It’s About Identity…

During the 2016 Global Emerging Leaders in Family Enterprise program, we invited Sharna Goldseker of 21/64 to help us explore “Family, Wealth and Values.” In closing, she shared this, which has continued to resonate with me.

“I used to believe the important things for the next generation to learn were how to manage money or to be entrepreneurial in business. Ultimately what I learned is it’s about identity; considering upon whose shoulders am I standing, what is my legacy? And then adding in, who am I, what do I value? Then adding those two elements together to consider what can I do to think about making a difference in the world, to make change? Those are the components of identity and the important building blocks to learn in order to live with purpose.”

Sharna Goldseker, Executive Director, 21/64

Registration for the 2017 Global Emerging Leaders in Family Enterprise program is now open.

An Interview with Holly Isdale (’86) on Cyber Safe Families

Cornell Family Business Scholar Holly Isdale (’86) recently shared her insights on “Cyber Safe Families” based on the work she has done with many businesses. Originally shared on The Practitioner on September 28, 2016. She is interviewed here by Lanie Jordan, formerly of Wilkes University.

Access the podcast here. Cyber Safe Families

About the contributors

Holly IsdaleHolly Isdale is a tax attorney by training and has spent the last two decades advising wealthy families on estate, financial and investment matters. Holly founded Wealthaven in 2010 to serve as an outsourced, full service, family office for some families and handle strategic projects as needed for other clients. Holly received her B.A., cum laude, from Cornell University in 1986 and her J.D. from Boston University School of Law in 1990. She is a noted speaker on a wide variety of topics around investment and financial planning, digital death, gamification, and the importance of playtime. She has been widely quoted in the financial and mainstream media. Holly can be reached at holly.isdale@wealthaven.com.

Lanie Jordan, FFI Fellow, is the former executive director of of the Sidhu School of Business at Wilkes University and a member of The Practitioner editorial committee

Announcing the Cornell Family Business Fellows and Scholars

The Smith Family Business Initiative is pleased to announce our first cohort of the Cornell Family Business Fellows and Scholars. The SFBI Faculty Fellows represent current Cornell faculty members engaged in research or collaborative projects related to family enterprise. The Academic and Practitioner Scholars are faculty members and practitioners from beyond the Cornell ecosystem. The selection of these scholars recognizes their breadth of experience, knowledge and understanding of family business, family dynamics and business success. Collectively, these individuals are helping to create curriculum, programs and opportunities for our students, alumni and network of global family-owned enterprises.

For a complete listing of the Smith Family Business Initiative Fellows and Scholars, including individual biographies, please visit the SFBI Fellows and Scholars webpage.

 

The Biggest Threat To Family Businesses?

ropesAt Cornell’s second annual Families in Business Conference, we were excited to hear from Cornell alumnus and founding partner of Continuity Family Business Consulting Doug Baumoel (’78). Doug discussed his book, Deconstructing Conflict: Understanding Family Business, Shared Wealth and Power, as well as participated in a panel on cybersecurity threats to the structure of a family business. Below, Doug shares his insights:

“Family businesses get a raw deal. Often viewed as the poor cousin to ‘real’ businesses, most everyone I meet has a story of the disastrous end of a family business – replete with the family war over the business. Researchers point out that most family businesses ‘fail’ to pass to the next generation. With all these strikes against them, you would be justified in thinking that family business is dysfunctional business.

The truth is that family businesses are not dysfunctional; they’re just different. 

The family business system is the oldest and most widely employed type of business.  When compared to non-family enterprise, the family business is actually more robust. (After all, fully 80% of the Fortune 500 companies are no longer around). They face the same risks as other businesses, answer to the same market forces and still need good business plans and ample capital. And because many family businesses are small businesses that have an inherently higher failure rate due to thin capitalization, statistics against them may seem over-weighted.

So why do we single out family firms for their failure rate?

Just because a family business ‘fails’ to transition to the next generation doesn’t mean that it has indeed ‘failed’.  Many family businesses do not make it to the next generation for good reason.  Like their non-family owned counterparts, they may have been sold for a good price, enabling the family to redeploy their assets in new and creative ways.

Not surprising, however, the biggest threat unique to family business is poorly managed conflict.  These struggles stem from the high degree of interdependence among family stakeholders that is inherent in family businesses. With family members potentially active in so many roles (such as employee, shareholder, director), overlapping and competing interests abound.  The potential for conflict is woven into the very fabric of the family business.

What makes stakeholder conflict even more of a threat to the family business is that when conflict arises, it is rarely a simple dispute over something simple and negotiable. Roles in a family business often connect strongly to identity or sense of self. A stakeholder may believe that he/she was groomed for the top-slot at the firm or that ownership in the family business is an essential part of who they are. If these roles are threatened, stakeholders will go to great lengths to defend them.

Recently, Cornell and the Smith Family Business Initiative held their annual Cornell Families in Business conference.  I was honored to be a sponsor and moderator of a panel on the Implications of Trust, Fraud and Cybersecurity for Family Business.  While all businesses face these threats, they take on a whole new dimension when coupled with family stakeholders.  In addition to security threats from outside the company, family businesses are subject to security threats from the inside; from family members fighting over control, position and wealth.  When family members feel that their role in the business is threatened they routinely snoop on each other’s email and hack into each other’s computers in an attempt to further their own agenda.  The panel explored both common and unique security threats that family businesses face and the panelists provided helpful tips, such as the use of Password Vaults, on how these threats can be managed.

Understanding the nature of conflict in family business and developing the ability to avoid, manage and recover from conflict is often the most important factor in achieving family business success. “

 

Embracing patience is key to creating an innovation culture

cornell-prof-allan-filipowiczNew executives can lead innovation at family firms by accepting failure as a necessary part of the innovation process, Cornell University innovation expert Allan Filipowicz said at a CKGSB-Cornell University event in New York.

“Innovation is going to be very, very slow,” said Professor Filipowicz, who is the Clinical Professor of Management and Organizations at the Samuel Curtis Johnson Graduate School of Management at Cornell. “You will do something, nothing will happen; you’ll do it again, nothing will happen. And so what happens is we give up, much too soon.”

Companies, he told an audience at the CKGSB Americas learning center, should focus more on process than outcome – no small task. “Process goals are a measure of effort,” Professor Filipowicz said. “We love measuring outcomes. We hate measuring effort.”

Professor Filipowicz’ lecture helped reinforce how family enterprises represent a growing force in the economies of China and other emerging markets. With family-owned businesses expected to represent nearly 40 percent of the world’s large enterprises by 2025, they also come with built-in challenges – developing global leaders for the future of the enterprise and sustaining wealth into the next generation and beyond.

Daniel G. Van Der Vliet, Executive Director of the Smith Family Business Initiative at Cornell, began the presentation by saying that in China and Latin America, it is estimated that 90 percent of businesses are family-owned. In India, 98 percent of businesses have family ownership. In the United States, 70 to 90 percent of businesses are family-owned.

If innovation is important to an emerging leader, then he or she must track daily and weekly how much effort is being put into developing innovation, Professor Filipowicz said. A leader needs to answer these questions: How much time have I spent setting low expectations? How much time have I spent giving people time autonomy? How much time have I spent developing psychological safety, developing a belief in one’s ability to get the job done?

Originally posted in: CKGSB-Cornell Session: Embracing Patience ‘Key’ to Creating an Innovation Culture

It’s Not What You Think: Five Myths About Family Business Conflict

All families, and particularly family business will face some level of conflict. While many will avoid conflict at all costs, often facing these challenges will have numerous positive outcomes. Continuity Partners and Deconstructing Conflict Co-Authors, Doug Baumoel (78) and Blair Trippe share some of their recent findings based on years of work in working with family businesses and dispel a few of the myths surrounding conflict.

Myth #1: A Family Business Experiencing Conflict Is “Dysfunctional”

It is only through being challenged by conflict that we learn, grow and advance as individuals, families, companies and societies. Therefore, a healthy family system processes conflict constantly. Well-managed conflict can lead to new approaches, innovative strategies, and resilience. In a family business, it is completely normal for deeply-caring individuals to struggle in coming to consensus over the governance, succession and growth of their enterprise. Sometimes, external factors that are beyond a family’s control can cause stress and conflict in their company. While there are no easy answers, it is absolutely possible for families to learn to manage family business conflict in constructive ways that ensure the success of their families – and their businesses.

Myth #2: A Family Business That Never Has Overt Conflict Is in Optimal Shape

The absence of overt conflict is often a cause for concern since it usually indicates that families are ignoring or avoiding difficult conversations because they worry that they will lead to disagreements. When families spend a lot of energy avoiding conflicts, it can often drain their enterprise of innovation and resilience, leaving them “stuck” in patterns that may no longer serve them well.

A stuck family system will miss valuable opportunities, because paralysis often prevents important decisions from being made (e.g. planning succession to the next generation, growing the business, adapting to new economic circumstances.) Furthermore, a stuck family can ultimately experience more severe strife and infighting than if they had acknowledged their differences earlier on and found ways to manage them.

Myth #3: Conflict at Work is Just About Work

Being family often complicates the management of conflict in business. In addition to managing the substantive business issues at hand, family members are trying to negotiate how they will stay together as a family in the process. Disputes in family enterprises are unique because these continuing relationships matter greatly, and parting ways is usually not an acceptable outcome for most family members.

Emotions run high in every family, and these emotions are amplified when a family experiences conflict over running the business. Sibling rivalry and complex struggles over power-sharing – along with rebellion – are all normal family processes that don’t show up in the average business, but they are common phenomena in family businesses. Ultimately, failing to acknowledge and manage the unique family aspect of these conflicts will lead to greater discord, and the wasting of precious business resources like time, money, human capital and the family’s good name.

Myth #4: Family Members are the Only Ones Suited to Understanding and Handling Their Conflicts

While family members are most-definitely the experts on what is going on in their family business, being stuck usually comes with limited ability to see beyond themselves and find creative ways to move forward. In these situations, a trusted outside party can often offer new ways of analyzing the data and looking at the big picture. Seeking outside help with assessing and managing family conflict can enable stakeholders to gain new understanding and perspectives on their conflicts and work together to find ways to move forward.

Myth #5: Family Business Conflicts Need to Be Severe to Benefit from Conflict Management Guidance

When families gather to brainstorm and problem-solve in less stressful times, they often can discuss more “loaded” topics and better plan how they might handle a situation when it unexpectedly arises. This is a golden opportunity for forward-thinking families to convene and use their strengths and talents to plan for the future. There are many strategies and tools that families can deploy to help them manage unanticipated conflict and ensure that their enterprise will run smoothly.

Reprinted with permission.