Business, family and ownership: working in three dimensions

David HarveyThe Family Firm Institute annual conference is a mixing pot of those who advise family businesses and business families – family counsellors, management  consultants, mediators, accountants, lawyers, psychiatrists, psychologists, academic commentators, a good few family members and, interestingly, consultants who have come from businesses, families. A good few of the above are TEPs.

This year’s FFI conference offered a one-day introduction for US attorneys to advising families. A brave group of soft-skilled FFI members, led by Scott Budge and Roy Kozupsky, together with  STEP participants led by Mary Duke and me, and ably supported by UK family business guru Peter Leach, set out to cover some of the legal aspects, but focusing mainly on how families are different. We covered issues of psychology and chemistry; in essence, why every family business is happy or unhappy in a different way, how that often drives the business and why, to achieve any success with structuring, all of the right questions have to be asked to dig behind the external forms. We focused, too, on the mutually conflicting perceptions of advisors and consultants, using work carried out by STEP in association with the Institute of Family Business. This highlights on the one hand how lawyers can find families and family wealth frustrating and difficult to engage with because of issues of chemistry and blood; and on the other hand, it looks at complaints from the families themselves:

  • the failure to look at the family’s long term ambitions, rather than just proposing the best way of planning a structure and putting in place reasonable mitigation of tax;
  • the failure to look at long-term generational issues in the business e.g. training for the next generation, psychological issues regarding the retirement of those who are stepping back from the business;
  • not seeing the different drivers of family members, including tradition and adapting the business to include younger generations;
  • the interaction of professional, business management, whether family or not, with family owners who don’t work in business;
  • understanding the ghosts in the system — overwhelming influence of a dead founder or the power of ‘non-owning and never seen but extremely influential’ in-laws and partners;
  • the importance of family governance structures e.g. family councils

(You can read a summary of this research here http://www.step.org/new-perspectives)

The Chairman of attorneys for Family Held Enterprises, Michael Hawthorne, also joined us with a rather more hard skills and knowledge-based approach, but adding great interactions, insight and knowledge.

The challenge, though, is that most delegates at the conference were TEPs, and almost every one of them understood the above issues because their trust and estates practice had, at the very least, madeFamily business them both aware and respecting of what they did not know. The audience of attorneys who are oblivious to the drivers of family enterprise were, however, notable primarily by their absence. Yet, anywhere in the world, the practitioner who has at least a holistic understanding of family enterprise and can, at the very least, call in a colleague with soft skills to assist, is always going to give a better service and have a much stronger business model.

Talking to practitioners with family understanding is mutually rewarding and involves learning for everyone, but there are great mass of advisors out there who have yet to realise that business families are three-dimensional combinations of business, family and ownership, and you need to work on all three. Getting that message across is hard work, but also an exceptional opportunity for professional groups who want to offer the right professional development and for professional practices who see the market gap.

One thought on “Business, family and ownership: working in three dimensions

  1. I think your point about an “holistic” understanding of the family enterprise is well made. We live in a world focussed on cost recovery and the ability to invest time in “potential” clients, before working on a legal or tax solution rarely goes down well with the Finance Department!

    Similary, I feel the investment industry has historically also missed this opportunity. Too few financial advisers have spent time genuinely understanding their clients’ key goals and objectives. The opportunity to invest the money and ask questions later is often way too tempting.Sucessful businesses have business plans and my view is that private clients should also have a Familty Business Plan, that provides a roadmap for the family to follow.

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