Learn. Explore. Grow.

To maintain a business in the family past the infamous third generation (“the first generation creates, the second grows, the third dissipates,” as the saying goes), it is crucial to have a shared vision, maintain open lines of communication among a wide range of stakeholders, and address concerns about perceived fairness in a transparent manner.

The members of the fifth generation (Gen5) were already in their twenties when a multi-billion dollar construction corporation asked for assistance in making the transition from the third generation (Gen3) to the fourth (Gen4). Historically, only males in the family had jobs at the company, but several female Gen5 family members were close to earning master’s degrees in business-related fields and were eager to join.

Two Gen3 cousins who survived a turbulent transition from Gen2 maintained ownership in equal shares; the primary source of contention concerned non-working owners who lobbied for more significant dividends and were not happy with the working family owners who also got wages (fair according to market norms). Family owners who were not in the workforce at the time want a greater return on their investment. Working-family owners favored expanding the company for ensuing family generations and devoted, intergenerational staff (some valued employees had grandparents who worked for the firm). After bitter debate and legal fighting, the family ownership tree was cut by purchasing out non-working members, but the act irreparably harmed ties.

To prevent future issues, the family decided to make it a policy that only working family members may become owners, advised by technical consultants without a thorough understanding of family business dynamics.

Main themes and interventions

• The family’s incorrect assumption that a technical policy (allowing only working families to hold shares) would resolve future transition issues was the key learning from the previous Gen2-to-Gen3 transition. Instead, top management brought in a new, inexperienced in-law, which led to a lot of tension.
• Instead of selecting senior management candidates based only on their potential to contribute to the firm, fairness had been defined as allowing each owner (family line) to choose members of their own families for such positions.
• Cliff led conversations on this subject, some of which became rather hot. The family decided that eliminating arbitrary quotas and turning the company into a meritocracy (where individuals are employed and promoted based on ability) would be in everyone’s best interests.
• He assisted the family members in articulating their desire for the company’s income to be reinvested in its expansion. He encouraged the creation of a dividend policy so that shareholders would know precisely when they might access liquid funds.
• Cliff assisted the family in comprehending the difficulty of blending family and company when they felt humiliated about the level of friction and its repercussions on the business and non-family team members. Although there are many crucial technical factors to consider, they must be combined with family dynamics interventions and forms of governance that are distinctive to families.
• A large portion of Cliff’s work with the family consisted of facilitating family gatherings with creative activities to aid in expressing a shared vision and essential guiding principles for current and future generations.
• Cliff worked with them to ascertain if there was a shared desire for the family to work together or operate a business.
• He visited with them in several groups, including spouses, the next generation over the age of 16, working families, non-working families, and spouses.
• Cliff engaged the board of directors and helped the family clarify roles, duties, development plans, ownership rights and obligations.
• Women were not expected to work in previous generations, particularly in the family-run construction industry. Still, everyone engaged acknowledged that women were respected as family members and employees. With Gen5, Cliff worked on the family’s aim to provide chances for women with the necessary education and skills.

In each situation, parenting presents both possibilities and problems. Parenting becomes more complicated when a family has accumulated substantial wealth. The optimum way to start preparing the next generation of stewards is for couples to do the right things before they have children, or at the very least, throughout the first few years of a child’s life.

There are numerous pleasant and effective methods to start the discussion and set realistic expectations, which substantially aid in preventing difficulties, whether you do it at that age or later in childhood, in the adolescent years, or later in life. A crucial point for parents to remember is that this is a long-term process of healthy growth of children and the family as a whole – in a particular environment.

Cliff Locks has specialized knowledge in both the developing sector of family business and wealth creation, as well as child development and parenting. Each family client of His Purposeful Legacy Family Project receives a unique design.

A couple from a central Europe nation fell in love, married, and then relocated to the US to pursue further education. They put forth much effort and finished their chemical engineering graduate study. They successfully gainedemployment in their fields, had modest lives, and saved money. They established a business after seeing a chance to provide a unique service in their industry. It considerably expanded over eight years, and they were able to sell it $40MM in the process.

Main themes and interventions

• Briefly introduce the dynamics of family wealth (historically and current practices).
• Create a genogram (family tree chart) to learn about the genealogy and highlight noteworthy family tales to tell the kids.
• To customize the project, consider the kids’ maturity and developmental stage.
• Learn the qualifications of the advisors to the family, their areas of specialization, and their prior initiatives to include the next generation.
• Encourage parents to draft a Will to discuss with their kids subsequently.
• Teach the parents how to politely describe their motivation for contacting Cliff. Cliff soothed their anxiety by educating and supporting them.
• The legacy family project was well received by the children, who were eager to meet Cliff and find out more.
• Early sessions with parents and children focused on explaining the process as an ongoing endeavor to ensure that family money supports family values.
• Sharing Will as a heartfelt family event.
• Creative activities helped identify personal and familial values and turn them into mission and vision statements.
• The family explored human, social, cultural and financial capital, family purpose, humanitarian work, faith, socioeconomic differences and employment expectations.
• Cliff created situational challenges to encourage family discussion about potential future scenarios.
• Educational sessions brought family members and advisers together to develop a collaborative mentality and mentoring connections for the future generation.

The process of assisting a family selling their company involves a wide range of different and essential specialists. Many components need technical expertise, which necessitates the teamwork of accountants, attorneys, merger and acquisition experts, financial consultants, and other professionals. Even when other specialists have expertly handled more technical aspects, the interaction of family dynamics/relationships with family business/wealth might thwart a profitable sale.

This is because family dynamics/relationships and family wealth are interdependent. Intelligent professionals seek advice and assistance from family facilitation specialists.

For several years, Cliff and a well-known acquisition and merger (M&A) company had a continuing connection, and as their confidence grew, they contacted out on behalf of a client. To be ready to sell their company, two brothers who had built a very prosperous marketing corporation contacted the M&A firm more than a year prior. They had possible purchasers at this time, and the market was ready to sell. The boys were unable to continue because they were trapped.

The main themes and interventions were

• Cliff and one of the M&A business partners had a short phone conversation, during which Cliff offered an hour-long video conference with the partner or two brothers.
• They understood the history of their relationship: the elder brother had a master’s degree, while the younger did not complete college. They launched the company as equal partners and invested equal money.
• Cliff was able to ascertain that the brothers trusted one another, sincerely cared for one another, and were open to compromise.
• Cliff proposed arranging a four-hour meeting with the brothers after spending two hours alone with each brother.
• The younger brother was able to convey his brother’s complaints in a sympathetic manner and take responsibility for his difficulty speaking up during crucial business issues.
• Cliff debriefed the elder brother, who could now understand the experience appropriately and showed genuine concern and care for his younger brother.
• Cliff highlighted how the younger brother’s inability to speak up in crucial situations linked to an earlier painful experience.
• The elder brother prepared an apology and the brothers ultimately reconciled.
• They both decided it was time to sell the company, and Cliff gave them strategic strategies to describe how they would cooperate to accomplish the transaction.
• Being able to comprehend one another’s points of view was essential for healing and progress.

Immigrants, and in general all parents who work very hard to accumulate wealth, often want to see their offspring benefit from that wealth and own and manage it together. However, problems often ensue when there is a priority on minimizing taxes and less focus on finding out if the next generation wants to work together and has the interest and capability to take it on.

A Singapore immigrant couple came to New York City with nothing. The husband did menial labor, and the wife cleaned houses. They lived simply, worked hard, and saved harder. He learned to be a licensed electrician, and she developed a cleaning business with employees. His contracting business grew; he found a very inexpensive building to store supplies and later turned it into a supply shop for other electricians. In the same area of Manhattan, they began to buy inexpensive residential properties.

The children had peripheral experience managing the properties, and all went to college. When the children were in their late twenties and early thirties, the parents hired an expert in transitioning wealth from a strategic tax perspective. The children expressed concern that the siblings had varying levels of experience and interest in daily operations and suggested finding an expert.

Main themes and interventions

• Cliff interviewed the parents, the three siblings, and the spouse of the one married sibling.
• He brought the family together for an education and feedback meeting focused on basic needs and typical dynamics of family businesses.
• The siblings came to terms with the fact that two were very close and wanted to work and own together, while the third was more of a loner.
• Options were presented for alternate scenarios depending on how the siblings wanted to sort out owning and working together – or not.
• Cliff worked with the siblings to develop a vision and operational details, clarify roles and responsibilities, and develop compensation plans.
• They developed operating principles and a process for how decisions would be made.

When the next generation joins the business, they must focus on assessing their desire to own and lead in the future, along with specific milestones that, when reached, trigger transparent or agreed-upon progressive steps toward formal transition. Transitioning to a family business requires more than just occasionally saying in passing, “someday, this will all be yours.”

The younger generation also needs chances to work their way into positions with increased responsibility and strategic decision-making. It is crucial to actively cultivate, communicate often, and engage in activities that foster trust.

The father, mother, son, and daughter make up the family. The father had left a profitable accounting profession forty years before to take a chance on an innovative concept involving contemporary, high-quality, moderately priced office furniture. The son earned an MBA and worked for a renowned consulting company before joining the business. The daughter studied painting and later took administrative and accounting duties.

The family’s primary objective was to accomplish the ownership change while maintaining their sense of harmony.

Main themes and interventions

• The family accepted Cliff’s offer to bring a reliable business valuation firm and formalized a term sheet.
• Cliff advised the father on creating a strategy for a fulfilling life beyond the company, including golf, travel and fishing.
• He collaborated with the couple to identify shared interests and develop a plan for their future together following the sale.
• Cliff advised the mother to conduct a conversation with a Certified Financial Planner and helped the family outline achievable objectives and an investment strategy.
• Weekly one-on-one mentoring sessions helped the father sift through conflicting emotions about leaving his company.
• Cliff collaborated with the daughter on a growth plan including courses, seminars, conferences and individual learning.
• The family had a thorough transition plan after the engagement and was once again able to enjoy non-work-related family interactions.

Many excellent accountants, attorneys, wealth managers, and other allied professionals do a great job for their family clients. It can be hard to stand out when competing for business, and wealthy families and families with operating companies have special needs. When professionals ally themselves with outside expertise, they differentiate themselves from the competition and better connect with prospective family clients.

A well-known wealth manager who frequently appeared on national media was often vetted by large families with very significant assets but was not engaged with the frequency he wanted. He was looking for a way to set himself apart from others much like him. He was introduced to Cliff and explained his dilemma and desire to attract and engage more of these families.

Main themes and interventions

• Cliff provided education about family business/wealth dynamics and governance for this wealth management expert and his team.
• Cliff visited dinner events and noticed potential clients losing interest as they were overwhelmed by technical presentations.
• Cliff presented on issues these families were most concerned about: Will my wealth hurt my children? How much should I pass to them, and how? Can the next generation take over the business successfully? What will I do if I walk away from my business?
• Cliff trained the team to understand and address these issues on their own going forward.
• Cliff sat at tables, engaged potential clients deeply in conversation, and landed the firm a new client for the first time.