The Art of Conversation Between Generations - Part 3: The Cousin’s Forum, the “Second Interlocutor”

Govern your house and you will know how much cost firewood and rice; raise your children, and you'll know how much you owe your parents.

-Eastern proverb

In the first article of this series we describe that one of the main objectives when working with or in a family business is to help create conditions that allow effective communication between the leaders of today and tomorrow. In our case study, (the second-generation heirs to an empire of food distribution nationwide, the Woods brothers), while facing the challenge of a crisis related to the transfer of their shared patrimony to the next and third generation (who so far had shown no interest in participating in the company), decided to get to work and make a plan to organise the succession, involving their children, bringing in an external consultant that promised to help the Woods to create conditions that allow effective communication between the second and third generation, through a system of "family governance structures”. These conditions were imperative and help the members discuss, analyse and propose different scenarios to address the future of the heritage they have shared so far.

The center of decision-making would be a Family Council (a body cohesive in their decisions and clear goals, based on effective communication, mutual respect and recognition), and to regulate these decisions and provide a framework of agreements that would allow them to function properly, the Woods siblings decided to create a set of rules, named the Family Protocol. After that, they started to face the Cousin Consortium stage of the evolution of their family business with the creation of a scenario for leading their children into the succession of their patrimony: The Cousins Forum.

The main goal of this kind of body is to be a key instrument in the preparation of the next generation to be capable and responsible owners as members of a wealthy family. The Forum reports directly to the Family Council. Such preparation is usually set on two levels at the same time:

a) Forum Meetings: While having meetings in formal and well organized sessions addressing issues related to family governance and legacy, future shareholders learn to work together, to discuss and to reach conclusions in order to develop the abilities as a group for the next step of leadership of the family. Usually, Working Committees are created, in issues related with Philanthropy, Culture and Values, Management or Entrepreneurship.

b) Educational training: designed to improve the group skills and knowledge needed to be responsible owners and/or manager, in areas not covered by the formal education they could have received in their University or high level studies.

Although the training plan is specially designed for the next generation, the best value that a family can get of this kind of work, is that every member of the family (as many as the common sense suggests), participates in the educational training sessions, in order to generate the necessary conditions and safe environment for the establishment of conversations on specific issues related to the transmission of the family patrimony, as well as the orderly and secure exchange of concerns and expectations among generations.

Every dialogue should confirm that the family wants to truly continue on with this heritage in the future or, in the worst case scenario, lead solutions for those who don’t want to keep going on together as a result of this process. This work will then lay the plans, strategies and projects to be undertaken by the family to achieve their goals, following the rules and the governance structures they’ve created, letting the effective conversations between generations be a natural part of their lives, for the sake of balance and harmony of their heritage preservation and transmission.

Read part 1 and part 2 of the Series "The Art of Conversation Between Generations".

*The persons and names in this story are fictional

Originally published on line in Thrawat Maganzine. To access the article please clck here.

El Arte de las Conversaciones entre Generaciones (II). El primer interlocutor: La Generación de los Padres

Hay que atender no sólo a lo que cada uno dice,

sino a lo que siente y al motivo porque lo siente.

Marco Tulio Cicerón

Los hermanos Madera, segunda generación de herederos de un imperio de distribución de alimentos en todo el país, se enfrentan a su primera crisis relacionada con la transferencia a la siguiente generación del patrimonio que comparten. Juan, Luisa y Carlos Madera, decidieron ponerse a trabajar y hacer un plan para organizar la sucesión, con la participación de sus hijos, que hasta ahora no habían mostrado ningún interés en participar en la empresa.

Lo primero que hicieron fue entender que no podrían hacer frente a esta situación sin ayuda externa. Necesitaban un guía experimentado que les proporcionase claridad en los pasos que seguirían. Pensaron en Pedro, su octogenario padre ahora semi-retirado, como un posible candidato (después de todo, él había sido el arquitecto de la riqueza de la familia). Pero pronto desecharon esta idea o cualquier otra que incluyese la participación de otra persona que no garantizase la objetividad e imparcialidad que necesitaban.

Finalmente, después de evaluar algunas ofertas, se decidieron por un consultor externo que prometió ayudarlos a crear las condiciones que les permitiesen una comunicación efectiva entre la segunda y tercera generación, a través de un sistema de "estructuras de gobierno de la familia". El centro de la toma de decisiones sería el “Consejo de Familia”, un cuerpo en el que los tres hermanos se reunían para dirimir sus intereses relacionados con la preservación, el crecimiento y la transferencia de la riqueza compartida (una serie de importantes activos generado durante las últimas décadas, además de las acciones de la empresa familiar). Para regular estas decisiones y proporcionar un marco de acuerdos que les permitiesen funcionar correctamente, el Consejo de Familia decidió crear un conjunto de normas, llamado el "Protocolo Familiar", en la que los hermanos estuvieron de acuerdo en trabajar en la calidad de la comunicación y la armonía familiar, con el fin de regular las decisiones más importantes sobre los activos de la familia, la planificación de la sucesión a la siguiente generación, las reglas para entrar a la empresa, los acuerdos sobre los beneficios económicos y salarios de los miembros de la familia, el desarrollo de oportunidades para los miembros de la familia, el reconocimiento de la cultura y los valores familiares y orientar las acciones de filantropía, entre otras disposiciones.

La implementación de estos procesos en una empresa familiar no es sencillo ni está libre de obstáculos, pero el éxito se puede lograr siempre que se cumplan dos condiciones: En primer lugar, todos los acuerdos deben ser coherentes con la proyección de futuro (lo que se conoce como el "sueño compartido"). En segundo lugar, todas las decisiones en un Consejo de Familia deben basarse en el concepto del "consenso" que, a diferencia de la "unanimidad", aviva el debate y aumenta el compromiso del grupo. Para las familias que se enfrentan a esta situación, por lo general surge la siguiente pregunta: "¿Cuándo va a participar la próxima generación en este proceso?". La respuesta es siempre "Cuando la generación actual (los padres de la siguiente generación), esté lista". No es posible generar un programa que prepara a los futuros propietarios si los líderes actuales no tienen claros los objetivos y las reglas de compromiso para la próxima generación. Los problemas entre primos (tercera generación) por lo general se deben a problemas de relación entre sus padres (segunda generación). La mejor manera de lograr un plan de preparación para la segunda generación está en tener un Consejo de Familia que sea coherente en sus decisiones.

De este modo, a través de su Consejo de la Familia, los hermanos Madera, lograron conformar un foro que les permitió coordinar y al mismo tiempo separar las funciones de la familia y de la dirección de la compañía, lo que ayudó a fortalecer el papel de la Junta Directiva de la empresa familiar, centrándose de manera más eficiente en sus responsabilidades como administradores de la estrategia de la empresa. Pero todo esto sólo fue posible a través de la creación de un espacio exclusivamente dedicado a la conversación de temas familiares y patrimoniales, sobre la base de una comunicación eficaz y el respeto y el reconocimiento mutuo, con la conciencia entre los hermanos de que el liderazgo heredado de su padre ahora estaba dividido entre los ellos tres. Y precisamente, gracias al diseño de las estructuras de gobierno que la familia creó, la tercera generación pronto pudo contar con su propio espacio para el desarrollo y la preparación de esas conversaciones, bajo la dirección del Consejo de Familia.

The Art of Conversation Between Generations - Part 2: Introducing the “First Interlocutor” - The Parent’s Generation

-You must attend not only to what everyone says, but what their feelings are and why they feel them.

Marcus Tullius Cicero

The Woods brothers, second-generation heirs to an empire of food distribution nationwide, were facing their first crisis related to the transfer of their shared patrimony to the next and third generation. Charlie, Paul and Jean Woods, decided to get to work and make a plan to organise the succession, involving their children, who so far had shown no interest in participating in the company (watch the video below).

The first thing they did was understand they would be unable to tackle this situation without outside help. They required an experienced guide to provide them with clarity in the steps that would follow. They thought of their father as a possible candidate who now in his eighties was semi-retired, or at least as much as a founder ever retires. He had after all been the architect of the family wealth. The second generation soon discarded this idea or the notion of involving any other person who could not guarantee the objectivity and impartiality they needed.

Finally, after evaluating some offers, an external consultant promised to help the Woods to create conditions that allow effective communication between the second and third generation, through a system of "family governance structures”. The center of decision-making would be a Family Council, a body in which the three siblings would meet to settle their interests related to the preservation, growth and transfer of their shared family wealth (a number of important assets generated over the last few decades, apart from the shares of the family business). To regulate these decisions and provide a framework of agreements that would allow them to function properly, the Family Council decided to create a set of rules, named the “Family Protocol”, wherein the siblings agreed to regulate the most important decisions about the assets of the family, the succession planning to the next generation, rules for entering to the company, agreements on economic benefits and wages for family members, the family culture and values recognition, provide development opportunities for members of the family, ensuring the quality of communication and family harmony, and guiding the actions of family philanthropy.

Implementing such processes in the family business is neither simple nor free of setbacks, but success can be achieved provided two key conditions are fulfilled: First, all agreements must be consistent with the dream of the future (what is known as the "Shared Dream"). Secondly, all decision-making within a Family Council should be based on "consensus", which, unlike "unanimity", calms the debate and increases the group commitment. For families facing this situation, usually the following question arises: "When are we going to engage the next generation into this process?" The answer is always “Whenever the current leader generation (their parents) is ready”. It is not possible to generate a program that prepares future owners if the current leaders are not clear about the objectives and rules of engagement for the next generation. Problems between cousins (third generation) usually stem from relationship problems between their parents (second generation). The best way to achieve a training plan for the second generation is having a Family Council that is cohesive in their decisions and clear goals.

Thus, through their Family Council, the Woods siblings managed to shape a forum adding and separating the functions of the family and the company leadership, which helped to strengthen the role of the Board of Directors of the family business, focusing it efficiently on their responsibilities as administrator of the company strategy. But all this was only possible through the creation of a dedicated space for conversation about family and heritage issues, based on effective communication, mutual respect and recognition; with awareness among the siblings that their father's inherited leadership was now divided between the three of them. Due to the family governance structures the next generation would soon, under the direction of the Family Council, have its own space for development, preparation and dialogue.

*The persons and names in this story are fictional

See the promotional video here.

Originally published in Tharawat Magazine: http://www.tharawat-magazine.com/en/family-business-articles/next-gen/2058-the-art-of-conversation-between-generations-part-2