Differentiation and Developing Critical

Boundaries in the Family Enterprise Presented by

David Bork

Leslie Dashew

Sam LaneTHE ASPEN FAMILY BUSINESS GROUP

Family Firm Institute 20th Annual Conference

INTRODUCTION

•     INTRODUCTION AND PHILOSOPHICAL

PERSPECTIVE

DAVID BORK

BOUNDARIES AND DIFFERENTIATION

•    CONCEPTS AND

APPLICATION

LESLIE DASHEW

Boundaries and Family Business

• Intrapersonal Boundaries

• Interpersonal Boundaries

• Subsystem Boundaries

• Boundaries Between Systems

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Intrapersonal Boundaries

• Separation and Individuation

• Differentiation: – Non-reactivity– Behaving with integrity– Clarity of self

“It’s hard to find your place in the sun in the shade of the family tree!”

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Permeability Of Boundaries

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Interpersonal Boundaries

• Agreed upon boundaries between people– What I agree to do; what I expect of you…

• Defined, at times, as roles– CEO/Employee– Parent/Child– Owner/Operator

• Often contextual – In the business, I am…– At home, I am….

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Family Triangles

Communication should happen directly between individuals, not through others.

Me

SisterBrother

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Family Business RolesBoundaries Between Roles

OwnershipFamily

Business

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Overlapping System

Family (sub) System1. Emotion-focused2. Inward oriented3. Minimizes change4. Unconditional acceptance

Tasks:NurtureDevelop self-esteemGrow adults

Business (Sub) System1. Rational-focused2. Outward oriented3. Requires change4. Conditional acceptance

TasksGenerate profitsDevelop skills

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Boundaries Within The Family

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Boundary: Family vs. Community

• Privacy within the family

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Managing Boundaries

• Border Guards

• Passports

• International Treaties

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TOOLS TO MANAGE BOUNDARIES

SAM LANE

TOOLS

Procedures, Structures and Agreements

that develop and promote healthy

boundaries and pre-negotiate areas of

potential conflict. They promote positive

emotional interactions based upon

principle-centered governance and counter

the negative impact of conflictual

interactions in a personality-centered

system. Taken together these agreements

form the “Family Constitution”.ASPEN FAMILYBUSINESS GROUP

MANAGEMENT / OWNERSHIP TOOLS

• Succession Plan

• Governance Structure

• Family Mission Statement

• Family Meetings

• Family Employment Policy

• Dividend / Distribution Plan

• Developmental Goals

• Shareholder / Buy - Sell Agreement

• Estate Plan

• Shareholder Position Paper

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PRESIDENTF1

F2 M2M1

BOARD OF DIRECTORSF1 F2

SHAREHOLDERSF1 - B2 - F2 - B2 -

F3

NON-FAMILYMEMBERS

FAMILYCOUNCIL

B1

B5

B3

B7

B4

B6

B6

B7

BOUNDARIESB1 - Shareholders Position Paper - Distribution PolicyB2 - Buy-Sell AgreementB3 - Board Membership Criteria - Family Mission StatementB4 - Business Plan - Succession Plan - Family Employment PolicyB5 - Family Council CriteriaB6 - Employment AgreementB7 - Employment Policy - Business Plan

GOVERNANCE STRUCTURE

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FAMILY EMPLOYMENT POLICY

FAMILY ENTERPRISE

POTENTIALFAMILY EMPLOYEE

BOUNDARY

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FAMILY EMPLOYMENT POLICY

• Who can work For the business?

• Preparation required - Monitoring

• Entry decision process

• Compensation

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FAMILY DISTRIBUTION AND COMPENSATION POLICY

FAMILY ENTERPRISE

FAMILY OWNER

EMPLOYEE

FAMILY OWNERBOARD

MEMBER

FAMILY OWNER

BOUNDARY

FAMILY NON-OWNEREMPLOYEE

BBB

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DISTRIBUTION POLICY

•Who Decides?

•Based on “Free Cash Flow”

– ”Cascading Pools of Cash”

A BUSINESS PLAN:

•Financial Projections - 5 Year

•Migrate or Aggregate Value

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FAMILY COMPENSATION POLICY

• Concept: “Fair Market Value”

• Who Makes the Decision?

• Performance Based?

• How Administered?

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BUY-SELL AGREEMENT

FAMILY ENTERPRISE

ADULT FAMILY

MEMBERS

NON-FAMILY BOARD

MEMBERSSPOUSES

BOUNDARY

YOUNGERFAMILY

MEMBERS B B B

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SHAREHOLDER / BUY-SELL AGREEMENT

• Anticipates and pre-negotiates areas of potential conflict

• Balance financial, business and family factors

• Ownership proliferation issues

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