Family Wealth: Part 2 - The View From The 4th Generation
“We do things the way we do them, because we have always done them this way”, may very well be the most expensive words in the history of our family. What my colleague has referred to as a minor miracle, in that our family’s wealth has survived more than three generations, is most certainly appropriate. Our business was started in the 19th century by my great grandfather and it has not only survived the great depression, two world wars, and a potpourri of business cycles, but also the stewardship approach of subsequent generations.
What is our key to success? Patience, perseverance and ultimately a willingness to change, that was pushed through by the fourth generation of which I am a member. Prior to our attempt to bring the governance structure of our family wealth up-to-date with modern standards, the family was run like a benign dictatorship. A handful of family members took it upon themselves to take care of everything and left the rest of the family to focus on their silver spoon.
The lack of involvement by the younger members of the family led to a very disenfranchised group that felt neither a connection nor a responsibility to carry on the work of their forefathers. Governance was virtually non-existent until we finally began to find our voice and push through a charter that spelt out a common vision in a family constitution to which all family members could subscribe. At the core of our structure, we installed a family-business board that oversees important strategic decisions. We also set up a shareholder academy, which meets twice a year so that all of our 50 members can get involved, connect and learn about the business. All in an effort to manage mutual expectations and instil the important values that will allow us to pass on the business to the 5th and subsequent generations.
There are many pitfalls when trying to institutionalise a family business and the management of the wealth. The generations quite naturally have different viewpoints, given their respective positions in life. Everyone has different needs and also incentives to do the things they feel are essential to placate these needs. Therefore, it is of vital importance to agree on a strategy, which is to be implemented in the best interest of the entire family, rather than just the business or a particular generation. The key is a form of governance with a balance of power and the realisation that family wealth is not an entitlement, but a responsibility that lasts for generations to come.