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FFI 2011 Presentation

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Justin Anderson

on 23 August 2012

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Transcript of FFI 2011 Presentation

Framing the Issue Theory Case Study The Challenge
It is not that the firms who are working with the first generation of a family are doing a poor job…

…it is because they haven’t found a way to connect directly and significantly with the next generation. Stats Approximately 30% of all family-owned businesses survive into the second generation

12% will be viable into the third generation

Only 3% percent of all family businesses operate into the fourth generation and beyond. Of the 70% of businesses that fail to transition successfully… 60% fail due to problems with communication and trust

25% fail due to a lack of preparation from the next generation

15% fail from all other issues (e.g. poor tax or financial planning, legal advice, etc.) The Natural Change Process Outlines the natural and spontaneous process of change Pre-contemplation
“I’m not even thinking about it/aware of it.”
“I’m thinking about it/aware it’s an issue.”
“I’m preparing to do something about it.”
“I’m actively doing something about it.”
“I’m maintaining the new status quo.” Pre-Contemplation “It isn’t that they can’t see the solution, they can’t see the problem”

No intention of acting

Resist change suggestions

Lack information about their problem and tend to want to stay uninformed. Contemplation “They know they need to address something”

Struggle to see the extent of their problems or their causes, but wonder about solutions.

Often have indefinite plans to take action sometime in the near future

Know destination, but aren’t quite ready to move yet. Preparation “They are planning to take action soon”

They are committed for action, and can appear confident, yet underneath still have ambivalence

Awareness is high and anticipation is palpable

Still need support to convince themselves that action is needed Action “They most overtly modify their behavior”

Busiest period and one that requires the greatest commitment of time and energy.

Changes are move visible and receive the most recognition. Maintainence “They must work to consolidate gains of action”

Without commitment to Maintenance their will likely be relapse usually to Passive Consideration or Active Consideration stages.

Failure to consolidate benefits of action is typical of providers who ignore the Maintenance stage Transition Preparation Assessment Tool was developed to… To educate as well as to assess where clients report being in the transition process by using “bite-sized” pieces of information in it’s questions (based off of motivational interviewing) Assist TA’s in understanding where their clients are at in the change process.
Reduce overall client resistance to transition process
Increases the speed and integration of successful multigenerational transition practices More than  90%  of all business enterprises in the United States are family owned or Privately held

25% of senior generation family business shareholders have not completed any estate planning other than writing a will

80% want the business to stay in the family

20% are not confident of the next generation’s commitment to the business. Context On the Horizon... In the next 5 years, 30% of family-owned firms will experience a change in leadership due to retirement or semi-retirement.

90% of next generation clients will choose new advisors to work with their generation. The Baby Boomer generation is in the midst of transitioning, or preparing to transition…

…an unprecedented amount of wealth -- and leadership -- to the next generation. Because of increased life expectancy…

…It is quite possible to have 3-4 generations of a family trying to work/lead/communicate together. Why this Matters In order to support the successful successions of in our client families, while maintaining or increasing what we know to be the very foundation of 5-generation families -- Human Capital / Family Harmony -- we have to be able to adopt an approach that works with this evolving intergenerational dynamic. For…
The sustainability of advisory practices
The successful transitions in family office leadership teams
The successful successions in families
The evolution of the field

… it is imperative to explore a new paradigm and embrace this opportunity to support our client families -- as well as our own practices -- consciously and intentionally. Connect and engage with the next generation

Facilitate meaningful and nonthreatening conversations between generations

Meet clients ‘where they’re at’ The Opportunity Meeting Clients in thier Stage A recent review of several accounting and financial services firm websites that work with Family Businesses revealed a vast majority of the products and services they sell are positioned for clients in the Preparation or Action stage. Yet, many family business owners are in the Precontemplation and Contemplation stages when considering the transition of their business. When we push for a product or service too quickly… Defenses rise

Regress back on the Stages of Change continuum

Creates longer change process

Potentially loses trust in TA. If your clients aren’t yet ready for action or are showing resistance… Offer a variety of safe, low risk, low commitment learning opportunities. Examples include: Short self-assessment surveys

Presentations that include concrete items that client is already interested in, and introduce topics around transition along with it.

Short, yet relevant articles

Case studies of other successful family business transitions Preliminary TPA Data on Transitions*: 73% of business owners who have completed the assessment believe they are in a growth phase of their business lifecycle.
75% are confident in the next generation of leadership.
81% are still in the Precontemplation or Contemplation stage when it comes to transition of Ownership.
63% of are in the Precontemplation or Contemplation stage when it comes to transition of Business leadership.

* The TPA is still in the early stages of collecting data and developing its norms, validity and reliability measures still need to be completed . Please take into consideration when reviewing the numbers above. Implications and Future Opportunities Enhances important and challenging conversations between the TA and the FBO For each Stage, TA has the tools/information to examine and address what needs to be accomplished in order to move to the next stage and ultimately successful transition. Trading Power Creating Successful Intergenerational Transitions
Using the Natural Change Process Kristin Keffeler, MSM
Next Gen Success Strategist
Kinetic Enterprise, LLC Justin S. Anderson, Psy.D., LP.
Family Business Advisor
JSA Advising, LLC Highlights of using TPA Self-Assessment:
Helps educate clients on Role and Responsibilities of the Sr. Generation, Successor Generation, Trusted Advisor, Expert Advisor- and how the fit together
Objectives of the FBOs, TAs, EAs
Mindsets of the Sr. Generation, Successor Generation
Statements from FBOs “Presenting Problem” and appropriate responses from TA and EA
Identifies common mistakes or incorrect assumptions
Identifies triggers that can move FBOs to the next stage Questions? Contact us at: Justin Anderson:
janderson@jsaadvising.com Kristin Keffeler
kristin@kineticenterprise.com Family Tree Diagram

Jon (65) Susan (62)

Joe (37) Sam (35)—Karen (30) Denise (28) – Brad (28) Fact Pattern:
•40 year old family business.

•Equal shared ownership (25% each) between the parents (G1) and the three siblings (G2) – ages 37, 35, and 28 .

•Father (Jon) is the founder/owner/operator and is seeking to transition from his current role as CEO, to Chairman of the board, to retired (a 10 year transition plan).

•While Jon’s preference would be to keep the business in the family, he is open to selling the business, hiring an external CEO to run the business, or mentoring one of his children to run the business.

•Susan doesn’t want to sell the business, and doesn’t feel that a woman should run the business , but she doesn’t speak openly about her opinions. She often complains that the process is moving too fast and asks for to put off making a decision on the success plan.

•None of G2 currently are actively employed in the business, but each has expressed an interest in taking a more engaged role. However, only Denise has taken action and is seeking apprenticeship.

•Jon and Susan, in an attempt to not show favoritism, haven’t spoken about which of their children (or in-laws) they feel is qualified to step into a management role.

•The succession planning process frequently stalls and gets derailed because there are fights about who is qualified to work in the business, who is showing up to operational meetings and whose not

•Fights also often include stories of broken trust for childhood/teen years

What is the best action plan for an advisor to begin with in advising this family?
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