Tag Archives: education

Managing the FUDG factor in a Hold or Fold decision

Norbert Schwarz
Norbert Schwarz

Fear, Uncertainty, Doubt and/or Greed (FUDG) often play a major role in a family’s decision to keep or sell the family business.  Managing these emotions in the decision can have a powerful impact on the success of the process.

Several steps can be taken to manage the first three elements of the FUDG factor to the extent needed to make an informed hold or fold decision. Educating family shareholders on the products, the competitive environment, and the challenges and opportunities of the business is a good starting point. Encouraging family members to be informed on business issues in general can also help those not in the business better understand the current and future business environment in which the company operates. If the company has embraced a comprehensive strategic planning process, management should be well aware of these subjects. The planning process should also clarify the company’s vision for the future and outline its plans to achieve that vision over time.

An outside board I worked with recently had a policy of asking shareholders to discuss and communicate to them their long-term vision for their ownership annually. This was done before the board reviewed and approved the annual revisions to the company’s strategic plan. Building value and growing the company were the focus for many years until the shareholders responded unanimously that they wanted to prepare the company for sale within a three to five year timeline.  A successful, fully priced sale was accomplished in less than three years.

The Greed factor is a bit more problematic. There is a difference between greed and rational self-interest.  The need for individual financial security may become a key driver in the decision process. The question that arises is “what is enough?” When that question cannot be answered rationally, an element of greed becomes suspect and may lead to conflict before, during and after a hold or fold decision is made.

Fear, Uncertainty, Doubt, and to some extent, Greed may always be present in one form or another in every hold or fold decision. The key to success, whether the decision is to hold or to fold, is to manage these factors effectively.

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Keeping the Brain from Going into Temper-Tantrum Mode When It’s Time To Change the Family Business

JoAnne Norton
JoAnne Norton

“You need to change” must be one of the ugliest, most unwelcome sentences in any language. Neuroscientists David Rock and Jeffrey Schwartz have a good explanation why. Using functional Magnetic Resonance Imaging (fMRI) and Positron Emission Tomography (PET), along with brain wave analysis technology, they can actually see neural connections in the brain for the first time ever. Rock and Schwartz contend that when we tell another person or groups of people what to do, such as change, the human brain automatically pushes back like a two-year old child. One reason for this is homeostasis—all organisms naturally move toward equilibrium and away from change. According to Rock and Schwartz, “Brains are pattern-making organs with an innate desire to create novel connections.”

It seems that when people come up with their own solutions to problems their brains release neurotransmitters such as adrenalin. So not only do our brains scream “No!” like a typical two-year old when told what to do, but they also follow up with another familiar toddler line, “I do it by myself!”

Rock and Schwartz suggest that their research provides a scientific basis for leaders to ask questions and let people come up with their own solutions rather than telling them what to do. Asking good questions to modify behavior goes back thousands of years; Socrates candidly admitted, “I cannot teach anybody anything, I can only make them think.”

One way to facilitate change on a large scale, according to Drs. Rock and Schwartz, is to have some kind of event that allows people to have the opportunity to think for themselves. They site the work of Mark Jung-Beeman of Northwestern University’s Institute for Neuroscience and others who have found sudden bursts of gamma waves in the brain right before people have moments of insight. This means a new set of connections is being made, which makes it easier to overcome the brain’s resistance to change. The researchers claim the best thing leaders can do when dealing with the challenge of change is to help their followers focus on solutions instead of problems and to let the followers create their own solutions.

In a business, when we pay people to work for us, it seems to be fair game to tell them what to do and that they have to change when it is necessary for improving business or the bottom line. If employees refuse, everyone understands the ultimate dire consequences—an escorted trip out the front door. But when change needs to occur in a family enterprise, especially when family members are also owners, it is vital that the family members spend time together considering the situation, asking the right questions, and discovering the answers together. Heeding the warning of the neuroscientists, if we simply tell family members what to do, or that they need to change for any reason, their brains are likely to go into temper-tantrum mode, and that’s not good for the family or for the business.

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Life Long Development

Jennifer Pendergast
Jennifer Pendergast

A few weeks ago, I had the opportunity to participate in a family business conference.  I was struck by the number of sessions devoted to the topic of education – educating the next generation of owners, educating the next generation of leaders, educating responsible stewards of wealth.  The audience was clearly attuned to the importance educating the next generation to ensure they are prepared to carry on the family business…  Yet, they didn’t seem to think much about what they, the current generation, may need to be doing themselves to ensure they were doing the best possible job as owners and leaders.

One of the experts leading a session raised the point that the words training and development, often inter-changeably, are actually not the same.  Training refers to a set of exercises or activities that are designed to lead to mastery of a topic. Many of the conference attendees were seeking advice on how to train their next generation members, so they would be well-prepared owners and leaders.

 Development, on the other hand, is an ongoing pursuit, with no end point.  While one may work on development of leadership skills, leadership will never be fully mastered.  There are always opportunities to learn ways to become a better leader.  So, while preparing the next generation is important to the perpetuation of a family enterprise, we shouldn’t forget the importance of the ongoing development of the current generation. 

We know that the best way to perpetuate a desired behavior in a younger person is to model that behavior.  The old adage “Do as I say, not as I do”, is NOT a recipe for success. 

If you are a member of the current generation of family business leaders and owners are concerned about the next generation, consider what you can be doing to develop yourself.  Ask yourself the question – “What could I work on that would help me be a better mentor and teacher for the next generation?” “How could I model the behavior that I hope to see in them?” By expanding the focus of your education programs beyond those that come after you to include yourself, you are setting the best example of what you hope for – owners who are constantly thinking about how to develop themselves.

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Information and Communication: The Challenge of Data Overload

Drew Mendoza
Drew Mendoza

A keynote speaker I heard twenty years ago, who promoted himself as a ‘futurist’, made the point: “don’t worry about the trash, we’ll find a way to deal with all the trash as better recycling technologies arise.  The thing you’ve got to worry about is the data.  We’re all going to be drowning in information.” 

Turns out he was spot-on.

In enterprising families, attention to information flow seems to be on the rise.  So too are family meetings, family councils and boards of directors are becoming more disciplined and more thoughtfully and strategically comprised.  *

The challenge for leaders of families and family firms is building the processes by which family members are educated and enlightened so that they can understand the data they’re receiving and apply it to metrics which indicate the degree to which the family and its enterprise(s) are reaching its goals.  Doing so results in more fully aligned shareholder groups and, as any CEO with multiple family shareholders will tell you, an aligned shareholder group makes the CEO’s job much easier.  In my experience, these are the same families that are more likely to achieve their business goals.

We’d love to hear from you – what steps are you taking to keep family shareholders both aligned and informed?

*For a great read on family enterprise boards read Building A Successful Family Business Board: A Guide for Leaders, Directors and Families

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Creating community…

Anne Hargrave
Anne Hargrave

Last week’s Time Magazine article, The Last Politicians, highlights female senators, from both sides of the aisle, who have been engaging regularly with each other for decades over lunch, dinner, bridal showers and play-dates.  Over the years they have created an unwritten rule of refraining from publically criticizing one another; they focus on what unites them and on listening deeply.  By getting to know each other well, they have learned to value different life experiences and appreciate their colleague’s ability to approach a problem from a different perspective.  Family business owners who spend time together having fun may find that it’s much easier to make decisions together when times get tough. 

 

 

 

 

 

 

 

 

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Questions Students Ask Most

by John L. Ward

For the past few years we’ve kept track of the questions most often asked by MBA students who come from business-owning families. Would you suggest any other pivotal questions?

  1. Should I join my parents’ business? Culturally, do I have a choice?
  2. When should I join the family’s business – especially if it’s a large business or large family?
  3. Can the family business fit my dreams? Can I bring my personal passions to the business?
  4. Will I be encouraged to grow the business or struggle with resistance to change?
  5. What will it be like to work with siblings? Can we have a sibling partnership based on meritocracy?
  6. How can I best engage my family in sensitive continuity planning topics?
  7. What wise tips are there for developing a business together with my spouse?
  8. What business school courses are the best to prepare me for working with my business-owning family?
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Playing to Strengths

Dana Telford
Dana Telford

There are many ways to create wealth – particularly if you use your strengths.

Consider the trophy wife.  In her husband’s final days he whispered, “Barbie, promise me something.”
“Anything, Baby Cakes,” she replied.
“My money means a lot to me,” he said. “Please bury me with it.”
She nodded solemnly, thought carefully, and agreed.  He died shortly thereafter.

As the funeral concluded, she placed a small box inside his coffin. Her girlfriend, seeing the box, asked incredulously, “Did you really do it?”

The widow replied, “Yes. I promised I would.  Call me old-fashioned, but I believe in keeping a promise.”

She dabbed carefully at the water welling in her eyes and continued,” After he passed, I put the money in my checking account.  Inside that coffin is a check I wrote to him for the full amount. If he can figure out how to cash it, he can have it.”

Of the many paths there are to creating wealth, I believe they all start with playing to strengths.

I have a client with a son named Henry. After years of frustrating his teachers and parents, Henry was diagnosed with ADD.  By his mother’s account he couldn’t sit still for 10 seconds, let alone concentrate on a blackboard. She became obsessed with finding something that would hold his attention.

Then she took him to a go-kart track. He drove with confidence, zoomed past everyone, and loved it.  From then on all he wanted to do was race go-karts.

She got him involved in circuit racing.  He won nearly every race.  In one particular race she noticed him raise and shake his right hand as he passed her seat in the bleachers. As she congratulated him after the race, she noticed that he seemed upset.  When asked about it he replied, “You changed seats in the middle of my race. I know where you sit.  I watch you every lap. Don’t you see me waving at you?  It’s hard to concentrate when you change seats while I’m racing.”

The realization hit her that her son’s ADD brain was wired to manage lots of images and information simultaneously.  A 16 year- old who did poorly in math could drive a go-kart 60+ mph, maneuver corners and opponents, locate his mother in the stands, wave to her, and win the race.

We all have inherent strengths. Let’s all get better at helping the young people around us discover theirs — whether it’s driving go-karts, sculpting, singing, running a business, or a myriad of other talents.   By so doing we’ll help them build self-confidence, attain individual fulfillment, and succeed.

 

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Knowing Your History is (Psychologically) Valuable!

by John L. Ward

Emory University research professor Marshall Duke and colleagues show the value of children knowing the family history. The benefits?

  • Better functioning family;
  • More resilient children;
  • Higher self-esteem of children, and
  • More self-confidence and self-competence for them.

This happens, they argue, because knowing your family’s history provides:

  • Meaning beyond the self, which brings feelings of strength and stability (intergenerational self);
  • Stronger belief that one is able to influence one’s destiny (locus of control);
  • A security from a longer perspective on time (anchoring).

They recommend:

  • Tell family stories over dinner…
  • …especially stories about the parents before the children were born, and
  • Relate where grandparents came from and what their work was.

Business families have remarkable and compelling stories to share with their children, for great value to the family and the business.

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The Roles and Responsibilities of Beneficiaries

Norbert Schwarz
Norbert Schwarz

Trusts are important tools when planning for the continuation of family ownership into future generations. While trusts are often effective in tax and transition planning, family and business issues can emerge when little is done to educate beneficiaries about their roles and responsibilities.

The following are suggestions for minimum education that should be provided to beneficiaries, they need to:

  1. Understand why the trusts were set up and the governance processes by which they are overseen.
  2. Have a basic understanding of businesses owned by the trusts, and the processes by which they are governed.
  3. Know how to manage personal finances responsibly.
  4. Be educated on how they can become productive and knowledgeable stewards of their heritage.  Help them to think of how, even as beneficiaries, they can add value.
  5. Develop the habit of thinking in terms of multiple generations, and appreciating the role of ‘steward’ of wealth.
  6. Get help and support to establish an effective decision making process at the family and beneficiary level.
  7. Understand the basics of business finance.
  8. Develop a real appreciation for the importance of confidentiality.
  9. Support those who have been entrusted with governing the family business and the business of the family.

 

 

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3 Different Audiences for Family Business Education

Stephanie Brun de Pontet

In a previous article on family business education, Amy Schuman and I suggested one critical task in planning education is to ‘Clarify your Purpose’ – and an important related construct may be ‘Think about your Audience’.  While there are many possible ‘audiences’ – the following three have very different ‘learning goals’ – yet all are very important, and investing in these individuals’ education will serve the long-term health of the family and the business well:

1) Those who aspire to leadership roles in the business – Education programming to support this purpose should be done in close collaboration with your HR department, and should also seek input from other key leaders in the business who will provide important insight on the skills and experiences that aspiring managers and leaders of the company require.  This learning program may include encouraging family members to pursue certain kinds of academic credentials or hands-on experience elsewhere, it may include summer or other short-term projects or internship opportunities at the business, and it may include comprehensive career planning within the company.

2) The next generation of owners – We often find families benefit from setting up a ‘next generation’ group that engages in regular learning about the roles and responsibilities of ownership.  Before young adults even come into ownership it is helpful for them to gain basic knowledge of the business they will own, learn skills like reading financial statements, learn about topics like ‘taxes’ and ‘wills’ – two realities that will be far more complex for them than for their peers, and begin to understand the importance of stewardship, or the responsibilities that come with the good fortune of ownership.  Not only does this group have similar learning needs, they also need to learn to make decisions together, so the process of working and regularly meeting together to learn – can provide an important benefit of bonding this group in addition to getting them used to collaborating.

3) Those who marry into the family – Marrying into a business-owning family can be daunting and is sometimes fraught with emotional landmines.  Families in business together are often close-knit, have many traditions of togetherness, and have all been brought up with this company in their midst, so they may not see the business-focused things they do as atypical.  A new entrant to this family must gain acceptance – but will be at a serious disadvantage of not knowing the company as well, and may fear that if they ask questions some family members will accuse them of putting their nose where it doesn’t belong.  Therefore an education program is an important way of providing some basic knowledge of the company to these new family members, while also giving them insight into family traditions and shared values to help them feel accepted and well integrated.

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