by Doug Gray | Dec 27, 2024 | Business, change, Consulting, family, Family Wealth, Leadership, strengths, Success
And why we should talk about it!
Yes, the pyramids and Great Wall are significant structures.
However, if I were to list the greatest wonders of the world, Tribalism would be #1. Think about it.
You and I do whatever we can to protect our loved ones. Their safety is critical. We may mortgage the house to protect our children who require healthcare. Our social groups reinforce whatever world views we think are accurate. Algorithms are as ancient as the walls in Jerusalem that separated tribesmen. Why assume that tribalism is always a bad thing?
Tribalism describes the social fabric in every community. In every corner of the world. We have dress codes that reinforce local norms. We have countless languages, and jargon, to reinforce who is in the group. And we have endless examples of battles for property and social honor. Those tribal histories create identity and protect shared values.
My family roots include a Scottish clan that brutally fought for marginal farmland and sheep. My wife’s roots include a different Scottish clan that brutally fought against my antecedents. And today we embrace our shared Scottish roots. When I travel abroad and hear someone with an American accent I’m immediately drawn to them. Tribalism at work. We quickly identify those who “in group” and those who are “out group.”
Psychologists (like me) know that those judgements occur in a millisecond. Thankfully! They enabled my antecedents to survive. And they enable you and I to quickly discern threats from allies.
Tribalism in extended families permits all of us to protect and distribute assets (That’s the second wonder of the world, on my list of two wonders. For a different post). We save money and property so that we can distribute it to our loved ones.
When families protect assets, they can compound over time. The Vanderbilt assets were dissolved within one generation amid squalor. The Rockefeller assets are wisely distributed to this day because the family and their advisors subscribe to a shared belief: wealth requires responsible stewardship and service to others.
All philanthropy is the result of tribalism at work. Look around your city. Look at the names on the buildings such as that museum, university, church, synagogue, stadium…. Look at the beautiful shared spaces like parks, libraries, with anonymous donors who want to support their legacy.
Recently I video-recorded some comments about tribalism and compounding assets with a Family Office client. They serve 80 wealthy families with complex needs. At root, most of them share the same values of integrity, asset preservation, legacy leadership, stewardship, philanthropy.
We don’t talk about family business succession because we don’t understand wealthy people. All family enterprises are built on tribalism.
Fears prevent us from understanding the greatest wealth transfer in human history, which is quietly successful, and happening today.
I wonder what would happen if we discussed the power of tribalism and compounding assets more openly? I can think of 4-5 people I’d like to learn from. How about you?
Schedule a 1:1 session with me soon!
by Doug Gray | Dec 24, 2024 | Business, Consulting, faith, family, Family Wealth, Leadership, strengths, Success
What interest should go first?
Family Capital is defined as durable family harmony and governance.
Financial Capital is any investable asset – time, treasure, tithe or truths.
I’m not sure which form of capital goes first.
But I am sure that values drive behaviors. We love our children, and we would take a leave from work to care for our children. Right?
Recently one of my clients shared a story of a family that did just that. They rallied around a 2-year old fighting cancer. They re-designed work loads and scheduled care givers. They pooled money to support the healthcare costs. And last week they rang the bell- to celebrate! The nurses lined the hallway. The neighbors lined the street. The grandparents drove the car. The parents waved to neighbors and protected their immune-compromised child from any risks. Values drive our behaviors.
I am also sure that most families share the same values: integrity, asset preservation, legacy stewardship, philanthropy, responsible service to others.
When I directed a non-profit summer camp program at a Quaker School near Washington, DC, I saw those values every day. Parents invested as much as possible to provide more opportunities for their children. That program grew over 800% because of their shared values.
Many of those parents struggled to support their children. They wanted to support their family capital. And they had limited financial capital. Just like you and I.
My experience is that most families struggle with financial literacy because they don’t discuss financial capital enough. There is an endless need for family meetings to discuss cash flow and investing.
When our children were in Middle School and High School we had Sunday evening meetings after dinner to discuss the week, and financial matters. They were short meetings. The children led parts of them. They learned to live below their means. They learned that what their friends posted on social media was not always true. They learned to invest in compounding assets.
Now I facilitate family meetings for clients. On Tuesday night I facilitated another virtual 90-minute family meeting. The patriarch, matriarch and a sister represented the Elders. The Next Gens included 3 children aged 28-40 and one spouse. Three wealth advisors provided content on retirement and investing options. My role was to encourage the Next Gens to ask questions about Roths, IRAs, compounding, employee matching… everything needed for them to make more informed decisions.
That was their second educational session and we will have at least two more in the next 4 months. One breakthrough was when the daughter, newly divorced and single, realized more options from her employee match. Another breakthrough was when one of the sons realized that as an independent contractor doing work for the family business, he needed to contribute more to his pretax options.
As the children shared their takeaways the father was glowing with delight.
Every Elder wants their children to make smarter financial decisions.
Maybe Family Capital and Financial Capital go hand in hand.
Any thoughts?
by Doug Gray | Dec 20, 2024 | Business, Coaching, Consulting, Financial Professionals, Leadership, Managers, Meetings, money, organizational leadership, strengths, Success
… that ANYONE should avoid
A grey-haired patriarch recently told me, “I love my kids and grandkids. But I don’t trust their ability to manage my money when I’m gone. My lawyer tells me that I need to restrict their access. What do you recommend?”
This Family Business Chaos myth assumes:
- That fears motivate most human behaviors
- That Elders need to restrict access to financial assets
- That the Next Gen family members are unable to manage money
- That advisors can recommend effective solutions
How silly.
Tragically, I’ve met “Family Business Consultants” who boast about $100,000 annual retainers to “manage the process.” They presume that family business leaders are inherently unstable, dysfunctional, heading toward chaos. With a wink they say, “And who knows when you will need me?”
How tragic and silly.
I call it the Family Business Chaos myth. In future posts I’ll share some more related myths. In this post, let’s look at each of these 4 statements in turn.
- Fears do motivate most human behaviors. When we are hungry we eat. When we are threatened we fight. When we are confused or uninformed we create stories to “fill in the silence.” I recently heard about two Elders who anticipated a visit from their niece, whom they had not seen in 15 years. They created stories to explain the visit, from “she must have cancer” to “her husband may have abused her.”
In the same way, Elders often create stories to explain their kids and grandkids. It’s a delightful, ancient past time! When I visit Elders they may entertain me with stories, just as we drink lemonade on the porch. They often voice fears such as “she will never find a man who appreciates her” or “he couldn’t make money if we served it on a golden platter.” Those stories are entertaining. But they may be downright silly.
- That idea that Elders need to restrict access to financial assets is ancient, and often based on some local precedent. We all repeat stories that reinforce our biased beliefs. Have you heard about our neighbor named Bubba who received a trust fund when he turned 21, then became an opioid addict? Confirmation bias occurs when we repeat desired beliefs. The fact is that most people with access to money learn to live below their means. They practice financial literacy.
Restricted access to wealth, or any resource, does not accelerate social change. In fact, restricted access can imprison people. Look at global slavery, work conditions, oppression of women or poverty. Restricted access may cause violence. Look at global divorce, broken families, suicides, loneliness, drug abuse. Instead, what if wealth advisors actually shared their knowledge in a series of educational sessions? What if digital courses encouraged Next Gen leaders to ask questions about index funds, incentive trusts, donor assisted funds, IRAs, retirement, employee matches?
The #1 web browser is Google because people search for information. The #2 web browser is YouTube, because people search for answers. And they are both owned by Alphabet. The fact is that Next Gens are digitally trusting, better educated than many Elders, and often want to develop more financial literacy. Just ask them!
- The notion that Next Gen family members are unable to manage money is based on ignorance. Throughout recorded history, in every corner of the world, most assets are quietly transferred to the Next Generation. (Also called the Rising Generation, like a Rising Tide or a tsunami). If Elders are not able to teach responsible wealth management, then other advisors can do so. One positive outcome from the Certified Financial Professional (CFP) designation is that wealth advisors are better self-managed to actually serve their client interests. For many decades “financial managers” were incentivized by higher commission fees or transactional incentives from their product managers.
Throughout my career I’ve taught people how to manage their precious time, money, treasures and talents. Nothing is more important. Perhaps anyone reading or sharing this article shares that same commitment.
Teaching financial literacy assumes that Elders and Next Gens are willing to learn. When I facilitate family meetings, I encourage the Next Gens to ask questions, because curiosity is the currency of learning. When they ask questions, the wealth advisors can share resources. I also encourage the Elders to bite their tongues- which is difficult. They often want to share their values and knowledge. But our kids learn to swim from other adults, not from their parents. Our kids learn to golf from professionals, not from their parents. In the same way, when Next Gen leaders ask questions and learn, the Elders smile with delight. They are practicing financial literacy and seeing that “light in their eyes” when their children and grandchildren actually learn.
- We want to believe that advisors can recommend effective solutions because we want to trust “experts.” We go to physicians when we require healthcare, and they diagnose and treat us. We go to lawyers when we require asset transaction or protection. For many years, when I asked Google “Can you provide some business consulting?” it replied “Not at this time.” Now over 40% of my clients use ChatGBT for business consulting. Immediately. I have copied responses from one platform, like Claude, to ask other platforms, like Inflection, to provide more details. And recent studies confirm that some AI platforms demonstrate more empathy than “professionals.”
Let’s assume that advisors using AI will be more effective than those not using AI. And they will become even more effective next month. And every month thereafter. The best advisors are already using AI to provide more recommendations than ever for their clients. In seconds. Converging technologies, such as healthcare and AI consulting, will increase in power and provide even more value. Accurately. Imagine an empathic robot that suggests how Elders can bite their tongues. Imagine a hologram of the founders that can explain the values and challenges faced 50 years ago. Imagine a family meeting with 5 generations of healthy, opinionated owners instead of 3 generations.
Now imagine that one “family business consultant” can serve your legacy needs. How silly.
The example of the $100,000 annual retainer from that winking “family business consultant” who says, “you never know when you may need me” could be a waste of money.
My experience is that the presumption that family business leaders are inherently unstable, dysfunctional, heading toward chaos is downright silly. It may be lucrative for those using retainers. But it ignores the reality that family business leaders can flourish.
Yes, I’ll address HOW to flourish in a series of future posts. Please share this post with anyone who might appreciate it.
And add your thoughts or comments on this post about the Family Business Chaos myth? This could become a discussion.
Schedule a 1:1 with me today.
by Doug Gray | Dec 19, 2024 | Business, change, Coaching, Consulting, Family Wealth, Financial Professionals, Leadership, Personal Development, Uncategorized
… and Succession Facts
You know the myth: Business succession is difficult and full of conflicts.
The myth is that outrageous Hollywood movies like Succession, The Godfather, Dallas or Dynasty are the norm. The myth is that tax advisors are never able to minimize taxation, that estate attorneys are well intentioned but haphazard, that more wealth leads to more conflict.
The fact is that most wealth transitions occur quietly when there is shared understanding of decision making. That’s called governance.
Good governance is the reality for ALL of my clients- or they wouldn’t hire me.
Good governance can be taught and developed.
Let’s start with two definitions. Then I’ll share 4 steps that really work.
There are two types of conflict: Interpersonal conflict is usually bad, and Task conflict is usually good.
Interpersonal conflict is based on emotions and should be managed carefully, even if you dislike that cousin who just said something outrageous. But how do we self-manage? We are emotional animals driven by fears. Threats are everywhere. !Right?! Behavioral psychology research confirms that we think faster or slower depending on the stimulus and the situation. When I’m inclined to speak impulsively, I often massage the back of my head. Why? Because I want to slow down, think, and respond with care. We can all practice self-management. The oldest part of our brain is in the back of our skull. The prefrontal cortex, our executive center, is in the front of our brains. So, on good days, we practice self-managing to avoid interpersonal conflicts. (Or not…)
Task conflict is based on different understandings of information or roles. When one cousin wants to invest in a new digital marketing program, and another cousin wants to invest in a new building, they will have task conflict. Task conflict is usually good because it may lead to innovations. I define innovation as “new ideas applied.” One reason for agendas and information packets before board meetings or family meetings, is to share information so that the participants can make smarter, more informed decisions. There can still be emotional moments- full of drama- but the focus of the meeting is on decision-making to address the task conflicts.
One reason for a facilitator with expertise in behavioral psychology (like me) is to minimize the interpersonal conflict and maximize the task conflicts.
As a species we all want to create order out of chaos. That’s why we construct processes, and (occasionally) organize our closets. That’s why we ask experts for advice. When we require a healthcare assessment we expect nurses to collect data, so that physicians using AI can diagnose and treat our evolving needs. Right? When we require a transfer of assets we expect attorneys and wealth advisors to assess needs in a deep discovery process, then recommend next steps. Right?
I organize teams of advisors to serve families because I know what works. Holistic advising is here to stay. And my clients deserve a team of experts. They also deserve a cleanly defined process. Something useful.
Here are the 4 steps in my Family Capital Discovery Process (based on my research and decades of consulting). Think of these as 4 phases in any engagement together. Notice the verbs in bold font. Perhaps you can adopt these?
a. Assess the current and future Family Enterprise ecosystem. I call these states the Now and the Next. Each ecosystem has unique history, values, legacy, stages, visions, and risks. A Family Business may generate assets, like a golden egg or a core business. And there may be multiple businesses over time, called a Family Enterprise. Think of Cargill or Walmart. Or think of the nearby franchise owner or car dealership in your city. Perhaps you know that over 60% of our GDP and job growth is driven by Family-Owned Businesses. How do you assess those unique strengths and weaknesses? Lately I’ve been using AI tools to accelerate that assessment process.
b. Develop a Family Manifesto that describes the Family Purpose and reasons for working with multiple advisors. Most families have a verbal understanding of what the founder, Elder or owners want. When that verbal understanding is written and shared, teams can evolve. For example, in a recent series of meetings, I conducted interviews with the Elders, took detailed notes, and shared their asset map with the Next Gens. They had never seen one list of their capital and financial assets- and there were plenty of rumors! Finally, they were able to draft a manifesto that accelerated succession planning. After decades of avoidance and mystery, they were finally able to make crucial investment decisions. Four branches – over 50 people- were relieved. When verbal or unstated assumptions become written and shared, family businesses can evolve. That’s called organizational maturity. And that process is not too difficult. Perhaps you know a family that can benefit from a Family Manifesto? Perhaps you can accelerate that process?
c. Define the four Family Focus Pillars. These are 4 critical questions used by families with over $50M in investable assets, who may have a Family Office to organize their legacy. (With credit to my friend Peter Vogel and his team at IMD). My experience is that these 4 questions can be useful for any family, with any amount of wealth. Perhaps you can answer them this weekend when you sit down for your next family dinner. Who we are? What do we own? How do we function? What is our impact on society and the environments and legacy? Yes, I’ve had these discussions with our nuclear family. Yes, you can do so also!
d. Organize more effective work guidelines with a team of advisors. We all need a little structure at times. We can’t play football without yard lines and goal posts. We can’t have a swim meet without lanes and a timing system. I recommend the least amount of structure in the moment. Families need to evolve. The reason I wrote the Success Playbook for Next Gen Family Business Leaders (2024) is because clients asked me to do so. It’s a playbook of books, structures, and great resources. Perhaps you know someone who needs a little structure or a loving nudge?
Bottom line: Now you know what works. Please share this post with those who would appreciate knowing what works.
- One fact is that succession usually happens quietly, without conflicts.
- Another fact is that good governance can be taught and developed.
- Another fact is that we can each minimize interpersonal conflicts and maximize task conflicts.
Any thoughts or comments?
Schedule your 1:1 session now here.
by Doug Gray | Jan 30, 2023 | Business, Coaching, Consulting, Family Wealth, Leadership, Personal Development, strengths, Success
There are many opinions about the top strengths of family business leaders.
One of my recent projects answers that question.
We (Kent Rhodes, Ed.D) and I recently developed and validated a 360 assessment process for next generation family business leaders. See www.AssessNextGen.com for details. We determined the top 50 items.
Our recent research found that the number 1, top strength, or Career Catalyst for family business leaders is Item 13: “Keeps confidences about family business wealth.”
Hmmm. On a scales of 1-10 how well does your family business keep confidences about family wealth? Here are some quick thoughts about how to apply this finding to your family enterprise or family business consulting.
For more details contact Doug Gray, Ph.D. at Gray@theFBCG.com or Kent Rhodes (Ed.D.) at Rhodes@theFBCG.com
Here is the transcript for your reference and sharing:
Video posted on Monday 1/16/23.
Link: https://www.linkedin.com/feed/update/urn:li:activity:7020809894287015936/
Title: What is the most important strength for Family Business leaders?
Description on YouTube post: A quick research update from www.AssessNextGen.com.
We can now answer that ancient question, “What is the most important strength of Family Business leaders?” Here are some tips for your family enterprise or consulting.
Transcript of video:
Sometimes people wonder, “what are the top competencies that family business leaders need?” And I’m happy to report some early results from the Assess Next Gen Family Business Leadership 360 assessment. This data is from 163 responses in the last few months. Here is the top score, in other words, the Career Catalyst, the behavior that is number one. I’ll give it to you and then I’m going to ask you to reflect on it.
The top score, the thing that our raters said others ought to do, is item number 13: “Keep confidences about the family business wealth.” To repeat, the most important strength of Family Business leaders is to “keep confidences about family business wealth.” What does that mean for you and your family or your enterprise?
I recently asked that question of a friend of mine, John Broons, who’s in Australia, who is pretty brilliant. And he said, “family wealth needs to be part of the conversation. It’s too often not discussed.”
I agree. We need to prepare for risks, like a transition or a succession or continuity or another line of business. And too often family members don’t have any idea of what’s next. There’s the core business. Perhaps there might be other lines of business, but family wealth conversations should definitely stay within the family.
Many of my clients have a charter or clause which states, “This is what we will say, and to whom.” They may have a conversation with the wealth advisor and estate attorney, and they may not have that conversation with somebody like me, a business consultant. The family members are the only ones who have access to that information. This is to protect them from journalists or politicians or inappropriate people seeking to learn something about that wealth. And often this confidentiality clause is written in an agreement. So we’re really talking about the two first words here…
Keep confidences. The most important strength of Family Business leaders is to keep confidences.
How do we keep confidences? I think we need to reinforce some useful guidelines. My clients require trust guidelines. Let me give you a quick example. One of my clients has eight G4 children on this side and four children on this other side. Potential conflicts, right? So they made an agreement in writing, and verbally reinforced it in every one of their meetings, about what could be shared with Doug as the family business consultant working with that G4 generation. My focus is on leadership development. Part of my job is to reinforce for them what’s confidential and what they need to keep confidential.
It’s a bit like driving a car when you’re driving down an unfamiliar road. You’ve got the white lines on the right side, the yellow lines on the left side. Like a good driver, we need to keep confidences. We don’t want to go to the edge of those lines. We don’t want to go off the center of the road. We certainly don’t want to go in the dirt or the gravel on the side.
So, my invitation is to keep confidences about family business wealth. Keep that conversation sacred. There you go. Tip of the moment.
For more details on the Assess Next Gen Leadership 360 process, see www.AssessNextGen.com
Or schedule me at contact us
by Doug Gray | Oct 1, 2020 | ISO 30414 Compliance, Leadership, Managers, organizational leadership
Guest author John R. Mattox, II, Ph.D., VP of People Analytics, Action Learning Associates, LLC
I doubt that your team is ready for the SEC. Let me explain.
The Securities and Exchange Commission (SEC) currently requires publicly traded companies to report ONLY ONE metric about human capital: number of employees. Human Capital is their biggest expense. For investors, that ONE METRIC does not provide adequate information about an organization’s most profitable intangible resource- human capital. For HR and business leaders, that one metric is NOT SUFFICIENT to monitor and manage the workforce effectively.
Human Capital metrics are essential to 1) manage the workforce and 2) drive business value.
On August 26, 2020 the SEC revised its rule on Human Capital Reporting. Anything that has a “material influence on the operations and profitability of the organization should be reported.”
Privately-owned businesses WILL follow publicly-traded organizations. They always have.
A wide range of human capital metrics will apply. Thankfully, there is a well-researched and comprehensive framework for measuring and reporting human capital metrics. We can help your team immediately.
The International Standards Organization, (ISO) which has improved product quality and consistency around the globe with ISO 9000, has developed a NEW standard for sharing meaningful measures of human capital called ISO 30414. You need to know about it.
The ISO 340414 standard outlines 11 areas that organizational leaders should measure and report on various aspects of your workforce. The purpose is to give investors insights into the people-side of the business. Equally as important, ISO 30414 gives the c-suite a standard set of metrics to monitor and manage to improve the organization.
What are the Human Capital Measures?
The ISO standard contains 11 general reporting areas which are listed below:
- Compliance and ethics
- Costs
- Diversity
- Leadership
- Organizational culture
- Organizational health, safety, and well-being
- Productivity
- Recruitment, mobility, and turnover
- Skills and capabilities
- Succession planning
- Workforce availability
Along with these reporting areas, the new ISO 30414 standard provides specific metrics and recommended ways to calculate each of these measures.
You can expect updates to definitions and calculations in the coming years as practitioners adopt and apply these ISO 30414 standards. We can help you.
Back to my question: Is Your Organization Prepared?
The question for you is simple: Are you ready? I doubt it.
Is your organization ready to adopt this ISO 30414 framework, measure your workforce, take action to improve your organization, and also report that information internally and externally as needed? I doubt it.
If you have an HR analytics team, there is a good possibility that you can analyze and report some or even all of these metrics. If you do not have an analytics team, your system administrators might be able to cabal together a representative set of measures. But you will still require our help.
Based on the LinkedIn Global Talent Trends study (2020), 85% of those surveyed think people analytics will be a dominant function in human resources in the coming years. Yet, 55% of those surveyed say they “still need help putting basic people analytics into practice.”
Nearly half of all organizations are not prepared for ISO 30414 human capital reporting.
Sadly, I doubt that your team or organization is ready for the SEC. We can help you.
Is Human Capital Reporting Required?
This is a simple question that has a complex answer. The current answer is “no.” The SEC does not require publicly traded companies to report anything more than the number of employees. However, other countries like Germany are requiring extensive HC reporting and they are basing their efforts on the ISO 30414 standard. Dave Vance, the Executive Director of the Center for Talent Reporting (www.centerfortalentreporting.org), recently published an article in CLO Magazine describing when the SEC will require human capital reporting. The current answer is that the SEC is likely to require publicly traded companies to report “material information”—meaning anything that an investor would find valuable when considering buying a security. That is very broad language and will likely encompass all Human Capital measures.
The ISO 30414 provides a useful framework, valuable metrics, and informative calculations and will likely serve as a guide for future organizations. We recommend that YOU adopt these measures today.
Conclusion
Most organizations are not prepared today to augment current public financial statements about the health of their company with information about human capital. However, information about “material influencers of the business including human capital” are now required by the SEC for publicly traded companies.
ALL organizations need to prepare for ISO 30414 compliance. You will soon be required to leverage internal resources like analytics groups, HR systems, and standard measurement processes.
Most business leaders will need to hire external consultants like Action Learning Associates, with expertise with HR analytics and the ISO 30414 standard. Not only will you need to be compliant with new SEC rules, you will be able to recommend solutions to your c-suite leadership team. Your biggest expense is Human Capital. Soon you will be required to manage your investments in people and improve all aspects of your Human Capital business. Why wait?
Call us TODAY to get started.
John Mattox, PhD and Doug Gray, PhD can be reached at contact us or 615.236.9845.
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