Aspen current thinking column


Spring 2013

February Current Thinking Column

Monday, February 29, 2016

Defining a Purpose Changes Lives 

by Joe Paul

Today I want to touch upon the effects that a purpose has on individuals, families, and organization, and in particular, how a clear sense of one’s purpose develops the capacity for leadership. My ideas about this topic have been shaped by my work counseling and mentoring family business leaders, their successors, and their advisors.

Imagine a scenario in which Fred, his father’s successor in their family’s business, had gone through a process with a consultant to define a statement of purpose for his life. The only requirements were that the statement must be limited to one sentence and it must be applicable to every role in his life (e.g. a husband, a business owner, a father, a citizen, etc.). He was told that going through the process of defining a purpose for your life often stimulates qualities such as courage, commitment, and stamina. It can also complicate your existing relationships. Fred found that it also enhanced the ability to focus his energy and develop a greater self-confidence. A commitment to the statement seemed to also illuminate what his efforts were actually in service to on a deeper level. 

His Statement of Purpose for his life was,

“To encourage trust, transparency and peace in all my relationships.” 

In a few months his purpose was tested. Fred had been a long-term supporter of a politician with whom he believed his values were most compatible. But upon hearing reports of his clandestine activities, Fred began to realize that the money and time he devoted to the politician had been in service to something that is antithetical to his values and his new sense of purpose. The seriousness of the disparity between what the politician would say and what he actually did was so egregious that Fred started petition to sanction the man for violating the party’s code of conduct. This action was difficult for him because this politician was a friend of his parents. It was a real test to see if he could “walk the walk.”

I am relating this story to you because it is an example of how self-definition precipitates substantial changes, including a greater capacity of leadership. But another question I have often wondered about is how these ideas about one’s sense of purpose actually bring about changes in the thoughts, feelings and behaviors of others. 

I have found that the theory of Memetics has a great deal to say about the life-cycle and influence of ideas. Memes are ideas that spread by competing for the mind space of individuals and groups. For instance, introducing you to the concept of memes is already creating competition with your existing ideas about how knowledge flows between people.

Memes have been described as having a virus-like pattern of survival. For example, when a person has a religious conversion they are “infected” by contact with a Christian memeplex (a memeplex is a powerful cluster of memes in symbiotic relationships). An infected individual becomes a vector for the spread of that denomination of Christianity.

I encourage you to look into the literature about memes. A good place to begin is a cursory introduction is hereIf you would like to discuss memes and how they can be used in your work with family businesses and/or their advisors I encourage you to contact me here

I’ve also included a previous essay, "Guidelines for Consulting to Family Business Leaders, Successors, and Their Advisors" for further exploration of the topic below. The Aspen Family Business Group recently published a book called Balancing the Emotional Ledger: Axioms and Guidelines for Counseling Families in Business which can be purchased here

Guidelines for Consulting to Family Business Leaders, Successors, and Their Advisors 

by Joe Paul

Regardless of the consultant’s “discipline of origin,” there is a meaningful distinction between family business consultants and consultants to families in business. The former works with unique kinds of businesses, the latter works with unique kinds of families. Significant differences in assessment and intervention flow from this difference. 

Assessments and interventions need to be grounded in an understanding of individual psychology, family systems theory, and organizational development.

The level of trust in the family and in the business defines what is possible. Interventions need to be based on an assessment of the level of trust in these systems and the basis of the mistrust, when it exists. 

Of the factors that make a family business work, we have found that trust is more important than love. 

Commitments to rational agreements and contracts among family members typically will not control the family dynamics that drive behaviors; especially when mistrust or a sense of unfairness is prevalent among family members. Generally speaking, problematic family issues need to be dealt with directly by the consultant if he or she feels competent to do so, and not indirectly via documents that have not addressed underlying family issues. 

A family owned business is often weakened when a family leader uses the business to try to manage the problematic psychological issues of an individual family member, or the problematic relational issues in the family itself. The more serious the issue and the longer it goes on, the more likely it is to damage the business. If, for instance, a leader maintains an incompetent family member in an executive position only to keep harmony in the family, the business is bound to suffer. The longer it lasts, the more damage it does. 

The interventions of consultants need to be based on an assessment process that integrates the interactions of family dynamics, management requirements, and ownership concerns.

The consultant should not “take sides” until he or she is sure they know why they are doing so. The initial responsibility of the consultant is to create a context that is safe enough for the family to have the conversations they have been avoiding. To do this the consultant must be seen as trustworthy in the eyes of as many members of the client-family as possible. This means that it is important to avoid being unwittingly co-opted by the politics of the family early in the engagement and before a strategic plan for the engagement has been developed. 

Much of the change that happens as a result of successful consultation shows up first in the way people communicate. Sometimes this means talking about things they have avoided, and sometimes this means that they simply learn to be more civil.

Resistance to change is a natural part of a system’s way of surviving. Whenever possible, this resistance should be honored and “reframed” by the consultant as an individual’s attempt to preserve something important. It is the consultant’s responsibility to monitor the balance between the forces for change and the homeostatic forces that preserve what is familiar to the family. Interventions should be managed accordingly.

Most successful interventions lead to:

A) Increased differentiation of some family members as effective fiduciaries, or “accountables”, e.g. Managers, Directors and/or Trustees. We describe this process as “finding your voice” in a new role or business responsibility. 

B) The differentiation of organizational sub-systems within the family and business that will carry significant responsibilities, e.g. creating a Family Council, a Board of Directors, a Management Team, a Shareholders Group, etc. 

C) The ability of individuals and sub-systems to “morph” from one role to another in an orderly way.


One of the most important intangible assets of a family in business is the ability to think clearly together. The most common factor that interferes with the ability of the family to function intelligently is family politics. The assessment process needs to identify those factors that keep the family from thinking clearly.

Avoid rushing to solutions early in the consulting process. To do so is often an indication that the consultant has been co-opted by factions within the client system, or by personal (sometimes unconscious) issues of the consultant. 

The consultant needs to develop a standardized assessment process that integrates objective assessments and clinical interviews. The consultant should also attempt to include all individuals in the family who have, or will have, either a direct or indirect influence on the family’s decision-making process. This means that it is important to include spouses who do not work in the company, or own stock.


January Current Thinking Column

Saturday, February 06, 2016

Family Business Mistakes: How To NOT Set Your Widow Up For Failure

by William E. Roberts, CLU, ChFC

In the past year, we have been exposed to several situations with widows whose husbands ran significant family businesses. In some cases, the passing of the husband/founder was sudden, in other cases, an illness preceded the demise, but the death came at an unexpected time. All the dialogues had remarkably similar issues and problems, so much so we decided to address the issues and create a series of questions that you might use to evaluate your readiness should a catastrophic event occur in your family.

In two of the families, the loss of the founder and driver of the family business success was sudden and completely unexpected. Until the event, one a boating accident, the second an unexpected heart attack, neither of the spouses were involved in the business other than from the periphery. Also evident was a lack of a Catastrophe Contingency Plan directing what actions should be taken if an event occurred. In both cases, the estate plan of the owners passed 100% of the stock to the widow. In some instances, this might work, and the widow might make wise decisions that results in the business continuing successfully. Unfortunately, neither of the aforementioned examples resulted in a happy ending. Let's explore what happened and what could have been done differently.

In one case, the stock passed to the widow, conferring all the power to make/enforce decisions, take distributions from the company, and hire/fire employees. Their son, who was in the business with his father when he passed, was completely unprepared when his father dropped dead of a heart attack. While friends and advisors provided advice, the fact remained that he was hamstrung in the running of the business, leaving him little room to make decisions to allow the company to continue much less grow to its capabilities. Key employees left as the situation deteriorated, finally leaving them with only one alternative. They were forced to sell at a deeply discounted price to a competitor. The mother was left with a depleted lifestyle, and the son was forced after a short period with the new buyer to leave and find a new position.

In the second scenario, the surviving spouse, despite her inexperience running the business, decided to step in and continue the business her husband had founded. While valiantly attempting to manage a complicated business, she made decisions to bring in relatives to run divisions of the company. Unfortunately, while loyal to her, they proved inept at the job they were required to do, and in too many cases, more enamored with the salary and perks their position afforded. Eventually, the business fell apart and was forced into liquidation.

The third scenario did not involve an unexpected event. An illness of the founder preceded, but his passing came unexpectedly and without warning. In this case, considerable planning was in place. A complicated estate plan had been completed by the owner and a successor selected. Control, however, remained with his spouse through trusts set up for her benefit. A Board of Directors had been created with outside board members, which his spouse chaired. While the potential for success had been put in place by the founder in naming his successor, creating the Board of Directors, and completing a thoughtful financial estate plan, problems still arose that would ultimately result in family conflict.

This case is more complicated because considerable planning had been done. The spouse was placed in a position that has taken her a good two years to understand. Her responsibility was far beyond mere financial issues and grieving for her lost spouse. She was thrust into a role as trustee and running a board that required her to learn all new skills. What was it like to run a board? How to act as a responsible fiduciary of her spouse's trust? All were challenges she was unprepared to handle. She turned to the family attorney to assist her in understanding her new roles, but felt fairly or unfairly that he was pressuring her to make decisions unfavorable to her family. Rather, he urged her to accede to the wishes of other branches of the family. She felt very alone, left searching for answers.

What steps could have been taken to change the results of these situations and hundreds like them, to avoid the tragedy of losing the family business? The following are a few questions that you can use to assess your own plan.

Does your business have a Catastrophe Contingency Plan to handle the stress caused by the sudden loss of the CEO/owner? This is not simply purchasing a key person life insurance policy. This is addressing the next day, the next week, the next month, concerns of customers, vendors, advisors and your banker. This is the “first 90 days plan.”

Is your estate plan the substitute for a well-thought out succession plan? Will it really work, and have you thought through all the scenarios that could arise?

Will stock be owned by non-operating family members? How well will the operating shareholders get along with the non-operating shareholders?

Does the company have compensation plans in place tying key employees to the company particularly during a difficult transition like the loss of the key driver in the business?

If your spouse will inherit the business, how prepared is she/he to make decisions about the operations of the company? Which advisors would they turn to and how well do they know them? How versed are they in the governance factors of running a company or a Board of Directors? What time frame will be required for them to overcome grief and learn the details of running the business and the board?

Complete succession planning is composed of seven elements, and an important practice that goes hand-in-hand with avoiding some of the aforementioned situations. For an in-depth look at the seven dimensions of succession planning, read our previous musings here. Also, for coping with the devastating effects of losing a loved one suddenly, Bonnie Brown Hartley’s Fire Drills for Sudden Death offers meaningful and constructive advice.

By no means is this a complete list of the issues faced in the scenarios described above. There are, of course, specifics unique to each situation, but what was true throughout was the lack of focus on the reality of the loss that occurs in these situations. While some planning had been accomplished, the in-depth planning and communication needed to survive was lacking. Whether it was an unwillingness to face the reality of mortality or serious procrastination, we will never know. What we do know is that the result was predictable, but also avoidable with the right effort and focused thought.


December Current Thinking Column

Thursday, December 24, 2015

From the Aspen Family to Your Family

Another year of learning, growing and sharing!


We  have enjoyed our friendship and colleagueship

and the dialogue that has ensued with many friends and clients.

We are grateful for the engagement we have had across the country and

the world with those of you who share our passion for and commitment to

the health of families in business.


We wish you peace, harmony and prosperity in the coming year!

Leslie Dashew, Joe Paul, Bill Roberts

And the associates of the Aspen Family Business Group, LLC


November Current Thinking Column

Monday, November 30, 2015

Unintended Consequences

by Joe Paul

Fred had a reputation of being one of the top estate planning attorneys in the region. He had his share of groundbreaking, but legally durable documents. However, over the years, a significant percentage of his estate planning cases were met with passive resistance to the implementation of his elegant plans from clients. Even when the consequences of inaction were dire, some clients persisted in self-destructive evasion and resistance to establishing a plan.  These frustrating clients would fail to return calls, repeatedly reschedule appointments, fail to approve documents, and generally drag their feet. A current couple is a recent case in point in Fred’s legalistic woes. If either of the couple (who are in their mid-eighties) died without funding a crucial trust, their estate would have to pay millions of dollars in unnecessary taxes. Fred was considering withdrawing from the case. However, when Fred probed more deeply into the family dynamics, he discovered that one of the couple’s children was emotionally blackmailing her parents. She told her parents that they would never see her children again if they made her brother the president of the company. 

When a client resists the services of their advisor it is often because of an intersection of two issues:

1. The client omitted something important in the assessment of their issues.

2. The client is withholding information out of fear of untended consequences, usually in the family relationships.

Here is list of some of the issues that you might probe with your client:

Chemical dependency in the family creates an atmosphere of secrets.  Often the family with these issues creates a set of unspoken rules such as “don’t think, don’t feel, don’t talk.” The advisor’s need for information violates these family rules and puts pressure on the family to do things they don’t know how to do.

The consequences of tax evasion can weigh heavily on the family leaders. There are usually “thinking errors” at work such as, “If you don’t get caught, it doesn’t count.” The evader usually has an underlying sense of entitlement that justifies his illegal activities. 

Mistrust among family members.

Incompetent successors may be an issue that is difficult to deal with for the elder generation.

The unequal distribution of inheritance can create open warfare between siblings.

The propensity to flood planning processes with emotional reactivity derails rational discussion.

The groomed successor decides she does not want to stay in the company.

Issues of unfairness within the family.

The founder is emotionally unable to give up control.  Retiring is like a version of suicide.

The fear that the succeeding generation is not likely to function well together.

The lack of transparency based on mistrust and/or internecine competition.

Fred initially thought the daughter’s actions were deplorable, but later discovered the rational thought process behind her actions. When Fred interviewed the daughter, he found that she had good reasons to question her brother’s fitness to be president.  He was prone to take risks that were dangerous to the long-term viability of the family’s assets, and his parents had bailed him out of bad deals on several occasions. At the same time, she felt her brother had their parents wrapped around his finger.

The attempt to change her parents’ mind about her brother’s position had fallen on deaf ears. Thusly, she made a desperate attempt to prevent a financial tragedy by threatening to withhold her children from their grandparents.

With a complete picture of what was truly going on in the family, Fred was able to make effective plans and suggestions for the betterment of the family business. In order for the brother to remain president, he had to find an investor to buy out the rest of the family. He was successful in doing this, so the family remained protected and cashed out. Unfortunately, over the next few years, the son lost the confidence of the investors. Several capital calls later, he was fired with only a fraction of his original stock in the company.


October Current Thinking Column II

Saturday, October 31, 2015

The Art and Science of Governance: 6 Rules Applicable to Any Business Organization

by Burak Kocer, PhD


“If I was unsure about the timing, I would rather be wrong because of doing something too early than doing something too late.” 

I like how Joe Paul, our visionary leader in the family business field, had articulated this while discussing the development of a strong and functional board of directors with a chairman of a company. The question pertained to deciding on the appropriate governance structure for his individual businesses at different stages of development.

 This is a very legitimate and valid question. In fact, legally binding governance principles for public companies have produced inefficient results in many jurisdictions when they are regarded as a goal rather than a means to an end. This end is the desired outcome of a fair, transparent, accountable and responsible management system.

 The art of leadership is to develop the principles that would lead the company successfully under different circumstances. Yet, luckily enough, there is a set of rules that we can rely on. Here, I would like to set forth these rules that are applicable to any business organization regardless of its stage of development.

Rule #1: Rewards of inclusiveness outweigh perceived risks.

Not all lights in a house are as “important” and as “fancy” as the expensive luminaire in your living room. But a short circuit in one of the ordinary bulbs in the small storeroom will black the entire house out, including the living room. Just like wiring, the family business system consists of different elements, some more central than others, but the “right to be heard” goes for all of them. Participation in the communication process and decision-making are different roles that must be distinguished in the governance mechanisms.

 Rule #2: Each ship has only one captain.    

It is quite fair for shareholders to have different strategic preferences, risk appetites, or management styles. But these are all discussions at the ownership level and must be melted into a single voice that will set the direction for the business. Keeping this plurality at the executive level will turn into incompatible managerial actions that could potentially lead to a business disaster. The board of directors is where different alternatives are evaluated and the direction is set.  The head of execution holds the steer as the captain to lead the business in the manner designated by the board. Depending on the complexity of the business, the appropriate mechanism may change, but the need is same: You need to develop a process for evaluation of different alternatives in a way that all shareholders feel legitimized and heard, with a single voice to guide the entire organization, accordingly.

 Rule #3: No ship owner holds the steer of their own ship if they are not qualified for it.

This principle emphasizes that ownership and management are different roles associated with different rights and responsibilities. A business will produce excellent results under qualified leadership. Therefore, a sound governance system must be able to differentiate between what is expected from an owner and what is expected from a manager, including facilitating the appointment of a qualified manager. Of course, ownership and management roles can be combined under an owner/manager, but not when the person is qualified to be one and not the other.

Rule #4: If both questions and answers come from the same person, you cannot be sure about the accuracy of either one.

This rule relates to the principle of accountability. Referring to the analogy in rule #2 and #3, it is the ship owner’s responsibility to ask the right questions and the captain’s responsibility to provide the right answers. The depth of separation will depend on the complexity of the business, but any business requires some sort of borders between execution and control.

Rule #5: Trust is good. Informed trust is better.

According to Lenin, “Trust is good, but control is better.” In a family business environment, on the other hand, things are slightly different. Power, hierarchy, and social relationships are much more interlaced than a bureaucratic organization. Many family members refrain from controlling their relatives in business due to fear of creating the perception that they do not trust them. In a social setting of interlaced relationships, trust is more productive than any contract or mechanism to maintain a healthy relationship. Adequately informed about the state of the business, non-active owners will feel more comfortable with their relationships in the family business. Thus, carefully designed communication will support the level of trust, while helping the family to grow responsible business owners.

Rule #6: If there is no goal to achieve, there is no progress to be secured.

When the company is not operating in line with the pre-defined and approved goals, the performance of executive managers may be questionable. In a family business, the cost of this suspicion is usually higher. It is good practice to have a system in place that allows for setting goals objectively and agreeing upon them. Some families commit to the principle of reporting to a non-family manager or an executive from the other branch of the family to mitigate challenges of the performance management process.

The art of governance

In my view, the aforementioned six rules represent a fair summary of what a business organization needs to endure regardless of its development stage. These rules represent the “science” aspect of the process. The “art” is to decide its level of sophistication.  


October Current Thinking Column I

Sunday, October 25, 2015

Perpetuating a 125-Year Legacy

by Leslie Dashew

I recently gave a talk to families in business in Hawaii.  One of the questions I was asked was: "How do we get the younger generation interested in being part of the family business?" 

This story about The Columbian and the Campbell family illustrates one such example of successful engagement.  The Campbells have just started the process of family meetings with the younger generation.  In our meetings, they are exploring individual and collective dreams for the future. In so doing, the three young men have begun to see more clearly how they can be part of the business in different roles, each applying their individual talents.  They are also witnessing how they can help evolve the business into a more sustainable one for the future.  I thought you would enjoy seeing this article.


September Current Thinking Column

Sunday, September 27, 2015

Steps to Setting up a Fiduciary Board

 by Leslie Dashew

Once again, I have seen the tremendous opportunities and benefits that accrue to a family business when a truly professional fiduciary board is put into place:  access to intellectual capital;  wisdom and objectivity; networks of business contacts;  and institutionalized leadership.   I have found repeatedly that through the implementation of a fiduciary board, we can access incredible talent that surprises most family leaders.  

An example: 

“Legacy Family Business” is a 70-year-old company that has been led by two second-generation brothers  in their late 70s. The non-family CEO is in his mid-60s and has been recently thinking of retirement. In one branch of the family business, two third-generation family members work, but neither are an appropriate candidate for succession. Moreover, the family has remained largely uninvolved in the business, always perceiving it as "dad's business." 

Their advisors had been encouraging the family leaders to complete succession planning, which included all three roles and estate planning.  The fiduciary board was one of the recommendations I made when I began working with the family. This was to ensure that the leadership talent would be in place during the time in which the three leaders were transitioning and the family was becoming educated about stewardship.  As the process began, the three leaders scratched their heads and wondered how they would attract anyone to serve on the board. 

The leaders were astounded by the results we had!  The brothers, who were the majority owners of the business, decided to have a majority of five independent directors and three family members along with the CEO.  From among a large pool of candidates who responded to our outreach, we selected:

  • a very bright CPA with amazing experience in mergers and acquisitions and oversight of public and private companies;
  • a wise elder in the industry who had vast experience using the company’s products;
  • an extraordinary marketing and strategic background who had worked in the industry and in other industries;
  • and a business leader who had formed a board for his own third-generation family business, served on several other family business boards and had become very knowledgeable about governance. 

One member of the former advisory board was selected to continue on the fiduciary board because of his extensive experience in banking, business and financial matters. They all shared the values of the family and were excited to serve the family and with each other.

Oftentimes, I have found that families and their business leaders are intimidated by what seems to be insurmountable obstacles to organizing and operating a board with independent directors.  The cost is well worth the outcomes.  As with finding other talent, it is important to be clear about your goals for these resources, the roles they will play and to effectively communicate the compelling reasons they would want to be part of your team.

Here is the process.

1.Clarify the purpose and goals for having a board.

For example:  Legacy Family Business is seeking to establish a Fiduciary Board of Directors to provide oversight and guidance to a  growing company during the transition from one generation of leaders to the next.  The family members who own this business are committed to see it led and governed by the most qualified business people available. This commitment is driving the family’s goal of developing a Board of Directors with a majority of independent outsiders who will bring a variety of talents, experience and perspective to help assure that the business continues to thrive in its third and fourth generation of ownership. The family shareholders will look to the board for guidance, education and objective perspectives. 

In some family businesses, one of the objectives of the board is to provide mentorship to up and coming younger generation leaders.  This can be specified in the board statement of purpose as well.  Board members often bring a wealth of experience in helping young people in their business lives (and personal lives) with objective perspective on what is needed to be effective leaders. 

2. Create a board matrix that identifies the competencies and perspectives desired for the board. Click here for an example.

3. Discuss the investment needed (fees, insurance, time)

Typical board fees are at a rate of $1-8,000/meeting (a formula often used is to divide the compensation of the CEO by 200 for the meeting fee for each director) plus travel expenses. It is important to look at what other closely-held businesses in the area are paying board members as well. D&O insurance may need to be increased depending on the nature of the business and the requirements of board members.  Much time is required to set up the board, go through these steps, and prepare for each meeting. 

4. Clarify indemnification and assure sufficient Directors & Officers insurance

The bylaws and/or articles of incorporation often specify how the company indemnifies its officers and directors.  This refers to willingness of the company to “hold harmless” those guiding the business if they act in the best interest of the company, and to cover the costs of defending themselves should the company, its officers and/or directors be sued.   Board members who are experienced will have specific expectations about the language of indemnification and the amount of D&O insurance required to protect them in the event of litigation.

5. Create a board prospectus that gives background about the board, the company and the owners, while specifying expectations of board members.

The prospectus typically includes the following topics:

Purpose of the board Background/history of the company

Current business (products, services, volume, customers)   

Ownership and leadership

Structure of board (independents, insiders, committees, responsibilities)

Specific goals and plans for the board (challenges or transitions to address, frequency of meetings)

Board member qualifications (competencies, experience or perspectives sought)

Compensation and D&O/indemnification provisions

Process of recruitment and selection (timeframe, where to send letter of interest and resume)

6. Develop a board manual that guides the operations of the board and committees, while providing ongoing information needed by directors

Company background

Company basic data                                                                                    

Company philosophy                                                                      

Purpose of board of directors                                                                   

    role of the board

    role of owners

Guidelines for board member                                                                   

      Operations of the board

      Board meeting location and scheduling                                                  

      Board member compensation, expense reports

      Appendices, e.g.

          Contact information


          Shareholder agreement                                 

          Financials of last three years and some data             

          Types and amounts of insurance                       

          Types of compliance/agencies/frequencies  

           Conflict of interest form                                              

          Organization chart                                                  


7. Board Recruitment:  send out a letter with prospectus to everyone you know, advisors, industry associations, etc. about the board you are forming.  Create a time frame for review/interviews and selection

8. Board Selection:  use the matrix to evaluate candidates and compare them; interview the finalists; select those whom you feel have the competencies, values and chemistry to work with owners, families and each other

9. Orientation of new Board Members: develop a program of orientation to the business and the family

10. Setting the Schedule and Agenda:  set the schedule for a year of meetings and the areas you want to be covered in the first year

The process, if done systematically, will take time and attention, but will yield a highly functioning organization from the beginning.  Some of the benefits we saw right away with the client above:

A higher level sense of accountability than had existed in the officers before, and attention to detail and communication that had been missing; Education of all stakeholders about what is possible in the world outside of this industry and this business for best business practices; Opportunities to connect with publications that would create new marketing opportunities that had not existed; Beginning of a process of strategic analysis and planning that helped all leaders to begin to develop realistic and sound plans to continue growth and sustainability in an expected downturn in industry; Confidence within shareholders that there was a talented team of business people who would help them make the best decisions about the business now and in the future.

Aspen Family Business Partner, Joe Paul comments:  One of the valuable traits that a director can bring to the table is experience in their own or another family business.  That might extend into the willingness to address family issues that are complicating the governance process. It might be called the “Dutch Uncle” role where in this, the director would have the emotional license to speak to the issues of disruptive family dynamics, and  be willing to take a family member to "the wood shed" when necessary.

It would also be helpful to shine a light on the leaders’ personal sources of resistance to more rigorous governance such as:
Fear of becoming obsolete.
Fear of unintended consequences in the family relationships
Fear of not having stamina required
Fear of failure
Fear of loss of control
Fear of discovery of "skeletons in the closet"

I find that folks often cover up fear with another emotion, like anger, since the latter is a safer emotion to be in.  Helping them become more conscious of their camouflaged emotions helps, such as helping them identify certain emotions by the physical sensation they create like a tremble in their chest, or gritting their teeth.

A couple of quotes occur to me concerning fear: "A problem identified is a problem half solved." --Charles F. Kettering 

And regarding governance is: "It is not a question of whether you are governed or not:  It is a question of what are you governed by."--Joe Paul


August Current Thinking Column

Sunday, August 30, 2015

Know Your Advisor's Succession Plan

by William E. Roberts, CLU, ChFC

An often overlooked issue in family business succession planning is the succession plan concerning the advisors to the family.  It is a sensitive and sometimes delicate subject to broach with advisors who, oftentimes, have worked with the family for several years. That being said, it is a subject that should be a definitive aspect of the family’s agenda, as demonstrated by the following story.

We spend our lives with clients, assisting them in devising sometimes complex succession plans for their family businesses.  While doing so, we and the other advisors build a significant body of embedded information and history that is brought to mind at almost every review meeting.  Having the memory of or recorded documentation of why certain decisions have been made is an important element in keeping the family on track as they progress into their transition plan.  The availability of this information is often assumed as a "given."

That is, until one of the advisor collaborative teams is taken out of the planning circle by events beyond their control.  In an instant, all the wealth of their cumulative knowledge and experience with the family is lost. Trying to reconstruct this information is both difficult and time-consuming.  

We encountered such an occurrence with one of our most valued clients.  The business is currently passing to the third generation, and the family has spent significant time and resources in the succession planning from Generation-1 (G-1) to G-2, and now on to G-3.  They have done an amazing job of remaining consistent to their family values and principles, all of which are deeply embedded into their planning advisory team's memory. Two members of the advisory team have worked with the family for over 35 years, and in regards to the family’s planning, "know where all the bodies are buried,” to use a cliché.

All was proceeding normally until suddenly, the family attorney, one of the 35 years of service to the family advisors, announced in an estate planning update meeting that he had been diagnosed with stage 4 prostate cancer, and was anticipating significant radiation and chemotherapy treatments.  He asked to resign from the planning to focus on the difficult task of beating the cancer.  Unfortunately, his battle was not successful, and he passed a mere 9 months to the day from his resignation.

The problem this created quickly became apparent.  He had been a very successful estate planning attorney, but was a sole practitioner practicing out of a home office.  With no successor nominated or mentored by him, there was a vacuum in the knowledge and history of the complex legal work the family had accomplished through the years.  This essentially brought the important planning that neared completion to a halt.

The family spent nearly a year acquiring recommendations of qualified attorneys and interviewing them extensively.  They were fortunate enough to find a very competent replacement with vast family succession experience and good rapport with the family.  However, even with his remarkable skill sets, it took months to retrieve the family's legal files from the home office of the deceased advisor and additional time to read through and understand the complex set of trusts and other structures.  Meanwhile, the estate planning projects previously mentioned were at a standstill.  Fortunately for our situation, nothing happened that adversely affected the family.

This experience was not lost on the rest of the planning team, as the CPA has brought a very accomplished cohort into our meetings, who is currently building her knowledge of past history, as well as contributing additional perspective and impetus from the accounting side.  I have brought my son into the family meetings because he will be a significant presence in my transition planning.  He is now working with G-3 on his estate and succession planning.

The moral of the story is in the title of this article: know your advisor’s succession plan.  Ask them the same tough questions that they have posed to you.  What or who is the successor who would step in should, God forbid, something happen to you?  What are you doing to bring them up to speed on past planning?   How are you mentoring them to improve their ability to be the good successor if the unthinkable happens?  When will they become part of the planning team and what role will they play?  You can create your own agenda of questions, but the important point is actually creating this agenda for discussion.

As the life insurance industry's legendary figure, Ben Feldman, stated many years ago, "No one has a lease on life.” That includes your advisor team.  Hard questions that motivate an actionable agenda by the advisors can save your family an enormous amount of angst and time-consuming difficulty.


July Current Thinking Column

Friday, July 31, 2015

Family Businesses and Cultural Evolution

by Joe Paul

The Engles’ family business enjoyed great success throughout its career in the marketplace. As they neared retirement, Charles and Virginia, parents and founders of Engles Imports, turned their attention to philanthropy. However, a unifying concept failed to govern their generosity, and their money mostly went to charitable requests. The Engles’ will stipulated that their four children could spearhead the family’s philanthropy, requiring the siblings to meet and discuss the charitable giving.

Upon gathering, the children struggled to determine not only a process to evaluate gifting, but also a specific field to channel their philanthropy. The youngest sibling, Jane, had an epiphany.  In going through the history of their parents' gifting, she began to see a pattern. More and more, her parents donated to two areas: medicine and design. The first because of their own aging, and the latter because Virginia never fulfilled her desire to pursue interior design. In a blinding flash, Jane realized they could offer scholarships to graduate students who developed innovative design solutions to medical challenges. 

Although the grant has only existed for 5 years, the competition is high. The grant has already funded the development of orthopedic implants and a new kind of apparatus for patients with sleep apnea. The four siblings managed to honor the desires of their parents’ philanthropy, yet still adapt to the demands of the social and cultural ecology.

"Cultural evolution is the idea that human cultural change––that is, changes in socially transmitted beliefs, knowledge, customs, skills, attitudes, languages, and so on––can be described as a Darwinian evolutionary process that is similar in key respects (but not identical) to biological/genetic evolution. More specifically, just as Darwin described biological/genetic evolution as comprising three key components––variation, competition (or selection), and inheritance––cultural change also comprises these same phenomena." –Dr. Alex Mesoudi, Cultural Evolution

The processes of succession and inheritance are replete with beliefs, knowledge, customs, etc., that organize this transfer and perpetuation of the tangible and intangible assets among the family business stakeholders.  Thus, when an elder begins to contemplate their estate plan, or an advisor begins to create such a plan for their client, they are acting (usually unconsciously) as an agent of cultural evolution.  In the estate planning process, western or civil rules allow that we can give an inheritance to anyone that we wish, be it a family member, an outsider, or even a pet. The civil law recognizes such desires and upholds these wishes despite depriving the natural heirs of, often, millions of dollars. It can be considered an injustice to the heirs, but they are helpless. Even when challenging the legitimacy of such wills, the civil courts tend to recognize and uphold these wills to be valid. In contrast, Sharia law, derived from the Quran, stipulates in great detail whom can inherit what. Here is a sample of Islamic estate planning taken from the Quran:

"Allah enjoins you concerning your children: the male shall have the equal of the portion of two females; if there are more than two females, they shall have two-thirds of what he has left, and if there is one, she shall have the half; and as for his parents, each of them shall have the sixth of what he has left if he has a child: but if he has no child and only his two parents inherit from him, then his mother shall have the third; but if he has brothers, his mother shall have the sixth after the payment of any bequest he may have bequeathed or a debt. You know not whether your parents or your children are nearest to you in benefit. These are settled portions ordained by Allah and Allah is All-Knowing, All-Wise” (4:11)

In contrast to western civil law, Sharia treats individual rights and women's rights as unnecessary threats to the collective. It is based on divine injunctions rather than legislation. Thus, Islamic rules of inheritance do not allow any variation from the very specific, pre-determined rules about whom gets what from the estate of the deceased. 

Western and Sharia legal systems have evolved over centuries. New concepts challenged old ones as both legal systems adapted to many variables.  We can see from the contrast of two cultures' rules of inheritance that the survival of new ideas depend on their fit in a given culture. Not so long ago Western cultures persecuted women and allowed slavery. While both legal systems have been changed by new liberal ideas, the pace of assimilation has differed.

When we delineate an estate plan, we are weaving the beliefs, knowledge, customs, skills, attitudes, languages, wisdom, etc. into an evolutionary package that will either sink or swim in the surrounding social ecology, which includes family dynamics. In this process, each estate plan becomes an experiment that may or may not give the family an evolutionary advantage. Family patterns of behavior and a business system’s accountability are also factors that may give a family/business advantages in the world. The fact that one decade's competitive advantage is the next decade's liability speaks to the evolutionary importance of the ability to change the allocation of assets in anticipation of fluctuations in the marketplace.  Families that are still wealthy benefactors into the 5th generation usually have the ability to change, yet remain the same. Or, as Victor Hugo said, "Change your leaves but keep your roots intact."

We live different lives when we know what those roots are.



June Current Thinking Column

Sunday, June 28, 2015

Balancing the Emotional Ledger: Axioms and Guidelines for Counseling Families in Business by Joe Paul is now available!

Why should you read the most recent publication of the Aspen Family Business Group?  Because whether you are in a family business, their service provider, or a professor, the book will provide you with insights and facilitation tools that will deepen your understanding of your clients.

Our colleague and author, Joe Paul, has distilled decades of experience and thoughtful reflection into pearls of wisdom in his new book. Readers can learn about the basis of your influence, your practice, your ability to facilitate change, and your skills in reducing anxiety and creating more trust among family members.

After many years of collaboration with Joe, I continue to draw upon his insights and perspective to inform my work, and often find myself pondering one of his profound statements long after we have visited. For instance, he encourages us to embrace other's resistance because it is usually based in a desire to protect something important in the individual, the family, or the business. This affirmation of each client's resistance as an attempt to help the family reframes the resistance and increases the willingness to trust.

The generation and transfer of knowledge among family members, especially during succession, is a crucial element in family business sustainability. Just so, each profession defines itself via its unique body of knowledge. I think you will find Balancing the Emotional Ledger: Axioms and Guidelines for Counseling Families in Business to be a significant contribution to the multidisciplinary profession of counseling families in business. -Leslie Dashew


In other AFBG news, Leslie Dashew is proud to announce the 20th Annual Women in Family Business Program for 2016. The four day event will take place on March 10-13 at the Miraval Resort and Spa in Tucson, Arizona. This upcoming year's topic, "Wise Women Revisited," will draw upon the various topics from the past two decades of the conference, while continuing the tradition of gathering, collaborating, and learning from each other. For more information about the program or how to register, click here.




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