Dynamics of Family Business For the Professional Advisorchapters.onefpa.org/fpaofthetriangle/wp-content/... · 10/1/2017 · Consultants to Family and Privately-Held Businesses Objective:

Dynamics of Family Business

For the Professional Advisor

Henry Hutcheson

President October 12th, 2017

Confidential Family Business USA

WHY YOU ARE HERE Advisors who can demonstrate some

knowledge about the unique issues facing family businesses, and how they might be dealt with, will: Resonate stronger with potential clients Make you more effective with current clients


Consultants to Family and Privately-Held Businesses

Objective: Preserve Wealth and Maintain Family Harmony

Background in Psychology, Business, Family Business

MBA, Certified Family Business Advisor, Management Consultant

Family Business Correspondent for N&O and Charlotte Observer Adjunct Professor Campbell University Author: Dirty Little Secrets of Family Business


Available through: Hudson Booksellers Barnes & Noble.com Amazon.com AUDIO available through Audible

Good News or

Bad News?

THE RIFT— a family dynasty fights

over the future of Luray Caverns

By Ken Otterbourg March 14, 2013

Worth about $20 million, it is a family business run by a family that can’t get along.

They’ve been in U.S.

District Court in

Harrisonburg, where the

three youngest siblings

sued two of their older

sisters

Inside An $8 Billion Family Feud: Who Poisoned The Orkin Fortune?

Today RPC boasts a market cap hovering above $4.6 billion.

Kids suing Father and

Uncle

One lawyer has already

made $1 million

Forbes 9/29/2014 @ 6:00AM

http://www.forbes.com/forbes/

Good News

FIAT Capitalism

6 November, 2013 | By David Bain

The fifth-generation owner/manager of the 26th biggest company in the world wants capitalism to change.

“One of the benefits of family

businesses is they focus on all

stakeholders.”

John Elkann Chairman of Fiat

Perpetual Family Business

http://www.campdenfb.com/author/david-bain

• Founding • Door to Door • Studios/Demographics • Telemarketing • Family Business • 1st to 2nd • 2nd consolidate • 3rd (Hutcheson)

• New 3rd


America’s Richest Families – All Family Businesses Forbes July 21, 2014

What is the value of owning your own business?

Technology is eliminating high level and low level jobs

#1 Employment = Truck Driving (8.7M)

Truck drivers will be going away

Easy to sell, BUT...

a) Investing-new business

b) Lose Control

Keeping a Business = Keeping Control

Too Little Work for Too Many People?

80 to 90 Percent of all Businesses

78% New Jobs

62% Employment, 64% GDP ($6 T)

1/3 all “Fortune 500”

FBs Outperform Non-FBs---Why????

The Scope


33% will Successfully Pass Into “next” Generation

45% of CEOs That Plan Retire in 5 Years have thought about Succession

31% Have No Estate/Transfer Plans

85% Have ID’d Family Member Successor

25% Have Woman CEO – 31% Plan To – 3% Fortune

60% of CEOs Plan To Die In Office

86% Believe Their Business Will Remain Family Owned

The Facts

CASE


Family Business SYSTEM

Family Business

Ownership

A family business system is an interactive system and is interrelated and interdependent. A change in any one part of the system can have an impact on other parts of the system.


Dad Son

Conflict

Family Business USA

Mom

Dad Son

Triangulation

Mom

Dad Son

Triangulation

Resolution

1. An attitude of deserving privilege because of who you know or what you have, not what you have accomplished.

2. Entitlement creates: 1. Unfounded overconfidence 2. Reluctance to listen 3. Difficulty being accepted by those who

earned their way

Entitlement


Diddy Buys Son $360,000 Maybach for 16th Birthday

Talk about a sweet 16.

For his 16th birthday, Diddy gave his son Justin Dior Combs a brand-new silver Maybach (price tag: $360,000).

"I'm just ecstatic right now," Justin told UsMagazine.com at his party, which will be featured on an upcoming episode of MTV's My Super Sweet 16. "Words can't even describe how I feel. I'm so blessed and thankful for all of this.“

Diddy said his son's elaborate bash is in stark contrast to how he celebrated his 16th birthday back in the day.

"I don't think I even had a party!" Diddy told Us. "I think I had a cake -- and that was it!"

But Diddy said he was happy to open his wallet for Justin.

Diddy told Us he's so happy how his son "has grown and matured ... how well-behaved he is; how respectful of a kid he is. It just makes me proud.“

Us Weekly, January 25, 2010

Handle hearing “no”

Differentiate between wants and needs

Tolerate delayed gratification

Make Tradeoffs

Develop a healthy skepticism

Five Financial Values Make sure your children learn to:

Richard Morris, Jayne Pearl

Family Business Disrupters

N %

Financial 15 23%

Health 13 20%

Relationships/Conflict 25 39%

Aging 12 19%

Alter Ego 11 17%

Addictions 29 47%

Mental/Mood Disorder 30 47%

Confidential Source ReGeneration Partners

Must Have Common Goals

Key Roles MUST be Filled with Competence

Family Business Best Practices


Develop Family Mission Statement

Hold Regular Business Board Meetings

Establish a Family Council and Meet Regularly

Establish Sound Governance



Policies And Systems – i.e. Financial, Handbook, Ethics, Vacation, etc. (64% of Entering FB Members Do Not Have Qualifications Or Experience For Their Job)

Disciplined Approach

Agreements – Up To Date Shareholder, Buy/Sell, Succession (30% Have Written Succession Plan)

Board – Independent Advisors

Regular Meetings – Transparency

Governance


Shareholders

Directors

CEO

Family Council

BUSINESS FAMILY

Family “A”

Family “C”

Family “B”

Increase Shareholder Value Growth and Development

Family Business Governance

Create Your Own Family “Code of Conduct”



Be on time

Not globalize issues - i.e. you always, you never

Not engage in personal attacks

Not scream, yell, shout pound, point.

Not make threats to each other.

Recognize personal and business boundaries

Show honor and respect for each other

Actively participate in discussions

Practice the “Golden Rule”

Speak only for yourself and not bring others in as support for your ideas or agenda

Turn OFF cell phones

Practice active listening, not interrupt, hold our retorts until the other person has finished

Be brief and to the point

Be honest, forthright, candid

Focus on problem, issue or behavior, not individual

We Agree to:

Code Of Conduct - Sample


Family Business USA

Dedicated to Improving Communication



If I heard you correctly, you said

…………………

Is that Correct?

If Yes, then great, move on

If No, clarify using active listening

Active Listening


Improved Communication

Establish a Written Management Succession

Develop Your Own “Family Employment Policy”



1. Treat all kids fairly 2. Non-family employees 3. Family cohesion 4. Estate Planning

SUCCESSION: Top 4 Concerns


Develop the Successor

Independence

Competency

Communication

Estate Planning


Defining Responsibilities and Expectations

Financial Acumen

Strategy Development

Dad/Mom just won’t leave!

Monarch General Ambassador

Governor Inventor

Ernesto Poza, Family Business Confidential Family Business USA

Current Generation Gracefully stepping back

Next Generation Competently stepping up

Sib

lin

g

Co

op

era

tio

n?

Next Generation

Same Generation Strategies Siblings, Cousins, In-laws

1. Put Childhood in the Past

2. Define Roles and Responsibilities

3. Establish Communication system

4. Don’t let disagreements fester

5. Agree $ and Benefits inside and out

6. Understand each other’s goals

7. Incorporate some fun

Family Business USA


Questions?

Thank You!

Documents

Dynamics of Family Business For the Professional Advisorchapters.onefpa.org/fpaofthetriangle/wp-content/... · 10/1/2017 · Consultants to Family and Privately-Held Businesses Objective: