Dr. Joseph H. Astrachan, Executive Director of the Cox Family Enterprise Center at Kennesaw State University, speaks on on the topic of Building a Family Business That Lasts and provides viewers with four key points to walk away with. Video published courtesy of Business Families Foundation.

Latest research from KPMG in Singapore identifies the challenges facing family firms. This landmark study of family businesses in Singapore by KPMG reveals several interesting findings about how they see themselves. While some findings contain new insight, there are some which are less surprising. Preparing and training a successor was the most important challenge for family businesses. Other ‘top of mind’ concerns for family businesses in Singapore included choosing the right successor, resolving potential conflicts among family members and maintaining family control of the business. We have observed that many family businesses did not have a clear succession strategy. They should therefore start planning and grooming their successors early. However, 9-in-10 participants of the survey indicated that dealing with the issues of running the business was more critical than family disagreements. When asked about the major causes of conflict within family businesses, nearly a fifth cited the competence of family members working in the business. Nearly a third indicated they had no formal processes to resolve conflicts. While they face many challenges, family businesses are also able to count on strengths such as the ability to win business or customer loyalty, opportunities for competitive pricing or strong brand presence. A significant 9-in-10 considered governance structures to be an important element of the family business. Surprisingly, close to half of those surveyed said their current structure was optimal, with another 29 percent indicating that some minor tweaks might be required. In our experience, many non-listed family businesses are in need of change in this area. Download and read the full report below:

Make sure you plan so your estate ends up in the right hands. Penny Lovell shares her thoughts. Have you prepared a will? Have you made sure to plan your assets so that your estate will end up in the hands of the right people should anything happen to you? These may be personal questions but they are important ones that more of us need to ask our loved ones. Talking about death is uncomfortable, particularly with those we care about. However, making sure that your estate is in order could save a lot of money and heartache in the long run. New research from Foresters Friendly Society and ICM has revealed that almost two thirds (61 per cent) of us don’t have a will. On top of this one in ten of those who do have a will have told no-one else where it is. If you’re in either of these groups, and there’s a good chance that you are, you may find your money and possessions may not end up in the right hands after your death. All too often there are headlines about people who have died without a will, and sadly, while in many cases they would have preferred to have left their affairs in order, the result is far from ideal. A very good example of this is Stieg Larsson, author of the Millennium Trilogy books, who died intestate. As a result, his entire estate went to his father instead of his long term partner, who in turn has not benefitted at all from the worldwide success of his books and the subsequent films. Without a will or effective estate planning you don’t get to control where your assets go. Your estate will be divided amongst your relatives in accordance with government regulation and could even end up with the Crown. You may be under the impression that wills don’t matter if you are married with children and plan to leave everything to your spouse. However, your husband or wife will only receive the first £250,000 of your estate. After that they have a right to an income, but not the capital, from the remaining estate. This is the default position and one very few people would actively choose. If you fail to update a will post a break-up, despite being in a subsequent relationship, your estate might end up going to the wrong person entirely and cause great upheaval amongst your loved ones. Bob Marley died in 1981 without a will and, 30 years later, disputes are still raging with new claimants still appearing out of the woodwork. In addition, if you leave dependent children under 18 behind when you die then you may not have control of who looks after them. Instead, the courts may decide who is appointed as their guardians. This alone should be enough to encourage anyone to make a will. Worryingly the Foresters report also showed that more than three-quarters (77 per cent) of parents with children under the age of five have not made a will with nearly half those who have (46 per cent) not reviewing it in the last five years. This means that they have not appointed guardians or ensured their children’s inheritance is secured. Again, a famous example of this is what happened to Heath Ledger, whose will was not updated to include his daughter Matilda. Of course the older we get the more important a will is. Despite this nearly half (46 per cent) of those aged between 55 and 64 have not made a will with more than a fifth (22 per cent) having never thought about making one. One in eight (13 per cent) rely on self-written wills, the validity of which is more likely to be challenged upon death. March is ‘free wills month’, an initiative that brings together a group of well-respected charities to offer members of the public aged 55 and over the opportunity to have their wills written or updated free of charge. This is done using participating solicitors in selected locations around England and Wales. Whatever your background or situation it is important to have effective estate planning and a current will in place. This will ensure that you have control over your assets and make sure that your wishes are carried out if you aren’t here to control the situation. Making a will can also provide an opportunity for you to think through whether your beneficiaries require financial education. There are so many stories about people who inherit wealth without any financial training and therefore struggle to protect the assets for their own lifetime and for future generations. Financial training can help prevent this potentially challenging and unhappy outcome. Finally, there are many of us who wish to leave assets to charity and making a will is a great opportunity to explore the best way of structuring your gift.

Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment and was 50 years old in 2013. Managing Director Adrian Maxwell shared his thoughts with Paul Andrews. What does your family business do? Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment. We are celebrating our 50th anniversary in 2013 and are very proud to have been awarded the title of the UK’s top manufacturer and the UK’s Outstanding Export award from the manufacturer’s association the EEF. How did you get involved? I’ve been involved with the business ever since I was a baby when my dad, Fracino founder Frank Maxwell, took me in a carry cot to our customers in Leicester and Birmingham in the heady 60s before we’d started manufacturing and were repairing machines. After leaving school at 16 I went to Rolls-Royce for four years and completed my technical apprenticeship and HND. I next took on a couple of jobs which included manufacturing and selling agricultural gates and fittings before joining Fracino full time aged 23 as a service engineer. At that time dad could not complete the volume of work on his own and there were just the two of us compared to the 40-strong team we employ today. What did you want to be when you grew up? I always wanted to be an engineer from a toddler. Our house, garden and workshop were always heaving with cars and machines being repaired which would drive my mum to distraction. I loved learning how to take things apart and reassemble them. We must have been the neighbours from hell with all incessant hammering and banging at all hours of the night! What are your first memories of the family business? My first really clear memories are going with dad when I was about five years old to see long standing customer Geoff Rossa at Cafe Bocca in Leicester in our new – well new to us – Morris J4 van. Geoff has been a valued customer and friend for 50 years (as long as we’ve been in business) and I would happily sit on top of his counter changing the steam valve washers. What values are important in your family/family business? Trust, respect, transparency – and openness. My respect for my dad Frank is enormous – and he is my business hero. As a family we value our hard work ethos and quality driven culture – always striving to do everything to the best of our ability. What is the best thing about being a family business? Being united in a common goal and supporting each other while sharing our business experiences as a close knit family unit which is always travelling in the same direction. And the worst? The fact that we never escape from our work and find it nigh on impossible to switch off when we’re at home. I’m the biggest culprit by far! What is the best thing about your working day? Getting up for work – every day I’m excited about what the day will bring even though many of them are hijacked before they get off the ground. No one day is the same and I relish the opportunities and challenges each one brings. What is your proudest family business achievement? Being awarded the EEF’s UK’s Winner of Winners Award this January this year. It’s the highest honour the EEF can bestow on a British manufacturer and reflects how, in four years, we built a global export business which now exports to over 50 countries. Is there a next generation waiting in the wings to take over? Definitely – outside of Frank our founder and Marion my wife who is our credit controller, our daughters Rebecca and Katrina work as service coordinator and purchase ledger respectively. Our son David is currently training to be an engineer at Leeds University and works with us during his holidays. What do you see as the biggest challenge facing family businesses? Succession planning is critical – as is keeping things on an even keel and identifying and managing any potential sibling rivalry. We wholeheartedly believe in the adage that ‘the whole is greater than the sum of its parts’. What words do you associate with family businesses? Unity, trust, hard work, stability, reliability, tenacity, transparency and quality driven for starters. We’re all in this together which has proved a powerful formula for our success. Words of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? Join it for the right reasons, not because you feel obligated – the worst possible reason. Also, if you do believe its right and it does not work out then bow out gracefully and move on as opposed to being miserable. We only have one life so it’s vital to be fulfilled by what we do for a living.

At Cropwell Bishop they believe in keeping things in the family. That is why, from their creamery in the beautiful Vale of Belvoir, they have made mouth-wateringly delicious Stilton for more than three generations. Today, cousins Robin and Ben Skailes oversee the day-to-day running of the cheese dairy along with their fathers, David and Ian. Using traditional methods passed down by their grandfather, they continue to produce award-winning Stilton of the very finest quality. Robin spoke to Paul Andrews and shared his thoughts on the family firm and his passion for their product. What does your family business do? Makes handmade Stilton cheese and other handmade blue cheeses from our family farm. How did you get involved? I always loved the cheese so it was easy for me. What did you want to be when you grew up? A Racing Driver What are your first memories of the family business? Being forced feed Stilton at 4 years old! What values are important in your family/family business? Responsibility towards the local community and protecting traditional cheesemaking. Our creamery plays a big part in Cropwell Bishop village life. Most of our employees live locally, and some of them have been with us for more than 25 years. Some have even worked under Robin and Ben’s grandfather. That is why we trust them to maintain the highest standards of cheese craft; and why we regard them as part of the family. Our strong family values extend to our suppliers, too. We have hand picked some of the best milk suppliers in the region: small, family-run farms whose expertise, like our own, has been passed down through generations. And in return for the exceptional milk they supply, we make sure our farmers are paid a price that they deserve. After all, we’re likely to need their milk for several generations to come. What is the best thing about being a family business? To plan for the future and the long term. And the worst? Having my father as my boss! What is the best thing about your working day? Tasting Stilton! It is something that I will never tire of either! What is your proudest family business achievement? Being shortlisted for the Midland Family Business Awards and winning the 2013 Family Business of the Year Award. Is there a next generation waiting in the wings to take over? Yes, I have 2 young sons who already love Daddy’s cheese. What do you see as the biggest challenge facing family firms? Competing with much bigger companies as more consolidation takes place. What words do you associate with family businesses? Passion, fun, long term. Words Of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? Work for someone else before joining the family firm.

Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment and was 50 years old in 2013. Managing Director Adrian Maxwell shared his thoughts with Paul Andrews. What does your family business do? Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment. We are celebrating our 50th anniversary in 2013 and are very proud to have been awarded the title of the UK’s top manufacturer and the UK’s Outstanding Export award from the manufacturer’s association the EEF. How did you get involved? I’ve been involved with the business ever since I was a baby when my dad, Fracino founder Frank Maxwell, took me in a carry cot to our customers in Leicester and Birmingham in the heady 60s before we’d started manufacturing and were repairing machines. After leaving school at 16 I went to Rolls-Royce for four years and completed my technical apprenticeship and HND. I next took on a couple of jobs which included manufacturing and selling agricultural gates and fittings before joining Fracino full time aged 23 as a service engineer. At that time dad could not complete the volume of work on his own and there were just the two of us compared to the 40-strong team we employ today. What did you want to be when you grew up? I always wanted to be an engineer from a toddler. Our house, garden and workshop were always heaving with cars and machines being repaired which would drive my mum to distraction. I loved learning how to take things apart and reassemble them. We must have been the neighbours from hell with all incessant hammering and banging at all hours of the night! What are your first memories of the family business? My first really clear memories are going with dad when I was about five years old to see long standing customer Geoff Rossa at Cafe Bocca in Leicester in our new – well new to us – Morris J4 van. Geoff has been a valued customer and friend for 50 years (as long as we’ve been in business) and I would happily sit on top of his counter changing the steam valve washers. What values are important in your family/family business? Trust, respect, transparency – and openness. My respect for my dad Frank is enormous – and he is my business hero. As a family we value our hard work ethos and quality driven culture – always striving to do everything to the best of our ability. What is the best thing about being a family business? Being united in a common goal and supporting each other while sharing our business experiences as a close knit family unit which is always travelling in the same direction. And the worst? The fact that we never escape from our work and find it nigh on impossible to switch off when we’re at home. I’m the biggest culprit by far! What is the best thing about your working day? Getting up for work – every day I’m excited about what the day will bring even though many of them are hijacked before they get off the ground. No one day is the same and I relish the opportunities and challenges each one brings. What is your proudest family business achievement? Being awarded the EEF’s UK’s Winner of Winners Award this January this year. It’s the highest honour the EEF can bestow on a British manufacturer and reflects how, in four years, we built a global export business which now exports to over 50 countries. Is there a next generation waiting in the wings to take over? Definitely – outside of Frank our founder and Marion my wife who is our credit controller, our daughters Rebecca and Katrina work as service coordinator and purchase ledger respectively. Our son David is currently training to be an engineer at Leeds University and works with us during his holidays. What do you see as the biggest challenge facing family businesses? Succession planning is critical – as is keeping things on an even keel and identifying and managing any potential sibling rivalry. We wholeheartedly believe in the adage that ‘the whole is greater than the sum of its parts’. What words do you associate with family businesses? Unity, trust, hard work, stability, reliability, tenacity, transparency and quality driven for starters. We’re all in this together which has proved a powerful formula for our success. Words of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? Join it for the right reasons, not because you feel obligated – the worst possible reason. Also, if you do believe its right and it does not work out then bow out gracefully and move on as opposed to being miserable. We only have one life so it’s vital to be fulfilled by what we do for a living.

The family constitution is a written document that lists the mission, vision, and purpose of the firm. It also spells out the family commitment to business continuity. For example, does the family intend to pass the business on to future generations or sell off at a profit? The family constitution lists responsibilities of ownership, conflict resolution procedures, as well as company policies and procedures on such important issues as family member employment, hiring, retirement, and terminations. The constitution includes items that can often be disruptive or loaded with the potential for conflict such as the role of spouses in the business and what should happen with shares in the case of a divorce. In addition, the document is where policies and procedures are created for when a family member develops a drug or alcohol problem or becomes disabled. The critical function of the constitution is to foster family discussion and agreement, and to create guidelines on key issues before being forced to make a difficult decision on a moment’s notice when emotions are likely running high. Interestingly, the vast majority of family businesses do not have this important document. In addition to the previously mentioned items, the family should discuss the following for possible inclusion in a family constitution (not an inclusive list): 1. Why is the family in business together? Should the business stay in the family? 2. What is the process for succession (choosing the next leader)? 3. A share liquidity policy, including buybacks from family members and dividends. 4. A family compensation/remuneration policy. 5. A procedure for making decisions (e.g., consensus, or vote), who will make the decisions? 6. Corporate officer roles and responsibilities. 7. A family member entry policy. Is a university education required? Should entering family members be required to work elsewhere and find success on their own first? 8. A family member exit policy. 9. What is the process for terminating a family member? 10. The role of non-family employees. 11. Establishment of a board of advisers or directors and their roles, and the number of times they will meet annually. 12. Establishment of an annual family retreat. 13. Number and role of family members on the boards. 14. Establishment of a family council and its responsibilities and roles. 15. Educational reimbursement policy. 16. A policy for settling disputes or conflict among family members specifying who will settle the dispute, such as the outside board of advisers or the family council. 17. Reporting structure for family members. Should family members report to family or to non-family members only? 18. Charitable giving goals. 19. Investment policies and procedures. Should the firm support younger family members in startup businesses of their own? 20. Procedures for developing and training the next generation of leadership. It will take several meetings to create a document the family can agree with. Many families agree it is time well spent and important to discuss before serious issues arise. The constitution is commonly an agenda item at the annual family retreat. The document should be considered a living document that can be reviewed annually and updated as necessary. Reproduced with permission from Keanon Alderson and The Press-Enterprise (www.pe.com) Keanon Alderson Ph.D. is an associate professor in the Robert K Jabs School of Business, at California Baptist University in Riverside CA. He can be reached at kalderson@calbaptist.edu

Historically daughters were not considered for succession into ma­n­a­­gerial positions in family businesses. Gender used to be a main fact when determining a successor, with males being preferred. If daughters were brought into the business they were expected to carry out lower-level tasks, not be leaders. Daughters used to be willing to join the family business for various reasons such as to help the family, to fill a position nobody wanted, to have more flexible schedules, and to increase their job satisfaction. The reality for many now – although not for all – is more positive and there is a shift in mentality. More recently, women have gained more managerial experience and education. However, families which do not consider daughters as viable successors to their family business still exist, as do situations where daughters find themselves working harder to prove their abilities and be more visible. Women in family businesses still face discrimination and stereotyping as a result of societal prejudices. The roles and patterns of behaviour in families are often gender-specific. When family members work together, patterns of behaviour, value beliefs and expectations are often transferred to the work environment of the family business. Why are there women in family businesses who still, to this present day, are not being groomed for future leadership roles? Reasons vary and may include the parents’ need to protect their daughters more so than sons, and avoiding their daughters having to deal with problems that come with managing a business. Alternatively, work-life balance considerations may keep daughters from seeking leadership roles in the family business. Daughters may receive mixed messages from the family. Parents may encourage daughters to have children, but at the same time, they might complain if the daughter neglects the business. Fathers sometimes fail in defining the daughter’s role in the business, expecting her to behave as a businesswoman while perhaps treating her like Daddy’s Girl. These multiple roles can confuse the daughter because she will not know when to act as an employee and when to act as a daughter. Tension is generated between both parties, making it difficult for the daughter to establish her sense of identity. This conflict can be magnified when the outside world recognises the daughter as an adult, while the family may still see her as a child. Positive characteristics may be taken to an extreme and become detrimental for the daughter; characteristics like daughterly concern about the father and the business, seeing parents as mentors, and a tendency to avoid conflict. Some women may identify with other scenarios: a daughter obtaining a better position in the family business, contributing to sibling rivalry, and family tensions. Daughters might have to choose between gaining respect in the business hierarchy or the family hierarchy. Research shows that daughters have typically carried out three roles in family businesses. The first is that of the “invisible”. The “invisibles” are generally part of a large nuclear family and are not included in family succession plans. A perceived benefit of invisibility may be that daughters may leave and come back into the business as they wish. The second role is the “anchor”. The “anchors” come from families with few men in any generation. They are essential for the continuity of the business. They are guided from a young age as well as in their education to work in the business. They are offered very little alternative and may be ambivalent about their careers in the business. The third role is that of the “professional”. The “professionals” work in the mature family businesses with complex ownership structures, where a reasonable number of men also work. They interact professionally with the business. Another role is emerging for the woman in family businesses: the entrepreneur who starts her own venture. As women are starting successful family businesses, daughters are increasingly being considered as possible successors of the business. Differences between men and women should not be denied as when denied difficulties arise. Family businesses are a kind of environment particularly attractive to women due to the simultaneous valorisation of both the private aspects of family life and those of professional life. The recommendations for next generation women are to get an education and work experience outside the family business, not to take over the business unless they are passionate about it, compete on a male level while respecting oneself as a woman, work hard to achieve personal goals and trust inner instincts. About the Author - Roberta Fenech is an occupational psychologist currently reading for a PhD at the University of London.

An interesting and thought-provoking insight into Asian family business owner thoughts about succession and the next generation. I was having breakfast recently with an accountant from the UK and with an old friend from the trust industry in Hong Kong. The trustee commented that she had a client who ran a family business in Asia who had just done the thing that many Asian father’s seem to do and called his son back from studies in the UK to come and start working in the family business. The English accountant automatically said: “What a bad decision – he should let his son make his mistakes somewhere else before he comes to work in the family business!”. From an English or American perspective there are many good reasons why the next gen should go and get outside work experience before coming and working in the family business. However when discussing this issue with business men and women in Asia I do get a lot of resistance to this “Western perspective”. Some of the explanations that I have heard from different families around Asia include: “I need my sons there because who else can I pass on the work to.” “I need to make sure that my sons enter the business because if they decide not to join then how can the business continue?” “The best person the children can learn from is their own father or mother.” “They should learn their family values directly from the source – from their own parents.” “You need to bring them in early so that they can bond with the non family executives that in the future they are going to lead.” “If I don’t bring my son into the business now his cousins are going to be there and get established before he will have any chance”. Other friends that I have discussed this issue with have basically responded saying that they have observed many successful second generation business leaders from Asian families who went to work straight after finishing their university and who have been successful in business and in their personal life. This leads to the most difficult Asian response to argue with: “This is what my father did with me – are you saying I have not been successful!?” I think that at the heart of the American thinking on this topic are the concepts of: adult developmental stages as articulated by Daniel J. Levinson in The Seasons of a Man’s Life (and later also The Seasons of a Woman’s Life); and the need to differentiate from your family. (The term “differentiation” comes from family systems theory. It should be compared to the term “individuation” which is the term used by Carl Jung in his discussion of the adult life cycle.) Under Levinson’s framework for men, the ages of 22 – 28 is the stage of “entering the adult world” and if you can be independent of your family during this key period it is very valuable in becoming emotionally distinct from your family. American culture is well understood to being an individualistic culture and Asian culture a collective culture. However is the concept of differentiation relevant for Asian families? The answer to this question seems to be a clear “yes”, but perhaps with some modification. One Asian academic has written that she has found that “a healthy family system correlates with a healthy family business”. Is it important for business owning families in Asia to give their next gen the best chance to differentiate? While this does not appear to be intuitively accepted in Asia I believe there are some sound arguments why this is very important. First, many Asian families do believe in the concept of human capital and intellectual capital as being important components of the family wealth. To give your next generation the chance to become mature adults is an investment in human capital. An Asian father (or mother) thinking about whether to pull their young adult back from school and into the family business should ask themselves the question of which is more important to you? The good of your business or the good of your son or daughter? If you value the well-being of the next gen, give them a chance to find maturity away from the family. Second, while you hear of many Asian families where the next generation successor came back straight from school and started working in the business and all went successfully, you also hear of cases in Asia where the successor later drops out and leaves the business – or they wait until the father has died and then they sell the business! Giving them that time away from the business so that they come back in as mature adults will likely mean the decision to join is a mature decision that they will not lightly go back on. I have to admit that my first two reasons are still very American in logic. This leads to my third reason which I think is very specific to the Asian context. The third reason then is that in many traditional Asian families, in families with a strong family hierarchy (“Confucian families”) the siblings often do not find it easy to work together collaboratively once ‘Dad” has gone. The siblings carry over their birth order and family role ways of relating to each other into their adult working lives. The more differentiate one of the siblings the better their ability to define a new adult self, and a new adult working relationship with their siblings. In short, the more maturity they will have in their interaction with their sibling partners. So if you send your next gen away to get outside work experience first, and to give them a chance to differentiate away from the family business, when they come back they are going to be much better business partners with their siblings and it will give the family business greater immunity against family conflicts. About the Author - Christian Stewart helps enterprising families around Asia work together, by facilitating family meetings and as a process consultant, helping the family to develop their own family governance structures.

Preparing to pass the business to the next generation is often seen as one of the biggest challenges facing the family business, resulting in changes both for the family and the business. In addition, there are issues that need to be faced such as the fact that the current leader is getting older, and getting closer to ‘death’ which is a topic that is not often up for discussion, and there is the matter of the next generation waiting in the wings, some willing and able to take the helm and others quietly hoping that they will never be asked. Sadly, doing nothing does not make the succession challenge disappear as it will inevitably happen one day. So, it is not easy to plan for succession due to the emotional and relationship aspects that need to be addressed, but successful family businesses mitigate the risk to both the family and the business by planning for the future and therefore being in a position to address the topic in a much more rational and business-like manner. As Howard Hackney, family business consultant and experienced family business adviser explains, “Succession planning should always be on the agenda for any business and cannot really start early enough. Businesses that plan to succeed reduce the risk of problems further down the line.” “Although it does not eliminate the risks completely, holding a rational, sensible conversation about what the business needs from the leader going forward and evaluating this against the potential in the next generation in a clear and practical manner, undoubtedly provides a greater platform for success going forward.” With that in mind, the succession planning process can be broken down into seven key steps, helping to engage the next generation in the conversation: 1. Preparing Attitudes It is important that the next generation understand the nature of the business, and the values that are important too. Many of these will be derived through contact with the family business as they grow up, summer work experience, listening to conversations, visits to the office etc and these are important so that they gain a feeling for ‘what the family business is all about.’ 2. Entry Into The Business Clearly, the next generation need to want to work for the business, have the right skills and competencies and entry into a role in the family business will provide them with this opportunity. It is important that they enter a role for which there is a need and are not simply recruited as they are related and there needs to be a clear job description and role for them, just as there would be for any other new inductee. It is also important to ensure that they are given the necessary training, orientation and assistance in developing relationships within the business with other employees, managers and directors too. 3. Developing Their Understanding Once the next generation have gained a footing in the business and are performing a role, the next stage in the succession planning process is to develop and cultivate the skills required to lead the business in the future. Initial understanding can be derived internally but external inputs may assist in the process through mentoring, leadership programmes and university educational programmes too. 4. Leadership Development As the next generation get older, and the existing generation have aged too, there will be a period when the leadership skills of the next generation are developed, preparing them with the skills that may be required to run the business in the future. 5. The Selection Process Selecting the next person to run the business is not an easy decision, and there may well be more than one candidate to consider from within the family as well as outsiders. It is important that the selection process is clearly understood by all concerned and that the process is adhered to in order to reduce the risks going forward. The process may involve selection by the incumbent, the family executive team, the board of directors or general consensus between the family, board and executives. 6. Transition Once the successor has been appointed there will be a period of transition where they become involved in the strategic decision making processes and the development of their own management team too. Over a period of time, key relationships are transferred and naturally the incumbent will do less and the successor will do more. 7. Starting Again Although unlikely to commence straight away, when it comes to leadership of the family business, succession planning should always be on the agenda and consideration should always be made to the next generation and developing the leaders of the future. As Howard explains, “All too often family businesses leave the decisions until it is too late – the incumbent passes away suddenly and the next generation are left to pick up the pieces, at a time when they are emotionally hurt and grieving and planning in advance can help to reduce the burden at that time.” “Furthermore, failure to address the issues on a timely basis may result in the next generation forging a career outside of the family firm and then decide that they don’t want to come back to the family business so communication between the generations is vital to ensure the right outcome overall, for the family and the business.” Succession planning does not happen overnight but clear and open communication over the years can certainly help to provide a framework within which to operate, with everyone knowing where they stand and understanding what the business needs and the skills that the next generation need to lead the business going forward too.

According to recent research from Barclays Wealth, 40% of the UK’s high net worth individuals do not trust the next generation to protect their inheritance. Key Findings include: 37% of wealthy Britons have experienced family conflict as a result of family wealth Earned, as opposed to inherited, wealth is key to financial happiness 40% of the UK’s high net worth individuals do not trust their children and stepchildren to protect their inheritance The report, The Transfer of Trust: Wealth and Succession in a Changing World, is based on a global survey of more than 2,000 high net worth individuals. It provides an in-depth examination of wealthy individuals’ attitudes towards wealth transfer and succession planning, as well as offering insight into what the future holds for the next generation. Interestingly, it reveals how wealth in many cases can act as a double-edged sword, leading to distrust and conflict. Globally, developed countries display higher levels of uncertainty when it comes to trusting their children and stepchildren to look after their wealth. Respondents in Australia (59%), North America (61%) and Europe (62%) show lower levels of trust in their children and stepchildren when it comes to money management and protecting their inheritance, in comparison to the Middle East (78%), Africa (77%) and Latin America (75%). Experts featured in the report have partly attributed this lack of trust in the future generation to the changing structure of many UK families. As second and third marriages become more common, this is thought to lead to more complex relationships with both children and stepchildren in relation to wealth and inheritance planning. David Semaya, Head of UK and Ireland Private Bank, Barclays Wealth, said: “This report provides an in-depth study into the attitudes of high net worth individuals towards succession planning. It is clear that with wealth comes an increasing complexity of choice, and in some cases this can result in concerns about trust and conflict when considering the inter-generational transfer of wealth. Understanding options for succession planning in advance, and seeking professional advice can help address these fears and provide confidence that your wealth will be wisely managed in the future.” Wealth, Happiness And Family Dynamics Parents want to pass on their material wealth to their children, as well as a roadmap for a happy life, but the report reveals some interesting paradoxes about inheritance and succession. Source of wealth is seen as a key determinant of financial happiness, with earned wealth much more likely to result in happiness than inherited wealth. However, wealthy respondents in the UK remain committed to passing on their wealth, with 94% of respondents intending to do so. However, an unfortunate drawback of wealth is its ability to cause conflict – and in the context of succession – family conflict. The report reveals that 37% of wealthy individuals in the UK have had direct experience of family wealth leading to disputes. Accentuating this conflict, the report reveals that the risk of disinheritance increases in line with wealth for high net worth individuals in the UK. Whilst five per cent of those with wealth levels of between £1m and £2m have disinherited someone or cut a family member out of their wills, this rises to 13% among those with more than £10m. Catherine Grum, Director, Wealth Advisory, Barclays Wealth, commented: “In the case of wealth that has been inherited, tensions around entitlement may lead to disputes. However, it is surprising just how many wealthy respondents report experiencing such conflict and the impact that source of wealth can have on this, with wealthier respondents more likely to have encountered such conflict.” Despite all the potential tensions associated with succession and wealth, the report shows that the UK’s high net worth individuals remain committed to passing on their assets to the next generation, with only six per cent of UK respondents believing that this should not be the case. Globally, 60% of respondents say that they require a significant level of professional advice when deciding on an inheritance plan for their children and stepchildren, emphasising the need for expert advice to guide them through this decision-making process.

Family businesses are certainly not immune to difficult economic times. But they usually have more options than publicly owned corporations. Let me share with you what some of my clients are doing to not just survive, but thrive, even in today’s business climate. A recent online Gallup article entitled “Building Engagement in This Economic Crisis,” quotes its chief scientist of workplace management, James Harter, Ph.D., saying, “In bad times, employee engagement is the difference between surviving or not.” But how does a family business keep employees focused and motivated? Rather than lay employees off (which reinforces the message of fear and uncertainty), many companies use downturns to create their own “stimulus package” to grow their businesses. Expand in a shrinking economy? Sounds impossible. But that’s just when you need your employees’ most creative thinking and loyalty. A policy of no layoffs in tough times (and I have clients who manage to do this) makes it clear to everyone that we are in this together. Another of my clients involves key employees in brainstorming sessions to create new opportunities for the company. This is not “make work” but truly helps the company take a fresh look at what its customers need and how to better meet those needs. The brainstorms have produced several ideas for new opportunity. Enthusiasm replaces hand-wringing. Positive attitude maintains an environment for growth and possibility. Think how strong that company will be when economic prospects do improve! A business plan is an excellent template for discovering new opportunity. Most family businesses don’t have a formal business plan. They can get by without it during the good times, but in difficult times operating without a plan is needlessly punitive. Formalising the business strategy sets you up for new options and renewed profitability. An effective planning tool I am familiar with for small to medium sized family businesses is the Jack Tesmer Institute’s Quick Plan; part on-line survey and part face-to-face discussion. The process helps focus the business on the market to evaluate your approach, organisational readiness and profitability. Another possibility is to work with a traditional business planner, such as John Pope, who works with family businesses to create a formal business plan. With a strategic business plan in hand, you have a better understanding about what to do, how to do it, when, with whom and at what cost. It could not only help you weather the current storm, but prepare you for an even brighter future. All of this discussion is about the business side. But what about the family side in rough times? Stress rises when any business struggles and it can go stratospheric within business families. Now is the time to reinforce and strengthen the family’s commitment to the business. Hold regular family meetings aimed at building emotional equity of your family and bond the family team. Family businesses traditionally spend a lot of time, money and energy building the financial equity of their business. In tough times as well as in good times, it is equally important—if not more important—to building the emotional equity of the family. Emotional equity in the family is the emotional connection, the emotional reserve and the sense of belonging we all need to get through the stress of tough times. Remember to celebrate family rituals and traditions. Keep up informal get-togethers where father and sons or brothers and sisters meet over a cup of coffee to support each other through stresses. One of the most difficult topics for any family to discuss is money. Start a series of family meetings that focus on money, on the family’s values regarding money, and money management and spending. Make sure your family’s behaviour is aligned around your family values. In a recent client meeting, a grandfather expressed his concern that stock market losses meant he could no longer continue to fund his grandchildren’s education at the current level. The grandparents were reluctant to raise the topic in the family. By not doing so, they were inadvertently creating tension within the family. Once the topic was on a meeting agenda the family was able to discuss and resolve it. Stress plummeted all around. Tough economic prospects do not automatically mean paralleling tough emotional and financial prospects. Opportunities can be found. Involve your employees and the entire family through family and company meetings. Share, brainstorm, and envision the future. It’s not a diversion, it’s an embrace that will certainly help the family and likely help the business. managing growth. About the Author - Tom Hubler continues his long-standing dedication to helping families of wealth and family-owned businesses succeed. He helps families develop a shared vision for the family and for the business; identify individual talents; tackle any unspoken issues; and create individual and organisational strategies to ensure a personally and financially rewarding business with a wealth preparation plan that ensures family values continue to emphasise a family culture of gratitude, philanthropy and purposeful living. www.hublerfamilybusiness.com