In my work with enterprising families I get to see a lot of heart-warming situations. Parents, siblings, cousins, aunts, uncles, grandmas and grandpas develop rising generations and build on the generation(s) before them, combining family life and economic life in a way that brings out the best of both.

These families have a way of seeing many possibilities for how the future can play out and they embrace them over time, sifting and sorting through them, looking at pros and cons. They actively manage the interplay of family and business, creatively developing the next generation (in and out of the formal business of the family), and formalizing their activities with policies guiding how family members can own, manage and lead. Not everyone is satisfied with every decision, but they have a way of going forward together in relative peace and harmony and their businesses grow.

I also see families in turmoil and pain related to combing family and business/financial aspects of their lives. They tend to assume the “family stuff” will work itself out and believe their effort is better spent working in the business. Some of these founders and senior generation family members believe they can sit with attorneys and write up documents that will nurture and protect the future so it unfolds as they imagine it – without expending the energy necessary to truly engage those they hope will carry the torch.

In the last couple of weeks three families reached out in deep distress that could have been avoided had the senior generation been more proactive about the transition process over time:

  • One family was finishing up litigation between siblings, some of whom will likely never speak again. The founder did almost no planning for the transition of their very successful business and did not even have a will.
  • The next situation involved generous parents with the best of intentions who made large gifts while still alive to their adult children. They set up trusts for some of their children based on their belief that these kids could not manage the money themselves. Other siblings were made trustees and put in the tough position of being caught between the parents (who assumed they would have influence even though legally they had let go of control to the trust and trustee), and the siblings/beneficiaries who did not understand why their money was so tightly controlled when their siblings had free access. Several family members were not speaking and the parents were about to write some of the kids out of their wills when they reached out for guidance.
  • Finally, a patriarch made all four of his children equal owners of some very valuable real estate. He was quite sure this would help them to remain close. However, they were never close and resented being bound together around properties that required lots of time and joint decision-making. They were miserable and dad could not understand why his generosity went so unappreciated.

The key issue here is the Proactive Mindset – a fundamental acceptance of the reality that successful transitions take many years and lots of talking, developing and planning. So much of the painful drama we all hear about in the world of family business is based on a lack of respect for the importance of being proactive far in advance of a baton being passed.

What is the lesson?

Enterprising Families: Being proactive is simple yet difficult. Simple to understand and difficult to pull off yet necessary and rewarding. The time and energy invested in making a generational transition is effort intensive but families who do not make that investment are destined to pay a heavy price.

Advisors to Enterprising Families: I frequently hear professionals who serve enterprising families talk about the strife they see on a regular basis. There are many ways to be helpful to these family clients outside of the usual aspects of your work (tax, investments, trusts and estates, insurance – which are all very important in their own right). Progressive professionals are moving beyond their core competencies and learning about the many ways they can develop their skills and grow their client base. Interested in learning more? Check out the Family Firm Institute and Purposeful Planning Institute and consider attending one of their annual events.