Strategies to create better relational alignment
‘Stepping In It’ With Good Intentions
“It never matters to him what I think!”, Cheryl said in a loud, sobbing voice. “For 32 years, he has decided everything about money and he never asks me what I think.” There were tears coming down her reddening cheeks.
I had sensed things taking a turn for the worse before this outburst. I’m not qualified to do therapy but anyone could have felt the tension between them.
We were only 15 minutes into the meeting. Cheryl and I had exchanged small talk before the meeting while waiting for Bill, her husband, and business partner. He was always running late and this day was no different.
When Bill showed up, he seemed distracted and cut off Cheryl when she would start to share an opinion that differed with his.
Bill was 72 and Cheryl 65. They had amassed a net worth of $14 million between their medical device company, real estate, and other assets. They had no debt and freedom to travel more and enjoy time together.
Typical Family Issues
They had two adult kids, a daughter, and a son, both married with kids of their own. Their daughter, Jennifer, was involved in the business and their son, Peter, was not. Jennifer was capable of running the business while Bill was away. Bill was too much of a control freak, though, to allow that to happen for very long.
Jennifer and Peter were not on speaking terms. Jennifer was unhappy that Peter seemed to have a sense of entitlement about his share of the family business while doing no actual work; Peter felt like Jennifer always talked down to him.
Things had gotten so bad that they could not even spend holidays together. The cousins weren’t allowed to see each other even though they were in a pretty close age range. The kids didn’t understand why their families were at odds.
I knew Bill well enough to know that he was a loving husband. The gruff tone was part of his personality. It belied his true sentiments towards his wife. Bill regularly bragged about his wife to me many times before I had even met her. He always felt blessed to have married someone so caring, supportive, and responsible.
Most Common Reason For Strife In Couples
What was the issue that could create such emotional tension within 15 minutes of conversation? No surprise to most people reading this.
Disagreements about money. They had enough money. Their budget was not particularly constrained.
The issue was that Bill’s hard-charging, risk-chasing style contrasted with Cheryl’s desire to reduce risk and transition to less risk and, in her estimation, stress.
Business Insider cites money as the number 1 thing that couples fight about. So Bill and Cheryl weren’t going through something unique.
Nor was the strife between Peter and Jennifer uncommon. These dynamics can take place in any family.
All families have issues.
Family Business Makes Things More Complicated
What is different about closely held family businesses is the number of variables involved. There are many more ways for family strife to manifest when the family owns a business enterprise.
As an example, on the topic of inheritance fairness alone: If most of a couple’s assets are in investment accounts, dividing things up is pretty easy.
It’s not difficult to be fair.
You take the accounts and divide them up equally.
Simple as that.
Other challenges typical in family enterprises:
Unique family dynamics
Resistance to change
Family members wear multiple hats
Fairness & equality
Disparate vision & goals
Poor or lack of communication
Need for specialized governance
Variety of assets that need to be managed and shared
There are many more considerations in a family enterprise; even a relatively small one: How to prepare the next generation to take over leadership of the asset. How to manage family dynamics and conflicts. Division and transition of assets. How and where to transition the business. Should it go to family, employees, outside buyers, or some combination thereof?
What Ultimately Went Wrong
Cutting back to my planning conversation to Bill and Cheryl, there was no brilliant recovery on my part on this day. Cheryl completely melted down and Bill looked at me like it was my fault. It was a ‘fail’ in the sense that the planning was not going to move forward in a productive way.
What could I have done better? A planner needs to tackle difficult topics with clients and we’re not therapists.
How could I have handled things in a more skillful way that would have empowered Bill and Cheryl to both feel heard and to move them forward in taking on some necessary and difficult tasks?
How To Get It Right
As it turns out, that was a very important day for my development as a planner for closely held businesses. It has changed the way I approach a financial planning engagement with a business owner and the family.
There is going to be strife — Accept this. Don’t be surprised when it manifests. Family businesses are comprised of families. There are different personalities, styles, generations, and preferences. Encourage open communication about problems.
Slow down the process — My business model needed to change in order to do this. I had to realize the level of complexity involved in a family enterprise was not conducive to the old financial planning model of getting the data as quickly and efficiently as possible so that I could move on to the analysis. In my Bill and Cheryl example, what I would do differently is interview them separately first. I would also get buy-in to interview Jennifer and Peter separately. In these scenarios, I explain to the business owner that the kids are not in control but it’s to the business owner’s benefit that I seek all relevant parties’ input. This takes time.
Collaborate — Early and often. You are not a therapist. You cannot be expected to get out of your lane into areas that you’re not trained or equipped to handle. Set the expectation from the start that you can quarterback the collaborative team but cannot possibly fulfill all roles.
Personal & Financial Goals Come First — Business owners will often push me to get into the strategic business goals right away. This is a mistake. If I take the bait, at some later time, there will be a conversation that halts the planning like the one I described with Bill and Cheryl. Why? Because the personal and financial goals were not in alignment first. The alignment of personal and financial goals is an absolute necessity. It is the foundation that everything else will be built on.
If Alignment Is Missing, Things Will Get Derailed
I’m not the only advisor who has seen hundreds if not thousands of hours of work go down the drain at the eleventh hour. If there is no alignment in the personal and financial and the owner cancels the sale of their business when it’s almost past the finish line.
Are you a CPA, attorney, or advisor who works with closely held family businesses?
Are you an owner or active in the management of a family business?
How have you managed some of these delicate situations? What techniques have you learned to successfully navigate these challenges?