The Real Reasons Behind the Loss of Family Wealth
An interview with John Messervey
John Messervey isn’t your ordinary family business/family wealth consultant… he is described by his clients as part coach, therapist, wealth creator, relationship builder, strategist and often “friend of the family.” One client recently shared, “John was able to get us on the same page. We didn’t realize that we had become our own worst enemy. All of our infighting had become very costly – to everyone in the family.”
Part of John’s unique approach is his respect for his client’s ability to create wealth, and his understanding of the unique issues that families encounter passing wealth through generations. While some advisors have great difficulty discussing money and wealth, John gently and persistently moves point by point in creating new understandings. John advises, “All families get stuck from time to time. Together we get unstuck and moving in a new direction. If a family stays stuck, their wealth declines each day.”
The core of family business life; the inevitable differences, questions of fairness, competitiveness, harmony, and communication are enduring. That’s where John’s work begins. He shares, “Most families are three or four important conversations from resolving an issue. You have to reframe the problems, offer new perspectives, create options, establish new boundaries and gently change the enmeshment found in successful families. There is so much at stake.” Many clients ask John, “How have other families solved these issues?” Although he has worked with more than 350 clients over 30+ years, John respects that each client is unique. That said, there are many timeless themes that affect family life, wealth continuity and smart business practice.
His many clients value his optimistic and positive nature, encouraging advice and often over the top sense of humor. One client added, “John’s stories are priceless—and memorable. There is a lesson in each tale.”
At Maplewood, John’s expansive Lake Forest, Illinois (USA) office, Thought Leader caught the well-travelled advisor to capture his thoughts on the real reasons behind the loss of family wealth.
TL: Let’s get right down to it. Bottom line, unresolved family differences and conflicts must be very expensive.
JM: Almost incalculable. Individually, the cost is in the millions; over generations the cost can be in the billions. No one ever said running a family business was easy, but far too much money is lost by unresolved conflict, status quo management and indifferent family owners.
TL: So, it’s more wealth lost than the oft-quoted family business succession survival rates?
JM: Absolutely, the primary reason families lose their wealth isn’t estate taxes, poor succession planning or inept heirs. They fail because of multiple unresolved conflicts, family litigation, divorce and far too much energy spent on inter/intra generational differences. Family business owners are smart. They have completed their tax planning, estate transfer strategies and investment allocations. The conflicts are like a constant bell ringing, calling for attention.
TL: What do you say to families that try to solve conflicts on their own?
JM: Wonderful, have at it! I often ask, “How is that working for you?” My hunch is that if a family could have solved their issues they would have. I ask clients at the beginning of our work, “What have you already tried?” I have observed that how a family attempts to solve a problem is often more of an issue than the real matters at hand. Rarely do they recognize that what they have been trying isn’t working.
From generation to generation, family life takes on many forms. To use a sports analogy, in golf, tennis, and baseball, it is hard to see what you are doing when you are doing it. Often family members are so close to the problem they can’t see it clearly. Tangled in their collective and unspoken discomfort, some just plod on… afraid to share the deep frustration they are feeling.
With each family, I try to provide a safe environment for new possibilities to emerge. I facilitate difficult conversations. At the beginning of each assignment, I often say, “blank sheet of paper, all options are on the table, what can you do, what can’t you do?” I am not on anyone’s side. That said, I am not afraid to share my observations on what keeps a family stuck. The list of what ails families in business and families of wealth is long and varied. Too often family members are afraid to say anything, so the miscommunication, mistrust and misunderstandings grow. Like weeds in a garden, eventually the weeds take over and generations of work dissolve.
TL: So, when should a family begin to deal with their issues?
JM: Before everyone is stuck in concrete and their positions harden. So many new clients share, “I should have called you three years ago.” Quite often the death of the patriarch or matriarch results in a call for help. I recognize how difficult it is to acknowledge family difficulties. At the same time, I am very aware of how relieved everyone is when our consultations start. So much is at stake with every assignment—if we can just get the family matters out of the way, the business can thrive.
TL: What are the most common “presenting problems” that you see?
JM: There a many challenges—too many to mention. Among the most common are succession, ownership equality, fairness, governance, compensation, personal performance, business performance, sibling rivalry, next generation leadership and business strategy. It is not easy to be in any business together, but growing a family business takes unique skills. In many cases, there is a unique form of stuckness that constrains the family and limits the growth of the business.
TL: Does everyone in the family need to be on board?
JM: Well, that helps, but at times someone holds back. That said, we start the consult. I would never let one family member stop a family from getting healthy. Not surprisingly, the holdout almost always comes on board.
TL: How long does a consult last?
JM: Always difficult to say, since the presenting problem may not be one of the real issues. Like peeling an apple, you have to get down to the core. Those who have an openness to change, some flexibility and can manage their control issues arrive at better outcomes sooner. Some clients resolve their issues in a few months, some take a little longer. We make that decision together.
TL: Do you mediate legal disputes among family members?
JM: Yes. Unfortunately, our legal system is deeply flawed and not a place for families to seek a resolution. In dozens of cases, I have yet to hear a client say they were pleased with the outcome of litigation. To those considering family litigation, I offer, “Imagine years of sleepless nights, a public airing of family matters, millions of in legal fees and a system that has very uncertain outcomes.” To quote U. S. Historian Arthur Schlesinger, “all wars are popular the first thirty days.” I would add, “after that, you are on your own.”
TL: Family systems are often resistant to change, how do you manage the change process to achieve better outcomes?
JM: First, a family member (or members) has to have the courage and commitment to put a stake in the ground and hold it long enough for good and better things to happen. Given a family’s impulse to resist any change and maintain homeostasis, the family member seeking change is often castigated and labeled the “black sheep” of the family. Too often the “black sheep” has the family issues already figured out. I have to keep asking the right questions—at the right time in the right order. We explore options together. There is a bit of a paradox in our work, “if you listen long enough, some clients talk themselves into a solution.” For most clients, this process becomes a win-win-win for the family, the business and ownership.
TL: What about families that are perennially in disagreement?
JM: I would ask, “Who gets something back by keeping the conflict going?” For some, fighting is a way of life – conflict has a very important role in managing inevitable power and control issues. For others, conflict holds the family together or provides a valuable distraction. This is especially true when the family owns an underperforming business. Over the years, we have seen that how a family attempts to solve their issues is often as problematic as the issue itself. One key is to learn how to control your negative impulses and manage your negativity.
TL: What are some of the other unresolved issues that limit wealth and keep families stuck?
JM: There are many – from simple misunderstandings to genuine disagreements. Frequently, I am asked to resolve entitlement, fairness and relationship issues… particularly generational issues between father and son(s). The father’s anointment of a son or daughter is a timeless question. So is the inevitable rivalry between siblings. Among siblings, there is a common dilemma of the high performer/ low performer. I provide a safe place to discuss these issues on a very personal and confidential level. Without addressing these differences, life can be pretty miserable for everyone.
TL: Tell us about your interest in LEADING CHANGE; your work accelerating family wealth.
JM: While family business/wealth consultations are the bulk of my work, my focus on entrepreneurship, strategy, liquidity (selling the family business) and wealth continuity are important skill sets that clients appreciate. I often help second or third generation families grow their business. And, I guide entrepreneurs, particularly the next generation, in launching their new ventures. We have created a LEADING CHANGE program for families in business. Much more than vision, values and mission, the Leading Change program gets every family manager/owner engaged, focused and in alignment.
Recently a client shared a very powerful thought. Highly effective business leaders can only advance 2-3 real priorities each year. Often, family disagreements, unresolved generational issues and other relationship challenges take up one of two of those “slots” each year. Far too much energy is spent year after year on those items rather than growing the business. Everyone in the family becomes exhausted and exasperated, the down cycle begins and then the blame game takes over.
TL: I sense that family ownership issues are a big part of your work.
JM: Unfortunately, some family members do not have the business savvy, maturity or perspective to be competent owners. I see too many family board members who have difficulty effectively analyzing their income statement or balance sheet or define EBITDA. Often you must “prune the ownership tree.” In some families this is difficult, but critical to long term success of the enterprise. Building ownership skills as well as managerial talent is essential. A competent outside board of directors is also high on my list of recommendations.
TL: It sounds like there are few shortcuts or miracle cures to all that challenges families of wealth.
JM: Yes, that’s true. Recently I worked with a family business CEO who was the epitome of leadership and respect. He exuded confidence and trust. It was truly a pleasure to work with him. Their family ownership group did not have the maturity or business savvy to understand the changes that were required to accelerate the business. Rather than cave in to family drama, he led the company to the next level of prosperity and teamwork. Having completing many of the standard assignments and projects at a local university business program, he discovered that, “personal behaviors trump family business project work” almost every time.
Some families are rather hopelessly enmeshed. They are so fused together that it is difficult to find any independent thinking or flexibility in outcomes. Chaffing under the family rules, all kinds of conflicts emerge. Paradoxically, separation is a key component of family life. Until the family sees this dilemma clearly, little progress can be made. Family members are stuck—permanently in a rule bound family that has little chance of harmony or long term financial success. Separation and individuation are the critical issues that takes a bit of time to understand—and implement.
TL: What are the essential skills for a thriving family and a growing business?
JM: More than wealth creation, mutual respect is a good place to start… integrity and trust building are also essential. Having a purpose bigger than yourself; your wealth will only get you so far. Removing family obstacles from business performance and family wealth continuity is a critical task for long lived families. So much energy is depleted on unresolved family conflict and misguided attempts at resolution. Every family and business can be regenerated to create more harmony, more focus, more direction and more wealth.
TL: Any final thoughts?
JM: Families are complicated – wealth adds an exponent to that complexity. Unresolved family conflicts can needlessly frustrate owners, managers and family members for generations. Waiting for a problem to solve itself only prolongs a very expensive agony. The instinct of denial is strong and ever present. Never give up—on yourself, your family or your business. There is always a solution.