The family owned business has from the beginning and continues today to be the engine that drives America’s economic might. Head to head, toe to toe a closely held business can and will out maneuver, out serve and ultimately out perform a business driven from afar – the challenge is that while the “big guys” (many of whom are no bigger than successful family owned businesses) may sacrifice a better solution for homogeneity they often defeat the local business because of one reality – if a business is truly family owned and operated it many times is tied to the lifecycles of the people who make up that family. The drive of youth is replaced by the knowledge of experience but it also may take with it some of the willingness to take some risks. The generation that started the business may know all there is about the product but will the next generation be as strong – or the next or the next… I founded BSR on the principle of helping family owned businesses to “fill in the blanks” between the many aspects of their lives to free family business to excel at both family and business. Look For Carey Berger's upcoming book, "Got Family?" Here's an excerpt: We sat in one of the nicest restaurants in town enjoying a good meal and fine wine. Our conversation centered on our mutual client, and we spoke confidingly about the client and his family. I was the new kid in this game, and my dinner companions’ confidence in their judgment spilled over to the point where they were a little condescending toward both our client and me. “Just give the daughters some money and they will stay out of the way – at least until they want more money,” the accountant said. The attorney displayed only a little more tact. “Only the son has the background to be in business, and he really hasn’t shown the leadership necessary for a business of this size,” the attorney said. Both gentlemen had worked with the clients for many, many years. They thought it their right and perhaps even their duty to judge their client’s children and anticipate their likely direction. After all, the client had – and would – ask for advice, and such advice could only be given in the context of the desires and abilities of the people involved. The attorney and accountant certainly had spent enough time with the next generation; they provided ongoing services for all of the family members. Tax returns were prepared, contracts were drawn, wills were drafted, divorce was handled, births, deaths and transfers of assets occurred. And whenever one of these advisors asked the client or his children about their desires, the responses were generally unimpressive. The children did not speak in business terms or legal lingo – none of the four daughters had attended college and all had lived their lives to that point primarily as wife and mother. I entered into this family’s situation after one of the daughters heard of the concept of a “family assembly” (a communication and control link between generations and business we will discuss at length later). She suggested to her father that perhaps this approach could address some of the trauma the family had been dealing with. The trauma stemmed from each of the four sons’-in-law trouble working for the family business and dealing with the eldest son who was the new CEO. In retirement, Dad had stayed in the business picture only as necessary. He and Mom traveled and spent time together at their lake home. Dad still put in a couple days a week at the office, but he did not second-guess his son, nor would he allow others to go around his son to him. Dad did everything right in that regard but trouble still happened … But perhaps it is better to start at the beginning – this is not my story, so it should not start where I started. It is the story of family business, so let’s start with the beginning of a family business. Defining a family controlled business This book is based upon years of work and interviews with hundreds of family controlled businesses. I said family “controlled” on purpose – some of these businesses are or have been publicly traded but the key here is one individual or group of related (by blood or shared history) individuals could substantially impact the company’s direction. The Ford Motor Company serves as an extreme example of a company in this concept. Obviously, Ford is publicly traded, and as I understand it (I haven’t worked with them – yet) no one has enough shares or special class of voting stock to control the giant company. But when it comes time to select a CEO, enough people with a common interest have enough shares to place a family member into the top spot. It is not an accident that the gentleman who heads Ford bears that same last name. By my definition, this situation makes Ford Motor Company a family controlled business. As I noted earlier, a group defined by something other than bloodline stretches this definition by virtue of the word “family.” Such a case would be a group of partners or the families of partners. Decades ago in Pittsburgh, five families started a fine wholesale and retail grocery business. Today, members of each of these five families still hold the company’s voting shares. It might be difficult for any one family to control the business, but if you count the five families as one group, they control the business absolutely. Where YOU fit in So, what is the point of this discussion? Are the stories of families in business like a train wreck you just can’t look away from? Or perhaps like a circus sideshow where your curiosity gets the better of you? Or perhaps there is a little more to it for you … perhaps you are one of the millions of people in the United States around the world who works in a family controlled business – either your own or someone else’s family. Perhaps you founded the business and would like a glimpse into the future of what might be ahead for you and yours. Perhaps you seek a little reassurance that viable options exist to address the challenges you see ahead or that your friends have faced. Perhaps you want some comfort in knowing that yours is not the most screwed-up family ever to share a business. From another perspective, perhaps you are a member of the “next generation” of your family business, and you want a way to open a conversation with the current generation without sounding greedy or disrespectful. Perhaps you are concerned about your siblings and their future roles in the family enterprise – you’re not so sure you want your future tied to their's (or their spouses’). Or perhaps you are an employee of a family controlled business. You want to know what the future holds for you and your family – is there any reason to stick it out and help build this business for someone else’s family? Will you have a future in this business when “junior” comes into his place of privilege? Is there a way you can help the business and its owners, and thus help you succeed? I do not pretend to know all the answers – or even all the questions – in these varied and complicated situations. But I have been blessed to work and speak with some amazing people and their incredibly capable advisors. From these experiences I have gained insight and knowledge into family controlled businesses, which has led me to an enjoyable and successful career in helping families – the founders, their next generation and their employees. My job is to “fill in the blanks.” I am an attorney, but not that kind of an attorney – I’ve never been inside of a courtroom, and I intend to keep that record intact. I decided soon after entering law school that I did not want to be Perry Mason – perhaps because my last name is “Berger,” and those of you old enough to remember Perry Mason probably recall his weekly legal adversary was Hamilton Burger. If you know these characters, you also likely know that Perry almost never lost a case, meaning Mr. Burger almost never won. Actually, that is what I discovered I disliked about the traditional practice of law. Not that my namesake lost practically every week – though that was a bit disconcerting – but rather the idea that for one side to win, the other side had to lose. It always seemed to me that when a situation came down to a winner and a loser, you actually had two losers. So, I set about to find if there is a way that more can win – ideally, everyone could win. Perhaps winning everything isn’t winning My first stop was with the question “What is “winning?” We assume we know what a victory looks like – the side with the most points at the end of the game wins. Or, as the T-shirt says, “He who dies with the most toys wins.” But in life we don’t all want the same thing. Even if we all wanted money (not all do) what we would spend it on would be different, and as such, that essentially means we really don’t want the same thing. What if you were in a situation with another person, and you could afford one meal at the pancake place and it came with eggs, bacon, sausage, pancakes and hash browns? If we stopped our discussion here, one gets fed well and one goes hungry. But what if you did not like hash browns and sausage, and you only wanted one pancake? Would it make sense to find out if your tablemate might happen to love those items and you might share the meal? If in the ideal world what you wanted he did not and what he wanted you did not – no one is compromising their desires or giving up anything they wanted – everyone wins. In the hundreds of interviews I have conducted with family members about their businesses, I’m amazed that what one wants the other does not; and what one does not, the other does. It is the rule, not the exception, even though it goes against conventional wisdom. That’s because we have been taught we either “own” it or we don’t. But ownership has many pieces and parts that could be separated if one wanted to go to the trouble to do so. And I enjoy going to that trouble. Why? Because that is where the solutions are and I love finding solutions that work and help families and businesses. When I attended The University of Kansas School Of Law, a professor used the analogy of a bundle of sticks for property ownership. Each stick represented a different power to do something with, or to, the property. If left bundled together, you would own the property in “Fee Simple Absolute” and you “owned” the property the way most people think of ownership. Then again, you would not actually own all aspects of the property. You could not do certain things with the property. The local government, for example, could stop you from doing some things with the property. Worse, the local government could do some things to your property you would not choose to do. If this is what it means to own property, then what does property ownership mean if we unbundled the sticks and pick and choose the ones we want or don’t want? There are many names depending on the particular combination of sticks we choose, and some combinations that do not have common names, just contracts that spell out who gets what powers (“The Artist formerly known as…”). My point is that it is actually quite freeing when you accept that you do not have to take all the sticks if you don’t want them, and you can get the ones you do want. Once you accept this idea – that winning isn’t a total thing – then you can see if there happens to be enough left that others you care about may want, this realization marks the beginning of a solution where someone else does not necessarily have to lose for you to win. Question and listen So, this is what I do: I listen to all the people that the client wants to consider to be at their table (the client is always in charge – it is about them, their family, their business and their desires, never mine) and find out what everyone wants. But I don’t just ask what they want. They have heard that question over and over from many sources. Instead, I ask the question “What do you want?” like the annoying three-year-old: “Why, why, why … why do you want that? But what about that do you want? Would you still want it if…?” This approach may strike you as a harangue, but I have a legitimate reason for it. I’ve been told by a gentleman I met in Minneapolis that the “Honda Model” tells us by asking “why” five (count ’em 5!) times you get to the heart of the question. Perhaps it is true, but I think it is a little more complicated than the number of times you ask. I think who is asking matters. If you are 6 years old in a room with a broken lamp and your father is asking the question (perhaps holding a flexible and painful looking item in his hands as he asks), the question sounds different. If you are 35 years old and deeply love that same father (despite the lamp incident) the question may sound different. In the first example, perhaps because you are afraid of the possible pain you could receive depending on how you answer the question; in the second example, perhaps because you are afraid of the pain you may cause your father depending on how you answer. An Oregon client told me about speaking numerous times with his son and daughter about their interests in the business. Each time, he came away confident they wanted nothing to do with it. He let me speak with his children (in their 30s but still his children – a discussion for later in our book) but was certain there was no real point. After I held their head under water for minutes at a time (just kidding!) they “confessed” they actually wanted to be in the business but “knew” their Dad and Mom wanted to retire. The adult children feared admitting their interests would cause their folks to sacrifice their desires to give the children what they wanted. So the kids had refused to tell their true interests …they thought it was win or lose and did not want their parents to lose so the kids could win. It was a different answer when I asked. Many – but not unlimited – options The other key to my task is opening up all the appropriate options without confusing the matter with items that do not apply. As I listen, I stay quiet until the client says something to the effect of “You cannot do that” or “You must do that.” Then it is my job to tell a story that shows just the opposite of what they think they “have to” or “can’t” do. I’m annoying like that but in a good way. We all have been “taught” a lot of things we can and cannot do. I’m sure Alexander Graham Bell was taught a lot of things that could not be done, but he went about proving people wrong and we all are happy for it – except when a cell phone rings in a restaurant. Same thing goes here; the limitations that most planners have taught most people cannot broken are actually quite breakable if you just ask the right questions. At the same time, throwing out ideas that do not apply can be so confusing that it becomes just as limiting. More than once I have received calls to the effect of “Carey I think I need an ESOP plan.” My reaction often is “What makes you think that?” but in the example at the front of my mind I was a little more direct and said, “So you went to a seminar did you?” (He had.) Given a little effort I could probably make a fair case that virtually any plan or design was THE plan or design – but the truth is there is no panacea. Knowing more options allows you to consider finer nuances and find the plan that fits the needs that much more precisely. The second advantage to knowing more options well is to know which ones you cannot mention at all. If an ESOP would be great except it is not applicable in this situation, then don’t bother to mention it! An advisor who is trying to prove how smart they are by showing all the options that might almost fit is not helping you; he is just making noise. Too much noise can make you deaf to the ideas that might actually help. “I’ve tried everything” or “I’ve been working on this for years” usually precedes the concept “I’m done” – not finished as in complete but finished as in done messing with this silly thing (I’m taking the stickers off my Rubik’s Cube). Ground rules for stories Before we proceed further, I want to elaborate on how “real” these stories are. You know us attorneys – there’s always a disclaimer. Rest assured, these stories are real. The conversations I relate to you from me talking with clients occurred. I presented viable solutions to these clients and they accepted them. But as these real stories unfold, I have made certain, intentional adjustments to honor and preserve my clients’ privacy. Only with permission will I tell you the family or business name. The rest of the time I have done my best to make sure you cannot figure out of whom I am writing – and that is not a challenge to see if you can. Please, understand me here. I worried a lot about this privacy issue: it is the point of my business. I am here to help people and not add more talk to the gossip that inevitably follows success. Put another way, let’s all honor the Golden Rule here. Not the version of “He who has the most gold rules” – we debunked that myth earlier. Instead, I mean the original version of “Do unto others as you would have them do unto you.” My challenge in this book is to tell you a 100% true story based on 100% real families and help you gain the value of their experiences and their advisors’ knowledge while preserving everyone’s privacy. Thank you for understanding the ground rules. This should be fun.