Hey there, and welcome to the July newsletter!
This month, we’re going to explore the long-term decisions that family companies constantly face, and then an interesting statistic and news story. I hope you enjoy!
1. Twenty Year Decisions
When you work with family, you run both the company and your inner-family business.
Your inner-family business is the unique way your family works in and owns your company together.
Over the last year, I’ve noticed a unique pressure that families face: making multi year decisions, many times without realizing it.
John’s Three-Year Time Bomb**
Richard, a third-generation vice president in his family’s company, told me a chaotic story about a recent family gathering. His uncle, John, their second-generation CEO, chose not to hire Ashley, Richard’s cousin. However, John did not give Ashley much of an explanation; she just wasn’t a good fit in his mind.
John avoided Ashley’s emails and calls for months. She reached out to Richard for help, but he could not get John to engage in the conversation either. Eventually, Richard got what he wanted: Ashley found another job, and her calls and emails stopped.
Problem solved…for about three years until an extended family cookout over the Fourth of July.
John casually asked Ashley if her family would like to contribute to one of his favorite charitable causes. Ashley, still hurting from three years prior, chose instead to confront him about the secretive family hiring process and his decision to “ghost her”. Their argument played out in front of anyone who cared to watch the family business drama.
Family ACTion Meetings that Look Ahead
I have not met John, but I doubt he realized he had planted a three-year time bomb.
And that horizon is short by family company standards.
Buy-sell agreements can set a family company up for an inevitable succession or sale twenty years later.
A family compensation policy can encourage a generation or two of driven family employees, or start a slide into an entitled mindset.
Ownership transition decisions can encourage cousins closer together, or drive heartbreaking estrangement.
This is why Family ACTion Meetings (building alignment, communication, and trust) matter so much. Inner-family business impact an entire system, one that extends well beyond the current day and year. A friend of mine who works in wealth management said:
“What is the probability that a decision involving millions of dollars and affecting future generations will be perfectly accepted with zero input from those it impacts?”
Likewise, if your family holds meetings and you choose not to engage, what is the probability that the decisions will affect you well without your input?
When you choose to work with and own a company with family, you take on the pressure (and opportunity) of long-term decision-making. Give yourself plenty of family meetings to let company and legacy issues breathe, and constantly ask yourself:
“What implications might this have for the next generation?”
2. Interesting Statistic
A recent survey of 200 family offices also underscored the importance of family meetings.
The study, which spanned the globe, found that 80% of the surveyed family offices said that the next generation is already shaping their strategy and future.
This may sound idyllic, one generation taking the baton from the previous one, but the survey also found that the next generation, unsurprisingly, has different priorities:
You likely feel this whether you have a family office or a family company — the next generation is stepping up sooner, and they see the organization and the world differently. This can be thrilling, as they stimulate progress towards the future, and unnerving, as they may not clearly understand the core of what got them here or commit to preserving that.
What I like about this survey is that it, like Richard’s story above, underscores the need for family meetings. You cannot drift into alignment when generations have different approaches and priorities. Those variances are not bad, but they will create tension and even chaos if left unattended.
3. Inner-Family Business News
Last, here’s a news story that none of us want to see about our families. The Lopez family controls Lopez Holdings Corporation. They are one of the most influential business families in Puerto Rico.
Unfortunately, the Lopez family is not setting its own family meeting schedule; the Securities and Exchange Commission is.
Click here for a Lopez family summary When I read the story, this line jumped out at me:
“The Lopez companies are not suffering from a lack of corporate governance. They are suffering from the absence of family governance.”
Read for yourself and see what you think.
Till next month
As my grandfather would have said, thank you so very, very much for reading.
Adam, for 21 Clear
** - Unless I name a real company, any story is based on real family companies, with names, industries, and other details changed to protect the families’ privacy. Most times, a story is a synthesis of two or more similar stories. Any resemblance to an actual family or company is strictly coincidental.