In turbulent times there is a clear need for “white space” – that is, quality time for reflection with a trusted neutral person. Greg McCann explains more. Even before COVID-19 rocked our world, family enterprise leaders have had the challenge of navigating today’s rapid pace of change, global interdependence and complexity. They’ve also had to adjust to the fact that the average family enterprise now consists not of one but of five or more businesses. Add in all the other challenges of running a family enterprise, and it’s no surprise that one thing every leader I have worked with other the past 20 years has agreed on is the need for “white space” – that is, quality time for reflection with a trusted neutral person. Those who get this through leadership coaching find it leads to a direct increase in their capacity and agility as a leader, which helps them meet the challenges family enterprise leaders face today—and will almost certainly increasingly face in the years ahead. So, how exactly do these qualities of capacity and agility benefit you as a leader? What does a leadership coach do to develop them? And, what should you look for in a coach? The benefits of developing your capacity and agility Developing your capacity means becoming better able to think on different levels—to identify whether any given problem is a problem to solve, a system issue in need of a strategic solution, or a culture issue to influence. It also benefits you by deepening your self-awareness—so you know your strengths, weaknesses and blind spots, which helps you relate more effectively with others. It also increases your empathy for others, which research on emotional and social intelligence has shown is a significant benefit to business leaders. Agility is about being able to choose the right style or approach for a given situation or relationship. In short, developing your capacity gives you a greater number of effective ways to think and act, and agility helps you choose the right one for each situation. Together, they help you become a better leader; and with many family enterprises over-managed and under-led today, that gives you a powerful advantage. What A Leadership Coach Does A leadership coach creates the framework for all this work to occur. For example, I often spend a day with new clients and then arrange for three one-hour calls per month. This framework is designed to allow the time for leaders to pause, reflect, and process challenges, opportunities, patterns and even choices they may or may not be conscious they are making in the hustle and bustle of business. It is also allows leaders time to process big ideas—such as, considerations about changing your enterprise or your family—with someone who is neutral, which can be hard to find among your family members. Coaches are also more focused on helping you explore your own good ideas than on giving you advice—recognising that giving someone advice robs them of developing their capacity as a leader. They start with the belief that the client has the answer, and it is the coach’s role to facilitate the exploration of those options with questions, objective feedback, a re-framing issues, and an offering of stretch goals. In other words, a good coach views each discussion as less about solving some immediate issue (say, a sibling conflict) and more about helping you develop your overall capacity (for example, recognise your communication patterns, which may or may not serve you in the current and other situations). What To Look For In A Coach Trust is vital. You need to ask yourself: Can I trust this person to have my well-being and development as of primary importance? Trust, in turn, rests on competence and character. Is the person you are considering as a coach competent at what they do? Do they have experience and training as a coach? Expertise in your industry may not be necessary but understanding the nature of a family enterprise is. As for the coach’s character, it helps to ask yourself if you respect him or her as a person and a professional. Do you think they can support you, push you when necessary, and have the fortitude to go deep when necessary? As someone who has both had coaches and been a coach for two decades, I can say that it is one of the best investments you can make in your leadership development.

The Pensions Regulator (TPR) has issued new guidance to help protect savers and give employers and trustees more choice ahead of Government legislation. The guidance unveils the high bar it expects new superfunds to meet to ensure savers in defined benefit (DB) schemes are protected ahead of Government legislation. The new guidance, which comes into force immediately, sets out TPR’s expectations for how DB consolidator superfunds and other new models must show they are well-governed, run by fit and proper people and are backed by adequate capital. It also explains how they will be assessed and regulated. The regulatory regime announced by TPR is interim to ensure clear rules are in place as these models emerge. It ensures that savers and the PPF are protected while providing employers and trustees with more choice during this period of uncertainty caused by COVID-19. TPR believes DB superfunds have the potential to offer benefits for pension savers and sponsoring employers, such as economies of scale and good governance. However, before a permanent regime is in place, TPR has acted to introduce a stringent set of standards and robust regulatory framework to manage the risks and to ensure that retirement incomes are protected. This guidance has been long awaited but as Jon Sharp, Director at Western Pension Solutions explains, “Innovation is welcome in the pensions market and we are pleased to see the release of this interim regime and associated guidance by the Pensions Regulator. We feel that it is important for family businesses and their Trustees to work together to find the best solutions both for their businesses and for the support of their pension scheme members.” Family businesses can expect TPR to request information about four areas to ensure a smooth transition to the legislated framework once it is in place: The superfund is capable of being supervised. The superfund is run by fit and proper people and has effective governance arrangements in place. The superfund is financially sustainable and has adequate contingency plans in place to manage funding level triggers as well as to ensure an orderly exit from the market. The superfund has sufficient administrative systems and processes in place to ensure that it is run effectively. As Jon concludes, “Family businesses are a key part of our economy; the emerging Superfunds market is a new option available to them and their Trustees. Moving to a Defined Benefit Superfund could be helpful for some family businesses to finally resolve their legacy pension schemes issues. This will in turn help them to support their communities with investment and employment in these challenging times. Superfunds provide an opportunity to gain economies of scale, reducing advisory costs and potentially provide additional protection for members through external investment.” If you are a family business that needs any help with regards your legacy pension scheme please contact Western Pension Solutions on their free helpline 0207 726 2718. WPS are part of Vestey Holdings Limited, a pioneering fourth generation family-owned food and farming business, whose origins date back to the 1890’s. Headquartered in the City of London, at the home of the Vestey family office, WPS combine the values of a multi-generation family business with a team of highly experienced professional consultants across the country that can provide all aspects of corporate pensions advice. Find out more at www.westernpensionsolutions.com

Giving the decorator everything that could possibly be needed for a perfect finish was Clement Brewer’s dream when he opened his first shop in Eastbourne on the Sussex coast, in 1904. Selling mainly wallpapers and all the materials necessary to make up a wide range of varnishes and paints. Now with 177 stores in the UK, Brewers Decorator Centres serve decorators and homeowners alike up and down the country. Clement stuck to his ideals and so have all the subsequent generations of Brewers. After over 100 years of successful growth and service to painters and decorators alike, they hope that you find the same friendly support, advice and service that Clement Brewer strived to offer. Clement was a Quaker and a man of strong business principles. His customers appreciated his unfailing reliability; his heavily laden delivery bike was always on time, whilst suppliers welcomed his excellent payment record. Before and after World War One, five of Clement’s sons came into the business, which made possible expansion beyond Eastbourne. Soon branches were thriving at Redhill, Tunbridge Wells, Guildford, Horsham and Bexhill. At the close of World War II the huge programme of rebuilding and repair work saw Brewers grow to meet the demand for decorating materials. During this period branches opened throughout the South of England and South London – with the third generation of the family picking up the baton. Later the fourth generation has seen moves into the rest of the UK. In increasingly competitive times Brewers have always valued the loyalty of their customers. But that was no accident – establishing good relationships with customers, suppliers and staff has always been at the heart of their philosophy. Today’s employees – now over a thousand strong – are continuing to build the company’s reputation through their friendly, helpful advice and their knowledge of decorating products, techniques and trends. How the decorating trade has changed since 1904! In those days the decorators’ merchant did many of the things that a manufacturer does today. For example, wallpaper was received from the manufacturers in large hessian-wrapped hand sewn bundles. The Brewer ‘boys’ would then carefully unwrap them and make up the pattern books. Wallpapers had to be hand-trimmed to size by Brewers, a process calling for some skill, where the odd mistake could prove expensive. A ‘piece’ of wallpaper was made by joining 12 sheets of ‘Double Demy’ (22” x 35”) which measured a length of 11 yards. This size standard is almost identical today. Clement Brewer’s paint stock included White Lead, a pigment that was mixed with linseed oil to make paint. Colours were supplied both dry and ground in oil; you could choose from 16 different coach varnishes, 22 kinds of decorative varnishes, 14 stains and polishes – and others specially to order. A milestone of those early years was the arrival in 1908 of the first supplies of Halls Distemper, the revolutionary wall treatment in pre-determined colours. Clement prided himself on having everything the decorator would ever need. Nothing’s changed! All the major brands If service and expertise are at the heart of Brewers, then the backbone is surely the unbelievably wide product range – an A to Z of leading brand decorating materials, paints, papers, tools and accessories, plus Brewers’ highly regarded in-house brand of Albany Paints and Wallcoverings. The Albany brand has grown over the years. The name was originally chosen by Clement in the 1920’s for their wallpaper collection to reflect the highest standards of interior decor which were to be found in the flats just off London’s Piccadilly. The brand is just as strong today because there’s consistent quality in every can that the decorator can trust – and because of the depth of range which all adds up to the complete painting system. Available for interior and exterior applications, every finish is represented – traditional gloss, vinyl matt, vinyl silk, soft sheen emulsion, eggshell, masonry point and the latest water-based acrylic gloss and eggshell finishes. Every colour too: hundreds of shades including British Standard, NCS and RAL colours that would surely have turned Clement Brewer green with envy! Brewers have a vision At the celebration of a centenary of supplying decoration materials it was time to look back and reminisce – but only briefly. The Company has prospered by their readiness to anticipate market needs, nurturing a hard-won reputation for having everything the decorator will ever need, with knowledgeable, well-trained staff in the branches. They have steered a steady course through some momentous changes in trading conditions in recent years – preserving services that put the long-term benefits of customer loyalty ahead of short-term gain. This is why, for instance, Brewers trade decorators continue to enjoy best value with free daily deliveries, free technical advice and on-site representation. ‘Can we do it any better?’ is a question they continuously ask themselves. The answers come with initiatives such as the development of online shops selling quality designer wall coverings and paints. Whilst decorators searching for specialist industrial coatings or looking to move into spray painting will find that the products and expertise are now available at Brewers. Looking further, chairman Mark Brewer says, “By retaining our status as an independent family business, we have been able to grow at our own natural pace. This has enabled us to build teams of knowledgeable and helpful people at each branch and to ensure that new outlets are always launched with competent staff ready to give our customers all the decorating help and advice they need.” For more information please visit www.brewers.co.uk

At Tim’s Dairy they’re proud of their 70 years heritage in making yogurt, and in this video they share the journey so far. From their Dairy in the Chiltern Hills they make yogurt in batches using fresh pasteurised British milk, natural ingredients and bio-live cultures. Their family has a traditional Greek heritage and they’ve been making fresh live yogurt since 1949. Tim’s Dairy is a family business located in Chalfont St Peter, Buckinghamshire, and is run by brothers, Chris, Peter, Bides and Tony Timotheou. At the dairy they are passionate about making yogurt, crème fraîche and soured cream for a wide variety of market sectors including retail, wholesale, foodservice, private label and supplying fresh ingredients to food manufacturers.

A family business that has made it to the 3rd generation has already beat the odds. Approximately only 12% of family businesses will ever make it to this point. Making it to the 4th generation proves to be even harder with only 4% ever getting there . There are some key inter-generational conflicts that make transitioning the business to the next generation and working with another generation family member even harder. We all know working with any family member can be a challenge, but working with one that has very different goals and expectations stemming from a generational gap can be difficult to manage and understand. Danielle Walsh explains some of these inter-generational conflicts that include: Differing work ethics: The founding and 2nd generation often worked very long hours. The founding generation is likely to have spent more time working in the business then at home, the same can often be said about the 2nd generation. The 3rd generation tends to value work-life balance and looks to automate or find efficiencies to ensure they can find time for family. This is also very different from the 1st generation since back then there was often a stay-at-home parent. Now days, it is the norm to find two working parents, which means both parents need to have some flexibility with work. This differing work ethic can sometimes lead to conflict between the generations due to a lack of understanding and a significant change that can be hard for the older generations to deal with. Communication: The founding generation and 2nd generation of many family businesses are famous for being poor communicators. I have often heard “No, I haven’t told anyone else – they should just know.” The 3rd generation tends to be much more transparent and willing to take the time to communicate with family members. Keep in mind, however, that the way the 3rd generation communicates often frustrates the 1st and 2nd generation. Emails and text messages instead of phone calls or face-to-face. This change has had a major impact on how families communicate and for the older generations it can be difficult to adapt. This sometimes leads to communication significantly slowing down or even stopping between the generations, which can leads to serious issues for the business. Being aware of the method that an individual prefers to use to communicate can certainly help bridge the communication gap. The 3rd generation needs to be aware that just because they sent an email about it, doesn’t necessarily mean it has been clearly communicated to all. Differing priorities: This ties in with the differing work ethic above. The 3rd generation tends to prioritise work-life balance and family. This can be very different from what the founding and second generation have done, which can lead to conflict. In my experience, the 2nd generation is often frustrated by what they perceive as a lack of commitment to the business by the 3rd generation. The 3rd generation is often frustrated by the demand on their time. Clear expectations need to be outlined so that all members of the family irrespective of the generation know what is expected of them and what they can expect from the business. Business priorities also tend to differ. The 3rd generation often prioritises innovation, change, and the use of technology which can be difficult for the 2nd generation to support. This is an issue that is becoming more and more common in family businesses and particularly in the jewellery industry. Therefore, we will further explore this issue below. Innovation & Change I don’t think we should be too surprised that the 3rd generation often find that they struggle to get their current owners (the 2nd generation ownership group) to endorse change and allow them to implement new and innovative strategies for their jewellery operations/stores. It just might happen to be due to one of the more common outcomes of inter-generational ownership. It is well known and documented that 1st generation family business owners are very entrepreneurial, which by definition means they are innovators, risk takers and typically passionate about both the industry they are in and their business. They tend to dedicate all of their time to building the business which in turn fuels their continued passion for it. But the next generation, the 2nd generation, often join the family business while gen 1 is still at the helm with their primary role in the family business being one of managing what is already there. They become managers and focus on improving effectiveness and efficiencies (refining) of what the founders built. They typically do not have the same degree of passion as the founders which is to be expected since it is not their baby that they brought to the world but rather that of the founders. As Gen 2 move along their career paths in the family business they tend to become risk averse and less open to change. They view their role as gate keepers to what the founders have built and continue to build. They tend to rely on Gen 1 to continue to innovate, implement change and take risks. These same managerial traits then get to permeate their thinking once they become owners. Note: Of course, the above does not apply to all Gen 2 individuals but it does apply to many so in that regard it is worth addressing. Then along comes Gen 3 who are a whole new breed of individuals with very different expectations with respect to life balance and very different expectations with respect to the use of technology (change) as well as a keen desire for innovation since it surrounds them every day. Gen 3 tend to be quite comfortable with change even rapid change and they tend to view business risk as a necessary frame of mind for success. Clearly these Gen 3 traits will be in conflict with those of the Gen 2’s described above. As such, Gen 3’s often feel like they are being stalled in their desire to innovate, implement change and take calculated risks to grow the business and take it down new paths. We can see this in the desire of many 3rd generation family members to shift from brick and mortar stores to online stores. This change is not a small one. The 2nd generation that has continued the family legacy and often maintained the business in a very similar way as the founding generation may not be comfortable or used to taking major risks such as this one. Without taking this major risk, the business may not survive long-term. A major shift in business strategies, like going from a store to online, is one that often occurs only once the 3rd generation has become owners and have control. However, this may be too late. Ideally, this change occurs with the support of both generations meaning a wealth of experience and a united front. One of the major risks for the family business (other than the inability to survive) is that they may lose those entrepreneurial Gen 3’s who do not have the patience to wait for approval to implement their strategies and who feel passionate enough to go out on their own and often in the same business. So what can a family business do mitigate this risk? 1. Gen 2 needs to recognise that Gen 3 are different and that they want operational improvements now (versus later), they want a work-life balance that meets their expectations, they want to innovate and be current with respect to what technology can do to help meet all of these objectives. 2. Gen 2 need to accept that the differences between them and Gen 3 is nobody’s fault but more so an outcome of inter-generational transfer of power and ownership. 3. Gen 2 and Gen 3 should implement a management succession plan that will allow Gen 3 to prove their skills, decision-making, and ability to work together over time. Without a clear plan, the competent Gen 3’s are likely to leave. By implementing a management succession plan over a specific timeframe the Gen 3’s have the opportunity to prove themselves to the older generation. When this happens, Gen 2’s often feel more comfortable relinquishing managerial control but also tend to embrace the new ideas and changes put forth by the 3rd generation. 4. Gen 2 needs to realise that Gen 3 may manage and lead in a very different way. Often Gen 3’s will have a management team made-up of some family and some non-family managers. It is no longer just one person that will fill all the roles (like mom or dad did). 5. Strategic planning is very rarely completed by family businesses. If there are competent and knowledgeable Gen 3’s in management it can be of benefit to let the next generation (in this case Gen 3) do the strategic planning and then have them present it to the owners (Gen 2). This helps bring together the next generation, allows the next generation to gain the trust and respect of non-family managers and provides new and different insights on how to move forward. This doesn’t mean than Gen 2 has no say it just means we allow the next generation to put together the first draft of the plan. Allowing the 3rd generation to participate in this type of decision-making plays a big part in keeping them motivated and retaining them in the long-term. There is no magic solution to dealing with inter-generational differences – just know that all family businesses face these issues at some point. Being aware of these issues and accepting them are steps in the right direction. Learning to work with them will lead to greater success for the business and will help safeguard family harmony. By implementing a comprehensive family business succession plan you will increase the likelihood of transitioning to the next generation successfully and it will certainly help manage the inter-generational differences by clarifying what is expected (what is expected work in the family business, manage the family business, and own the family business). About the Author - Danielle Walsh is the founder and President of Walsh Family Business Advisory Services, a consulting firm that specialises in assisting family owned and operated businesses navigate the rough waters of management and ownership succession. Danielle is a Chartered Professional Accountant (CPA), Chartered Accountant (CA) and a member of the Family Firm Institute (FFI), an international association of family business professionals providing in depth information on family businesses from around the world as well as ongoing education and training in the field of family business consulting. Danielle has obtained the FFI Certificate in Family Business Advising and the FFI Certificate in Family Wealth Advising.

Stewardship matters for successful and enduring family businesses. Stewardship is a defining hallmark of businesses that achieve success, significance and sustainability. In crux, stewardship encapsulates the essence of responsible and meaningful value creation in a sustainable way to benefit stakeholders, as well as the larger community that they are a part of. It underscores the importance of an ownership mindset, a long-term perspective and an inclusive approach. These stewardship elements undergird and reflect the business leaders’ motivation and commitment to nurture and grow what they are entrusted with, such that it can be handed over in a better shape to successors. Stewardship is particularly pertinent to family businesses, which form a key component of economic activity around the world. This is especially relevant in Asia, where family businesses remain the mainstay of business ownership, and families continue to be influential players in the business landscape, as owners as well as managers. Successful and sustainable family businesses create wealth and growth for the family across generations. In their stewardship journey, such great and lasting family businesses leave a rich legacy, contributing significantly to the multiplier effects such as knowledge creation, economic development and capacity building of human and social capital to benefit society in the long run. Family businesses are very diverse in nature – ranging from small, medium local enterprises to huge conglomerates that operate across industries and countries. For our purpose here, we broadly define family businesses to include companies with the presence of family members as shareholders as well as board members and managers who are able to influence strategic decisions. We use the term family businesses to include family companies, family firms and organisations. Notwithstanding their diversity in scale and nature, family businesses in general face some common challenges: Responding and adapting to the vortex of disruptive changes stemming from the global and local fronts, while still maintaining the sense of purpose that propelled them to success Maintaining coherence and harmony as ownership becomes more fragmented over time Attracting, retaining and “professionalising” talents that constitute the human capital essential for family businesses to maintain their competitive edge Transitioning successfully during periods of leadership renewal, especially for firms where the influence of the founder-leaders dominate Guarding against the pitfalls of hubris and complacency on one hand, and a reluctance to adapt due to inertia to changes on the other Upholding high standards of resource management and corporate governance Faced with such challenges and an increasingly demanding business environment, stewardship has become all the more relevant and important. Well-stewarded family firms emerge over time as engaged, forward-looking and adaptable enterprises. They are able to leverage their inherent strengths and competitive advantages. Guided by their values, such family businesses remain resilient in the face of changing times and disruptions, overcoming adversity and outperforming their competitors. Stewardship is, however, always a journey. Every generation of family business faces unique circumstances, challenges and opportunities. A family business with a successful stewardship experience in one generation does not guarantee its continual success into the next. Hence, for family firms striving towards success, significance and sustainability, a resolve to continually imbibe, propagate and reinforce stewardship concepts and actions is vital, and remains relevant and timely. Download and read the full report below:

“What do you mean we can’t pay dividends this year?” Elisa was incredulous. The board of the watch company she and her husband Mark had founded had just reviewed projected end-of-year performance. Usually this meeting was a celebration of another incremental step forward, with moderate growth, no debt, and significant dividends, which Elisa and Mark used to support their comfortable lifestyle and charitable donations. This year, however, revenue growth was way up, but profits were down, and the covenants on the debt taken out by the company to achieve that growth did not allow for any dividends. It was the first time that Elisa had felt out of control of the company she had co-founded. (Throughout this article, names and identifying details have been changed to protect confidentiality.) How could the founders and sole owners of a company find themselves surprised by its inability to pay them annual dividends? Elisa and Mark had done many things right in building their business, including eventually appointing an independent board and an outside CEO to help the company reach the next level. But they made one crucial mistake. They failed to clearly and concretely articulate their “owner strategy,” meaning the tangible outcomes that they wanted to achieve – and avoid – as owners. For widely-held public companies, the owner strategy is simple. They are owned primarily by institutions (like index funds) or investors who have no personal tie to the business. These owners expect the company to maximise the growth in value of their shares, usually measured by hitting quarterly earnings targets. Indeed, most of what is taught in business schools and described in management literature is based on the assumption that companies exist to maximise shareholder value. But “that assumption ignores an equally obvious truth,” Bo Burlingham points out in Small Giants: “What’s in the interest of the shareholders depends on who the shareholders are.” For the vast majority of businesses in the world, controlling ownership is in the hands of people with a tie to the company, rather than outside investors. That includes companies owned by founders, families, foundations, partnerships, and employees. Family businesses alone account for approximately 70% of companies in the US, 79% in Germany, 85% in France, and over 90% in Asia, India, Latin America, and the Middle East. When these businesses are privately held, they provide owners the most freedom to define how they will measure success. They can choose to pursue certain outcomes and avoid others, even if they do not maximise the economic value of their business. We have found that very few of these owners would describe their sole objective as maximising shareholder value–and for many, it is not their primary objective. Yet, they are often not clear about what they do want, which can create missed opportunities for growth, a loss of talent due to frustration over the direction of the business, or a loss of control by the owners as management fills the void in with their own priorities. A clear owner strategy is critical to keeping a business on course. Passion project or growth machine? In the case of Elisa and Mark’s watch business, their mistake was in not articulating their owner strategy to themselves and then sharing it with the rest of the company. They had started their watch business several decades ago as a passion project. Elisa had been trained as an engineer and was fascinated by how to improve the functionality of the product. Mark helped come up with sleek, new designs and had eventually left his job to help her launch the company. Together, they created one of the industry’s most distinctive brands, with revenue approaching a billion dollars. But growing the business had never been a priority for them. As long as it maintained the culture of innovation and allowed them to enjoy the fruits of their labours, Elisa and Mark were happy. As the company grew to a size that exceeded their ability to manage it, they decided to hire an outside CEO with a strong track record in their industry to take over day-to-day operations. The CEO saw an opportunity to aggressively grow the business, and invested heavily in international expansion and the IT systems required to support it. He also came up with less expensive, and lower quality, versions of the core products in order to broaden the company’s appeal. Although there were promising signs from these investments, the lack of profit growth–and the missed dividend– led the founders to realise that the CEO’s vision was out of sync with their own priorities. So the founders opted to fire the outsider CEO and elevate an insider to the role instead. While the new CEO lacked the outsider’s credentials, they knew that he would ensure a return to a prioritisation of culture and creativity over hockey-stick growth. They created a clear owner strategy to guide all of the company’s major decisions – and achieve their own definition of success. To avoid a repeat experience, they spelled out their owner strategy to the company and worked with the board to align the new CEO’s compensation incentives with it. Define your owner strategy An owner strategy generates alignment among owners, board members, executives, and employees, which, in turn, improves both performance and satisfaction. Think of it this way: if owners are clear about how they want to keep score, board members and management teams will know how to win. That clarity also allows companies to define success on their own terms, rather than someone else’s. And isn’t that the point of owning a business, or working for one? Defining an owner strategy requires asking two basic questions: 1 - What are your goals: growth, liquidity, or control? There are three broad goals that owners can seek. They can aim for growth, meaning to maximise the financial value of the business. They may pursue growth to build long-term wealth, broaden their impact on society, or for the psychic rewards that accompany getting bigger. They can also seek liquidity, which is to generate cash flow for the owners to use outside of the business. Liquidity can be useful to pay for lifestyles, fund philanthropic efforts, or allow owners to have more independence by diversifying their assets. Lastly, they can want control by keeping decision-making authority within the ownership group. Some owners want control over their own destiny and don’t want to give up their autonomy to anyone else. Others value control as a way to run the business in a way that preserves what they value, such as a distinctive corporate culture, or having a company that lasts for generations. Most successful businesses face a trade-off between the pace of growth, how much liquidity the owners take out of the company, and how much control the business retains over its decisions. A company could pursue only one of these goals, or some mix of the three. But for most companies this is a “pick two problem,” meaning they can focus on two at the expense of the third. Growth-control (GC) companies are focused on getting bigger while maintaining control over decisions. They grow primarily through their retained earnings, paying low (or no) dividends to the owners. They also have low (or no) external equity or debt, since answering either to outside investors or borrowers requires surrendering a level of autonomy. When outside equity is taken on, it is often done on a limited basis or through dual-class shares that ensure the core owners maintain control (as in Google/Alphabet and Facebook). The avoidance of debt is often a surprise to those used to looking at widely-held public companies or private equity firms, who seek to maximise returns through leverage. For private companies, debt can be useful, but is usually recognised to come at the cost of control. Closely-held public companies will often take a similar view. In its Owner’s Manual, Warren Buffett says that Berkshire Hathaway will “use debt sparingly,” and will “reject interesting opportunities rather than over-leverage our balance sheet.” Growth-liquidity (GL) companies are also growing rapidly, but are paying out money to the owners and using other people’s money (equity and/or debt) to keep the engine going, giving up some control as a result. When companies go public, they are adopting this strategy. Private companies can use it too. We worked with one business that had a lot of growth potential, but the owners were concerned about the long-term threat for disruption in their industry. So they sold a stake in their business to a strategic investor and used part of the proceeds to diversify into other areas. Liquidity-control (LC) companies are not concerned with how rapidly they grow, but instead want to produce significant liquidity for the owners while allowing them to maintain control over decision-making. Elisa and Mark fit this profile as owners of their watch business. These are broad types, and companies can find a space in between. But, as they move from one part of the triangle to another, they are making trade-offs among the three main goals. Each of these core types brings its own advantages and risks to be managed. And we know of highly successful companies that follow each path. The key is for the owners of a company to be aligned on what goals they want to pursue, recognising that there are trade-offs among them. It is also important to revisit these trade-offs as things change, either external factors like the economy and industry consolidation, or internal factors like a shift in ownership or senior management. What worked brilliantly in one environment can be a disaster in another. We have found that aligning on the priorities of the company is extremely helpful. But to make it real, these broad goals have to be translated into specific ways of measuring performance. And that leads to the second question: 2 - What are your ‘guardrails’ for the business? Guardrails are boundary conditions that the owners want to put on the company’s actions based on their goals. They define what is in and out of bounds. Guardrails can be financial or non-financial. On the financial side, they should align with the mix of growth, liquidity, and control that the owners want to prioritise: Growth in value metrics (e.g., return on invested capital or total shareholder return) show owners how financial performance compares to peer companies and/or to other investment opportunities Liquidity generation metrics (e.g., dividend payout ratio) inform owners if the enterprise is producing the expected amount of cash to meet the owners objectives outside of the business Resilience of control metrics (e.g., debt-to- EBITDA) help owners understand and manage significant risks to the enterprise that could threaten their control of it. In our experience, owners should hone in on a small number of financial metrics (usually four to six) that can define whether or not the company is successful based on what matters to them. Doing so balances providing clear guidance to the company’s leadership with leaving them ample opportunity to figure out the best business strategy. Many owners are willing to sacrifice some level of financial performance to achieve other objectives. Oftentimes these objectives are not stated explicitly, but it is essential to define their non-financial guardrails. In our experience, they typically fall into four main categories: Is it important for the company to be led by its owners, even if they are not objectively the most qualified? We worked with one family business that believed strongly that only a family member should run the company, even if it meant that it would grow less quickly. Sectors/geographies. Are there particular areas that the owners wish to avoid investing in, or that they want to preserve, even though they are unprofitable? Some companies will hold onto an under-performing asset because it has non-financial value to the owners, as a source of historical pride or importance to the community. Are there any decisions that will be made or avoided to preserve relationships among the owners? Some companies will keep a division or office open despite its poor financial performance because it is led by an owner and closing it will have a negative impact on the broader harmony of the group. Business practices. To what extent are the owners willing to reduce financial performance in order to align business practices with their values (social, religious, environmental etc.)? We know one company that decided they would not supply the cigarette industry because it did not align with the owners’ values, even though it would have highly lucrative. Others pay higher than market wages or commit themselves to environmental sustainability standards that exceed industry expectations. There are no right or wrong answers in defining guardrails. The key is to create alignment among the owners on specific metrics and targets that measure success and inform major decisions. Create your owner strategy statement In order to codify their alignment, the owners of a company should draft an Owner Strategy Statement, which not only articulates their goals and guardrails, but the rationale behind them. The statement should be as specific as possible. The acid test is: does it help the company make decisions that require trade-offs? For example, one business we know set a 15% return on invested capital (ROIC) target for its retained earnings. During the time that the market was expanding, they reinvested almost all of the profits back into the business. As the market matured, they began to reduce investment and increase distributions to shareholders. A good Owner Strategy Statement should be the basis of a dialogue between the owners and board/management, as there are times when an owner strategy may require adjustment to fit with business realities. It also should be a living document, revisited whenever there are meaningful changes to the internal or external environment. Lastly, it should be translated into a dashboard that identifies the metrics and targets the owners can use to measure success, which they should review on a regular basis. Owning a company creates an opportunity to, within reason, choose your ownership adventure. Elisa and Mark figured this out while there was still time to make a change. Clearly defining success puts you in the position to create a company that accomplishes what matters most to you. About the Author - Dr. Josh Baron is a co-founder and Partner at BanyanGlobal. For the last decade, he has worked closely with families who own assets together, such as operating companies, family foundations, and family offices. He helps these families to define their purpose as owners and to establish the structures, strategies, and skills they need to accomplish their goals. Josh is also an Adjunct Professor at Columbia Business School, where he teaches an MBA course called Managing Conflict in Family Business and teaches in the Enterprising Families Executive Education Program. This article was first published on Harvard Business Review and is reproduced with permission of the author. Find out more about BanyanGlobal here

In 1997, Gael and Francesco Boglione moved their young family from central London to Richmond. Their new home, Petersham House, overlooked a local plant nursery, which had been carved out of the grounds of their Queen Anne home in the 1970’s. Francesco recalls initially not knowing what to do with the place. Inspired by his youthful travels to India, when as a self-confessed hippy, he bought and sold unusual furniture, paintings, sculptures and decorations as a means of funding his expeditions. He recalls a vision materialising. Bringing a gentle approach and an ability for drawing out beauty in the simplest of things, Gael’s natural style, elegance and attention to detail was at the heart of the transformation, evolving over the years into the strong ethos maintained today. In 2004, after extensive restoration works, the nursery re-opened, completely transformed. Furniture, gifts and antiques were found amongst the plants which adorned the greenhouses, and in the most elegant wooden teahouse, whole leaf teas and homemade cakes were offered. The nurseries became an instinctive mix of Gael’s love and enthusiasm for nature and the earth, mixed with Francesco’s desire to deliver products and services in a peaceful and beautiful setting on the river. Over the years, Gael and Francesco have steadily nurtured the space, drawing upon their travel experiences and incorporating their Italian and Australian cultures within this English garden setting. They have created a lifestyle destination, reflective of their values, love of food and personal collections within their home. The family is dedicated to positive living; where ethics meet aesthetics, philosophies which are interwoven in every aspect of the business. This is demonstrated from the way they look after their employees, to what is sold and served. In recent years, Gael and Francesco have encouraged their children, Petersham’s next generation, to step forward, forging a future for the nurseries and Petersham offshoots.

In this article, Morten Bennedsen of INSEAD takes a look at family business longevity, some of the challenges and the need for owners to step back. Too much centralised control puts a family business at risk when the owner-manager dies. Professionalising a family firm is a necessary yet difficult progression. The owner-manager starts with a solo performance but the firm builds into a symphony orchestra in which the family continues to have a say in the running of the firm. Family-run businesses need to shift their deeply engrained organisational culture from a single-family member leader to a professional manager leading the firm. It can be a difficult process to get right because of the larger emotional issues at stake. For professional managers who have little or no experience with family firms, most will have never confronted this kind of transformation before since it is unique to family firms. In general, both owner-managers and professionals often underestimate the length of time and the scope the process can take. One study has shown that large publicly-traded family firms in Hong Kong, Singapore and Taiwan have lost half their market value in the five years following the retirement of a family owner-manager. Most of these firms had been too dependent on the family leaders. Hence, embarking on the professionalisation process is crucial for the survival and prosperity of the family firm. In guiding the firm through this process, owner-managers will create added value while reducing key personal risks, such as sudden health problems or accidental loss of life. Take the example of Lee Kun-hee, the second-generation leader of Samsung who realised in the 1990s that the firm needed to move beyond its closed-door culture and begin hiring talent from outside the traditional pool, and at considerably higher market wages. A sea change in culture was necessary for the firm to move from a mass producer of cheap goods to a maker of high-quality innovative products. To make his point loud and clear, Lee issued a command to his staff: “change everything except your wife and children”. From that point on, Samsung has developed a professional cadre of talented leaders across all its approximately 60 business units, whilst the Lee family still manage and control the company. An example of a company that was dragged into professional management is the Evergreen Group, which in 2017 had 27,000 employees and 30 major affiliates worldwide, of which four were listed on the Taiwan Stock Exchange. When its legendary founder Chang Yung-fa died in January 2016, he went to his grave with the mistaken belief that his youngest son by his second wife would take over as Chairman. However, his three sons by his first wife put a stop to that. The leadership role was handed over to management professionals by the collective action of the three sons who together owned a majority stake in the company. Next-Gen Input The good news is that next-generation family members are more likely to embrace professional management if they are included at the very beginning of the transformative process. Their opinions count. Professionalisation of the family firm is also a key way to attract new minority investors including foreign ones. Investors want to hear that family-owned firms can continue to create value even without founders and their families. This is particularly true if the business could be sold to investors or taken public. Many owner-managers start the process of professionalisation to allow a formalisation of company strategy. In larger family firms with few formal procedures or defined structures, owner-managers often end up addressing the day-to-day issues and don’t have time to consider the big picture. In so doing, they are forced to postpone making decisions that affect the future of the firm, including adopting new business strategies, starting new investment projects, making long-term plans, restructuring capital assets, conquering new markets and relocating production to other regions. The typical elements of a professionalisation process are the following: Establish a formalised dialogue between generations. Restructure leadership with a two-pronged approach: For the owner-manager: Take less of an operational role and more of a strategic role. For family members: Find the right roles and jobs for current members and next gens. Hire and empower non-family managers to make decisions and take responsibility without interference from founders and family members. Clarify the role, structure and composition of the board. Once on the road towards professionalisation, owner-managers can better communicate the vision, strategies and goals of the firm while retaining the spirit of the founder. By holding fast to family values and traditions, owner-managers can take off the operational executive ‘hat’ to speak authentically as engaged visionaries. They can then improve their chances of overcoming the challenges facing their firms and improve the likelihood of attracting external investment or even the transfer of the business altogether. In this way, stakeholders will better understand the direction in which the founder is trying to steer the company. If a radical shift in the corporate organisation is on the table – such as an IPO or company sale – founders will be in a better position to communicate the news and adapt the firm to the new paradigm successfully. From Solo To Orchestra In conclusion, the professionalisation of a family firm can be compared to a concert by a symphony orchestra. At first, the star violinist gives a thrilling rendition of versatility. The performance is then handed over to the orchestral musicians who entertain the audience throughout the duration of the concert. It’s similar for a family business, where solo performances by the professional managers are contained with the larger symphony orchestra – family members are still pulling some of the strings.

Stephen Bampfylde shares his insights and observations specifically focused on the role of the Board and its evolution in the time of crisis. Are there themes or trends, particularly emphasised in this time of crisis, which are emerging across board work requiring greater focus, insight or development from you and your team? I think we have seen a number of particular changes since the beginning of this crisis. The most apparent of those, be it temporary or possibly more permanent, is the change in relationship and distance (beyond physical) between the board and the executives. For example, if you are on a board and your organisation is in crisis you need much more frequent oversight: waiting a month for the regular board update is simply far too long. We are seeing that in most organisations, planning horizons and board calls have been pulled in dramatically: daily for some and certainly bi-weekly for others. Those organisations who thought they had a great plan at the beginning are in many cases finding that they are tearing that up and having to go much harder in terms of their planning and delivery strategies. Even those who were more cautious and took the approach of presuming the worst, planning scenarios for how bad it really could get before they would have to take serious action, are still having to review and recast their approaches regularly. It is absolutely vital that board members are reassured about the approach of the business and have a clear view of the risk it is under. They need to maintain focus on organisational strategy and its operational implementation, however, the strategy itself has become one of day-to-day, week-to-week or month-to-month survival as opposed to looking longer-term. For many boards, it is here that operational and strategic implementation meet most acutely. Overall, there is a huge sense from the board of needing to know numbers more than ever. For example, I am a trustee of a theatre and while it is closed you might think there is little to talk about, but I am speaking with the Director more now than I was when the theatre was fully functional. While these are extraordinarily challenging times and the support from the board is vital, there is also a danger of cutting across the freedom of operational responsibility which executives should have to run the business. As we move forward in this current climate, it is important to assure executives that this modus operandi is temporary and not forever, but how temporary we cannot say right now. The pressures facing senior leaders have been increasingly challenging, but those are amplified by about 300 per cent currently! They are trying to keep a balance of operational control with the moral underpinning and cultural values of their respective organisations. For those senior leaders the support of the board is essential to share that pressure. How board members, and the Chair in particular, can support the senior leader and other executives without getting in the way is what I am seeing boards wrestling with most significantly at the moment. Can you expand on how you view the role of a board during a crisis? I can see it becoming a much closer, constructive, critical friend role. It doesn’t help the executives to have a nervous bunch of non-executives who need more time and reassurance than ever before. They want and need constructive ideas and suggestions from the non-executives. This additional element to their role is generating a real hunger and interest amongst non-executives to know what their peers are doing and thinking to bring shared experience back to their organisations, where relevant. There is a much-heightened desire for engagement than I believe we have seen before. The critical element becomes very important when executives are under the enormous levels of stress that they currently are. We all know that under stress people can occasionally miss things, so an increased element of oversight is crucial. However, alongside the critical oversight, the friend piece is very important: at this point the isolation of the individual leader is reinforced hugely and the Chair needs to be someone to whom they can go and express their vulnerabilities and their concerns. We know from our experience with psychological profiling, and particularly the Hogan suite of tests that we use, that when under stress and certainly extreme stress, people can revert naturally to type unless they either consciously recognise it or somebody else helps them recognise it. Where we have been able to do psychological work with the executive team, it is helpful for the Chair to know how best to support the executive, and what works best for them. Some chief executives are best supported by a daily call, some are best supported by nothing but a weekly call and an occasional email to check in. In terms of the functioning and facilitating of a board, we are seeing almost every type of meeting happening virtually, even within Parliament and the Cabinet. In the aftermath of the lockdown, it will be a real question of how organisations will operate under a ‘new normal’. For boards this will be particularly acute, I believe. Typically there is a bias towards wisdom when appointing non-executive directors, an attribute generally recognised as something developed with age and prior board experience, the majority of people on non-executive boards tend to be in the upper age limit. As such, sheltering and social distancing measures will likely remain in place longest for these individuals therefore this group will be amongst the last to return to working in a ‘normal’ way. There will also be limitations on many for travel, both domestically and internationally which will further restrict physical attendance at meetings. It would seem to me that boards are going to have to meet virtually for some time, whether that be in whole or in part. One of the challenges this presents, and I don’t think we yet have full answers on this, is whether a move to virtual functioning is easier for a board that is already formed than it would be to create a new board or introduce new members. For many organisations there is a tradition of the non-executive collection having a board dinner together before a formal board meeting. How do you replicate that in some way? We hear of virtual drinks and of virtual dinners, but it isn’t quite the same. This is going to be an area that we will need to explore much further and work harder at. Are boards coming under more scrutiny in this current crisis? I think Chairs and Chief Executives up and down the country are very clear about which of their colleagues have stepped up and which have not. We are seeing more Chairs wanting to think about future succession to the board. Some will action it now while others will not feel they have the capacity to deal with succession planning until the immediate challenge of the crisis is over. There is also a shift we are noticing in terms of appointing non-executives at this time. There are Chairs and boards still willing to go forward with non-executive recruitment without being able to physically meet the individuals, but they want more assurances. To that end, we have developed a psychological profiling piece specifically aimed at non-executives. Previously this was not considered of huge importance, but as appointments to the board are now potentially going to be made through only virtual meetings it is incredibly helpful to know more about candidates. Particularly this piece can look at how people respond under stress which is hugely important at the moment. One area to consider is scrutiny of the viability of an organisation by both the board and future board prospects. This pandemic has emphasised the potential financial fragility of some organisations and to be on a board presents risks in a way it may never have done before. I do believe that there will be a substantial level of due diligence needed from existing and potential new non-executives in the future. Has remuneration been affected for non-executives during this time? There are circumstances where pay for non-executives is being reduced or cut, in the short term at least. For example, in family business or employee-owned business, where non-executives are prepared to assume an impact more closely aligned with that of the executive. In public companies we aren’t seeing board pay being cut yet. How are you working with clients to establish more diverse boards? As we have always done, we continue our work to better understand the diverse communities and the individuals within it. By and large, if you are a diverse candidate you don’t want to be labelled as such; you want to be treated as a candidate in your own right. We have outreach programmes and undertake research into the most talented individuals across a broad range of communities for example, we have just been shortlisted in the RIDI awards for the work we are doing with the UK Civil Service to establish a mentoring scheme to help support high-performing civil servants who have visible or non-visible disabilities. We then work to establish how can we get to know them, how can we help them prepare for board work and how can we advise them. This means we can bring them forward for a wider range of roles – not just for those positions looking for diverse candidates. We expect to provide diverse shortlists but on the basis of equivalent quality. So even if we are not being asked for it, we are going to continue to do that work both because we think it is morally right but also because it is a fantastic source of advice and talent that is otherwise neglected. As we move forward is there a greater demand for cross-industry experience at board level, than might have been the case previously? I am not sure there will be as much demand for this as you might expect. I believe that the pandemic has emphasised the need to really understand how the water flows through the pipes in the organisation that you are involved in. If you come into the business and you don’t know it, there needs to be a seriously good induction programme very quickly for you to be able to contribute. Do you think boards are well enough equipped to support the integration digital agenda as we move forward? The two things we continue to be most asked for in non-executive directors and trustees are financial acumen and modern digital understanding. In terms of the digital piece, many boards go through the loop of thinking they want or need somebody younger and more digitally aware. However when they meet the 28 year old digital entrepreneur, for example, they realise that (obviously with some great exceptions) very often that person will not be able to contribute as a full trustee on more than one item on the agenda. Boards needs someone who can talk across several areas, have depth in digital but offer breadth as well – a t-shaped experience and perspective. In terms of your board work at Saxton Bampfylde how are you adapting to virtual working within your board-focused activity? We are managing it well I believe. Our board practice has grown throughout the pandemic. We have actually seen a very positive outcome in terms of getting to know our candidates across more diverse communities than in the past. Everyone is at home and happier to chat, there is a sense of more time and space. I do fear that should it go on much longer people may become bored of this sole way of working and interacting, but just now people are happy to have the time and space to talk about their careers and to talk about how they want to lead their lives and move forward. I would say this is giving people the time to reassess what they want to do with their lives going forward. Some are thinking that they will travel less locally and internationally, not just in the short term but permanently. They have seen evidence that things can work virtually and that may become a more common change for non-executive roles in the future. However, one of the things we are noticing is that we are seeing fewer serious board reviews at this time. Maybe it seems like a luxury that can be put off, or maybe it is part of a cycle, but I do also believe that there are many Chairs who are actually taking time to reflect and looking at their individual board members and considering if they are fulfilling their duties or if they need to be replaced in the future. Everyone reacts differently to stress and some people are reverting to type, whether they be executive or non-executive. However, at the moment, organisations need their boards more than ever, and this is something that will have longer term impacts as we move forward. Succession planning is going to be key and my anticipation is that there will be a significant uptick and in demand for board reviews as the pandemic finishes. How much influence does, or should, a board have in making sure an organisation is high performing both at this point in time and more generally? I think the board should have very significant influence in determining the performance level across a whole range of metrics that they expect the executives to deliver to. I do think, even in the current climate, that they should leave it up to the executives to, by and large, decide how to get to that place. The board must always define the vision of where an organisation wants to get to and what kind of organisation it should be. This should be done in close collaboration with the executive, as they are the ones who need to move forward and implement it. Boards with strong cultures and high performance are those that are responding well and doing better than others right now. It is very hard to retrospectively impose a collaborative culture amongst the board and non-executives if it hasn’t existed before. Is there a particular style of organisation you think others could stand to learn from in this time? I would say family businesses have been comparatively well-equipped to handle the pandemic. Everybody is struggling, but historically family business boards have had a slightly closer relationship with the executives so that a shortened distance between the two functions was already in play anyway. Family businesses tend to be more cash positive and less reliant on external debt. They also tend towards being more risk averse and more agile than other types of organisation. I also think that because family businesses particularly have a longer-term horizon, the concept of stewardship for a future generation is easy for them to understand as that is what they have all lived with. Focusing on having a business that is sustainable in the long-term whatever the situation currently being faced is a more natural tendency for this style of organisation than for many other business structures. About the Author - Stephen Bampfylde is co-founder and Chairman of Saxton Bampfylde. He began his career working for IBM and Whitehall, where he spent nearly 10 years before moving into top level executive search. For 27 years he has been involved in the recruitment of executives to senior positions across all sectors.

What matters most to high net worth families is giving their wealth a purpose. What does it mean to be wealthy in the 21st Century? Are successful families around the world driven by wealth generation, wealth preservation or the application of their wealth? Withers recently commissioned a research study to find some first-hand answers to these questions. Through quantitative analysis of the attitudes of 4,500 individuals with more than US$10 million in personal wealth and a further 16 in-depth interviews with multi-millionaires and billionaires around the world, we wanted to investigate the modern meaning of wealth. Equally importantly, in the course of the research we have sought to identify the valuable lessons that families have learnt from their own experience which they would wish to share with other families facing similar challenges. The research has spanned three continents – Asia, Europe and the Americas – because we wanted to find out if individuals and families from different cultures really do have a different perspective and experience of wealth and have different lessons to pass on. The results have provided a fascinating insight into the changing dynamics of family wealth between generations and between continents. What characterises wealth-owning families today is a growing recognition of the importance of purpose when it comes to the creation, control and distribution of wealth. Across all cultures and generations, the sense is that wealth matters because of what you can do with it. The research, drawing directly from interviews with high net worth international families, has revealed that generational succession in wealthy families around the world has led to a fundamental re-evaluation of the purposes of wealth and family businesses. In the words of one interviewee, as they assessed their wealth: “The most important things are how you make it and how you distribute it. If you can do that in a way that is socially acceptable and keeps your family happy, then you are winning.” Withers partner Sarah Cormack comments: “For many wealthy families, we found that simply having large amounts of money to invest is not enough to provide purpose and cohesion to the broader family group. Having come to realise this, wealthy families are responding by re-immersing themselves in active business operations or (and, in many cases, also) putting their wealth into effect to effect positive changes in their communities.” “Maintaining commonly-held reasons for working together as a family is a continual process. It is brought under intense pressure when a family sells out of active business ownership and moves to a financial/investment-based footing (or back again). When a new generation is called upon to take ownership of the family wealth, there is a similar potential for it to unravel, as the younger family members bring their own values and interests to bear. Clearly, anything that creates coherence and harmony is valuable, and these days it appears to be the social application of wealth,” says Cath Tillotson of Withers’ research partner, Scorpio Partnership. The research established five key lessons that wealthy families have learned through coping with succession and working to preserve their assets and family unity, as illustrated through the points and quotes below: Transitions Are Complicated Whether selling a business, setting up a foundation or passing control of wealth to the next generation, families should ask themselves ‘why are we doing this?’ at each transitional stage to find the common objectives that keep them and the family wealth intact. “In Asia we have three generations living side by side… the hard business stuff has become the easy stuff, and the soft family stuff has become the hard stuff.” Take Your Time As a collection of individuals, and not an organisation, family businesses require a unique leadership style which should involve listening, learning, observing, sharing and understanding. “Family members often think they are unique, with the right skills, so you have to be willing to let go. Sometimes you have to be willing to lead from behind and recognise just because you can do the job, doesn’t mean to have to.” Leading With Principle Wealth ownership means that attention is trained on you. Family business heads should lead by example and the wider community will view wealth ownership with greater respect when it is used as a force for positive social change. “Values cannot be taught. You have to inculcate them through your own actions.” Recognise Your Limits Within a family business there are many roles to play; no single person can play them all well. Once skills, strengths and motivations are accurately assessed (including one’s own), other family members and professional advisers can be effectively appointed to fill the gaps. “As a leader you have to be open-minded and accept that other people are sometimes smarter and better than you… A business family has to be multi-disciplined and that means accepting outside help sometimes.” Giving The Next Generation Just Enough Each generation should be able to think of themselves as the first generation. This means that those in the next generation are given everything they need to be successful and no more. For those in older generations, this also means recognising when to step aside. “It is better to let children find their own way… If they want to come into my family business, they can, but they will have to earn their place, just like everyone else.” Withers worked with leading wealth research agency Scorpio Partnership, basing the research on 16 in-depth interviews with multi-millionaires and billionaires from Asia, Europe and the US . The opinions and experiences described by these individuals were cross-referenced against the attitudes of 4,500 individuals with more than US$10 million in personal wealth, who answered digital surveys on a wide range of subjects over the past two years.

Almost every family business that we have spoken to in recent weeks is being disrupted by the COVID-19 pandemic. Josh Baron and Ben Francois explain some of the preliminary results of a survey they launched that indicate that nearly 90% have seen some negative impact on their business. Some are fighting to stay alive or deal with a major decline in revenue. Others are dealing with greater demand and stressed supply chains. Most are feeling isolated as they make decisions that will shape their future. There are many great resources for businesses already available to manage the impact of the coronavirus. But family businesses differ from other companies in that their form of ownership gives them the ability to take critical actions that could help them through these difficult times. Family owners, who may or may not have executive roles in the company, have power that is often hidden or unappreciated. They have the right to change almost every aspect of how the company works: what it owns, how decisions are made, how success is measured, what information is shared, and how leadership is passed from one generation to the next. Through exercising their rights, family owners have the ability to position the company for long-term success or doom it to failure. Under normal circumstances these are powerful rights, which owners need to exercise thoughtfully. But in a business crisis, the power of owners is magnified. Unlike public companies, which typically focus on maximising shareholder value, family owners value objectives that usually go well beyond financial returns (e.g., family legacy, reputation). This crisis is forcing family businesses to make trade-offs among objectives that would have previously been unimaginable—all while dealing with the complex dynamics of a family. The stress, anxiety, and fear that come out in a crisis can amplify already challenging dynamics, paralysing decision making throughout the enterprise or causing conflict to spiral out of control. On the other hand, the crisis can be a call to action, causing family owners to ‘rally around the flag,’ put aside their differences, and take actions that allow the business to survive. Our survey shows a split between those reactions: 29% have seen some negative impact on family relationships, while 24% have seen a positive impact (the rest have seen no change). The ultimate impact of the crisis on your family business will be substantially shaped by how you, as owners, respond. Through the choices you make, or fail to make, the owners of a family business will affect how the crisis is managed by company leaders and what kind of company, if any, emerges on the other side. We will highlight five specific actions that owners need to take in order to ensure that company leaders – especially executives and boards – have the proper guidance and tools to respond to the crisis: 1. Define what type of family business you want to preserve. Which assets in the family enterprise must be maintained and where is there flexibility to sell or starve some parts to save the whole? Under what circumstances would you consider opening up ownership to employees, in-laws, or outside investors to bring in new forms of capital? Should you consider changing your model of family business ownership? At the heart of your family business are choices you have made about what you own together, who can be an owner, and how owners exercise control. Together they determine what it means to have a family business. You need to clarify whether any of these choices can be revisited or whether company leaders need to work within those constraints. 2. Review your governance structures and processes. Do you have the forums you need across the ‘four rooms’ of family, owner, board, and management? If you’re missing an important party during the crisis, how will you fill the gap? How will you make the major decisions you will be face? Are there certain decisions that the owners should be more or less involved in? Are you clear about who has authority to make key decisions? Do you need to revisit any policies you have set (e.g., dividend, family employment)? Or do you need to set new policies to deal with these unique circumstances? Managing through a crisis requires the ability to make major decisions faster than ever. Actions that might have seemed drastic several months ago can quickly become insufficient to meet the challenges faced by the company. Embedded in your family business is a way of working that may need to change. It’s up to you as the owners to ‘decide how you will decide’ during trying times. 3. Revisit your ‘owner strategy’ for the company. What values will inform your actions during the crisis? How will you make trade-offs among your stakeholders? For example, how do you prioritise the needs of employees (wages, benefits), customers (staying open, extending credit), and suppliers (paying bills)? Are there certain objectives for which you are willing to lose money (e.g., retaining employees, supporting the community)? Two-thirds of survey respondents say they have reduced or shifted operating expenses to preserve cash. Are you open to changing the company’s capital structure? Will you raise your borrowing limits if the company needs additional debt? Are you willing to recapitalise the company? Over 40% of the survey respondents are raising cash through new debt or equity. Will you reduce dividends? Around a third of survey respondents have cut them, or plan to. Owners have the right, and responsibility, to define what success means for the business. That involves making trade-offs among different objectives, financial and non-financial. Company leaders need to know what matters most to you so they can do their best to achieve it. 4. Use communication to sustain trusted relationships. How will you stay connected with each other, as well as the rest of the family? How will you remain informed about what’s happening at the company, as well as share your questions and concerns? What should be shared with employees about the state of the business and your commitment to it? How will you manage communication with the public and press, especially if tough decisions need to be made? One of the most valuable assets of a family business is the trusted relationships that are built over time with family members, employees, customers, suppliers, and the community. Trust requires transparency. Especially in a private company, the owners of a business control the spigot for how much information can be provided to stakeholders. Help company leaders determine what can be shared with each of your main constituencies. 5. Consider the implications for the transition to the next generation. Do current family leaders need to remain longer than planned to steward the family business? Or do they need to make way for fresh ideas and untapped energy? Should you accelerate current estate plans due to lower valuations? Or should you put them on hold because of the cost or distraction? How can you use this opportunity to teach future generations about your core values and principles? Family businesses that want to last for generations keep one eye on the present and the other on the future. In general, a crisis is a time to narrow the gaze. But it might also be the window in which to make changes that have been a long time coming. Company leaders will be looking to the owners to see to what extent transition plans need to be put in motion or on the shelf. There are no right or wrong ways to answer these questions. What’s important is that the owners, collectively, review each of these five areas and address the most important actions to take in each one to help the company leaders navigate the current crisis and prepare for the long term. Alignment is vital – companies with a unified ownership group can act decisively, while a house divided will not stand. We suggest you start by organising yourselves as owners to get the work done and stay aligned. How often will you meet? In what venue (in-person, conference call, video)? Who is in charge of setting the agenda and facilitating the meeting? Who else should be in the ‘room’ when you meet (e.g., company CEO or CFO, board chair, family office director)? In a crisis, the facts on the ground change rapidly. Owners need to find the right cadence that allows them to stay on top of the situation without overburdening the management team. On that note, 42% of respondents in our survey said they are more involved in decisions than they were before (less than 5% said they are less involved). Owners need to help business leaders by finding the most constructive level of involvement, which will likely be a balance of stepping in (‘all hands on deck’) and backing off (‘give us space to work’). Look for the places you should step up or back off. As you do your work, acknowledge the emotions and help each other through the ups and downs. Focus on your common purpose in getting the company through the other side intact. Staying together during the current crisis is essential to sustaining what you have already built. Families businesses possess financial and non-financial characteristics that allow them to out-compete other kinds of companies in normal and crisis environments. They are great employers, positive contributors to their communities, financially disciplined, and have committed owners. Productively harnessing the power of family ownership will help these vital companies to weather the current storm. About the Author - Josh Baron is a partner and co-founder of BanyanGlobal Family Business Advisers, and an adjunct professor at Columbia Business School. He is the co-author of the forthcoming Harvard Business Review Family Business Handbook (HBR Press, January 2021). Ben Francois is a Principal at BanyanGlobal Family Business Advisers, specialising in family business ownership strategy. This article first appeared on Harvard Business Review and has been reproduced with permission of the authors. Find out more by visiting the BanyanGlobal website here