Family Wealth Continuity : Building a Foundation for the Future

162 Pages·2016·5.054 MB·English

by  David Lansky (auth.)

A Family Business Publication
F amily businesses encounter a unique set of challenges, ranging from stra-
tegic growth to succession planning to communication between colleagues
(and relatives!). Th e books in Palgrave and the Family Business Consulting
Group’s family business series provide guidance on how to overcome them
and achieve continued growth and success. Th e authors are experts in the
fi eld, sharing practical, eff ective, and time-tested insights from their many
years running their own family businesses.
Family Wealth Continuity
Building a Foundation for the Future
David   Lansky
David   Lansky
Chicago , Illinois , USA
A Family Business Publication
ISBN 978-1-137-57638-5 ISBN 978-1-137-57639-2 (eBook)
DOI 10.1057/978-1-137-57639-2
Library of Congress Control Number: 2016939254
© Th e Editor(s) (if applicable) and Th e Author(s) 2016
Th is work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
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mission or information storage and retrieval, electronic adaptation, computer software, or by similar or
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Th e use of general descriptive names, registered names, trademarks, service marks, etc. in this publication
does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant
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Cover illustration: © Bercutt/iStock/Th inkstock
Printed on acid-free paper
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Contents
Chapter 1 Introduction 001
Chapter 2 Learning Capacity 017
Chapter 3 Familyness 041
Chapter 4 Safe Communication Culture 065
Chapter 5 Commitment to Personal Development 093
Chapter 6 Eff ective Leadership of Change 117
Chapter 7 Putting It All Together 143
Index 155
v

Acknowledgments
T
his book is the culmination of several years of thinking and writing
about the topics in question.
I have had the privilege of discussing the concepts and ideas here
over the years with generous and intellectually curious people who have given
their time, energy, and genuine consideration to our dialogue. I am deeply
indebted to many such thought partners, but I name some of the most infl u-
ential here: John Duncan, Bryan Dunn, Th ayer Willis, Jay Hughes, Dennis
Kessler, and Paul Koprowski.
My partners and colleagues of Th e Family Business Consulting Group
have been an amazing source of inspiration, support, creativity, education,
and conversation. I am especially grateful to Steve McClure, who provided
thoughtful feedback and suggestions on all of the contents.
My wife Jane Jansen has been my closest confi dant and coach; I would not
be where I am today without her.
L aurie Harting and the team at Palgrave Macmillan were instrumental
in shaping, refi ning, and bringing the book to life. Michael Mok provided
masterful work on the graphics.
M any thanks to Sachin Waikar, whose counsel, guidance, and collabo-
ration have been indispensable in developing and articulating the ideas
expressed here.
F inally, I have been privileged to work with a great many successful, intel-
ligent, creative, energetic, and vulnerable families who have welcomed me as
a consultant and invited me to be a part of incredibly important processes of
growth and adjustment in their businesses and lives. Th eir stories have been
an inspiration, and I am forever indebted to them.
vii
CHAPTER 1
Introduction
A
s an introduction to the topic of the Foundation for Family Wealth
Continuity, consider two very diff erent family business situations:
Members of one family attended a national family business confer-
ence, where they participated in a day-long workshop to learn about diff erent
governance structures and processes. Upon returning from the conference, the
family discussed and began to develop several governance measures—including a
family council, a plan for management succession, and a plan for passing on fam-
ily ownership—and started implementing these plans soon after. Taken together,
these elements constituted the family’s wealth continuity plan and they soon wit-
nessed stronger family relationships together with the overall optimistic view that
the business and other family assets would be preserved across generations.
M embers of second family worked with several fi nancial/legal advisors and
consultants over several months to think about wealth continuity planning.
One of the advisors’ main recommendations was for the family to create a
family council including representation of cousins from all family branches,
and to harness the council to aid in succession and ownership transfer plan-
ning. While the cousins agreed with the general idea of such a council, they
could fi nd no common ground regarding its specifi c elements—including
size, election processes, and others—and it became clear they did not think
of themselves as a well-connected “clan,” as they struggled to even communi-
cate about simple topics, much less to develop complex plans together. Th e
hoped-for continuity plans never came to be.
Th ese examples, taken from a combination of several business families I’ve
observed, highlight an important reality: while most business families and
families of wealth hope to perpetuate their wealth across generations, their
2 ● Family Wealth Continuity
ability to do this successfully varies dramatically from family to family. Th e
goal of this book is to help families understand and improve their specifi c
nature on several key dimensions of communication, interpersonal interac-
tion, culture, and leadership related to wealth continuity planning—from
their collective capacity to learn, to individual members’ commitment to
self-development. Together, these “building blocks” make up what I call the
Foundation of wealth continuity.
The Challenge of Wealth Continuity Planning
As suggested by the examples above, most family business owners and wealth
creators share an important vision: perpetuating the wealth their enterprise has
generated for many generations to come. In this context, “wealth” means not
only collective fi nancial assets, but also less tangible resources such as family
relationships (within and between generations), harmony, and engagement.
T o promote wealth continuity, many family wealth creators put into place
structures, plans, and processes, including estate plans (which may include
diverse trusts), succession plans, governance structures/strategies, and others.
Such well-established, systematic components, described in detail later in this
chapter, would seem to work to preserve family wealth, at least in theory. In
reality, for many families, they don’t.
Th ere is growing evidence that wealth continuity planning is not working
for many families. Part of the problem is a failure to plan in the fi rst place.
A PnC Bank survey of nearly 600 business owners found that while most
expected their company and related assets to stay in the family for generations,
the majority hadn’t developed plans to make this a reality.1 More directly to
my point, a study by Williams and Preisser estimated that among a large sam-
ple of affl uent clients, 70 % of instituted estate plans failed, largely as a result
of family confl ict or communication problems.2 Th is shows that just because
families create elaborate plans, success of implementation is not assured.
Overall, there is no consensus, empirically or anecdotally, on why conti-
nuity planning fails. I have had countless personal conversations with fellow
1 PNC Wealth Management, “Wealth and Values Survey: Business Owners and Th eir
Path to Happiness,” February 2008, https://content.pncmc.com/live/pnc/personal/
wealthmanagement/WM_WlthVal_teens_0507.swf (accessed June 5, 2015).
2 Roy Williams and Vic Preisser, Preparing Heirs: Five Steps to a Successful Transition of
Family Wealth and Values (Robert Reed Publishers, Bandon, Oregon, 2010).