wealth but rather how to grow it.
If shared intention or a shared dream provides the overall motivation for the journey of family wealth, then educated, active ownership is the means for pursuing that journey.
Transition
Since family enterprises are always growing and changing, perhaps the most crucial challenge facing them is transition.
Within a family enterprise, transition can involve at least four possibly parallel sets of changes:
1 Family transition—the transition from one generation to the next, bringing with it new roles for family members and new methods of communication.
2 Ownership transition—the transition of ownership within the family (and sometimes to nonfamily member directors or trustees), which brings with it questions of how to do so efficiently and effectively; this transition often involves the problem of how to foster active ownership when most, if not all, of the family's financial capital is held in trust. In most families, 90 percent or more of the financial capital is held in trust by the third generation. This “trust wave” can help preserve financial capital, but it can be deadening to the family's qualitative capital.3
3 Board transition—if the family has a business board or a Family Council (as described in Chapter 20), this transition can impact the enterprise's strategic direction.
4 Management transition—this transition raises questions about the overall direction of the business or investment policy along with questions about selecting and evaluating appropriate managers.
Each of these transitions is crucial, and often several of them take place at the same time.
An added complication is that family enterprises require different types of leaders at different points in their development and transition. For example, the most famous leaders in business management are often “leaders in front.” Such leadership can be crucial in a crisis or in a new venture. Leaders in front have passion, vision, creativity, and a sense of their own calling as an inspiration to others.
The problem for family enterprises is that their long-term task is to enhance the flourishing of all members. In such cases, more effective leaders might be “leaders from behind,” who help all of the members of the enterprise find their own paths. While a leader in front may be essential to the creation of a family's financial capital or its preservation in a crisis, too much leading in front will retard the development of other family members and so eventually sap the family's qualitative capital.
Finally, family enterprises need to be aware of the different uses of transactional and transformational leadership. Transactional leaders meet and overcome today's issues while transformational leaders meet and overcome the issues of the future. The former helps a family enterprise meet and eat for a day; the latter not only helps a family eat for its current lifetime but also plans for the enterprise to provide food for generations to come.
Navigating these different transitions and styles requires great care, patience, and communication. Again, the remaining chapters in this book and the tools they contain are designed to help you prepare for and manage this task of navigation. At this point, ask yourself these questions to orient yourself to what lies ahead:
In your family enterprise, which of the circles gets the most attention: management, ownership, or family? Which gets the least?
Which type of leadership—if any—prevails in your family enterprise now? Which seems most needed?
Where is your family enterprise in the journey of educating active owners?
Time
One of the great virtues of family enterprises is that their lives far exceed the lifespans of individuals. And yet, when it comes to thinking about complete family wealth, people often fail to apply the appropriate time frames. The focus is too short-term and individual, and family goals for achievement are set far too low.
Time should be measured by the generation. Otherwise, how can a family address whether it will still be together in the fourth generation? Short-term for a family is 20 years, intermediate-term is 50 years, and long-term is 100 years or more.
Most of us know that abandoning a process too soon, because it seems too hard, is the most common reason that endeavors fail. Families who choose to start the journey of long-term wealth growth—and the growth of their complete wealth—face the daunting fact that, if they are successful, this process will never end. They must decide to continue the process literally for all the generations to come.
To help you decide whether to begin this process, we offer our favorite metaphor for growing family wealth: the copper beech tree. If you don't know what a copper beech tree looks like and you want to see one, go to Rhode Island and look in the front yards of many Newport mansions. When fully mature, a copper beech tree is one of the largest trees in the northeastern forest. It may take five or six adults, or 10 children, holding hands to ring its trunk. Once mature, a copper beech tree will live for centuries.
Why is this beautiful tree our favorite metaphor for successful long-term wealth preservation by a family? Because it takes courage to plant a tree that takes 150 years to mature. No one who does so will ever see it full grown. And it takes good fortune for it to mature. Think of the hurricanes, ice and snow, pests, and fire that may consume the tree while it is too young to withstand those hazards. Further, it takes care. It must contend with humans who want to cut it down for its wood, and with governments that want to put a road or a new housing development where it stands. Families, too, need courage, care, and good luck.
We'll close here with a story told in Family Wealth about a copper beech tree. In the nineteenth century, Marshal Lyautey, one of Napoleon III's generals, was reported to have the most beautiful garden in France. Standing with his head gardener, looking out over his estate, he observed the wonderful specimens of the world's great trees planted there. Lyautey then turned to the gardener and said, “I see no copper beech tree.” His gardener replied, “But, mon général, such a tree takes 150 years to grow.” Lyautey, without a second's hesitation, said, “Then we must plant today—we have no time to waste.”
Like the planting of a copper beech tree, to embark on the journey of complete family wealth is an extraordinary act: the members who initiate the process will never know whether they were ultimately successful. If you are courageous and you want to be a wealth creator in the most profound sense, get started. There is no time to waste.
Notes
1 1 For a deeper exploration of the concept of families of affinity, see Jay Hughes, Family: The Compact among Generations (New York: Bloomberg, 2007), Introduction and Chapter 1.
2 2 For an overview of the 100-Year Families Study, see Dennis Jaffe et al., Good Fortune (Boston: Wise Counsel Research, 2014).
3 3 For more on the positive and negative long-term effects of trust, see George Marcus,
