For most businesses they evaluate their success by quarters or perhaps terms described as “short”, “medium” and “long”. For a family business, they measure success by ensuring the company is preserved for the next generation and beyond. And despite the statistics which suggest that successfully transitioning a family business to the next generation is elusive, the goal for a large proportion of family businesses still is to transition the business to the next generation at some point.
Unfortunately, the challenges to ensuring that vision is realized come from many directions. A tax regime that is becoming so complex even the most ordinary Canadian needs advice. Regulatory changes that are fraught with pitfalls. Industries where the talent pool is tight. Leaving aside all of these usual business challenges, for a family business there are added pressures that come from what are often described as the “soft”, non-business issues – family dynamics and the inherent tension that exists when multiple generations are wrestling for control, with one generation hanging onto control so to preserve their legacy and the next generation believing their ready to begin creating their own.
Often both the family and their advisors are focused on the three structural systems that comprise the business family – the business system, the ownership system and the family system. Unfortunately, by focusing solely on the structural matters they have overlooked the fact that all three systems are made up of individuals and it is the individuals, often referred to as the “human capital”, that create the business and related wealth and can at times potentially distort the wealth. In this complex paradigm where technical legal, tax and accounting issues are often overshadowed by these “soft” issues, both families and their advisors often miss the opportunity to address the key link to ensuring the structural systems operate well together – the human capital.
Recently I had the privilege of hosting Franco Lombardo as a guest speaker. Franco is a leading global expert and a much sought after international speaker on the emotional impact money and wealth have on relationships within family businesses and family office operations. He is committed to helping families find, create, and maintain “Safe Space” by developing new models for cultural governance which contributes to the stability, continuity, and sustainability of the family business enterprise, its wealth, and its legacy.
In “Safe Space: Governance in Action”, his fifth book, Franco points a spotlight on the all-too-often overlooked issue of individual behavioral risk and shows how it can so easily undermine both the human and social capital components of family wealth; sometimes to such a degree that it represents the greatest area of weakness and unmanaged risk in any family office or business enterprise. To get a glimpse of Franco’s book click here.
To quote a Canadian family member’s review of the book: “Franco brings it all together, summing up what he has written about in his four previous books and emphasizing the importance of Safe Space. He encourages us to be curious of our actions, ask why, and dig a little deeper. He ends every chapter with questions and has quotes throughout that encourage self-reflection. If you are in true search of your own Safe Space, Franco masterfully provides all the tools to find it.”
For any advisor hoping to reach that “trusted” status for their family business clients, I would encourage you to read and learn from the insights Franco shares in Safe Space.