If you are the leader of a multi-generational family in business together or an advisor serving such families, one of your biggest challenges is preparing for and managing change while sustaining relationships, financial security and emotional well being. We have found the Zoom Out, a concept from The Lean Start-Up by Eric Ries, can help you meet this challenge.
(We like the concept so much, we’ve used it to name our blog.)
Ries shows entrepreneurs how to use a scientific model to answer one of the most pressing questions they face: “How can we build a sustainable organization around a new set of products or services?”
By slightly shifting focus, we can see enterprising families face an equally pressing question: “How can we sustain a multi-generational family in business together using planning tools to prepare for unexpected and inevitable change?”
The scientific model Ries presents helps clarify assumptions and creates a clear vision for what you want to accomplish. Key to making progress is the identification and monitoring of “actionable metrics”, ones that accurately reflect the key drivers of a business. (In contrast to “vanity metrics” that present only the “rosiest picture possible”.)1 To help entrepreneurs manage unexpected change, and address unsatisfactory progress, Ries introduces the concept of pivots: “structured course corrections designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.”2
This approach aligns very well with how multi-generational families in business together and their advisors can meet the challenges created by unexpected and inevitable change. When change occurs it triggers a pivot, a “course correction”. The effectiveness of a pivot is directly related to the validity of the “actionable metrics” a family has identified and monitors.
Now, here’s where the Zoom Out comes in. (We bet you were beginning to think we were never going to get to it!). A Zoom Out links a specific trigger to larger issues and begins with identifying the trigger you are facing, e.g. a parent’s cancer diagnosis. You then “zoom out” to the bigger plans for managing multiple change triggers like retirement, selling the family enterprise, divorce, or the dynamics of aging parents, any of which may significantly change your family’s life and the sustainability of your family enterprise.
In our work, we have created a number of structured zoom outs we call Fire Drills and clarifying assumptions is the first step in any Fire Drill. Consider the following example:
Mary was in the final stages of cancer. Her three children came home to take care of her. Jennifer agreed to serve as the executor of her estate at Mary’s request. As part of the estate planning process, Mary asked for feedback from her adult children about how she was dividing her estate. Jennifer was the only sibling who wasn’t married and had no children. Mary told all three that she had decided to divide her estate evenly among her children. The two who were married and had children would get the same amount as Jennifer.
The youngest of the three, her brother Tom, objected to their mother’s plan. He said the estate should be divided evenly among the children, spouses and grandchildren. Jennifer offered to resign as executor and to recommend to the attorney and their mother that Tom serve as executor instead. Tom declined.
A week before their mother’s death, Jennifer and Tom had a huge fight. Tom said their mother’s estate plan just proved Mary had always loved Jennifer more than her other children. During the year it took to settle the estate, Jennifer and Tom’s relationship was tense and distant. When he received the final report and distribution, Tom wrote to Jennifer to tell her he had not realized how complex and demanding the process of settling an estate was. Their relationship gradually got easier.
If they had done a Fire Drill and zoomed out a little, they might have avoided the stress, heartache and pain they experienced by clarifying these assumptions:
WHAT ASSUMPTIONS MIGHT HAVE BEEN CLARIFIED?
- In estate planning, fair does not always mean equal. Mary loved all of her children, her children’s spouses and her grandchildren. She had been generous over the years to each of them. She wanted “fair” to be equitable, and considered her three children her primary beneficiaries. She listened to Tom’s objections but wasn’t swayed by them.
- In family dynamics, money does not equal love. Tom was caught in a difficult spot. He didn’t agree with his mother’s assumptions or decision. He also thought it disrespectful to argue with her when she was dying. They had spent much of his adolescence fighting. He wanted her death to be peaceful.
- In families, talking about money is often taboo. Mary asked for input from each of her children separately, but wasn’t comfortable having a family meeting to work through the differences in perspective about her estate plan. The family had never had any kind of training in conflict resolution and tended to avoid hot topics like this.
In your family, you may be aware of contentious family dynamics made more challenging by un-clarified assumptions regarding aging parents, health issues and estate plans. Consider doing a Fire Drill starting with the following core questions. This will allow you to use the zoom out and pivot point concepts to clarify and agree on the broader impact of family dynamics issues.
To get support for this Fire Drill, go to www.cambiopress.com to see two books: The Dynamics of Aging Families and Health Care Issues of Aging Families. There are two versions of each, one for the aging parents, and one for the adult children and are available as a downloadable PDF files.
Ries, Eric (2011). The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Publishing. p. 103. ISBN 978-0-307-88791-7.
What’s Next for the Zoom Out Blog?
Trustee/beneficiary education
Often when a family member is asked to serve as a trustee or is named the beneficiary of a trust, assumptions are made including:
- They know what their roles and responsibilities are as trustees and/or beneficiaries.
- These roles and responsibilities will not put any stress on family relations.
- Reducing estate tax liability through trusts is a piece of cake.
And then, reality strikes.
Much of our work includes educating families about how to make sure the trusts set up as part of estate planning really work, both for the beneficiary and the trustee. Read our next blog to learn how trustees and beneficiaries can clarify and maintain roles and boundaries together while minimizing the impact of harmful assumptions.
