By all objective standards, you have a successful family business. Income exceeds expenses, you and other executives
receive generous compensation, you have a competent and loyal workforce and the business has a good reputation in the
Why is there 65% likelihood in the second generation and 90% likelihood in the third generation that this
business will be sold or fail?
The explanation in part rests in a failure to transmit family values.
In a recent article in CPA Wealth Provider, author Jeff Harris makes a strong argument that a distinguishing factor
between family businesses that successfully continue beyond the first generation and those that do not, is that the
successful family business is able to pass on to the younger generations its values, morals and family heritage; in
a word, its culture. “If you talk long enough to any thriving second or third generation business family you’ll find
they have, to a large degree, embraced their grandparents’ and parents’ positive heritage.”
The Article sets forth a five-step process to assist the family in identifying and transmitting its positive family
Step 1: identifying your values
The Family Office will either enter into a dialogue with you to assist you in uncovering your core values, or will
bring in a member of its alliance, who has an expertise in this area to take on this role. The Family Office would
explore with you such issues as your definition of success, what you feel is your most significant contribution to
the family, what factors/individuals were most influential in shaping who you are, the balance between business and
family, the spiritual role in your life, risk taking vs. incremental growth.
Step 2: creating a vision statement or bible
to help later
generations understand your family’s heritage
The Family Office can serve as a scribe at meetings in which you express what is important to you. In addition, as
a result of the many hours that it spends with you in formulating your family’s plan, it has gained an understanding
of your family that other family members may not have realized that you have articulated. This knowledge should enable
the Family Office to supplement and enhance your vision statement. To complement the vision statement, you can also
create a video of the family history, where each parent and/or grandparent “tells his or her story” so it can be
passed on to future generations.
Step 3: holding a Family Meeting in which
The Family Office calls family meetings on a regular basis. At an initial or early family meeting, it discusses the
basic estate plan so that the survivors are not faced with unanticipated outcomes. In addition to the estate plan,
it reviews the entire family plan and how it may effect the current and future generations. At later meetings, the
family may discuss future planning contingencies that affect the business, such as bringing in non family member
executives. This forum, with the Family Office moderating, is well suited for the family to discuss the family vision.
The family meetings are a place where values get expressed, stories get told, and the culture is handed down.
Step 4: creating a family council to foster
family members and instill and sustain your values
It would be the role of family members to create an agenda and assign responsibilities to various members. The Family
Office could assist the family in creating the agenda, notify family members of meetings and arrange for desirable
settings for the meetings. In addition, the Family Office could take on such other roles as coordinating speakers on
topics that the family has identified are of interest to it, such as investment strategies, charitable giving, the
college application process or planning an African Safari.
Step 5: ensuring that all of the family’s
professional advisers are
kept abreast of the desires of the family and are educated as
how the family defines “success”
For most of the families, this is not just return on investment. The Family Office recognizes that by sharing with
the family’s professional team the knowledge it has gathered and by exchanging ideas, the family will have a creative,
dynamic and unique plan that will enable the family and the business to respond positively to the demands that they face.
Finally and perhaps most importantly, author Mr. Harris notes that over time, your influence over the next generation
will wane and that of others, such as your daughters-in-law and sons-in-law, will increase. Without a solid process in
place to preserve and transmit your values, your family’s unique heritage as well as your thriving business, may be a
If, as suggested here, family values are vital in making a family healthy and a family business sustainable, then
consider now what you are doing to protect, enhance, and insure the worth of these assets.