Family councils from soup to nuts
The Family Council Handbook: How to Create, Run, and Maintain a Successful Family Business Council
By Christopher J. Eckrich and Stephen J. McClure
Palgrave Macmillan, 2012; 370 pp., $55
When a family business has transitioned into the third generation—or maybe even before then, depending on the number of family members involved—dilemmas begin to arise at the nexus of family and business. The best forum for airing these issues and bringing them to a resolution is a family council. Many family business owners have read articles mentioning this governance structure, unique to family firms, or have heard an adviser or fellow business owner recommend that they form one. Family council newbies considering such an undertaking should arm themselves with information on what a family council does, how it can help them, what's involved in forming one and how to avoid the minefields.
With The Family Council Handbook, authors Christopher Eckrich and Stephen McClure—both principals of the Family Business Consulting Group—deliver the goods. Their comprehensive guide offers advice on where to begin, how to overcome objections, how to plan meetings and create agendas, what the first order of business should be, who are the best people to play key roles, how to transition to a new slate of council leaders and much more.
Eckrich and McClure refer to a family council as the family's “communications nerve center.” They observe: “After a few generations, most business families come to the same conclusion: we must organize ourselves as a family, organize education, communication and ultimately manage ourselves as a unified voice of influence where the business is concerned.”
The book abounds with examples: a sample family council charter, sample meeting agendas, ground rules, family education topics, meeting site selection criteria, council chair role description and assessment form, a sample budget—and even sample memos requesting input on agenda items and reminding family members about meeting dates. (The authors caution, however, that fundamental documents, such as a family council charter, should not be merely cribbed from a template: “We have seen many families that have taken ideas from another family and then faced a difficult issue but lacked confidence in the very charter that was supposed to guide them through this challenge.”)
One of the best features of this handbook is that it doesn't presume that everyone in the family will immediately be on board with the concept of a family council or that meetings will proceed without dissent. Indeed, the authors identify areas where conflict or resistance might arise and offer suggestions on how to manage it productively. They counsel family council leaders, for example, that “Setting goals and achieving them are important, but there are times when the family group you are leading needs to take time to share ideas and talk issues through without the pressure of accomplishing a goal.”
In addition to helpful diagrams and tables, the book includes ample references to previous works by Family Business Consulting Group advisers. There is a lot of valuable information to digest here.
Eckrich and McClure accurately describe how much work is involved in forming an effective family council (spoiler alert: a lot). Their practical guide, covering numerous contingencies, takes a supportive tone. Rather than scaring readers away, the text will inspire many to move forward with this labor-intensive project, which can yield so many enduring benefits.
Unpacking a trunkful of issues
Great White Elephant: Why Rich Kids Hate Their Parents!
By Franco Lombardo
Roper House Publishing, 2012; 180pp., $32.95
Canadian wealth adviser Franco Lombardo acknowledges that the pachyderm in the title of his new book—Great White Elephant: Why Rich Kids Hate Their Parents!—is a mixed metaphor. Lombardo combines “the elephant in the room” (the big issue that everyone pretends isn't there) with a “white elephant” (an expensive, burdensome possession that can't be easily disposed of). The giant, pale creature must be released, Lombardo tells his readers, so that it won't impede a successful transfer of wealth.
Lombardo contends that in order for a smooth transition to occur, the senior-generation member must understand his or her own relationship with money and reframe the jumbo emotional issues that make wealth seem like a burden rather than a privilege.
The goal of the book, Lombardo writes, is to help senior-generation members “implement the process of wealth transition consciously, intentionally, and with a deep sense of love and in a state of generosity,” and to help inheritors feel “worthy and safe” and well prepared to receive the bequeathed assets.
The elephant metaphor pervades the book, but it's not the only recurring comparison. Lombardo also repeatedly likens transition planning to a table. Most estate-planning advisers, he argues, focus only on “top-of-the-table” matters like tax strategies, will and trust documents, and insurance policies. To ensure that the table doesn't collapse, Lombardo explains, its top must be supported by a sturdy set of legs—values that are clarified and emotional challenges that are tackled.
The subtitle of the book—“Why Rich Kids Hate Their Parents!,” exclamation point and all—refers to wealth transfer disasters that occur when parents fail to transmit a healthy attitude toward money to their children. “One must be prepared, both intellectually and emotionally, to become an owner of wealth,” Lombardo writes, “and be enabled to take appropriate responsibility for it.”
Parents who can't say no to their kids undermine the children's ambition and initiative, Lombardo writes, and those who try to buy their children's love foster a lack of appreciation for material possessions. He decries mixed messages, such as those sent by parents who warn their kids not to tell anyone the family is rich while at the same time flaunting their ostentatious possessions.
Lombardo suggests that “how we treat our money” is a reflection of how we treat ourselves and our loved ones. People who make bad investments, he writes, often do “to prove to themselves that they don't deserve the money”; he contends that these people also undermine their relationships.
Another phrase that recurs throughout the book is “Money Motto,” the author's term for a statement that clarifies one's deep-seated beliefs about money, usually influenced by one's parents. Lombardo cites some of his clients' “Money Mottoes”—“Making money gives me power”; “Money buys me respect”; “It's easy for me to make money; hence I don't value or respect it”—and describes how he worked with the clients to move toward a healthier attitude about wealth.
In addition to using client examples to illustrate his concepts, Lombardo shares (some might say he overshares) painful experiences from his personal life. He discusses how he's coped with the end of a recent “personal, intimate, and romantic relationship,” and describes how attending a workshop helped him overcome “a truckload of conflict … arising out of what I felt for my mother.”
The author urges his readers to strive for authenticity, both in their relationships with other people and in their relationships with money. An authentic “Money Motto,” he suggests, might be, “It's OK to follow my passion and make money doing something I love.”
Lombardo's book focuses on parent-to-child wealth and business transfer. He doesn't go into depth about the conflicts wealth can engender in multi-branch family groups, and he doesn't discuss governance structures like family councils, which can help family members move from an entitlement to a stewardship orientation. But his client anecdotes uncover some valuable insights. “Values and your clarification of them,” Lombardo writes, “is what will provide you with stability when the Great White Elephant is running amok.”
Copyright 2012 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.