MOM and the Family Business

As a business owner I’m always on the look out for client trends. Last year the majority of our clients were focused on scaling their businesses. So far, 2018 appears to be the year of acquainting clients with their MOM. You read that right… there are mid-market family business owners that have lost sight of MOM.

At present we are seeing cases of clients that never took the time to intentionally define MOM’s role in the business and it is causing significant transition challenges. I’m not talking about “Mom” the parent. I’m talking about the MOM of your business – Money, Ownership, and Management.

Defining guidelines for MOM allows owners to develop a coherent set of actions they can clearly communicate both internally and externally to shape transition strategy for scaling, selling, or family succession. MOM is a set of values based choices centered on identifying what outcomes the owner(s) does and does not want in a transition. We were recently with a very successful family that has 3 generations (founders, siblings, and cousins) all working in the family business. The stated challenge is “we want to grow, but there is so much jockeying for power that we can’t get anything done.” Exploring the situation further revealed that the family was having a legal discussion focused on the terms of a will and trust that were set up years ago. The founders, a husband and wife in their 70s, have maintained ownership while turning management over to their children (Gen 2) who will inherit the business.

Mean while, Gen 3 (cousin cohort) members are trying to figure out how long they have to wait to take over and when they get to become owners. Gen 3 has figured out that the business must be scaled in order to support more family members coming into the business. Gen 2 is comfortable with their lifestyle, willing to put in their time, but not inclined to take on more complexity or work harder. The result was summed up well by an insightful member of Gen 3 when she said, “we’re stuck, we’re frustrated, and we’re a ticking time bomb…”

How did this happen? An unintended consequence of Gen 1’s value for family harmony resulted in a faulty mental model that says, “holding ownership will keep the peace, we’ll provide money for the family, and the kids (Gen 2) will be happy with exercising management power… we just need to keep everything equal so it is fair.”

In this case, the root cause of the business being stuck is a family dynamics issue. By helping them take a dialogue based exploratory approach to explicitly defining the desires and needs of each generation  for MOM both today and in the future the family gains the clarity necessary to make strategic decisions about:

  • Business: Growth and investment opportunities
  • Money: Business and personal financial matters
  • Self: Individual implications can be reconciled relative to the goals and needs of the family as a whole

When you consider common challenges that arise in the 3 major types of transition (scale/sale/succession), nearly everything points back to owner aspirations for MOM. Once the aspirational goals of MOM are made known Owners are able to use the M3 Framework to explore 22 variables in 3 critical dimensions (My Business + My Money + My Self) to design a transition scenario that gives the greatest likelihood of success. Family business owners that take the time to explore these dimensions gain the additional benefit of family cohesiveness – a vital attribute for multi-generational success.

Here are 3 helpful resources for starting the journey:

  1. Download: “M3 Framework” white paper
  2. Download: “Beating the Transition Odds” white paper
  3. Listen to: “The Family Business Podcast” with @Russ Haworth