What does “family” mean to you?  (Part 1)

Stephanie Brun de Pontet

Brun de Pontet

Part 1: Defining family

A friend recently asked me this question and it caused me to reflect. Many of us identify family as our “top priority” and we strive to live up to that principle in our personal lives or in the complex balance of our family business collaborations.  Yet, how do we define “family” today and what do we expect or want from family?

If we think about family as society’s core building block, we can understand it serves many important roles.  Your family should be a “safe harbor,” a place where you can be yourself, where you find and offer love, security and acceptance. Family is anchoring as it represents your past and roots, yet it should also be a place where you grow and foster growth in others, accepting and celebrating change. Family is your closest personal relationships, your most profound commitments, your tie to the broader community, a reminder you are not alone in this big universe…

While most people’s families include traditional “players” such as parents, children, siblings, cousins, etc., many of us also count a broader range of close others as part of our core family, what Jay Hughes describes as your “family of affinity.” Jay’s concept relates to the intimate circle of friends and associates you develop over your lifetime – people with whom you have shared key portions of life’s journey, who know and understand one another deeply, support each other through heartaches, and celebrate triumphs.  Bonds with this group are built through many shared experiences, laughter, stories, traditions, and mutual support. They may not be “kin” by blood, but they are an essential part of your “tribe” – and for some whose traditional family is not well equipped to provide them with safe harbor and understanding, this family of affinity is their truest anchor.

As humans are inherently communal, this sense of connection and being understood is among the most precious experiences we can have with one another, and an enormous benefit of family, no matter how defined.  When we work with our family every day, we can lose sight of this broader purpose and role they play in our lives.

As we enter this season of Thanksgiving, set aside the big and small challenges of your shared responsibilities for a moment, reflect on the full range of your “family,” and share your gratitude with each of them for the richness they bring to your life.

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Using the paradox model to unstick a stuck situation

Amy Schuman

Amy Schuman

Recently, I presented to a very engaged, thoughtful and curious group of family businesses and their advisors at the High Center for Family Business at Elizabethtown College in Pennsylvania.  They quickly grasped the importance of managing paradoxes for both/and outcomes. But they kept pushing me to explain more specifically how they might apply these concepts, so I told them I’d use this week’s blog to explore some practical applications of the paradox insight.  (Additional examples can be found in Part 1, Part 2 and Part 3 of the series “Managing unsolvable problems: Understanding paradox.” )

Let’s take a very common paradox in family business: Harvest and invest.

Many business owners — especially founders — believe that every earned dollar should be invested back in the business.  Funds deployed within the enterprise outperform every other possible investment. Investing dollars in any other way appears foolish, almost crazy.  Keeping all the eggs in one, closely controlled basket is the only approach that makes sense. Besides, it is often argued, individual family members have plenty of funds and rarely have a real need for more money.

However many folks — especially in G2 or G3 — disagree. They believe that a harvest event, i.e. a dividend or distribution, is essential to give them some measure of independence and self-determination. They recognize that their financial return on investment may be smaller outside the family enterprise, but they value other, non-financial returns. For example, the opportunity to move some eggs into a variety of baskets and diversify their assets, or to engage in a project all their own.

Why is it so hard for the investors to see the advantages of an appropriate harvest? Can an appreciation of paradox help them see that harvesting is not a threat to investment, in fact it generates support for investment? Paradoxically, a modest harvest to owners is probably the most powerful force for building support for future investment which will be necessary for creating future harvests.

And what about the harvesters? They must appreciate the importance of expressing support for investment as the source of their past, present and future distributions. The classic need to “protect the goose that lays the golden egg” must be made crystal clear to those who are tempted to overemphasize the benefits of harvests.

How do you unstick a situation where folks are tussling over two desirable approaches? Paradoxically, start by helping each side embrace, support and even advocate the position of the other side.  It is part of how the paradox works: Expressing staunch support for your “complementary opposite” actually creates stronger conditions for the implementation of your preferred approach. In the same way, any action you take in support of your less preferred option will help create more stability and trust in the larger system.

Many family businesses do this instinctively with great success. Now that you’ve heard these ideas, give them a try — they work! Let us know what happens.

My deep thanks to Dr. Barry Johnson for his pioneering work and inspiration in this field. Please see www.polaritypartnerships.com for more on polarities and paradox. 

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Managing unsolvable problems: Understanding paradox (Part 3)

Amy Schuman

Amy Schuman

In Part 1 and Part 2 of this series, we have talked about the need for “both/and” responses to paradox. Easy to say, but how to put into practice?

Let’s take a fictional example based on actual situations. Bizco is a 35 year old real estate company, growing and profitable, moving from G1 to G2. From the beginning, mom and dad, along with their son and daughter, have set a goal of building BOTH a strong family AND a strong business. And, they have succeeded!

How? They started early!  While the children were young, the family actively participated together in volunteer activities and travelled together, building strong relationships and open communication. The parents spoke openly with their children about the growing business, its contribution to the community, and the values that guided the business’ growth and decision-making.  Although the parents encouraged the siblings to consider a career in the family business, they were clear that employment would be based on qualifications and skills, not family status. At the same time, they encouraged the siblings to explore their individual interests and passions with no pressure or requirement to come work in the family firm. The parents also demonstrated through their actions the power of a strong, mutually supportive family.

As the siblings entered college, the sister participated in the business’ summer internship and began to develop an affinity to real estate. Brother was more interested in animal medicine and found summer employment in a local vet’s office.

These different interests reached their logical conclusion, and the decision to employ the sister but not the brother in the family business came logically and without drama. The brother pursued his interest in veterinary medicine, but remained an active and supportive family member to his sister and parents. They continued to travel and volunteer together, now including in-laws and grandchildren. Employment of one sibling and not the other had no negative impact on the family, which continued on its supportive and loving way. And, since ownership of the business will pass to both siblings, they have begun meeting as owners to learn and plan for the future.

The family’s emphasis on family AND business started very early. As the years went on, the two were proven to be compatible — not in conflict.

We have looked at the most fundamental — although not simple — paradox for family businesses and gained insight into the importance of starting early and being consistent in supporting a “both/and” approach. Please share your questions and experiences with us!

My deep thanks to Dr. Barry Johnson for his pioneering work and inspiration in this field. Please see www.polaritypartnerships.com for more on polarities and paradox. 

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Managing unsolvable problems: Understanding paradox (Part 2)

Amy Schuman

Amy Schuman

To read the first post in this series, click here.

Which to choose: Family first or business first?

Those who recognize the presence of a paradox would say: “Yes, both!” However, many families feel compelled to make a choice.

Let’s look at one case where this paradox was not managed well. The fictional Smith family often worried about the family interfering with the business, and over the years, set out to pursue business-first decision making. A merit-based employment policy required family members to work outside the company for five years and earn their MBA before applying for employment at Smithco. Family members were expected to be more qualified than non-family applicants, and could only apply to the company when an open, existing position matched their skills and experience.

On the five-person Board, two slots were designated for family directors. To qualify for consideration, the family member had to have at least 10 years of demonstrated success in a top business leadership role and at least five years of experience on a Board of Directors in a related field. No family meetings or family council was felt to be needed.

Now entering its fourth generation of family ownership, only one G3 family member was working in the business and she was nearing retirement. No G4s had expressed interest in the business because most were pursuing careers in other fields and other cities. The two current G3 family directors were nearing their retirement age, and serious doubts existed as to whether any G4s would qualify as Directors.

The current owners of Smithco, while proud of the non-family management and directors that had been so important to its continued success, were quite disconnected from the business they owned. Outside of dividends, they experienced no benefits from their family ownership and knew very little about the business. Because of these factors, a committee of the board has begun exploring sale of the business.

A sale is not necessarily a negative outcome, but if the goal of the family was to remain a family business, balancing their business-first approaches with some attention to family-first actions might have led to a different outcome. Family-first actions such as educational family meetings for family owners not working in the business, tours of facilities or summer internships for younger family members could have yielded vastly different results.

The Smith family worried that unqualified family influence on the family business would bring about its destruction. Paradoxically, keeping family away from their business may well have created the very conditions they most feared.

Taking one side of a paradox to the exclusion of the other, always leads to suboptimal results. In our next post, we look at a positive example of managing the “Business First/Family First” paradox.

My deep thanks to Dr. Barry Johnson for his pioneering work and inspiration in this field. Please see www.polaritypartnerships.com for more on polarities and paradox. 

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Managing unsolvable problems: Understanding paradox (Part 1)

Amy Schuman

Amy Schuman

A paradox is a special kind of problem that has no solution. Paradoxes can only be managed, they can’t be solved.* Family businesses — like all systems — wrestle with tough challenges that, upon closer examination, prove to be “complementary opposites” or paradoxes. Some examples:

  • Family AND Business
  • Harvest AND Invest
  • Tradition AND Change

The wisest response to these paradoxes is to find ways to value and pursue BOTH values, even though it may appear  —  and feel  —  impossible.

Paradoxes are made up of two desirable values that appear to be in conflict but, in fact, are complementary. Choosing one to the exclusion of the other will yield predictable difficulties, but finding ways to pursue BOTH will yield superior outcomes, stronger relationships and more effective communication.

What’s the difference between a paradox and a problem? A problem can be solved, decided, put to bed. For example: Should I hire my daughter, yes or no? Should I invest this year’s profits into the business rather than paying a dividend, yes or no? Should we introduce a new product this year, yes or no? These problems may be difficult, but once decided and solved, we move on.

In contrast, a paradox can’t be solved, it can’t be put to bed. With the paradox of “Family and Business,” which would you choose? Which side of “Harvest and Invest” is superior? Which value would you select for “Tradition and Change?”

Hopefully, your choice in all of these examples is: “Yes, both!” The key to paradox management is recognizing that choosing one, to the exclusion of the other, will bring predictable problems. As you recognize the paradox, you know the necessity is to support both.

What paradoxes do you encounter in your family firm? How do you find the both/and solution?

Recognizing the presence of a paradox is the first step. Managing the paradox with skill is the next step and we’ll examine that more closely in the next post.

“We need a new way of thinking about our problems and our futures. My suggestion is the management of paradox, in that paradox can only be ‘managed’ in the sense of coping with…Paradox I now see to be inevitable, endemic and perpetual. The more turbulent the times, the more complex the world, the more paradoxes there are. We can, and should, reduce the starkness of some of the contradictions, minimize the inconsistencies, understand the puzzles in the paradoxes, but we cannot make them disappear, or solve them completely, or escape from them. Paradoxes are like the weather, something to be lived with, not solved, the worst aspects mitigated, the best enjoyed and used as clues to the way forward. Paradox has to be accepted, coped with and made sense of, in life, work and in the community and among nations.”

Charles Handy, The Age of Paradox, 1994

My deep thanks to Dr. Barry Johnson for his pioneering work and inspiration in this field. Please see www.polaritypartnerships.com for more on polarities and paradox. 

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When best practices (and Mini Coopers) backfire

Drew Mendoza

Drew Mendoza

A little knowledge can be dangerous – no matter how well intentioned.

The family member Chair was a regular face at the local university’s family business center events. She had heard a presentation about how having independent outside directors could be a powerful addition to the company’s competitive arsenal and be an equally powerful tool in managing shareholder relations. The presentation, delivered by an expert in the field with more than 20 years of experience, lasted three hours.

Bubbling with enthusiasm and new found energy, she entered the next board meeting a month later. Over the course of 10 minutes, she informed her cousin shareholders that what was most needed was the addition of three independent directors. She came to the meeting prepared with a slate of directors. The director slate presented would have been impressive to just about any other company in their space. Fantastic academic and career pedigrees, international experience, strengths in finance. In fact, the slate of directors were the equivalent of Indy 500 cars. By comparison, her cousins were Mini Coopers. (I mean no disparagement toward the Mini. I’m sure they’re fine little cars well made for in-city travel.)

Guess what happened next?

A fire storm erupted in the board room. The directors were taken off-guard, felt insulted and threatened. It took the chairwoman over a year to regain the board’s trust and educate the directors about the rationale of the changes she had proposed.

It’s one thing to understand best practices. It is another thing entirely to know how to educate and prepare an ever increasingly disparate shareholder group for change.

Today’s blog is inspired by and written in support of FBCG’s newly announced event, The Chair Forum. We invite family firm chairs to continue the conversation by joining us to share experiences, generate ideas and hone their skills at productive corporate governance. Click here to learn more>>

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Understanding the complex role of board chair

Drew Mendoza

Drew Mendoza

I’m a fan of good corporate governance particularly in family enterprises with the complexity or size that warrants having a (well) functioning board of directors. How complex and what the thresholds are for having a board of directors that has bench depth, structure and independence depends on a wide array of factors and are the focus of articles, books and blog postings throughout the family enterprise world. But, for today, I want to plant this seed in your thinking.

I believe the global community of family enterprises is awakening to and realizing the value and importance of good corporate governance and, more importantly, excellent management of those boards by qualified chairpersons.

Being the chairman of a family firm board is not like being the CEO. The CEO focuses on growth, profitability, strategy implementation, and the processes and structures that keep the business moving toward its strategic imperatives. The chairman leads the business’ governance function, not the day-to-day management of the company.

 Yet, most family firm chairs are the men and women who were the company’s previous CEO. Do they know their company’s operations? You bet, thoroughly and deeply. But, do they have the skills necessary to be the chairman? Can they manage the board in ways which reflect shareholder expectations and ensure the CEO is receiving clear direction? Do they know what data the board needs and in what format to do its job? Can the chair develop accountability measures for both the board and management without alienating family managers and family shareholders? Is the chair ready and able to listen to director input and facilitate difficult conversations without resorting to the meeting management style s/he used when they were the CEO? Is the chair able to identify the needs for creating or dissolving board committees?

We believe the role of the chair is very different from the role and responsibilities of the CEO. And, we believe that the chair is not just another director. The chair has special responsibilities that add value to the company and help align shareholder expectations.

Today’s blog is inspired by and written in support of FBCG’s newly announced event, The Chair Forum. We invite family firm chairs to continue the conversation by joining us to share experiences, generate ideas and hone their skills at productive corporate governance. Click here to learn more>>

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The most valuable values for smooth transitioning

David Lansky

David Lansky

In my previous blog post, I noted the “Value of Values” in the course of a family/business transition.

Two values I believe to be of particular importance to the course of a transition are Trust and Integrity.

I think of Trust as deriving from several factors:

  • Competence – Trusted parties are good at what they aspire to.
  • Honesty – They speak the truth, even when difficult to do so.
  • Intimacy – When speaking the truth they are caring and compassionate – they don’t believe in “brutal honesty.”

Integrity is a quality that is demonstrated by consistency between words and actions.

Families suffer, trust is undermined and lots of hard work is diminished when words and actions don’t match.

Family vision, family policies, and  family value statements can help to guide a smooth transition. However, a sure way to sabotage progress is to dismiss those words with careless (or uncaring) actions. Integrity means “walking the walk” –  that we act consistently with our vision of family; that we follow policies that we agreed upon; and that we are true to the values we have aspired to.

If you are managing a family/business transition how are Trust and Integrity being cultivated?

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A distinction among successful families: The value of values

David Lansky

David Lansky

Family leaders must be concerned with the tactical elements of a transition:

  • What the estate plan will look like.
  • The details of a leadership or ownership succession plan.
  • How best to develop the next generation.

But in my experience, families who have been most successful in continuity planning distinguish themselves not solely by the quality of their planning. An additional key feature of their success is their commitment to live by a set of values.

One family I know were wrestling with how to divide shared assets when it became clear that separate branches needed to pursue different business goals. They successfully arrived at a solution that preserved both family and business by establishing right from the outset two guiding values: Preserving good family relationships and having senior family members be proud of their process.

If you are contemplating a transition, what are the values that will guide your process?

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Trick or treat!

David Ransburg

David Ransburg

Americans celebrate Halloween on the last day of October, and neighborhoods are filled that evening with the children’s chorus of: “Trick or treat!” While children typically receive a treat in response to their request, there is, nonetheless, an implicit threat of harm or mischief if no treat is granted.

Do adults grant treats because of the threat? I suspect not. As one who grants these treats, I can tell you that I do so not because of “trick-o-phobia,” but because I want to do something nice for my neighborhood’s children. I’m surely not alone when I say that I’d give out just as many treats (with just as much good cheer) if the customary phrase became simply, “Treat?” Practically speaking, I believe that’s how most intend/interpret the phrase anyway.

What does any of this have to do with family business? In my experience, family businesses provide members with many opportunities for both consequences (“tricks”) and rewards (“treats”) and occasionally the tricks and the treats go hand in hand. “I’ll take on that unpleasant work assignment, but only if I get a company car.” Or: “I’ll give you a company car if you take on that unpleasant work assignment.”

Holding someone ransom or delivering an ultimatum is never productive, mainly because it establishes the two parties as adversaries rather than allies. Perhaps family business members can become more allied by borrowing from the children of Halloween: more treats than tricks.

And, just like all the children know when they examine their Halloween “loot,” focusing on the treats leads to an outcome that is very sweet.

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