[THIS BLOG IS THE SECOND OF TWO PARTS]

Russ Crosson on Helping The Family Enterprise Succeed [Part I]

Not only are family conferences productive in a general sense, they are usually beneficial in three specific situations:

“First, family conferences usually concern estate planning. Mom and Dad can explain to their children their current plan and why it is set up the way it is. Together, the family can discuss amounts to be given to specific charities. Reasons for equal, or unequal, distribution to the children can be explained. Children can be honest about their feelings regarding the amounts their parents are leaving to them. For example, many Christians may improperly believe just because they have four children, their estate should be split equally among them. Yet the Scriptural precedent is that the money should be left to those who have demonstrated sound stewardship. According to Ecclesiastes 7:11,12, if we leave money to someone to whom we have not left wisdom, it can be a devastating situation. Therefore, in many cases, discussing estate planning can be a catalyst to help children get “on board” financially and become fiscally responsible.”

“Second, family conferences allow discussion of current giving. Parents should be careful that they are not unduly restricting their children while at the same time giving huge sums of money to charity. Right or wrong, it is easy to drive a wedge between a parent and child if the child sees the parent giving a lot of money to charity while withholding things from the child. Such choices are the parents’ responsibility, as is the responsibility to communicate these decisions to the children, thus helping them understand your motivation and expectations for them and alleviate the potential bitterness and disharmony.”

“Third, family conferences provide a forum to explain to children the benefits of budgeting. The most effective family conferences involve a facilitator (such as a financial planner or attorney) who directs and mediates the discussion. Mom, Dad, the children, and the children’s spouses (if appropriate) may be present. Other advisors (perhaps an insurance agent or accountant) may also be invited. Or, a family conference may simply involve the parents sitting down with their children and explaining what they are doing financially and why. The timing of the conference depends on the specific goals to be discussed. Generally speaking, one may want to wait until children are in their teens before involving them in the estate or giving conferences. Budgeting conferences, however, could begin at an earlier age.”

The bottom line is that many family enterprises have succeeded—like many businesses generally—through careful strategic planning, good decision-making and a lot of hard work. There are no guarantees of success in the rollercoaster of the marketplace. Family members involved in a business, which involves the roles of owner or employee or both, can enhance their chances of success by learning lessons from those who have gone ahead previously.

In our experience at ELO Counsel, family enterprises rarely fail because of poor technical planning—rather they fail because of the non-technical issues such as lack of communication, misguided notions of business and interfamily, long-term embedded challenges. The family conference is one vehicle to enhance family communication and ensure a greater likelihood of success.