Case Study: The Initiation
Ernest* met his wife when they were both in college. The subject of her family business came up in passing, but he hadn’t spent a lot of time thinking about it when they were dating. “I knew there was a family business, but I didn’t know much about it other than her brother, her father, and her grandfather had worked for it,” he shared with us. “I knew eventually she was going to be a future owner of some sort, but that was sort of it. She was pretty private about it for a while.”
By the time they were married, Ernest knew enough to understand that the business was important to his wife (and her family) and that it might play a role in their financial future, but because she was pursuing a career outside of that business, the subject was never explored further. “I don’t recall there being a time when she sat me down and said ‘You need to understand where the money comes from. This is what my father does. And I’ll be part owner of it someday, with my cousins.’” They both put the subject on a back burner.
But about a year into their marriage, Ernest was finally “initiated,” as he puts it, when he accompanied his wife to a family meeting. Wanting to impress his new father-in-law with his business acumen, Ernest tried to bone up on the industry so that he could offer pertinent comments and guidance, if asked. Or least he wanted to make sure he understood the strategic decisions they were sure to be discussing. “I assumed we’d be discussing new investment opportunities or the new CEO.”
But that’s not what happened. Instead, he finally began to understand the enormity of the family business and its role in the extended family. “That was the first time I saw numbers and understood the significance of it all,” he recalls. “When I saw how many people were employed, the value of the enterprise, that was when I sort of realized how big and wide ranging this all was. This was a major operation. It was a little bit overwhelming.”
In the meeting it also quickly became clear that no one was going to ask Ernest for his pearls of business wisdom. In fact, discussion of the business was minimal.
Instead, Ernest realized that the dynamics among the family were at the heart of the meeting. “What surprised me most was now little they focused on the day-to-day running of the company and how much more focused on how this family group could work together as owners and how money will flow in and out of the company. For a lot of family members, this business was more or less their livelihood,” he observed.
He had not really discussed the financial details with his wife beyond knowing the business was kind of a “safety net” for them as they navigated their stressful careers outside of the business.
Considering how informal the meeting seemed to be on the surface, he was surprised by how family divisions became apparent in the room: family branches sat together. Ernest was perhaps most surprised by the topics that dominated the meeting that day. They discussed the business itself for just a few minutes. But the bulk of the meeting was focused on the prospect of diversifying the business and who got to make that decision. “People kind of broke into two camps,” he recalls. “Some people said, ‘Things are working fine, why mess with it?’ Other people wanted to try some new things.”
The conversation danced around that topic for a while before Ernest understood that the issue wasn’t simply about who gets to decide what next steps the company can take, but also the implications of that decision on the finances of the family members in attendance. It became clear the business was the financial lifeblood of many family members. How decisions affected individual family member finances was extraordinarily important. But that topic, Ernest knew, was not one he had a right to wade into. He was there simply to support his wife as a future owner.
Participating in that meeting did help Ernest see how to better support his wife. Though he understood that the family business was not a daily concern for his wife, who had a thriving career in a different industry, he came to see how much she cared about the family business and legacy, and perhaps most notably, how much she respected her father as the head of the business. “She would be more involved if she had time and energy for it,” he says. “She feels very protective of it.”
Even from just that one meeting, Ernest had a better sense of the family dynamics, family structure, family history, and how the family was working together. “I began to understand my father-in-law much better,” he says. “I have a much greater appreciation for how hard he’s had to work, especially building consensus. It actually improved our relationship.”
As a result, Ernest began to feel somewhat protective toward both his wife and his father-in-law. “I wanted to find ways to support and help them.” Ernest had his own career outside of the family business, but he wanted to find places where he could make a genuine contribution to the family.
After that meeting, Ernest looked for an opportunity to play an appropriate role in the business family. When the subject of forming a group to clarify the family’s education and employment policies arose, Ernest raised his hand. His professional experience would be relevant in this area. And this would not only be a good opportunity to both get to know other family members better, but also to make a genuine contribution. He could offer valuable perspective as an outsider.
As the only non-family member on that working group (which was comprised of other family members across generations and branches), “at times I had to fight the feeling ‘You’re not an owner. You don’t have this decision-making authority. Why would anyone listen to you?’“ But overall, he says, he felt like he was able to add some value.
One pleasant development in the years since he first married into the family is the relationships he has formed with other spouses. “I have great conversations with them all the time,” he says. “It helps that I’m not alone on an island here. Knowing that there are other spouses having to deal with some of my same concerns is super valuable.”
But perhaps the most valuable aspect of these experiences is how he’s come to understand both his wife and her extended family so much better now. “I can see a snapshot of it in my mind and it’s so revealing. I can see my wife interacting with her cousins and her parents. I can see things I wouldn’t if I weren’t involved. And especially how appreciative she is of her father, how supportive and protective she is.” And Ernest, too, feels the same way, having seen his father-in-law navigate the family dynamics so well. “Seeing it up close, I have enormous respect for him. He’s built – and maintains – something that is really important.”
*Identifying details have been changed
Response: How to “Onboard” a New Spouse
By Alison Isaacson
Bringing a new spouse into the fold can be a challenge for any family, but it’s a bit more complicated for business families. There are a host of legal issues – such as prenups and confidentiality – to consider, as well as myriad cultural ones. And for a family business that has thrived in part from being private, welcoming a newcomer can be complicated. How much do we share with a spouse? How much do we want the spouse’s “voice” in family matters? Where does a spouse fit in? What are appropriate boundaries so that the new spouse feels included and welcomed, but understand that they are not an owner? There are no hard and fast rules about how best to bring a new spouse into the family system. But we have seen a number of successful practices from the families we work with.
No matter how you do it, it’s important is that a new spouse comes to feel like a member of your family, not an “other”. After all, they will become their partner’s closest confidant and could influence their partner’s engagement with the business. They will also be likely to be the parent of the next generation of owners and will influence the next generation’s relationship with the family business. You want them to feel part of the family. Here are some best practices we’ve seen families use to welcome a new spouse into the system.
1. Start early. Have a plan for introducing the new spouse into the family system as early as the engagement. You want to set the new spouse up to succeed, so don’t wait for them to “figure it out” or make a mistake before you discuss family expectations with them. If there is to be a prenuptial agreement, don’t spring it on them at the last minute. The family member they are marrying should let them know that a prenuptial agreement will be expected. Don’t spring it on them for the first time in a meeting with lawyers. (For more on this, listen to our expert interview with Banyan’s Marion McCollom Hampton.)
2. Set context. Help the new spouse understand the family into which they’re marrying. This can be formal, such as participating in an official onboarding program or taking part in educational sessions designed for next generation family members to get up to speed, or informal, such as having one-on-one conversations with family members. What’s key is to share with the new spouse who you are as a business-owning family. Not just the facts and figures (though we’ve seen families do that, often requiring an NDA), but the essence of who you are, what the family stands for, and what the business means to you. Share the origin story of the business. The family history. Talk about the family’s greatest triumphs. Make sure the spouse understands the business mission and purpose. Discuss the values your family holds dear.
3. Set guidelines for spouses in the family system. Can a spouse work in the family business? Can a spouse become an owner? Can a spouse have a role in family governance? What events or gatherings is a spouse entitled (or expected) to attend? For example, “We expect you to attend the annual family meeting and the Gen3 Retreat. We encourage you to attend these optional events…”. Discuss what your family does – and doesn’t – do with the business or family name. How does your family conduct itself in public? What are the rules and boundaries of social media?
4. Define concrete benefits. It can be confusing for a new spouse to understand the matrix of benefits that they will now be entitled to (or those from which they will be excluded). Take the time to explain this in advance. Ideally you will have policies in place before there is a new family member, so the rules don’t feel personal, but if not, take the time to think this through. For example, will the spouse be entitled to services from the family office? What are the expectations about estate planning and what estate planning resources will be made available to them? What expenses will the family reimburse (for example charitable giving, travel expenses, etc.)? Will the spouse be entitled to tickets to charitable events the family sponsors and if so, how do they get them? Is there a corporate plane they are allowed to use and if so, what are the rules around that? Don’t assume that the new spouse (or their partner) will instinctively know what they are allowed to do or even where and how to take advantage of these resources.
5. Clarify how decisions are made. As Ernest learned first-hand, understanding who gets to make what decisions in the family and the family enterprise can be confusing to a newcomer. Take the time to walk through the Four Room Model – the family room, the owner room, the board room, and the management room – explaining who is in each of the four rooms of governance and, at a high-level, what decisions are made in each room. Explain where they fit and have a voice (the family room), where their spouse and future children fit, and where other members of the family fit.
6. Find ways for the new spouse to add to add value. Spouses can play a critical role in the culture of the family, supporting the owners and future generations, as well as bringing their own skills and talents to the enterprise. Find ways to tap those skills and talents for the good of the family as a whole. Spouses can play vital roles on committees, in planning family events, in keeping families connected. Look for opportunities to engage spouses in the activities of your family.
You don’t necessarily have to do all these things, pick and choose what’s right for your family. Consider a formal orientation to get started. But don’t stop there. It’s in everyone’s best interest for a new spouse to feel welcome, included, and loyal to the family.