As a parent, you have either already broached the discussion or will at some point: you need to have “The Talk” with your kids. You and your husband or wife do your homework, consult some books or websites for a refresher, and think about how to frame the discussion in a language your kids can understand. You might even ask for advice from a financial advisor or trusted attorney. Of course, “The Talk” I am referring to is on family finances and the family business.
A recent Barron’s piece highlighted how parents struggle to discuss finances with their kids, and it got us thinking about having family business discussions with your kids and the dialogue among multi-generation family board members. For an overview on basic business vocabulary, Travis Harms, who leads our Family Business Advisory Services practice, has a great series of whitepapers I would encourage any family board member to review, no matter their individual financial proficiency.
But as anyone with kids or family knows, it’s not just what you say but how you say it. And while we are not psychologists (we don’t even play one on TV), we do have experience in observing and leading discussions among family board members of varying generations and familiarity with the family business.
In our experience, adhering to three simple rules can help promote impactful and productive dialogue between parents, children, and different generations in your family business: big picture first, be transparent, and remember priorities.
Big Picture, Then Zoom In
Before you undertake an industry deep-dive, SWOT analysis, or financial study with your family board members, it’s helpful to take a big picture view of why the family is in business in the first place. James Hughes, family meeting facilitator, consultant, and author, explains his philosophy on family business and history in Family Wealth: Keeping It in the Family (see our full review here).
Family stories give members a sense of the unique history and values they share.
According to Hughes, one reason family businesses struggle is that they “fail to tell the family’s stories… Family stories give members a sense of the unique history and values they share…” (Hughes, 2004, p. 12). Family Wealth also offers guidance on how to craft a family mission statement, documenting the family’s purpose, vision, and values. These areas tie into the question we often ask here at the Family Business Director: What does your family business mean to you? Answering and reviewing these fundamental questions will help convey the shared mission and the “why” of your family business to your newer board members.
Transparency Yields Trust
Next generation board members shouldn’t be stuck at the kid’s table. Those short folding chairs are uncomfortable, and you can’t just eat mac-and-cheese and dinner rolls forever. To avoid “shirtsleeves to shirtsleeves” for your family business, you must take frank and direct communication seriously. What does that look like? It looks like treating your family shareholders as shareholders. As we’ve discussed, shareholders, regardless of age, deserve and are entitled to adequate financial disclosure and transparency. Educating them in how to understand disclosures and update letters is not only a benefit to your shareholders, but it creates a new set of “free” outside advisors able to form thoughtful questions from a new perspective that can help you run your business more effectively. This has the impact of staving off resentment or distrust often generated by secrecy within family hierarchies.
Remember, It’s a “Family Business” Not a “Business Family”
One aspect you need to often remember in your family board member relationships is…Family! Again, returning to Family Wealth, Hughes endorses an interesting habit he refers to as “hat work.” While Hughes recommends literally getting multiple hats, the key is to remember the proliferation of “hats” in your family business.
When onboarding new directors, remember the dynamics and hats you wear with that person.
It is not uncommon for more seasoned family members to wear multiple hats: parent, grandparent, boss, fellow board member, in-law, fellow trustee and/or trust beneficiary. When onboarding new directors, remember the dynamics and hats you wear with that person.
The Goal? Long-term Business Continuity
Older family members and parents are responsible for educating the next generation, as they will eventually be responsible for ensuring the continuity of the business enterprise. Getting off on the right foot in having these transitional and educational conversations is essential for family businesses. Unfortunately, multi-generation dialogue can often devolve, pitting “has-been-dinosaurs” against the “lazy-good-for-nothings.” Ultimately, remembering why you are in business together in the first place, being transparent and open, and acknowledging familial relationships will lead to better multi-generational conversations.
If you need someone to help you lead these conversations, give one of our professionals a call today.