Do your employees think of their work as a responsibility or a burden?  How does your answer affect your culture, employee retention or financial performance?  And how does it impact the emotional well-being of your employees?

I recently caught up with a former client and friend who’s about to retire.  She confessed that her excitement about entering the next phase of life was eclipsed by relief to be leaving her workplace.  

“I’ll finally be free of the burden I’ve shouldered for so long.  I know I should think of it as a responsibility, but it’s been a burden.  And, I’m exhausted.”

I was struck not only by the comparison between burden and responsibility – but also by the accompanying guilt.   As we talked, we realized it wasn’t the actual work that felt burdensome.  In fact, she loved the customer-facing side of her job and had a strong personal connection to its success.   But, her company’s culture and internal politics, including years of passive-aggressive treatment by her superiors and colleagues, made the role feel like a burden.  

There are two surprising things about her situation:

1. Her superiors and colleagues had no idea how their actions impacted her – and they didn’t seek to create such a demotivating, emotionally challenging work environment
2. She felt an immense amount of guilt about the weight of the burden – she  blamed herself for the realities of her day-to-day work experience

My client’s experience creates a teachable moment for all of us.  Here’s the rundown of the attributes of the situation that compounded her emotional burden:

Her Project Was Untethered  

Although tasked with a special project that she took very seriously, my client’s superiors and colleagues viewed the work as a “box-checking” exercise.  Without acknowledging the importance of the project to the company’s strategic objectives, they passive-aggressively refused to approve her detailed plan and budget and didn’t embrace their role in ensuring the project’s long-term success.      

She Was Consistently “Iced Out”  

Because the work wasn’t regarded as critical to the success of the organization, neither was she.  Her boss excluded her from meetings and never mentioned her work when communicating about his team and their accomplishments.  

Bad behaviors were rewarded  

Even though her immediate supervisor refused to engage and develop team members equitably, he was considered a superstar in the organization.  Some managers were consistently rewarded and praised despite their demoralizing leadership style.  It felt like the organization sought results at any cost, including employee morale and mental health.

She Felt Invisible  

My client’s superiors and colleagues didn’t value her expertise and had no vision as to how it could contribute to the company’s success.  Furthermore, they were unwilling to invest in her – they never provided improvement feedback or coaching for how to be more effective.  Desperate to be valued, she spent years without their support.  Instead, my client felt constantly shut down.  And worn down.  And demoralized.  And hopeless.

Sadly, her experience is pervasive in all types of businesses.  And, for certain employees, the weight of the burden is even heavier.  People of color, immigrants, women and other minority groups already carry extra emotional burdens related to the cumulative challenges of work, home and life.  When their day-to-day work experience increases the burden they carry it can have real impacts on their performance, productivity, satisfaction and health.

What about your company?  How many of your employees feel burdened?  Is it damaging your company’s culture?  How does it impact employee retention?  What’s the financial impact?  How does it affect your employees’ health and well-being?

What do your answers say about you as a leader?

Especially in times of crisis, we should aspire to bring out the best in all employees.  Don’t let your behaviors or those of your leadership team burden your employees.  They’re already dealing with enough.  

Contact enlight for help assessing your company’s culture and pinpointing clear actions for improvement.  

“Your silence will not protect you.” – Audre Lorde

In my most recent blog post, I asked if you were a hero or a coward. I am here to confess that I am a coward.

Last week I started writing about leadership, but in light of recent events, I’ve decided to scrap that draft, instead opting to say what needs to be said, and what I should have said years ago…if I’d only had the courage.

True leaders value every human and strive to bring out the best in them.

True leaders see every human for who they are, for all their humanity. Not just for their work performance or the HR box they check.

True leaders stand up for what is right – in the office and in life.

It is next to impossible to be a true leader while riding the coattails of race and privilege. We can’t be. Our complicity in the racial hierarchy has ranged from turning a blind eye to outright enslavement to murder in broad daylight. Those of us who have unjustly benefited must help those who have unjustly suffered.

Black lives matter.

Black lives matter. Period. If we can’t say it and mean it, we aren’t true leaders. We have four hundred years of wrongs to right. We either work to be anti-racist, or we are racist. Period.

Our friends and colleagues of color have been trying to get us to listen for years. Four hundred years, actually. And we refused.

“He must have done something for cops to detain him or arrest him or shoot him…or kill him.” Black people are murdered before our eyes. By police. By white people. And that’s just the visible injustice.

Black people also suffer from the prolonged health effects of racism. Black families have been robbed of generational wealth, largely thanks to policies and practices like redlining that were/are completely legal. Black children lack opportunities due to inadequate access to education and unconstitutional funding of public schools. Black men rot in jails because of bias in the justice system. The list goes on.

The keepers of privilege must dismantle the system. We don’t expect the battered wife to stop her husband’s abuse, and we can’t expect people of color to end racism. If they could, they’d have done it ages ago. It’s up to us. And we better get started because we’ve got lots of work to do.

I’ve been trying to understand white privilege and my role in institutional racism for over a decade. But I’ve kept that work “on the side,” separate from my day-to-day business. I didn’t trust my clients and colleagues to have the courage to consider the world from this perspective. I worried it would hurt my business. I was a coward.

That ends today. I commit to living my life as an anti-racist. Every day and in every aspect. I’ll make mistakes, and I’ll learn and try to do better.

George Floyd did not die. He was murdered. Words matter. Black lives matter. We can do better. I hope you will join me.

In The Hard Thing About Hard Things, Ben Horowitz tells a story about how he handled a delicate situation when he was five years old.  He says it shaped his life.  “It taught me that being scared didn’t mean I was gutless.  What I did mattered and would determine whether I would be a hero or a coward.”  

The COVID-19 outbreak is one of those defining moments.  Ask yourself – are you a coward or a hero?  The good news is if you don’t like the answer, you can take action to change.

“Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly.  If you are a CEO, these choices will lead you to a courageous or cowardly company.” 

Ask yourself these questions:

How do you respond to threats?

A hero is fearless, composed and proactive.  

• Fearless – Looks for, recognizes and acknowledges threats from the inside and the outside
• Composed – Defines the threat and distills the response into smaller parts that are easier to understand and actionable
• Proactive – Takes “no regrets” actions to mitigate threats and strengthen the company for the long haul

A coward says, “Our product is better than these new lower-priced competitors.  We don’t need to worry.”

A hero says, “Our products may be better, but we’re seeing sales slippage since these cheaper alternatives entered the market.  We need to understand what our customers think about the tradeoffs and how it changes our response.”

“There comes a time in every company’s life where it must fight for its life.  If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?”

How do you communicate with your teams?

A hero is authoritative, honest and hopeful.  

• Authoritative – Provides clear direction, even in times of uncertainty  
• Honest – Admits what they don’t know, anchoring on what they do know and control and providing honest performance feedback 
• Hopeful – Always builds a bridge from the current state to a brighter future  

A coward says, “I have no idea what will happen after our PPP funding period ends.”

A hero says, “I’m not sure what will happen after our PPP funding period ends, but I’m doing everything in my power to make sure we can continue to operate.  And I know the rest of you are doing your best, as well.”

“Can the leader articulate a vision that’s interesting, dynamic and compelling?  More important, can the leader do this when things fall apart?  More specifically, when the company gets to a point when it does not make financial sense for any employee to continue working there, will the leader be able to articulate a vision that’s compelling enough to make people stay?” 

How do you engage with your customers?

A hero is open, accountable and adaptable.  

• Open – Listens to customers and understands how the current situation impacts their life or business
• Accountable – Lives up to promises, doesn’t make promises they can’t keep and immediately notifies customers of issues
• Adaptable – Looks for ways to feasibly address customer needs, increasing opportunities and loyalty

A coward says, “I’m too busy trying to solve our quality and delivery issues to listen to more complaints from customers.”

A hero says, “I will personally meet with our top customers to hear their concerns and let them know what we’re doing to solve the problem.”

Everybody faces challenges sometimes.  The way you choose to navigate your challenges will define your customer relationships for years to come.  Don’t mess it up. 

How do you invest your time?

A hero is focused, disciplined and flexible.  

• Focused – Understands the fundamentals of the business and focuses on what is most important to get right in the moment
• Disciplined – Understands the big picture and sees most of the challenges that are looming, but doesn’t get distracted or overwhelmed
• Flexible – Learns from experience and knows when to refine the company’s fundamentals

A coward says, “I don’t have time to think about the future because I’m too busy putting out fires.”

A hero says, “In a crisis, the most important thing I can do is ensure we are focused on the things that will determine our fate and eliminate as many distractions as possible for my team.”

Time is money.  And in organizations, poor time management has exponential negative impacts on the business.  If the leader is focused on the wrong stuff or overwhelmed, so will the team.  Now more than ever, companies need heroes to keep everyone focused and aligned.  If you’re not sure what to do, narrow your team’s focus to core functions while you consider alternatives and gather more information.

So…are you a coward or a hero?  Being a leader is hard work.  And especially in times of crisis, it can be lonely work.  It’s not always easy to muster the courage to be a hero, but we all have it in us.  enlight can help you stay focused or correct course…contact us.

We’ve seen deals – and even families – fall apart when thanks to a direct investment gone bad.  While direct investment can be an exciting and lucrative tool to build and maintain your family’s wealth, if you’re just starting out, you’ll want to avoid these rookie mistakes:

1. Not Aligning Investments With The Family’s Strategy

Not every investment is a good fit for your family office.  Don’t compromise your family’s reasons for investing or its strategy to chase a deal that doesn’t support the long-term vision.

2. Lacking a Family Strategy Altogether

What?!?  You don’t have an investment strategy?   No one knows the goals for your FO? That’s family office 101, and it’s one of the most important things to get right.  You’re not a rookie, you haven’t even made the team. You need clear and concise reasons for investing and a guiding strategy of how to get it done.  And you need the rest of the family onboard.

3. Being An Uninformed Shopper

Be aware of what you get for your budget.  Don’t expect full voting rights and a couple of board seats for a $50k investment in a $50M company.  You get what you pay for, and rookies often expect more than their fair share.

4. Executing Sloppy Deals

This is not your iTunes end-user agreement.  Don’t blindly click ‘accept’ and write a check.  Due diligence is crucial. Know what you’re getting into and document the terms.  It’s particularly tempting to skip this step for friends and family deals. Protect yourself, your money and your relationships.  Put it in writing.

5. Wanting to Know EVERYTHING

Wait, did you go too far the other direction?  While you don’t want to consummate a deal without due diligence, you’ll need to stay focused.  No deal is perfect. Experienced investors have clear criteria for deals. They apply the criteria, make a decision and move on.

6. Using Family Lawyers and Accountants

Your family’s accountants are great at minimizing your tax burden and your lawyers kick ass at protecting you from any possible downside, but they’re probably not seasoned dealmakers.  If you want to play in the big leagues, you need counselors with relevant experience and relationships.

7. Requesting Non-Standard Deal Terms

Don’t use deal terms to fix every wart due diligence uncovers.  This is a key reason many bankers and VCs don’t want to mess with family offices – especially rookies.  Try to make decisions based on the deal at hand, and if you can’t, maybe it’s not the deal for you.

8. Taking Too Long

Between staggering levels of due diligence and non-standard term requests, rookies often take FOREVER to make a decision.  VCs make decisions in a matter of days, and private equity deals can come together in a matter of weeks. If you want to be taken seriously, be prepared to work at their speed.

9. Being Afraid Of Missing Out

Worried all the cool kids are hanging out without you?  Don’t be. Rookies often allow their enthusiasm to cloud their judgment.  Did you get cold called from a VC with a great deal that requires a snap decision with little information?  Run. You’ll be the dumb money in the deal. Don’t be exploited by a QVC-style solicitation, especially if you’re new to direct investing.  Good deals come to those who invest in generating deal flow and leverage their experts.

10. Skimping On Measurement And Reporting

Closing your first deal is a huge accomplishment – but wait, don’t go anywhere!  Many rookies want to sign, fund and flee, but direct investments need care and feeding.  The best deals are when the investors bring more than money – strategic insight, relationships or other valuable insight to the table.  Do your part to help your new investment be successful.

Ready to avoid these rookie mistakes?  Check out our series on doing direct investing right to learn more about setting up a successful family office.

When you hear the word discipline, you may think of world-class athletes or Nobel-winning physicists – or you may think of the principal’s office.  Whatever pops into your head, it’s probably not the execution of your family office’s investment strategy – and that’s one reason even the best strategies are often unsuccessful.

In our last post about Direct Investing in family offices, we outlined the importance of having the Right Strategy and Right Team.  Today, we’ll cover the final factor: Right Discipline. Just joining our family office discussion? Read our intro post on the topic or review the basics for the first two factors Right Experience and Right Reasons.

RIGHT DISCIPLINE ::  The family office and its team are disciplined in the execution of the strategy.

Discipline is where the rubber meets the road.  It’s the really hard stuff because it’s what’s required to execute with excellence – consistently and over time.  Direct investing might sound sexy, but there’s nothing sexy about this stuff… and without it, you’ll be unwinding your investments in a few years.  Hopefully, the wheels don’t fall off the family, as well. I wouldn’t wish that on anyone.

Here are five keys to having the Right Discipline:

1. Document Your Investment Thesis and Criteria

All that legwork you did to define your Experience, Reasons, Strategy and Team needs to be codified.  This document helps solidify the family’s direction and provides a reference should your boat drift off course.  Most offices include:

Target Types of Investments

• Industry
• Company size
• Company Attributes
• Maturity
• Growth Opportunity

Desired Basic Deal Terms

• Investment Size
• EBITDA
• Equity vs. Debt
• Voting Rights

2. Generate Quality Deal Flow

Successful direct investment is a numbers game.  You’ll need relationships with high-quality sources to generate high-quality leads.  Generating a bunch of crappy leads is a waste of everybody’s time and is a recipe for financial disaster.  Typical deal flow sources include:

• Investment Bankers
• Other Family Offices
• Personal Networks
• Proprietary Deal Flow

3. Apply Consistent Due Diligence

Evaluating a company for investment should be timely and conducted by experts, including experienced deal attorneys and accountants – not just the family’s “house” attorneys and accountants.  To believe you’re a legit investor – a hurdle for many family offices – people need to believe you’ll follow through quickly, which is particularly hard for family offices. The most successful offices establish and use a well-rounded investment committee that includes trusted, experienced third parties who can make decisions efficiently.  Typical activities of due diligence teams include:

• Verifying Strategic Fit
• Validating Financial Models and Returns
• Evaluating Deal Risk
• Recommending Changes to Deal Terms

4. Provide Investment Oversight

You can’t lose weight without regularly stepping on a scale. Successful direct investment requires careful monitoring.  Although your role in governance may vary based on your ownership share and voting rights, it’s your duty to actively monitor performance.

Direct investments aren’t passive.  Your family can’t sit back and watch the returns pile up.  On the contrary, companies have operational challenges, cash flow constraints, management turnover and other unexpected issues that require constant care.  The best investors bring both cash and insight to the table.  Leveraging your family’s industry expertise and business capabilities is a key element of oversight – maximizing returns while minimizing headaches.

5. Maintain Consistent Family Governance

Who speaks for the family?  How are intergenerational disagreements resolved?  Who has an active role in management? How can passive family members share their voices?

Transparent processes for making decisions and overseeing the family’s interests help keep everyone on the same page – and hopefully reduces the chance of destructive blow-ups.  Your family’s governance model should be grounded in your family’s vision, mission and values – and its structure should enable timely decision making. Mechanisms for family members to play an active role include:

• Leadership Positions
• Committee Memberships
• Project Management
• Operating Responsibility

Family is, well, family.  And while all families have their ups and downs, when you’re undertaking direct investment, relationships are even more challenging and potentially volatile.  Adding financial pressure magnifies these difficulties. On the other hand, high-performing family offices are a force for family cohesion – securing wealth for future generations.

Thoughtful planning and execution increase the likelihood your family’s legacy is secure.  Whether you’re just starting out or you’ve been investing for generations, it’s never too late to do it right:

• Right Experience
• Right Reasons
• Right Strategy
• Right Team
• Right Discipline

Need help with your family office? enlight can help.

In our last article, we detailed the first two factors for successful family office direct investment:  Right Experience and Right Reasons.  Today, we’ll cover the next two factors:  Right Strategy and Right Team. You can see the complete list in our intro post on the topic.

RIGHT STRATEGY ::  The family office develops a direct investing approach that fits their needs.

While defining the Right Experience and Right Reasons grounds the investment office and acts like a moral and decision-making compass, defining the Right Strategy helps your family office actually get moving.  There are at least three considerations for developing the Right Strategy:

How Much Can We Invest?

This is essentially a math problem that considers:

• Total Investable Assets – Assets readily available for investment
• Future Capital Needs Of The Family – Capital needed to fund the family’s future, such as education, lifestyle, future generations, new ventures, etc.
• Target Portfolio Returns – Returns required from the family’s assets to fund future capital needs
• Allocation By Asset Class – Appropriate investments by asset classes to achieve the target returns given the family’s risk tolerance (from the “Right Reasons”)

What Is Our Current Portfolio Risk?

It’s important to understand the risk exposures inherent in the current portfolio to help set boundaries for future investment.  Commonly overlooked considerations include:

• Macroeconomic factors
• Political and geographic factors
• Currency
• Legacy business assets
• Legacy financial investments

What Direct Investment Mechanism Will We Use?

There are several ways family offices make direct investments in companies:

• Buddy System – Family offices join other family offices to invest in companies.  This is often an entry point for direct investing because family offices can share the burdens of due diligence and governance.  There are definitely pros and cons to this approach; it can work, but it’s hard.  All the challenges that come with direct investing from a single family office grow exponentially with every family that added to the mix… and when things go wrong it gets really messy.
• Shotgun Approach – These family offices make a large number of direct investments with little due diligence or governance oversight.  Investments are typically in response to solicitations and rarely strategic. Sadly, family offices that take this approach are the “dumb money” in the deals they do, and investments rarely pan out.
• Surgical Approach – Cautiously enthusiastic about direct investing, these family offices place a high priority on diligence while skimping on deal flow generation.  They’re usually patient, and may only do a single deal in a three-year period.
• Dream Team – From the outside, these family offices look like a boutique investment firm, leveraging a full team of investment professionals (typically 3-20 people) to generate deal flow, conduct due diligence and provide ongoing oversight of private equity or venture capital investments.

Synthesizing the work above helps determine the Right Strategy.  Given the family’s overall morale and decision-making compass, how big is our direct investing pool, what returns do we require, how do we integrate new investments with our existing risks and what mechanism will we use to execute the investments?

RIGHT TEAM:: The family office assembles the right professionals and advisors to support its direct investing efforts.

You don’t need a team of strong rowers if you’re buying a powerboat.  The composition of the Right Team is driven by the Right Strategy. The team may include family members, investment professionals and external advisors.  Here are some considerations:

What Expertise Do We Need?   Distinct skills include generating deal flow, conducting due diligence, contributing industry-specific expertise, providing ongoing governance oversight and engaging with the family.

How Big Is Our Team?  The size of the team is related to the number of deals you’re targeting.  One deal every three years can be supported by a lean team of 1 or 2 people but closing a deal every few months requires more bandwidth – and therefore a bigger team.

What Points Of View Should Be Represented?  A team that captures specific points of view regarding direct investment decisions may include family members, investment professionals, experienced entrepreneurs, the CEO and others.

How Do We Structure Compensation?  Even the best teams struggle if their wallets aren’t aligned with desired results.  Appropriate compensation and incentives support the Right Strategy by aligning family and employee priorities – and attracting and retaining high-quality talent.

The family office factors we’ve talked about so far – the Right Experience, Reasons, Strategy and Team – focus on groundwork and planning.  There’s one more key family office factor to nail and that’s having the Right Discipline. You can have amazing plans, but without solid execution, you’ll be disappointed with the outcome. In an upcoming post, we’ll talk about the importance of discipline.

In our article, How To Start Direct Investing In Your Family Office, we outlined five key success factors that contribute to successful direct investing for family offices:  Right Experience, Right Reasons, Right Strategy, Right Team and Right Discipline. So, let’s jump in…what do we mean by Right Experience and Right Reasons?

RIGHT EXPERIENCE:: The family’s ability to successfully execute direct investments in companies based on prior business and investing endeavors.

Family offices that directly invest in companies typically begin in one of three ways:

1. The family is courted by friends and acquaintances to invest in their half-baked start-up ideas.  These opportunities come out of the woodwork for families of wealth, and oftentimes neither the family nor the family office professionals have the fortitude to say no.

As you can imagine, this scenario is a recipe for disaster – at least from an investment perspective.  These deals rarely involve any sort of due diligence and often lack ongoing fiduciary oversight, all without appropriate communication.  Coming back to the well to secure funds to survive the latest “rough patch” often becomes the sole investee interaction.

2. The family or family office has been investing as an LP in VC or PE funds, and they decide to go it alone.

This scenario has mixed results.  The biggest mistake I see is that the family and their family office professionals treat direct investments like another financial asset.  They expect higher rates of return for their investment dollars, but don’t recognize that direct investments are different from other financial instruments.  Direct investors become co-conspirators in the work of the company, and the family may face important decisions about how to intervene when there are problems with the business.  Interventions can range from additional investment to help the company buy time to assuming some degree of hands-on management. It can be very difficult to walk away and risk losing an entire investment.  It’s even harder if the family considers the potential implications of business failure on employees. Ultimately, these investments can become a huge financial and emotional strain impacting the fabric of the family.

This approach can work – but, it’s harder than it appears.  And, both the family and their family office professionals have to get the other four factors right to make up for their lack of experience.

3. The family’s direct investment aligns with the primary driver of the family’s wealth – either in the same industry or a new application of the existing capabilities or technology.

You probably guessed that the Right Experience I recommend relates to this approach – where the family has a right to win based on its prior experience.  As the former CIO of a family office with a large portfolio of direct investments pointed out to me, you can’t expect to earn outsized returns unless you’re deeply focused on something you know more about than everybody else.  This requires a combination of a significant concentration of resources (investments, talent, etc.) and a strong commitment to the topic.

RIGHT REASONS:: The family office pursues direct investments that include aspirations beyond financial gains.

It bears repeating that direct investments are not simply another asset class of financial investments.  Direct investments in companies have broader implications and should include more than financial goals. In my experience, the Right Reasons include two factors:

1. Sophisticated families of wealth establish a Vision, Mission and Values statement to coalesce what is most important to them.  It’s crucial the entire family contributes to setting, refining or recommitting to the statement as it serves as the “north star” that guides your family’s decisions and actions.  The family office professionals need to understand and embrace them as their “north star” as well. The importance of the Family Vision, Mission and Values increases with every generation and each additional family unit.

2. Even though direct investing shouldn’t be primarily motivated by finances, it remains important to consider financial goals and risk tolerance.  The family should assess the financial needs of the family.  While direct investment may be a good tool for creating wealth, it is a high-risk (and mediocre at best) way of protecting wealth.  If you seek to create wealth through direct investing, you’re more likely to be successful if you invest in areas where the family already has intimate knowledge.  However, keep in mind the risk of additional exposure to industries or technologies where the family is already heavily invested.

If you have the Right Experience and the Right Reasons, your family office is well on its way towards profitable direct investing.  Look for future posts that go deeper into the other three key success factors – Right Strategy, Right Team and Right Discipline.

Like DNS Capital, at enlight we’ve found the most successful family offices check all five of these boxes when it comes to direct investing:

1. Right Experience – The family office has the skills and the foundation to successfully embark on the endeavor.
“Prior to forming DNS Capital, [Pucker] worked with clients to build new businesses and acquire companies and helped them as a partner and adviser. “It’s basically a continuation of what I’ve been doing professionally for a long time,” he adds.”

2. Right Reasons – The family office pursues direct investments for the right reasons, beyond financial gains.

“The financial and cultural advantages of long-term investing appealed to the couple…Unlike many investors, DNS rarely views “alignment” through the lens of financial metrics. Instead, that term refers to culture, values and relationships.”

3. Right Strategy – The family office develops a direct investing approach that fits their needs.
For DNS, their desire to diversify drives a strategy of proactively identifying opportunities.   “To bolster industry knowledge, every year each of the firm’s investment professionals chooses an area to research in-depth—fragrances and flavors is one recent example—and to expand the firm’s network of experts. “[This deep dive approach] forces us, in a positive way, to be proactive in the market,” [Head of Development Elizabeth] Hess says. “We won’t sit in the office and just wait for the phone to ring.””

4. Right Team – The family office assembles the right professionals and advisors to support its direct investing efforts.

“Pucker agrees that hiring the right team is essential. In addition to cultural fit, he looks for a strong financial background when building his staff, noting that the firm enlists the help of subject matter experts when needed.”

5. Right Discipline – The family office and its team are disciplined in the execution of the strategy.  DNS Capital only completed 3% of deals they considered in 2017.

In upcoming blog posts, we’ll explore each of these topics in more detail to help you consider whether your family office is ready for direct investing.

• Plan early & often:  It’s never too early to plan succession in your family business.  In fact, the longer you wait, the more touchy the situation becomes.
• Beware the 2-headed monster:  Rarely – if ever – is it good for the business to have more than one leader at the top.  Resist the urge to placate your kids and make the right decision for the business.

In our experience, there is a right way to manage a family business succession…here are some things to consider:

First, Determine the Family’s Needs

• Ensure the family decision-making process is transparent – Who is responsible for making decisions on behalf of the family?  How are the decisions communicated to the family?  How does decision-making responsibility change as the family grows and/or generations mature?
• Determine how the family wants to benefit from the business and revisit it over time – Is the goal to maximize the family’s wealth through the business?  Or to provide other family benefits such as employment opportunities or a creative outlet for family members?  How do the family’s needs change as the family evolves and the business evolves?

Then, Run the Business to be Successful

• Set clear goals for the business and revisit them over time – How can the business be leveraged to deliver what the family needs from it?  What are the opportunities and limitations for the business based on the family’s needs?  Which alternatives are most likely to deliver on the family’s needs?
• Establish clear factors for decisions about the future of the business – Based on the business goals, how should the business be run?  What factors should drive decisions about the business?  When is the right time to bring in professional management?  Sell the business?  Transition to the next generation?  What attributes will the next generation need to demonstrate to earn a role in management?
• Set up an advisory board to reinforce objectivity in pursuing the business’s goals – Which advisors (based on expertise and relationships to the family) are best suited to help guide the business through the inevitable family challenges?  How are they empowered to ensure the business is well-run and able to address the family’s needs?

Manage the Family’s Role & Expectations

• Treat succession as a matter-of-fact aspect of managing the business – What are the factors that will determine who succeeds in management?  How will the successor be selected?
• Educate the entire family about the business goals and succession process – What are the family’s needs that the business is fulfilling?  How does the business deliver value for the entire family (spouses, the next generation, etc)?  Why is the chosen approach important to the family and its needs?
• Develop clear guidelines for family member involvement in the business – When can family members work in the business?  In what roles?  With what preparation?  What education or experience requirements are required to advance in the company?  Who decides when or if a family member is employed, advances or exits the company?

When you come to the fork in the road, make the best decisions for the business and don’t look back.  If you have defined the business goals in the context of what the family needs, you will also be doing what’s best for the family.  And, if you’ve effectively balanced the family and the business perspectives by following the tips outlined above, the bulk of the family will be supportive of the plan.

It sounds easy.  But, the reality is that family business successions are hard.  Very hard.  Emotional attachments to the family’s legacy and emotional baggage from a lifetime of family ties (and sometimes drama) cloud judgment and objectivity.  The sooner you start to plan for the transition, the sooner you can begin to bring balance to these perspectives.

When’s the best day to begin planning your family business succession?  The day you start your business.

When’s the second best day to begin planning your family business succession?  Today.