I was recently asked to join the Board of a local group that provides networking and educational opportunities for professionals who serve family businesses. This group consists mostly of wealth advisors, accountants, and lawyers. The Board asked me to help coordinate the educational content of its meetings. In setting the stage for a year long journey through the issues of business transition, I thought it would be interesting to have our first speaker step back and address the question “What Does Success Look Like?” It seemed like a good idea to know the hallmarks of a good outcome before we set about the tasks of trying to help families and their businesses achieve them.
To help with the inaugural presentation of the series, I invited a wonderful corporate attorney, Dori Brewer, of Perkins Coie to speak to us. Over her career, Dori has worked closely with significant family businesses and she shared her perspectives through stories and observations. What I suspected might happen did. After walking through four well-disguised case studies (two successful families and two wobbly families) she shared her observations of what she believed are the characteristics of successful business families. The following is taken straight from her slide deck:
Family
- Meaningful connection to each other.
- Meaningful connection to the business.
- Functioning governance structure.
- Trusted and respected family leader.
- Appropriate engagement with family, shareholders and business
Shareholders (Owners)
- Functioning governance structure (election of directors, fundamental decisions).
- Meaningful connection to business.
- Appropriate level of engagement.
Board (Governing Body)
- Competent decision-makers.
- Some independence from management and shareholders.
- Some representational aspect.
Company (Business)
- Strong, respected and trusted leadership (CEO).
- Healthy, growing business paying significant dividends.
- Run in a business-like fashion — not a family piggy-bank.
Take a minute and reflect on this list. What strikes you from her conclusions?
What first struck me was that Dori pretty much nailed it. These qualities seem to characterize many of the successful family businesses that I know. What struck me immediately after was both ironic and slightly disturbing: almost nothing on this list is obviously related to what the vast majority of the professionals in the room offer in the way of services or products.
If this second observation is accurate, it seems that it should raise some serious and potentially disruptive questions for professional advisors on a variety of levels. For example, if this is what success looks like, to what extent are the interests of advisors and the interests of their clients truly in sync? If this is what success looks like, do the incentives to sell services support, hinder or have no real impact on that ultimate success? If this is what success looks like, to what extent are advisors actually and directly helping their clients achieve it? If this is what success looks like, who do advisors rely upon to help their client families move in these directions. And so on.
To me, all of this points to a profound disconnect in professional advisory services that is worthy of attention. A number of people have spoken to this issue, most notably Jay Hughes. Jay goes so far as to say that the wealthy family should have trusted advisors (personnes de confiance) who actually create a wall around the family to protect it from those who offer goods and services. Those few advisors in that protective ring must understand and be in full service to helping the family generate the types of success that Dori articulated. Jay’s observations grow from this fundamental gap between the goods and services advisors provide and the actual requirements for success. This may be an extreme and certainly unpopular view among advisors who want direct access to wealthy clients, but it raises interesting points for deeper consideration. It also explains why it is so difficult for professional experts to truly attain the status of trusted advisor.
Those advisors who are merely transactional in their approach will be able to do little to actually help families achieve success as defined by the above list. They are also unlikely to gain the position of “trusted advisor”. They will more likely be viewed as providers of commoditized services – necessary supporters, perhaps, but not essential to success and therefore not invited to the table.
Advisors who intuitively “get” this disconnect between the services they provide and the ultimate success of the family business will stretch beyond the provision of merely technical services or the provision of “solutions” and begin to address these deeper concerns. Yet these concerns lie outside of their core area of competence. It is those advisors who work hard to stretch themselves into the unfamiliar, the difficult and the ambiguous complexities of business families who stand a chance of becoming truly trusted. This is because they understand and are addressing the core concerns of clients who at least intuitively understand what success looks like and recognize the tenuous connection between what their cadre of professionals routinely offer and what they truly need.
But for many reasons, these advisors can only go so far.
In the end, the work required is not a field for dabblers or part-timers. I see many advisors thinking they can do this work, but they have no training or real capacity for it. Even those advisors who understand the dynamics, but are not truly trained or prepared to address them, often quickly find themselves in a game well above their heads. Their interventions either do little to shift the family dynamics (which are stubborn) or, without care, actually do more damage than good (because business families can be volatile). Some advisors with high emotional intelligence can have a substantial early impact, but the amount of work required in almost all client families exceeds their skill sets and quickly outstrips the time they have to do what is required. They have other work to do with other clients. Moreover, this kind of family development effort is not their core business, doesn’t fit easily within their business models, messes profoundly with their compensation structures and even implicates their ethical boundaries. This leaves advisors in a quandary.
To make matters worse, there is an emerging group of people who purport to help with these issues. At this point, the field looks like the wild west. Fortunately, there are a few organizations that provide access to professionals who are recognized by their peers to be among the top in the field. These professionals are, in the end, a very small group. Among these are the members of the Collaboraton for Family Flourishing, some who are involved with the Purposeful Planning Institute, and a few with the Family Firm Institute. Connecting with the leadership of these organizations to find out who in the country is well-respected and doing good work can be an important first step for advisors who truly want to help their client families.
In evaluating these providers, it is helpful to understand the fundamental orientations of those doing this sort of work. Family business advisors tend to come at the issues from either a structural or a behavioral point of view. Structurallists tend to believe that if you change the structure, the system will change. Often these are people who come from law or business and are used to operating in more linear and organized ways. Their fundamental goal is to rationalize the family and business systems. They tend to bring models, processes, best practices and so on. The problem is that families are not amenable to this kind of linear structural work – even though their businesses might be. The result is all sorts of best practices that are taught, but very few actually adopted because the family dynamics undercut these “solutions”. Many advisors have a bias towards structural solutions because they approach their own professions in this way.
Others come at this work from a behavioral approach. These advisors often transitioned from fields such as psychology, social work, coaching and the therapeutic world. Behaviorists tend to believe that if individuals change their behavior, the system will shift. These people work on communication, family dynamics, connection, self-awareness, and the like in therapeutic fashion. Their fundamental goal is to connect the family. The problem is that the nature and role of families in business together requires strong structural knowledge and systems level work that is often beyond the expertise and understanding of people coming from therapeutic backgrounds. They often lack the capacity to work effectively with the very practical questions the family faces which often go well beyond interpersonal skills – such things as cash flow, governance structures, trust law, taxation and the like. Many advisors have a bias against behavioral solutions and write it off as woo-woo or touchy feely. They do so at the peril of their clients because it is deep within the behavior of the family that solutions lie – but behavioral solutions alone will not get the family business to the post office.
If you take a look at the list Dori created, you can begin to see the wide array of skills necessary to help families gain the capacity to reach these goals: leadership development, strategic planning, organizational development, effective decision making, mediation, governance structures, family dynamics, business savvy, experiential education, coaching, and so on. All of this centers on capacity building and developing competencies that will directly support the business and family success.
There is a growing body of professionals who are engaged in this bigger conversation. More books are being written. More conferences are arising. There are nascent attempts at certification. Local groups are forming to learn and grow. And there are a growing number of advisors who can play with facility in this space. These people universally have dedicated consulting practices that focus on this work. Most have professional training on both the structural side and the behavioral side and those that don’t have worked long and hard, with clear intention and real diligence, to qualify themselves in the areas they need to understand to do the work. And fortunately, for the families we all serve, there is a growing group of professional advisors from wealth management, accounting and the law who understand this disconnect and have been working hard to “up their game” to engage their client families in ways that help them more directly achieve the success they hope for.
— March 25, 2014