What makes for a more Successful Transition?
What makes for a more Successful Transition?
Throughout my career as a Chartered Accountant, I had the opportunity to work with a number of amazing private business owners and their management teams. I watched these owners and their teams create significant value for all stakeholders. They worked together through opportunities and challenges and continuously moved forward. Nothing seemed to stall them or create paralysis in their businesses. Yes, there were difficult moments from time-to-time, but they were always able to keep a positive momentum and move forward.
So what is a private business owner’s kryptonite?
In my role as a relationship partner, I got to hear the needs, opportunities and challenges of the private business owners and bring in the resources of the firm to help them. In some cases, this meant helping in the transition of leadership to a son or daughter, transitioning ownership, assisting with estate planning and tax planning needs, etc. The talented teams of advisors and the owners would come up with excellent solutions and approaches. Then things would frequently go “on hold” and not be actioned. This was always a bit of a mystery (i.e. “What was getting in the way of moving forward?”), frustration (i.e. “Good work not actioned”) and concern (i.e. “Client’s needs, opportunities, challenges were going unresolved and actioned”; and / or “Was it something the advisor team did or missed?”).
Intellectually I understood that private businesses had family members working in the business and that there was a family intertwined with this private business. Interactions with the private business owners would frequently include discussions regarding their children and the related opportunities, challenges and concerns. However, given my areas of expertise and interest, I did not spend much time to understand the impact of these family related matters on the owner. Nor did I seek out and build the appropriate network of third-party providers that I could work with or refer my clients.
My talented colleagues and I missed the fact that the excellent solutions and approaches to the respective needs, opportunities or challenges required the family, and individual family members impacted, to transition through the related changes.
The changes we were proposing would be situational and external. The transition is the period of time, and the psychological process, people go through to come to terms with the new situation. Transition is individual and “internal” for each individual impacted by a change. It was the transitions that the private business owners were concerned about, but we were doing nothing to support the family and individual family members through the transition.
The family had a clear understanding of the structural changes, it was the impact of those changes on the emotional life of the family that was blocking their ability to address them.
More insight on the impact of family
A number of years ago I had the opportunity to take the Family Enterprise Advisor Program. During the program, I gained a much greater appreciation of (i) the impact of the family dynamics on decisions that needed to be made in the family and business and about the ownership of the business; (ii) was introduced to resources that can assist owners and their family members; and (iii) how these family related matters, which were essentially unknown to me, were impeding progress on a number of matters in the business and ownership sub-systems. Here are some examples of learnings during the FEAP:
After completing the FEAP course module on “Family Dynamics”, I was out for lunch with the owner of one of my clients that I had known for about eight years. Over lunch I purposely spent most of lunch learning about his family and sketched out a “Family Tree” so that I knew who the family members were, what they did, and what the owner’s hopes were for each member of his family. About 90 minutes into the lunch meeting, my client asked “Don, where have you been?” I was obviously confused by the question and asked for clarification. His response was eye-opening – “I have been waiting eight years for this conversation.” Imagine my surprise.
The other significant learning from the FEAP course came during our group project when I got the opportunity to work with my current business partner, Heather Rose, who is a social worker / psychotherapist by background and training. Her line of questioning during our continuity planning project around the relational and emotional side of the family and business system was extremely enlightening. I found out things about my client and his family that I had no idea existed that were significant barriers to moving forward many of the good planning ideas we had discussed over the last number of years.
My shift in thinking
So why did I have a block in my thinking and approach to working with business families?
My background and training conditioned me to believe that if you change the structures, the system will change. Like others from an accounting, law or business background, I was used to operating in a more linear and organized manner. My fundamental goal was to rationalize the family and business systems and to introduce the families to models, processes, best practices and so on.
The problem is that frequently families are not amenable to this kind of linear structural work - even though their businesses might be. The result is all sorts of best practices that are taught, but very few are actually adopted and sustained because the family dynamics undercut these “solutions”.
Heather and others from such fields as psychology, social work, coaching and the therapeutic world come at this work from a behavioural approach. They tend to believe that if individuals change their behaviour, the system will shift. They work on communication, family dynamics, connection, self-awareness, and the like in therapeutic fashion. Their fundamental goal is to connect the family.
The challenge is that the nature and role of families in business together require strong structural knowledge and system-level work that is often beyond the expertise and understanding of people coming from therapeutic backgrounds. They often lack the capacity to work effectively with the very practical questions the family faces which often go well beyond interpersonal skills - such things as cash flow, governance structures, taxation and the like.
The reality is that it is deep within the behaviour of the family that solutions lie - but behavioural solutions alone will not get the family business to the goal.
My learnings lead me to want to partner with Heather to ensure that my client interactions going forward would address the family, relational and emotional aspects of business families.
Best of both worlds
Our experience in working with family businesses over the last number of years has fully validated the above observations.
It is our view that the combination of the behavioural approach (Heather’s perspective), combined with a structural approach (my perspective) is what is required for a more successful transition and continuity of leadership, ownership and resources of the family to the next generation.
The linear structural work (forums for family discussions, models, policy development process, best practices, etc.) helps the family and individual family members move forward on succession, transition and continuity planning initiatives, while the behavioural perspective ensures that the family and individual family members are allowed time and provided with individual and group support to move through the process at a reasonable pace.
Our final observation is that it is rare for a single advisor to possess the required depth of knowledge of both the behavioural and structural aspects to achieve sustainable solutions for private business owners and their families.