Dan and Gladys a Matter of Trust

(Disclaimers: I’m politically aligned to the right, live in Melbourne, and the current outbreaks are far from over)

COVID has become highly politicised; we might more accurately say it has brought out the worst of our political partisanship. The national cabinet is a fractured mix of a Liberal Prime Minister and mostly Labor State Premiers. The state response has followed a pattern along political lines, with Labor Premiers favouring lockdowns, and Gladys in NSW playing a lone hand in seeking to keep the economy open as much as possible. But now, she is struggling with a significant outbreak of the ‘delta’ variant. Given all that has transpired and all that we have learned, is anyone capable of shifting their view? I am.

Victoria went “early and hard” against the first delta outbreak, rushing to a “lockdown 4.0” that went for two weeks. During the outbreak, we were critical of Victoria’s alleged improvements to contact tracing; surely if it was up to standard, we would not need a lockdown? But fear was spreading about the more contagious delta variant, with claims (later shown to be mistaken) that it could transmitted through “fleeting contact“.

NSW, on the other hand, boasted “gold standard” contact tracing, and had avoided mass lockdowns. Where it did come to lockdowns or stay-at-home orders, it was done at LGA level rather than across the entire metro area or the state (which is much larger than Victoria). Both Melbourne and Sydney are geographically large cities, and while there is significant movement of some people around the city (side question: why aren’t the people who travel around the most – and therefore the greatest risk as spreaders – prioritised for vaccination?) it was possible to bring outbreaks under control using those methods and still keep the economy humming along.

Her strategy worked … until the current NSW delta outbreak. Why did it fail and what can we learn?

I think it failed for two reasons: firstly, because Gladys underestimated the way the delta variant spreads (not as bad as Victoria made out, but certainly more contagious than previous variants) and therefore did not go hard enough and fast enough with lockdown measures. The second reason is than when restrictions were imposed, Sydneysiders did not take them very seriously. They’ve had it so good for so long, that they didn’t think the restrictions were really needed.

This second reason highlights the pivotal difference between Dan and Gladys: the ‘trust balance’.

I lost trust in Dan back in August last year, after his government’s repeated failures that led to our extended lockdowns and the constant language of fear and control. That put him into what I call a ‘trust deficit’. In that situation, anything his government subsequently said or did was judged with a healthy dose of scepticism. Indeed, the continued alarmism and rush for extreme measures like lockdowns meant that when they said contact tracing was upgraded, I didn’t believe them. If indeed it was upgraded, why the continued lockdowns? If they kept using the same blunt tools, what evidence is there that anything is being done better?

How does one get out of a trust deficit? By going the extra mile to increase trust. How does one increase trust? By being more open and transparent. The continued language of fear, and the lack of any transparency over how they are deciding on the various restrictions, and what we the people need to do for lockdowns to end means he has done nothing to regain my trust. Indeed, as I write this, we are no in our fifth lockdown (at least this time he didn’t insult us by calling it a “circuit-breaker”).

By her success in striking a balance between keeping the economy running and the people safe, Gladys built a strong ‘trust surplus’. Time and again, she showed that infection levels could be controlled with measures other than lockdowns.

How does one lose a trust surplus? By screwing up, and by not owning up to it or sharing information freely. This time, Gladys screwed up. While she has definitely lost a degree of trust, she had built up a healthy balance prior to that, and that has helped maintain her standing. I’ve been #GunningForGladys, and I still am. It’s possible that her previous success in keeping COVID at bay contributed to a complacency (in the people, in government, or both) when for the first time, they really had to go hard.

Remarkably, as a result of these latest outbreaks, I have actually changed my opinion! I have revised my view of the Victorian contact tracing system, and now think it is as good as any others. The evidence points to the differences in the recent outbreaks between NSW and Victoria being about underestimating the delta variant rather than contact tracing capabilities.

Victoria and WA have been lockdown-trigger-happy. Lockdowns are the bluntest of tools – and they are quick to impose them (“snap”) and very slow to release us back into regular life. The economic blow to small business is huge, and the emotional blow just accumulates with each one. While NSW have shown that there is another way, their record is now blemished. Once they get back to COVID-zero, it will be interesting to see how they respond to the next outbreak (and it’s fair to say there will be further outbreaks).

It is also evident that governments are treading a fine line in their response to outbreaks. Just a day or two can make a material difference. Gladys has been comfortable at the margins, and until now that has worked. Dan and others have erred on the side of caution in favour of lockdowns, but the consequence has been economic devastation. They count COVID cases, but not small business failures or cases of depression (more about this in another article).

In the words of a previous Prime Minister, we should be “alert, not alarmed” to the threat of COVID. We are served neither by complacency nor alarmism. Oh, and quit the fuss and just get vaccinated already!

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Communication isnt important

Research has shown that 60 per cent of failed intergenerational family wealth transition are due to problems with trust or communication. Communication isn’t important in families. It is everything. If a family cannot communicate, it cannot function as a group. It’s that simple.

What does poor communication look like? An absence or lack of communication (e.g. “it’s none of their business”, “they don’t need to know”, “we know what is best for them”) is patronising, infantilising, and leads to a loss of trust. There is often hesitance to discuss family wealth or estate planning with family members because of the conflict it might cause. But not discussing simply leaves the latent conflict to fester. Some cultures have a strong concept of strictly obeying the mature generation – this has the potential to create interpersonal and internal communication barriers. Negative, emotional, distracting and damaging interactions among family members can lead to the “Family Drama Vortex”.

What does good communication look like? Creating a space where family members can ask and answer difficult questions like “What is our wealth for?”, “What is our family’s purpose?”, “What is our true value?”.  To communicate effectively, we need to listen. This may sound like a platitude, but not everyone can do it, especially when talking to someone we think we know well, such as our children.

A history of poor communication in a family means you have to work extra hard to regain trust and learn now to communicate well. To address toxic situations like the Family Drama Vortex, we must recognize that the drama and dysfunction are rooted in underdeveloped communication and interpersonal skills.

Because communication is difficult, especially across generations and borders, it can help to have external guidance and facilitation. That is best coming from a specialist, and not necessarily the ‘default’ choice of lawyers and accountants.

Consider This: How would you rate your own family’s ability to communicate? Are there some issues that “we don’t discuss” or that are shut down whenever they are raised?

Further reading: https://sg.asiatatler.com/life/rise-and-fall-of-family-wealth-how-to-achieve-financial-longevityhttps://www.coutts.com/insight-articles/news/2021/investments/speech-therapy–our-guide-to-talking-wealth-with-your-family.htmlhttps://www.wealthadviser.co/2020/12/04/293097/asias-wealth-management-industry-needs-ready-itself-great-wealth-transferhttps://onwallstreet.financial-planning.com/opinion/how-to-keep-multigenerational-wealth-in-the-familyhttps://e.vnexpress.net/news/business/generation-gap-communication-a-concern-for-family-concerns-4106858.htmlhttps://www.ft.com/content/825947e6-bf2d-11e9-9381-78bab8a70848https://www.forbes.com/sites/forbescoachescouncil/2019/04/26/is-your-family-business-in-turmoil-the-solution-could-be-communication/#792eb2e525echttps://www.clevelandjewishnews.com/features/special_sections/legal_affairs/succession-planning-big-part-of-family-businesses/article_6cd9a79e-45b6-11e9-ab20-ff24b4e7b8fd.htmlhttps://www.wealthmanagement.com/high-net-worth/hardest-part-planning-hnw-families-hnw-familieshttps://www.marketwatch.com/story/breaking-the-taboo-how-to-prepare-your-heirs-for-your-death-2019-03-07

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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A New Career for Founding Generations?

We’ve previously discussed the effect of increasing life expectancy on wealth transition – the ‘problem’ of the ageing family member who refuses to step aside is more prevalent than ever (the popular TV series Succession makes for great watching on this topic).

Traditionally, roles within families have very long tenure, For someone who has been managing the family wealth for many years, the thought of leaving a job they have become very good at can leave a huge void in their lives. The easy option is to leave things as they are. What can help is for older family members to have something to look forward to beyond their lives in the family’s operating businesses or family office.

This might be a shift to the family foundation (such as Bill Gates), a move into politics (Amo Houghton from Corning), or a more structured ‘statesman’ role working with the next generations (in their own or other families).

Having new roles they can look forward to is good for both the current and rising generation, and can avoid the fear associated with starting a ‘new career’ in middle age.

Consider This: What is your family’s history and attitude to how (or if) elder members step aside? Is retirement considered taboo? Have family members in their 50s and 60s thought about possible second careers?

Original article: https://www.forbes.com/sites/dennisjaffe/2018/11/15/stepping-up-what-family-business-leaders-can-do-after-they-step-down/

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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Family Business; Talk About Money

Money is one of the few remaining taboo topics for discussion, but in wealthy families, it’s something that eventually does need to be discussed. The challenge is to develop a greater comfort in discussing it.

The first step towards this is to understand the reason for discomfort, and it is usually because discussions about money bring on fear: fear that there isn’t or won’t be enough, that the next generation might be spoilt by excess, that money might be used to play out family roles from childhood. There are so many things that can go wrong, the easy route is simple to avoid conversations (and therefore the risk of confrontation).

While the fear of the unknown is a barrier to conversation, that same lack of communication can cause serious problems in the future.

One approach is to frame wealth in a different context – one of legacy. To do this, start thinking about the positive things wealth has achieved and can achieve in your family. Topics like how the family have used and can use the wealth for purpose (philanthropic or impact), and stories about those who made loyal and enduring commitments to the family (such as in the family business) can put a more positive spin on family wealth.

Consider This: Does your family have (official or unofficial) discussion taboos? Have you discussed the family wealth with the next generation? If you keep procrastinating, have you asked yourself why?

Original articles: https://www.wealthmanagement.com/client-relations/money-talks-family-gatherings, https://www.financial-planning.com/news/why-financial-advisors-should-be-looking-toward-gen-xers-not-millennials

[reposted with permission]

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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No Millennials Without Boomers

While I abhor the “generation wars” narrative that pops up regularly, the article below is about a novel – Boomer1 by Daniel Torday – that captures this generation wars zeitgeist, and tells the story of a frustrated millenial who takes his fight to the internet, complaining about boomers who refuse to retire and make jobs available to those of his generation.

The article makes some great points about this ongoing debate, and postulates as to what is at the core of this generational divide. It also examines the political shifts that may be emerging as Gen Xers and Millenials mature and start to vote (although the Boomers are still hanging around).

One one hand, generational politics seem to be just another manifestation of identity politics. But Gabriel Winant argues against this, suggesting that generation is not an identity – “it’s a relationship: no children without parents, and no millennials without boomers”. I think this is deeply insightful as it opens a new way to look at the collective familial relationship, and view generations as something that can bring us together rather than divide us.

Consider This: In your family, are generational labels used often as stereotypical pseudo-insults? Have you ever considered the extent to which generational attitudes of children came “from” parents?

Original article: https://www.theringer.com/2018/9/18/17873612/millennials-baby-boomers-boomer1-novel-daniel-torday

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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Intergenerational Resilience

#Intergenerational necessity, vulnerabilities, and resilience are typical factors addressed in determining wealth transition. However, adapting to the changing demands, expectations and opportunities in the disruption via #pandemic will epically force family businesses to rethink their strategies.

The immediate need for #workfromhome, revised #familybusiness strategy, #riskassessment, and governance are paramount for pivoting to #nextgeneration and #futureofwork organizations.

In the UK, the final report by the Intergenerational Commission speaks in terms of an intergenerational contract – “the principle that different generations provide support to each other and that each successive generation should be better off than previous ones.

One of the biggest issues in current reporting on this and so-called “generation wars” is the cost of housing, which has become significantly less affordable for Millennials compared to Baby Boomers.

The Financial Times challenges the entire underpinning of this argument, namely that there is no such thing as an intergenerational contract. They argue that generational boundaries are arbitrary (which in my view is only relevant to labelling), that inequality within each generation is far more significant than between them, and that the idea that successive generations should enjoy a better life is simply a proxy for sustained economic growth.

These are all good points, particularly the latter. As they point out, in the last decade, real GDP rose by 3.5 percent, compared with 29 percent in the previous decade.

The other consideration is the ageing population: as birth rates are collapsing in many countries, this poses a huge risk to economic growth as not enough young people are coming through the system.

We’ve discussed earlier the impact to wealthy families of increasing life expectancies, and will probably revisit this in future.

Consider This: It’s very easy to make arguments about how things ought to be between generations, but there are always implicit assumptions, and it’s a good exercise to challenge them. What are the unstated assumptions about how things ought to be between generations in your family?

Original article: https://www.ft.com/content/918e9a28-58f8-11e8-b8b2-d6ceb45fa9d0 (requires registration; if you don’t want to do that, access the article via google by searching for “The focus on intergenerational inequity is a delusion” and https://www.resolutionfoundation.org/advanced/a-new-generational-contract/

About
David Werdiger is a Familosopher, the Founder and Principal in Nathanson Pearson Family Advisory and Adjunct Professor https://www.transitionbook.co/conflict-resolution

Specialties Include:
#ConflictResolution
#CommunicationManagement
#StrategicPlanning
#SuccessionContinuity
#Governance
#LeadershipDevelopment
https://www.DavidWerdiger.com

#covid19 #coronavirus #pandemic #socialdistancing #shelterinplace #washyourhands #familybusiness #nextgen #familyoffice #businessowner #founders #transition #ypo #uhnw

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Mid-range and high-end intergenerational wealth transfer

Consider This: Are you (and your family) aware of both the direct and indirect ways wealth is transmitted? This can make for a good family discussion about the value and meaning of wealth.

The US Federal Reserve have completed a study on how intergenerational wealth transmission can affect wealth concentration. The issue of “inequality” is a popular one – the notion that the rich are the primary beneficiaries of national economic benefit (at the expenses of others, whatever that means), and the lack of economic mobility. I will tackle these issues in more depth in future newsletters.

The stats in the report are revealing. More than 70% of intergenerational gifts given while the beneficiary is alive are less than USD 50K, but the gifts of greater than USD 1M account for nearly 50% of gifts by value. This points to a two-speed intergenerational wealth transfer: let’s call them mid-range and high-end. This is an important point to note when reading commentary on this issue – these two groups display very different attributes with respect to wealth transmission.

Another important observation of the report are the indirect forms of intergenerational wealth transmission (which apply to both groups). While I abhor popular connotations of the term, they relate to family “privilege” that is self-perpetuating in wealthy families. In addition to financial gifts, a very important thing we can transmit to the next generation is access: to a good education, to a powerful network, and to employment opportunities. The value of these should not be underestimated.

Original article: https://www.federalreserve.gov/econres/notes/feds-notes/how-does-intergenerational-wealth-transmission-affect-wealth-concentration-20180601.htm

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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Fostering Entrepreneurship

Not every entrepreneurship story is “rags to riches”.

Many high-flying entrepreneurs came from from upper-middle-class families. While they don’t owe their success entirely to mom and dad, without their parents’ help, be it financial or otherwise, they may have never gotten their ventures off the ground. Research has shown that 75% of entrepreneurs from 48 countries said that their family was involved in starting their businesses.

Family money and background plays a critical role when it comes to starting up a business. In some cases, it can provide a financial safety net in the case of failure. As much as economically, the family environment that has a big impact on the startup entrepreneur.

Entrepreneurial behaviour is driven by families, not just family businesses. Families can act entrepreneurially together to create growth, and foster entrepreneurship and positive impact in society.

This doesn’t happen by default. While the entrepreneurial spirit of the founder may be passed along to their children, the spirit and drive may dissipate in subsequent generations. Passing on the creativity and innovation of the founding generation across new generations is a challenge of the highest order

In some families, the elders were able to build intergenerational bridges to their grandchildren by mentoring them as young entrepreneurs. The value created in doing that is far more than financial.

Consider This: Does your family ‘remember’ the entrepreneurship of the founder(s)? What do you do to foster the continuity of the entrepreneurial spirit? (e.g. share stories? invest in entrepreneurial risk asset class? mentor rising generation entrepreneurs?)

Original articles: https://www.forbes.com/sites/nextavenue/2021/04/22/im-turning-my-young-grandsons-into-entrepreneurs/?sh=37814eb51c0chttps://www.theguardian.com/business/2021/jan/31/small-business-entrepreneurs-success-parentshttps://entrepreneurship.babson.edu/family-entrepreneurship-family-business/https://www.entrepreneur.com/article/357381https://www.forbes.com/sites/dennisjaffe/2020/05/05/preparing-for-deep-change-in-a-family-business/#7efb375a7942https://www.fa-mag.com/news/russ-prince–the-downsides-of-being-a-rich-entrepreneur-55401.html

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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Family Business blood non-blood

Unless your family business is a “mom & pop corner store” (which is more akin to owning a job than owning a business anyway), you will need to have a mix of ‘blood’ and ‘non-blood’ people working in it.

As any business matures and grows, there becomes a need for professionalisation and systemisation. While owners may put a high value on the people in the business (especially family), the true value created in any business is through systems. A business that cannot function as well without family members is not worth very much to a potential buyer.

Family or non-family CEO? That is a huge question for many family businesses, especially as the founder generation seeks to retire. Even if there is a family member who is willing and able, is that what is best for the business itself?

For a non-family CEO to succeed in a family firm, they must understand the values of the family. The family also needs to be able to articulate those values to the CEO, and monitor their adherence in some way (which is by no means simple).

The challenge for any incoming CEO of a family business is to maintain and respect the ingrained culture, and at the same time drive the business forward. It is important to create an atmosphere of inclusion and purpose, and ensure people outside of the family are also seen and heard.

In larger business with many family members involved, possibly from multiple branches of the family and multiple generations, the kinship tensions are multiplied to a great degree.

When family differences get in the way, it doesn’t necessarily make you a bad employee, or a bad child, sibling, or cousin. It’s important for family members to retain their own identity and not become overly subsumed within the family enterprise and its mission.

Having people outside the family circle who can provide objective feedback – whether as advisors to the board or mentors to family employees – can be very helpful.

Consider This: Does your family business have policies around how family members qualify for a position and their performance measured? Do you have a board with externals and/or mentors available so family members can have a forum to discuss issues of concern?

Further reading: https://knowledge.insead.edu/family-business/why-family-ceos-outperform-their-non-family-predecessors-16601https://www.institutionalinvestor.com/article/b1rnywtxhyr5kq/How-Family-Offices-Can-Strengthen-Next-Gen-Relationshipshttps://hub.jhu.edu/2021/04/27/dynamics-of-family-owned-businesses-phillip-phan/https://www.smartbrief.com/original/2021/04/expanding-family-business-while-preserving-its-culturehttps://www.forbes.com/sites/chriswestfall/2021/03/29/leaving-the-family-business-how-to-know-when-its-time-to-go/?sh=569aa4571e7ehttps://www.thomasnet.com/insights/how-to-prepare-to-lead-your-multi-generational-family-business/https://www.campdenfb.com/article/transfer-family-business-power-next-generation-effectivelyhttps://www.dailyherald.com/business/20200716/6-tips-for-running-a-successful-family-business

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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2nd & 3rd Generational Response to their Parents Success

Children tend to grow up with their parents as role models and therefore their benchmarks of success. Now, here is some real research on generational difference. According to a study by Oxford University academics, men who surpass their parents’ qualifications report lower levels of psychological stress, while those who do worse are more likely to feel depressed, lonely or sad. Women, however, have no such hangups.

The study is quite extensive – using European Social Survey data from 52,773 people aged 25 to 65 in 28 countries.

The lead researcher attributed a possible reason that men are more likely than women to attribute success and failure by pointing to their own merits, abilities and effort rather than factors they have no control over.

At first glance, this looks quite controversial, in particular the suggested cause as a difference between the way men and women attribute success and failure (which looks like conjecture more than anything).

It is also commonly held that parents are rarely jealous of their children’s success and want them to achieve more than them.

Consider This: In high-net worth families, how large do patriarchal figures loom? Do the second generation feel the challenge of achieving more than their fathers insurmountable (I certainly felt that way)? What can both generations do to mitigate those negative feelings?

Original article: https://www.thetimes.co.uk/article/happiness-is-doing-better-than-your-parents-if-you-re-a-man-tshrgt5wk (requires registration but is free)

[reposted with permission]

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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