children, and to retell mysteries of Hanukkah and Christmas.

I hope that you found your winter holidays joyful restful and rejuvenating, and that you enjoy the very best of familiness in the year ahead.

12/25/16

The Longest Night

The Longest Night

The sun is disappearing… we must bring it back.

Throughout parts of the globe where the seasons change people have been observing the winter solstice for millennia—imploring the sunlight to return and celebrating its readiness to do so.

I find myself writing this blog on the evening of December 21st—the winter solstice—the longest night of the year. Images of families come to mind—the elders and the young ones.

On winter solstices past, members of the Iroquois Nations went to sleep early to invite “the dreaming” where visions would instruct their lives for the following year.Iroquois Nations

The darkness of this night, open to interpretation, inspired many different traditions and rituals. Ancient Mongolians entered a mystical tent that represented the world, where their shaman undertook a spiritual journey to the North Star to clean their souls of sins. In ancient Rome the people honored the God Saturn with the weeklong feast of Saturnalia. With the return of the light many cultures celebrated the rebirth of a God, and from these traditions the holiday of Christmas was derived.

Modern astronomy has revealed that the sun does not disappear…that the cycle of the seasons is due to the earth’s axial tilt. But the psychology and emotional impact associated with the winter solstice has not changed. We shrink from the darkness, the winter cold, and gather our families and communities to call back the light and warmth. 

As citizens of the earth, cycles and our responses to them are built into our DNA. Everything about our lives is cyclical, and that applies to family businesses no less than individuals. To them as well comes an inevitable time of change; a time that calls for the transition of leadership to the next generation, and the next. Here too, such a transition is open to interpretation. How will the family see this change? As an end, and frightening? As a beginning, and hopeful?

A family business, guided by the light and warmth of its incumbent leadership may struggle with their vision as that light wanes. And just as the sun when it dips below the horizon is not really gone, the wisdom and perspective of the founding generations continues to influence future ones.

Light endures.

12/10/16

Authentic Leadership–Suggested Holiday Reading

Over the past month I have found myself recommending Warren Bennis’ book, On Becoming a Leader, to a number of people. Bennis, who passed away in 2014, was a prolific writer on leadership and, according to management guru Peter Drucker, this is Bennis’ most important book. I find it intriguing that I am now recommending it so often.

As per Bennis, ingredients of leadership include vision, passion, integrity, self-knowledge, constant learning, curiosity… even daring. Bennis writes: “Good leaders engage the world. Bad leaders entrap it, or try.”1

One of Bennis’ most popular quotes illustrates his perspective on how leaders can be creative: “There are two ways of being creative. One can sing and dance. Or one can create an environment in which singers and dancers flourish.” Visit Freedom Inc. to hear Mr. Bennis expand on this quote in a video interview.

In the ideas he set forth in this book, originally published in 1989 now a classic, Bennis lays a foundation for authenticity and personal ethics in leadership.

Since a capacity to develop leadership qualities in all family members is characteristic of family businesses, I strongly suggest On Becoming a Leader as productive holiday reading for all. It’s on my list to re-read in 2017.

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1.Warren Bennis, Becoming a Leader (Basic Books, 2009), 38

12/3/16

Bequeathing Family History

Storytelling is basic to human society. Around the globe and throughout history storytelling has been used to communicate traditions, beliefs and values. Stories help to strengthen the form and order of the cultures and societies to which they belong. According to Judith Kolva Ph.D., professional personal historian and CEO of Legacies in Ink:”Our stories are the heartbeat of the human experience. They teach us who we were, who we are, and who we can be.”1

In her article: Story Power: Families’ hidden asset, posted on November 30th in The Practitioner, the online publication of The Family Firm Institute, Dr. Kolva cites sources that extend the importance of storytelling to longevity in family businesses. Her sources speak of the telling and retelling of a family’s most important stories as best-practices for successfully preserving wealth.

Despite the critical importance of making time at family gatherings to share their unique history, it seems few families do. They fail to understand that family stories are important assets; legacies that can help make them less vulnerable to the all-too-common ‘rags-to-riches-to-rags’ scenario within three generations. Or, they just cannot see how to get started.

Dr. Kolva describes the difficulties involved in initiating and continuing the storytelling process as “Someday List Syndrome.”2 In her article she offers many suggestions and strategies for overcoming these difficulties.

Why not visit the article page and pick some of these suggestions to try within your own family, https://ffipractitioner.org/2016/11/30/story-power-families-hidden-asset/.

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1.Judith Kolva. “Story Power: Families’ hidden asset, ”The Practitioner, November 30, 2016. https://ffipractitioner.org/2016/11/30/story-power-families-hidden-asset/

2. Kolva.

11/26/16

Diversity and Success

I recently heard Jennifer Brown, author, Tedx-Talk speaker and entrepreneur, talk about the social and economic advantages associated with diversity. 

In her new book, Inclusion, Diversity, the New Workplace & the Will to Change, Jennifer calls upon people who can drive change to embrace diversity. She argues that when we build systems that embrace diversity in all its forms, we directly impact the bottom line; and that diversity is essential for the viability and sustainability of every organization.

She identifies a bias toward our own thinking and our propensity to go with sameness as challenges to diversity. Importantly, she recognizes that diversity issues cover much more than race and gender. They extend to areas of leadership, our relationships, and collective customs.

Her talk got me thinking about challenges to diversity in family enterprises as they transition from one generation to the next. The leadership style of the founders may be significantly different from that of the next generations, and a stubborn prejudice in favor of one style can be detrimental to the future success of the business and the family. It’s important that family-business leaders recognize that the marketplace and the social environment will continually evolve. Different conditions will inevitably call upon different natural abilities in next-generation family members.

The hard-driving dominance of a founder who grew the business making tough decisions may differ from the relationship-style of the next family leader–a style perhaps now needed to carry the business and the family through the next generation.

11/11/16

The Inside Three

As I sit down to write the blog for this week, the election is heavy on my mind. On the receiving end of change, I am flooded with emotions.

I keep returning in my thoughts to author Henri J.M. Nouwen’s The Return of the Prodigal Son: A Story of Homecoming. Inspiration for the book sprang from the feelings Nouwen experienced while studying Rembrandt’s painting of a scene from the parable. He saw parallels in his own life—the younger son’s departure and return, the father’s joyous restoration of his place, the elder son’s resentment and ultimately the father’s compassion.

Nouwen found each of these archetypes in himself and suggests they are in all of us, both male and female. The younger son’s need to prove to himself and others that he is worthy of love and acceptance—often searching where they cannot be found; the elder son’s resentment, absence of joy, and obsession about being loved, felt as: “when I hear others praised it is hard not to think of myself as less praiseworthy;” the father’s infinite compassion, unconditional love and everlasting forgiveness, all resonate within us.

As the author sees it, we must live these types to be complete, passing from one to the other; at times returning to experience again the psychology of the younger and elder sons as we grow. Many pass through all three stages, some more quickly than others. Some never complete the full journey.

It is, in Nouwen’s words, “through grief, forgiveness and generosity that we become the father.”

Certainly, for members of family businesses, it is by living this journey that we truly become leaders of ourselves, our families, and fathers of our family legacies.

If you would like to have a conversation about the journey of your family business contact me at rickraymond@thefamilybusinessleader.com. To talk please call: 212-777-0083.

11/5/16

Purpose and Love

Last week I heard author Patrice Tanaka, http://joyfulplanet.com/books/, speak about the role that having a purpose has had in her life, and the benefit and importance of knowing one’s purpose in achieving success and satisfaction in life and career.

She mentioned that significant research reveals that “purpose-driven” organizations outperform “profit-only-focused” organizations. Personally I had no doubts about this, and was thankful for the confirmation

During her talk an audience member commented that she saw the purpose of life was to love and be loved –love the work you do and be loved for what you do–who you are.

Immediately, thoughts of purpose and love within family businesses came to mind. I venture to say that it is impossible for a family business to sustain itself through multiple generations without both.

10/28/16

The Top Seven Things I Learned at Crain’s

Last week I attended the Crain’s New York Family Business Summit where I heard fathers, daughters, sons and siblings discuss the joys and challenges of working side by side. I listened to stories of how families managed to grow their businesses with each successive generation, and learned how family businesses are seen from the unique perspective of non-family CEOs. http://www.crainsnewyork.com/events-calendar/details/4/3417544

Here are my top seven takeaways

1. In a family business good communication is learned early within the family environment.

2. A family business can be like a tree with many branches growing in a variety of directions, but all branches have the same root.

3. When instilling motivation in a 400-person organization, know that some people will ‘get it’ and others won’t. Focus on the ones who do. Money helps too.

4. Multi-generational family enterprises who own their real estate can better control their destiny.

5. Ten years ahead is not too early to start planning for the transfer of leadership from a non-family CEO to a family member.

6. Coming on board early and learning the business from the bottom up proves invaluable for someone who subsequently takes on the role of CEO.

7. Family firms should seek a president who has an all-encompassing perspective on the business, as well as presidential and leadership qualities. If these qualities are not found within the family, go outside to hire the next-generation leadership. A subsequent leader might be a family member.