Family Business
Resources

About money and power

Length

3 min

AppID

VIMEO-62352629

Description

Listen to Kathryn McCarthy, a Family Business Advisor and Family Office Expert, explain the relationship between controlling patriarchs; lack of communication; and hurdles in developing a business family legacy. In a family business, it is important to create a long-term plan including the roles and responsibilities of the rising generation. A clear succession plan will ease the transition of control and money between the founder and the next generation.

Speaker(s)

Kathryn McCarthy

Language

English
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Transcript

Money is a magnifier. Money is freedom, at one level. It is also control at another level. Ultimately if you really dug through the problems, the money is not the problem; it is just the magnifier of a problem that may have been set off by a founder and control.

I think control and communication, many times, are the big problems. It is really difficult to go from the founding generation- the person that owned the money, made the money, owned it- to the next generation, because the next generation does not have the same dream and they probably do not have the same drive. And that whole level of disappointment that comes out from the founder, unless they are able to find a way to deal with it, starts to set into a family system some negative stuff. And then the money just takes it from ... View More there.

The control aspect ruins the next generation’s lives. If they have not included the next generation, they have a really hard time because the legacy is the money and that gets into, you know, real control. Because they see, they can change people’s lives by controlling the cash spigot. I, you know, have worked with a family where the father was so controlling that the adult children, he controlled all the cash flows, fundamentally. I mean there were lots of sort of quasi-governance and rules that they, in theory they could weigh in on, but they really did not. And so he controlled even their credit card bills. And that is, you know, when they are in their forties, that is really tough.

It was really a very odd, very insidious way of controlling people’s lives, for a long time. And that started with this man years ago, and he just magnified it by the money because he was disappointed that the kids were not going into the family business, and could not reconcile that at all.

You need cooperation, and you need really the cooperation of founder, or the generation that is in the leadership position, because it is not always the founder, that they are willing to let go and have that conversation. You have to work on the patriarch or the senior family member, or they have to trust you enough to bring the next generation in. The family business guys have a sense of legacy once they kind of, get over the control, or they are seeing that the control is not helping the business. That allows them at some point to look at the next generation as their legacy.

I always say, give the branches, give the family members some money on their own so they have this sense of independence. Because the worst thing you want is this group of people who are tied together by a common asset and all they do is want to be away from it.