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Spring 2013

December Current Thinking Column

Wednesday, December 28, 2016

Professional Satisfaction: Not a Footnote to a Career

by William Roberts

Have you received a compliment lately that was unexpected and reflected well on your abilities and professionalism?  This is a season when we often exchange pleasantries, whether it be a “Merry Christmas” or “Happy Holidays,” that share our good feelings about the season or year we have almost completed.  Then, along comes a comment that is anything but ordinary or mundane—a sincere, thoughtful, from the heart expression that stops the world for a moment and causes a pause for reflection.  Just such an event recently occurred not once, but three times all within the last month. Clients, some of 20 years, took the time to express appreciation for the work their advisors have done resulting in two successful G-2 to G-3 transitions and a third that is well on its way to a plan of transition to G-2.

The stories behind these successful transitions or planning processes are as varied as the families that created them, yet there are success principles/lessons that run through all three and are instructive to us.  A bit of background will help put the challenges these families faced into perspective and lay to rest any thoughts that these were easily arrived upon transition results.  In fact, quite the opposite, there were facts and strong opinions that could have easily flipped the switch to a completely different result devoid of the principles and values that followed during the planning process.

Each of these families began their planning process knowing that there were likely going to be next-gens in G-3 who were employed in the business and some who would not be employed.  Among those employed, there was a wide variety of skills and dedication to their work.  There was compensation, family employment, and in some cases, entitlement issues to be dealt with.  In one case, there was not a clear-cut "leader" that had emerged and a real question about whether the next-gen had the unique skills necessary to be CEO of the family business.

Despite the plethora of challenges and potential landmines, there was also foundational pillars upon which we could build the plan for the continuation of the family business.  The first and foremost was deep-seated values that had been passed down from generations before.  Two of the families had deep spiritual beliefs and respect for one another that was critical as we moved through the planning process.  

Each of these situations shared the following values: strong family ties, respect for one another (even during disagreement), a desire to maintain family connection and to deepen the ties to one another, a passion to maintain the business the family had passed to them and to pass it along stronger and better for the next generation.  

Passion for education as it related to developing better management skills, and other talents valued in the family business were evident and important to the success of the transition as well.

Interestingly, what the families refused to allow—obstacles to destroy their connectivity to one another or to damage what had been passed to them—revealed additional family values. One such was the cancer of "entitlement,” another was the destruction that can occur from the impact of a forced sale of assets due to estate taxes levied on the value of the family business.  A third was jealousies or rivalries/conflicts caused by the employment of certain next-gens over others. Another was life choices made by some of the next-gens that could have been destructive to the family and ultimately the success of the planning process.  Each of the families dealt with these challenges in unique paths, but all referred back to their values to deal with them in non-destructive ways.

The lessons learned from these three families hopefully will be instructive to your family path, ultimately lending hope when times are difficult, as often they are. Hopefully, if these principles are followed, a successful outcome will ensue.  In looking back over the years of work with these families, their commitment to putting family first was inspiring.  They were not going to let the challenges or difficulties get in the way of their relationships.  There were times of constructive conflict when actions were challenged that were counter to the families values, but it was done with a goal of inclusion instead of exclusion.

In each of the families we dealt with the "equal versus equitable" philosophy surrounding the ownership of stock and participation in the family business.  Each family has dealt with this issue in its own unique way, but with common values exhibited. Those values are the owners of the stock control the decisions regarding the business.  However, the design of their plans focuses on exhibiting fairness to the non-active shareholders.  There are control mechanisms in place to protect the business (the goose that is laying the golden eggs) from distributions that could be damaging to its health and future while still providing benefits from the ownership of the stock in the family's business.

All the families have developed a “Shared Vision” statement that incorporates their values and principles.  This vision statement is prominent in family meetings and evident in the decision-making of the family and the business.  We like to think of it as the "lighthouse on the hill" as it provides guidance when the family is working through difficult issues or evaluating opportunities that are presented.  If the strategies or opportunities are outside of the family's vision of where they want to go, it is discarded and time is only spent on those strategies consistent with the Shared Vision.  

It also allows the family to identify obstacles that lie between their current situation and where the Shared Vision would have them.  They have not shied away from dealing with those obstacles. Rather, they have aggressively sought the advice or advisors necessary to creating a solution.

This leads me to another best practice observed in these families: a relentless dedication to the effort necessary to work through their planning with their advisors.  Each of the families has spent countless hours with a variety of advisors to assist them in crafting the solutions we celebrated with them this month.  Millions of dollars of tax-saving strategies were implemented to avoid the demolition of the business due to estate taxes.   Specialist advisors were brought in to address unique problems that family members faced.  Testing and evaluations to determine skill sets and compatibility were used appropriately.  Mentoring, education, and training were a hallmark of each situation resulting in the next-gens preparedness to accept the mantle of leadership.

Consistent with the dedication to planning was a loyalty to the advisors who knew and understood the history of the family, which contributed to suggestions that were in line with the family's values.  They were also aware of where "bodies were buried" so as to not step on long-buried landmines. While not afraid to bring in specialists when needed, the loyalty to existing advisors allowed the planning to proceed with an eye to the past as well as the future.

Inherent in all the above was a dedication to follow through.  Meetings ended with action plans, timetables, and leadership responsibilities.  Accountability was maintained among advisors, which raised performance levels and kept projects from languishing due to procrastination.  This ultimately led to completion and implementation of agreed upon strategies and to the success we see today.

Lastly, in all of the families, there was a real concern and compassion for the employees, many of whom had been with these companies for years.  There was a respect for their opinions and skill sets and an overall recognition that the business was highly dependent on their high-level performance.  The family was not only concerned about employee work performance, but also the families of their employees. They exhibited this caring in tangible and generous ways specific to the needs expressed.  I have found this to be a consistent value not only among these three companies, but also in many others over the years.

It is always heartwarming to see successful transitions of family businesses.  What we have learned is that transition is not easy or automatic, but rather a result of thoughtful leadership, strong values, consistency and dedication to the goal of transition and a commitment to the process.  Hopefully you will find the same principles in your family business and will develop your own success story to share with your advisors and peers.

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