In the 1960s, two young entrepreneurs started what would become thriving family businesses. They were very much alike; both had spent their youth loyally plying their trades and working for the man, yet both had a niggling sense that there was a better, easier, way.
Filled with fearless ambition, they took the plunge and stepped out on their own.
While the early years would be a tough, thankless slog, they would both ultimately be rewarded. They would build thriving enterprises that would not only reward their families financially, but provide significant opportunities for their children. They would become some of the largest employers in their communities and built legacies that had the potential to last centuries.
Fifty years on, both are still very much alike. They have seen their adult children immerse themselves in the family business, making their mark and adapting and evolving the business for modern times. They watched on proudly as their grandchildren became heavily involved in the family company.
But there is a small difference between the two patriarchs. One still goes into the office every day, opens the mail and meddles in business. His identity is intrinsically linked to the business. But unfortunately, his relationships with the family are strained.
On the other hand, the second entrepreneur has retired, having handed over the reins to his children when he turned 60. He has retained a non-executive role on the Family Council, offering his insights and advice when required. He has discovered numerous interests and passions outside of the business, including various community projects and roles. He has enthusiastically taken on the honour of documenting his family’s history.
What sets successful families apart?
Have you ever wondered what sets a successful multigenerational family enterprise apart from one which stumbles and falls at the second or third generation? It isn’t about hiring the smartest CEO to build the biggest empire. It isn’t that one patriarch wants their legacy to be perpetuated across generations and another doesn’t.
The difference sometimes lies in the ability of the patriarch to let go – to step out of the business in order for others to step up and be their best.
Letting go can be much easier said than done because it may require you to face some fears. A fear that if you relinquish control, you’ll be pushed aside and end up the scrap heap; but to overcome that fear, you must trust in the love and respect of your family. That, in turn, requires a belief that preserving and honouring your legacy is as important to your children and grandchildren as it is to you.
It also requires recognition that transition planning involves a different set of skills to the ones that helped build such a thriving enterprise. I urge you to start the conversation with your family about what they need from you to become empowered leaders.
A roadmap for managing family wealth across generations
While you may have blazed the trail in building a thriving enterprise over several decades, you are not alone when it comes to the challenges of transitioning family assets across generations. Yes, it might feel like a lonely world right now but there is a well-trodden path that sets successful families apart. The roadmap for managing family wealth across generations, spells out seven steps that successful families follow to avoid the heartache and destruction that comes from a failed wealth transfer.
What matters most?
A great place to start the journey is defining what matters most to you and your family. What is the purpose of your wealth? What is it all for?
Some family members will value dearly the legacy that you have created. They will be determined to sustain it for generations to come. Others will want to make an impact in the community, perhaps through philanthropy. Some family members will believe more strongly in the importance of education as a means of growing your family’s collective human and intellectual capital, rather than just your financial wealth. On the other hand, some will wish to enjoy the fruits of the family’s collective labour in the here and now and will be more focussed on funding lifestyle. Others will be driven to try and replicate your entrepreneurial success by building and investing in their own business ventures.
If you are seeking meaningful activities then you should examine your purpose in life and look to activities that will help you fulfil that purpose.
It also means you must understand the individual aspirations of family members and how they can best contribute to the success of the family as a whole.
Starting the journey
Perhaps the most difficult question is knowing where to start. First and foremost, your family needs to understand that you are thinking about these challenges. They are not mind readers and they too may be fearful to initiate what might be a confrontational conversation. They see you as their leader and they need to know that it’s ok to talk about this stuff. You don’t need to have all of the answers right now, but you do need to have an open mind and a warm heart.
That conversation can be as formal or as informal as you like. It could take the form of a conversation in the family home or as a structured family meeting. What’s important is that you open a dialogue.
Taking the conversation to the next level
It is one thing to initiate a conversation, but it is quite another to start mapping out a transition plan.
Working through emotionally charged issues associated with transitioning family wealth across generations can be complex. It will be very difficult to execute the process without the help of an independent expert. Why? Because the reality is that, like most patriarchs, you will have probably already put your children in boxes. “He’s the accountant, she’s the baby, he’s the black sheep, and she’s the bleeding heart.” Approaching the conversation through this lens can do irreparable damage to relationships.
You need someone who is not hampered by the shackles of your family’s baggage. Someone who comes with fresh eyes and who can give everyone a fair hearing.
Ripping off the Band-Aid
I cannot promise that mapping out an intergenerational plan will be either quick or easy. There is no ‘off the shelf’ solution. But I can promise you that if you continue to avoid the issue, it will get harder and it will get messier.
A strategy of avoidance is no strategy at all. As the Chinese proverb goes “The best time to plant a tree was twenty years ago. The second best time is today.”