Studying failure is far better than studying success because it’s easier to avoid doing the wrong things than mimic the good that others are doing. Here are some of the ways things can go awry: Families and businesses don’t grow at the same rate. From the third (and sometimes second) generation onwards, the family often grows faster than the business. What happens if many family members look to the business for employment or supplementary income?…
In times of chaos, economic uncertainty, and the crushing burden to lead the family’s assets out of the fire, the need for governance grows even stronger. Too many families consider family governance as a side dish – a pesky bug that wants to take away all the attention and resources from the main priorities which are revenues and operations. There is also an emotional side to effective family governance which is often overlooked by the…
There are very different generational attitudes to philanthropy in families. While previous generations saw philanthropy as “giving money to non-profits”, the rising generation of wealthy individuals has broadened and redefined the term, considering it to be “the action of transforming others’ social well-being through generosity”. The rising generation is more engaged and involved in philanthropic endeavors, and do so at earlier ages than their predecessors. They’re also motivated by the value propositions behind sustainable and…
Abraham Lincoln famously said: “Don’t swap horses in the middle of the stream”. Is a global pandemic the best time to change leaders? Or is it better to avoid dramatic changes during uncertain times? While we’d like to be well prepared, and knowing that succession planning is a process rather than an event, families may find themselves needing to accelerate the process at these times. Unplanned transitions don’t have to inevitably end in disaster, but when they…
A family office is usually structured around the individual needs and preferences of the family involved, and an increase in private wealth is fostering the creation of more and more single family offices (SFOs). The space is shifting rapidly, and with it comes the changing face of the family office and new definitions of what this means. One pervasive mistake is not developing a deep understanding of the goals, objectives and agendas of the wealthy…
The Greek philosopher Plutarch asked: “People, where are you going? Doing everything to gain wealth, but not caring about your children, who will inherit it?” If the rising generation is supposed to take the responsibility of managing the family wealth, there should be enough time for them to learn and prepare. To avoid raising a bunch of “trust-fund kids”, the family needs to define clearly what they expect and invest time and resources to help…
Family business conflict is often over long-standing concerns relating to roles and contributions to the company as well as family issues like rivalry and jealousy, and can simmer just below the surface for decades. Nothing can undermine a successful family business faster than an unresolved conflict among its owners. One thing that distinguishes conflict in family businesses is that the owners make the rules and therefore can also break them. Family squabbles are usually highly…
How can families best prepare the rising generation for inheritance and/or joining the family business? Parents may reasonably worry about raising spoiled or entitled offspring, and may feel uncomfortable discussing topics like wills and trusts before their kids are mature enough to grasp such concepts. However, a failure to prepare children for the responsibilities that come with being a custodian of significant wealth is not in the best interest of the child or the assets….
Financial advisors are an ‘old’ bunch – with an average age in their mid-50s and a big bulge of advisors now in their 60s and 70s. If that didn’t already pose a risk to their clients, the COVID-induced recession means that many of them will leave sooner than expected – either by choice or otherwise – and may choose to retire completely in the current economic environment. Merrill Lynch, perhaps in response to both issues,…
During a crisis, having a family business can be a double-edged sword. On one hand, there are often family elders with experience in overcoming previous recessions, support from the family unit, and the fact that family businesses tend to be more risk averse and therefore in a better position to weather the storm. But some of those very attributes can also manifest as weaknesses. For example, family businesses have a concern for a wide range…
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![Common Challenges in Family Business
Studying failure is far better than studying success because it's easier to avoid doing the wrong things than mimic the good that other are doing. Here are some of the ways things can go awry:
Families and businesses don’t grow at the same rate. From the third (and sometimes second) generation onwards, the family often grows faster than the business. What happens if many family members look to the business for employment or supplementary income?
Many owners maintain control by appointing only family members or close friends to their boards. This lead to the common problem of familiarity - where personal issues seep into the business, and where friends and family may tell the owner(s) what they want to hear instead of what they need to hear.
Policies regarding in-laws are a huge challenge and families tend to have polarizing views as to whether they are in favour or totally against. Whatever the policy, it's important to welcome and evaluate in-law children as a spouse, not as an employee. It can be very difficult to remain business partners following a divorce - the worst-case scenario is that it the business needs to be sold to split the proceeds.
A recent study found that more than half of family businesses lack a succession plan. In too many family businesses, succession discussions are forced in that parents not wanting to inflame sibling rivalries leave it to the last possible moment to work through. A crisis, such as a major illness, is often the catalyst for a discussion that is by then often too late.
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Actionable Generational Wealth Succession
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives: www.transitionbook.co/member-area/
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