Winning your service game

Until the late 20th century, universities, the professions of law and finance, and even the families that owned and operated businesses, did not make much of the distinctions that separate family owned businesses from their public or privately held counterparts. A business school professor or professional adviser, asked how to handle the influence of family on business, would simply have told you to separate the two.

Two diverging evolutionary processes were happening around this time. On the one hand many in the social sciences began to view cultures, nations, even families as systems – systems in a nearly constant state of change. Business education began to incorporate some of these insights, viewing businesses as systems with spoken and unspoken rules. By studying such topics as employee motivation, effective leadership and organisational structure it understood better how these systems worked and changed (though many business educators even today do not look beyond the fields of finance, marketing, and law as making any real contribution to the development of future business leaders). And we entered an era of new cultural norms which began to unravel centuries of primogeniture (the right of the oldest son to inherit) as the norm for family business succession.

On the other hand those trained in law, finance and the management disciplines, who during the post-war era were seen primarily as business counsellors in a peer relationship with those they represented (the “man of business” in Scottish terms), increasingly turned, as the pace of legislative change increased, to technical expertise as the means of building a reputation. In the “go-go” days of the 90s the only meaningful measurements of success for both client and professional were speed, efficiency and significant financial success, the professional focusing on the transaction itself, not the client. While this trend may now be reversing as those professionals attempt to stay relevant to their clients, a good deal of remedial education about human relations is required before the crucial ingredients of trust and respect can be re-established.

The extra dimension

During this period of transition, several practitioners from various disciplines, including law, began to recognise that for their family business clients (or in the case of therapists and family counsellors, their business-owning families), the technical expertise of their profession of origin simply was not enough. They intuitively understood that for these clients the family and the business were indelibly locked together. The question was how to maximise the unique strength such duality could bring to the competitive marketplace.

Perhaps even more importantly, these men and women recognised that while technical expertise would certainly be needed at some point in any major family business transition, it was their ability to listen, their courage and sensitivity in providing honest and compassionate feedback, and their willingness to allow the client to decide what was best for his/her own family or business that would be most useful. Inherent in this awareness was the understanding that family business transition work, more often than not, requires a multi-disciplinary approach in order to be successful.

While certainly not yet mainstream within most professional firms today, a growing number of organisations that see themselves as providing superior business advisory services to their clients have encouraged the development of these skills within their ranks. In this setting, family business consultants are called on to assist clients with such issues as: cross-generational conflict; transition of the business between generations; development of family and non-family leadership; change management; life and career planning for young people entering the business and their elders deciding what comes after business; development, recruiting, and training of governance councils and boards of advisers; and establishment of family offices and family foundations.

Moving forward productively

For the family business consultant, the answers to a business client’s problems most often lie not in technical expertise of the client’s advisers, but in the wisdom of the business leadership and the owner-family. Accordingly, their work is done principally in a “process” as opposed to a “fix it” mode. In addition to their business expertise, these professionals bring the ability to understand a wide variety of viewpoints and the skill to be able to knit those perspectives into feedback for the business family that enables a candid, safe dialogue about how to move forward productively. Through a process of modelling respectful communication and teaching sound business practices, the consultant affords the family and the business the opportunity to identify honestly and take ownership of their own problems and then select the solutions that best fit both family and business. All family businesses must keep their estate plans current; keep their buy-sell agreements up-to-date; develop sound strategic plans; and improve their leadership and employment practices. But first, they must be able to agree on the definition of the current problem and then have the skills to communicate well enough amongst themselves to agree on a set of solutions that serves the best interests of all concerned.

Family business consultants do not replace a business family’s technical advisers. Rather, their role is to facilitate a process of open, respectful communication and to coordinate the best use of the advisers’ technical expertise once the family has made an informed decision about where it wants to go and how best to get there. In the USA, Canada, Spain, and certainly the UK, the experience of having technical experts and process-oriented family business consultants in the same firm is not only growing, but demonstrating how well these two groups can support one another. To give a few examples:

• A partner practising in a traditional field such as corporate law, is struggling with his client who needs a new shareholders’ agreement but has problems with the next generation. The client seems unwilling to move forward. An internal referral to the family business consultant accomplishes two things. The technical adviser now has an action-oriented step that can be recommended to the client; and that step is also his best guarantee that the client will return to the partner when the family has agreed on a transition plan. In most cases, this scenario will also generate additional work for the partner: estate plans, financial planning, and perhaps even new agreements relating to business real estate.
• A partner doing estate planning is struggling to help a client couple who are very concerned about how their children will manage the wealth they have been fortunate to accumulate. The partner turns to the family business consultant. Together they design a family discussion centred around estate planning options and the parents’ concerns. The children get a chance to ask questions, express their own ideas, and begin the process of understanding what all this means to the greater family. After a session or two the children are looking at the partner as well as their parents as their adviser, and the resulting documents are no longer something imposed on them, but a new adult responsibility they feel they have had an appropriate voice in shaping.
• A family business consultant is working with a family in the process of business leadership transition. It is early in the process, but if it works the parents will probably want the active children to continue the business into the next generation. The consultant goes to a technical partner and asks for an interim estate plan to be drafted that would provide guidance and ultimate judgment on the transition process if the parents were to die before it is complete. The work is challenging and innovative and the technical partner has a wonderful opportunity to deepen his relationship with both generations.

This type of joint cross-referral work not only expands the service offering available from a professional services firm; it deepens the client relationship that will guarantee more business in the future. It can also assist in client retention when the emotional temperature is up. The technical partner may know what needs to be done, but either cannot get the client to move, or does not want to risk venturing into a situation where he/she does not feel comfortable. The family business consultant can take some of this “heat” and then return to the partner a client prepared to move forward. Perhaps most importantly, having both technical and process expertise available gives the firm the ability to do either side of work for the family business client exceptionally well. The history and expertise of the technical partner is always available to assist the family business consultant understand the business and economic drivers of the client; and, the family business consultant is always available to the technical partner when powerful human dynamics get in the way of doing the job well.

Today such professionals even have their own professional association, The Family Firm Institute (ffi.org) where multi-disciplinary skills and teamwork are taught and encouraged. Like their forebears, they enjoy being referred to as “counsellors” whether their profession of origin is law, finance, management, or one of the social sciences.

Glenn Ayres is partner and a family business consultant in the Minneapolis, Minnesota, law firm of Fredrikson & Byron P.A. and a founding member of The Family Business Alliance. He is current president of the Family Firm Institute and an adjunct professor at the University of St Thomas where he teaches “Family Business Management” to undergraduates, MBAs and their parents. He can be reached at 001-612-492-7003 or gayres@fredlaw.com.