Building Futures and Passing the Baton: Family Development for Seamless Successions

Welcome to Legacy Builders, Strategies for building successful family enterprises. Brought to you by the Beacon Family Office at Assante Financial Management Limited. I’m your host, Cory Gagnon, Senior Wealth Advisor. And on this show, we explore global ideas, concepts, and models that help family enterprises better navigate the complexities of family wealth.

Today, we kick off our first episode of 2024 by welcoming Gerry Meyer, founder and CEO of Meyer Advisory Group. With over 36 years as an HR practitioner, consultant, and advisor, Gerry brings his knowledge in organizational effectiveness. His leadership spans public and private sectors, family enterprises, non-profit, real estate, high-tech, and professional services industries. Holding the CPHR and FEA designations, he is a seasoned professional equipped to navigate diverse business challenges making him a trusted ally for those seeking transformative insights in human resources and family enterprise advisory.

My goal is to be the most curious person in today’s conversation with Gerry Meyer, where we discuss expectations of the active and next generations, emphasizing the significance of aligning these expectations for a successful family succession. We’ll explore stories surrounding development plans and the necessary timelines for cultivating executive skillsets. Additionally, we’ll unravel the vital components of nurturing human capital and constructing a forward-thinking enterprise plan. 

Gerry, drawing from his wisdom, asserts that he considers himself and non-family executives not doing their job effectively unless he is just one comment away from being fired.

Now, let’s dive in!

Cory: Welcome, Jerry. We’re excited to have you here today and share your to share your wealth of knowledge and experiences with us. Let’s dive in. Shall we?

Gerry: We certainly shall. Thank you for the opportunity to chat.

Cory: Gerry, imagine you’re delivering a commencement speech to the graduating class of 2024. You have the chance to inspire them with your story. How would you begin your speech to convey the incredible lessons and expertise that you’ve gained throughout your career?

Gerry: That’s a really interesting question to kind of kick off the conversation because I certainly recognize that my career path has been rather unique and opportunistic. I started, wanting to be an architect. And, fortunately, it was not accepted to any of the schools.

I then went into a general BA program and ultimately ended up in the field of human resources. And I was in that field for many years. Also, culminating and being the VP of HR for a family-owned and operated business. I was there for about 12 years.

Part of my answer is to plan where you want to go and think about how what your career might take a look at, but don’t, or let me rephrase, allow for the opportunities to arise that may not necessarily fit within that plan.

For example, when, I left the family business and moved to Vancouver, I fully expected to get another VP of HR role. And as it turned out, I was not necessarily successful in that, but I was getting phone calls from, different people asking if I could help them with this, that, and the other thing. And they were all family businesses.

I started to realize, okay, maybe there’s something in here for me to do. Working with families and, family businesses, that’s what I’ve been doing since 2014. I’m not sure where it would have been if I’d really ended up trying to pursue other human resources or corporate services role but looking back, I’m tremendously happy that I took the path that I did. So keep your options open.

Look for opportunities that may not certainly fit within the plan because everything creates an opportunity for you to further develop your skill set and your expertise.

Cory: And, Gerry, if we talk about opportunities and assuming that the graduating class is young, up-and-coming individuals joining the workforce. Plan for where you want to go but allow for opportunities, that present themselves within the family businesses that you’ve had the opportunity to work with. Talking to the generations in those businesses.

Tell me a little bit more about how that attitude can help as you bring that in as an adviser, but they were contemplating that within their structures.

Gerry: Traditional relationships within family enterprises have been within the wealth management, investment, the legal, the tax, and the estate planning. My background is in human resources, which you can describe in several different ways, but is all about relationships.

From an HR perspective is acquiring the talent that will help the organization succeed. Transitioning into the family enterprise sector and the family enterprise advising sector what I’ve been able to do is take the skills that I developed or acquired in, staff development, etc., and transition that into working with both the active generation and the next generation around. Where does the next generation want to fit in?

How do they want to be part of this family, enterprise family organization going forward? Do they want to be active in the business?

Do they not want to be active in the business? And with the active generation, what are their expectations?

Facilitating that conversation and developing those relationships, helping the multiple generations in a family enterprise, have the conversations that need to take place to work on what is succession. What is the continuity plan? How do the wealthy want to transition from one generation to the next generation?

Cory: Now, Gerry, going back to your question of what are their expectations? And sometimes expectations are verbalized and sometimes they’re not. And talking about opportunities versus expectations, can you touch a little bit more on some of the pressures and things that you see from that perspective?

Gerry: Well, the best way for me to answer that question is actually to give you the story of the family that I worked with. In that story or situation, we have a father who had a successful business, and, he had 2 daughters that he decided to hand the business over to.

He initially had that conversation with the 2 daughters, he was completely surprised when the 2 daughters said, we don’t want the business.

We don’t want to run the business. Now, I was brought in after that had transpired, and had I spent some time talking with the father. I spent some time talking with the 2 daughters. I even talked with the mother.

The father had a preconceived notion that he would just hand it over, so the daughters, would gladly accept it and then run the business, etc.

The daughters had a very different perspective,  they wanted to manage the health or the asset, if you will, but they did not want to run the day-to-day operations because they felt their father would expect that they would run the business he did, which was to work 70 hours a week.

To work on the weekends, to work in the evenings, and never take the occasion and that was not them. That was not their expectation. That was not what they wanted to do.

In the course of several discussions and interviews and then pulling the whole family together. I helped them get to a realization that there was an opportunity for the 2 daughters to continue to manage the asset and oversee the wealth, if you will, but not be involved in the day-to-day operations.

And, I was able to help the father understand, but that was actually okay. Since, he actually had done an incredibly good job of developing his executive team so that we could actually take someone out of his executive team to run the day-to-day operations, become the CEO of the business, and that freed up the daughters to be part of a board of directors that oversaw the strategic direction of the business and of the wealth.

It allowed for the father to take on a role as an interim role as an executive chair of that board allowing for the transition and the exchange of expertise and understanding between the father and the daughters.

That is a scenario where you have 2 different generations, 2 different expectations, and perceptions, and they not necessarily initially completely being in sync. What it took was a series of conversations, discussions, questions, to help both sides come to an understanding of each other’s perspectives and desires, and wishes.

We were successful in the sense that the business still stayed within the family. The daughters had a role that they were totally comfortable with and the business had the necessary operational and executive leadership to continue.

What it really boils down to is Cory is just working with the different generations, is opening up the lines of communication between the generations, and to extend that aspect of the conversation a little bit further, there’s a multitude of different models of family businesses and family enterprises.

The most common is that people relate to is the 3 circle model which has the aspects of the family and business and ownership. Frequently, when I get involved with families, multigenerational families, and the business. Those three elements are in just one big circle and are completely clouded together.

A lot of the work that I do with families has helped them understand how to separate the conversations. This is for them to understand what they need to talk about and how they can talk about these things and be governed in these conversations.

And compartmentalize discussions on the family side, discussions around the ownership side, and discussions around the business operations, the management side. Because each of those conversations, while they’re made, there are elements of interrelationship, there are also elements of those conversations that are very different and need to be held differently.

Because if you’re talking about the shareholder side and what are decisions that rightly fall within the shareholder’s bucket but you’ve got the family side and that’s getting clouded in there. I’m a family member of your son, I have my spouse. I think she should be part of this conversation. We’ll know what she should do. Or maybe she should.

That needs to be a discussion and a decision that’s made in Atlanta, right? I spent a fair chunk of my time in the areas of governance and helping families parse out those conversations, but more succinctly fall into the right bucket.

Cory: Right now, Jerry, going back to your story, the mother and father developed their daughters and the daughter spent their younger years up until that point. At some point in education, be it.

Going off somewhere, be it within the family, or the business, everyone has their journey. Some families were a little bit more intentional than others in the way that they’re developing that.

Can you talk a little bit more as you said, they wanted to manage the business as a piece of wealth, but they ended up sitting the 2 daughters on the board. With a great executive team that the dad had helped create. Some people have that vision and get to that point the dad might not have in this case.

It sounded like with your guidance, it had helped and worked out. But what if it didn’t?

What if he let’s say.. let’s start in the family and the daughters weren’t prepared to be on the board and maybe they had just worked in the business and didn’t see that ownership side of things? How do you see that within some families?

Gerry: There are It there’s like, it will depend on what generational transition at, the level they’re at. If it’s gen 1 to gen 2 or generation 2 to gen 3 or gen 3 to gen 4, gen 1 to gen 2, typically stereotypically, the transition of succession, the continuity is parent to child.

There may be a couple of children involved in which case you’re transitioning from kind of a sole operator to a sibling partnership structure. In that situation, maybe some children don’t want to be part of the business.

Maybe some children bluntly put shouldn’t be part of the business, and what I do in those circumstances is work towards understanding the difference between operating the business and being a shareholder.

And in some families, there’s just an automatic assumption that if you’re going to be a shareholder, you need to be in a business. That’s not necessarily the case, and that’s not necessarily what’s best for the business.

Developing the next generation as operators of the business versus developing the next-gen as stewards of the wealth and effective shareholders Those are 2 different dynamics. Those are 2 different develop development plans if you will. The skill sets are different.

The usual process that I take is to sit down with the active generation and say, okay. What are your expectations? What do you want to do? Where do you want to be in 5 years? And what are your expectations of your children?

Do you expect them to come into the business? Do you expect them to become the next CEO? And if that’s your expectation, have you talked to them about that? Have you looked to understand what their expectations are? If you have that expectation and if your child has that expectation, what are you doing? What needs to be done? What should be done to help them develop the necessary skill sets to be properly prepared?

I’ve had a couple of circumstances. I’m working with one client right now where he had made the decision, and his daughter had said yes, that he was now going to hand over or transition to his daughter taking on the CEO role. But she had no skill set and he wanted to transition it within a year.

I’m going, don’t think that’s the timeline we’re talking about here. Let’s talk about what you think is necessary for your daughter as minimum skill set competency requirements, and then let’s map out what that looks like in terms of developing those. And then, let’s sit down with your daughter and get her perspective on this.

Ultimately, where we ended up getting to is, that he recognized this.

There are certain things that he was doing as a CEO that he came to the realization that’s not really stuff that I should be doing as CEO.

So we could rescale the role of CEO and then put in place a program to run his daughter up.

That was probably about by the 2-year timeline, still fairly aggressive, but, achievable. Right? And so that’s what’s happening. But let’s to your point, Let’s talk about this. What happens if the child is not ready? Or has no interest. Or in particularly difficult circumstances, the parent doesn’t want the child to be involved in the business. Because they recognize they don’t have what it takes to be a CEO.

And how do you how do you position that conversation? How do you set the stage for that to be, a conversation that is ultimately successful and helps the child understand, “Okay, my future is not here.”

But I’ll go back to my earlier point distinction between the skill set to operate the business and the skill set to be an owner of the asset, the steward of the wealth.

In a couple of circumstances where I’ve been in circumstances where the family doesn’t necessarily perceive the next generation as being appropriate to run the business, we steer them into understanding your future is not in the business, but your future is in managing the well.

Cory: Now curious, as you mentioned the aggressiveness of a development plan, 2 years. That 2 years go by very quickly, but if you ask somebody when you want to have this happen by 3 to 5 years tends to be a very common, answer.

You asked them next year, well, 3 to 5 years, sometimes that timeframe is shortened due to circumstances. There might be something outside of their control that’s creating that.

Sometimes it’s the opposite. I’d like to elevate this next generation within 3 to 5 years and 3 years go by. It just keeps going and that next generation says, be it mom and dad or aunts and uncles, depending on where we are.

“Alright. What’s next?”

They’re in this development plan. They’re bought in, but maybe, expectations aren’t communicated. So how do you see that where there’s that implied, you work in the business and now it becomes a little bit tough because did they get fed up and leave?

Did they approach the generation that’s in control, how do you find those situations?

Gerry: You’ll notice that I’m chuckling as you’re going through that particular exam or a particular, situation. I’ve had to deal with that a couple of times and you might remember earlier on, I said that I have a conversation with the active generation.

One of the things that I do ask them is what’s your plan? Where you want to be in 5 years, and you might remember in the story that I told you, I interviewed the father’s life.

In that particular scenario, I said, where would you like to see the 2 of you in 5 years?

What do you want to be doing in 5 years? Just kind of a nominal timeframe.

And what I’m doing with those questions in that dialogue is setting the stage to hold them accountable for the transition plan that is almost put in place because they already indicated, in 5 years, I want to be in a motor home and traveling the US or whatever the case may be.

And, you’re dead. Right? The typical response in terms of timeline is 3 to 5 years. I have been in a couple of situations where the active generation, is asked the question every year, and every year, the answer is 3 to 5 years.

What needs to happen is, there needs to be accountability. We’re already holding the next generation accountable for their development and their experience. The experience they need to gain in order to position themselves to transition into the new role.

Similarly, we need to hold the active generation accountable for letting go. Stepping away. Sometimes that takes an outsider, not a family member.

I played that role in a couple of families. I’ve also seen it work very effectively if you have a board of directors and you have a couple of independents on that board. And those independents are made aware of the transition plan and can hold the active generation accountable to say, okay, the next generation has done what we asked them to do, and they’re moving along quite nicely.

What are you doing to prepare yourself to transition? Right? You said 3 to 5 years last year.

You can’t say 3 to 5 years. This year, you can now say 2 to 4. Are you making the right progress?

There was a panel group at a conference, several years ago, that was talking about this and talking about the transition, and it had different generations from different businesses.

The line that stuck with me, or the exchange that stuck with me was one with the older generation in one business talking about it, and this gentleman was saying, it’s really hard to let go. What was interesting was the immediate response from another person on the panel, a different generation, a different business. There was no relationship between these two people whatsoever, but their immediate response was, no, it’s not.

And that interplay for me illustrated that it goes back to opening up the lines of communication and managing your expectations. But also holding each other accountable within the family unit.

If you’re a dad and you say you’re transitioning out in 3 to 5 years, then you need to work towards those 3 to 5 years. Absolutely and you’re the next generation and you’re transitioning to take over in 3 to 5 years, then you need to be moving along that path to be fully prepared for the transition in 3 to 5 years.

Cory: Right. Gerry, you made mention of independent board members. We’ve previously talked in previous episodes about developing boards for advisory and how effective it can be.

Now, I do want to talk a little bit about non-family members. But let’s talk a little bit about non-family employees and your background in HR a little bit of those relationships because working in a family business as a non-family member can have its challenges.

Going through the development and developing the active generation for their succession to their next chapter of life but also watching the next generation develop.

There’s a bit of a hard place in between that and being those people in the business witnessing.

Can you maybe tell us all the stories?

Gerry: As far as that goes. I’ll share a few anecdotes. In the family that I was a non-family executive in, the last several years that I was with them, the family, the active generation had decided that they were transitioning from owner-operator to non-owner operator

3 of the 7 shareholders were active in the business, and had decided to step out of the day-to-day operations. So that necessitated effectively hiring an entirely new non-family executive team up to and including the CEO. In the course of going through that process, I observed some really interesting dynamics around how non-family executives worked effectively or not within the family business environment.

And Cory, quite bluntly put, as a non-family executive, you will never be equal. You will never be family, and you cannot lose sight of that. Conversely, and perhaps somewhat contradictory, and again, I’ll use the sound bite that I use, periodically.

I’m not doing my job either as a non-family executive or in my current role as a family enterprise adviser. If I’m not one comet away from being fired you need to be candid, you need to be transparent, and you need to show that you have the long-term interests of the family as a key driver of your behavior.

At the same time, you have to have the managerial or the managerial courage, and conviction, however you want to describe it of being able to provide perspective that may be contradictory to what is in the best interests of the long-term aspects of the business.

Because families and family enterprises and multi-generational families don’t have a short-term perspective when it comes to their wealth. They have a long-term perspective.

I worked in publicly traded companies many years ago where if you’re not generating a healthy percentage return every quarter, you’re not doing your job. Family businesses sometimes don’t think in those terms. They think about what is where they want to be in 5, or 7 years.

What do we need to do this quarter? That can be a difficult transition for some non-family executives is realizing that there is a long-term perspective that’s involved.

Similarly, the family needs to put in place a compensation and investment, incentive structure that ensures that the non-family executives are completely aligned with where the family’s long-term strategic plan is going.

There’ll be a base comp element. There’ll be an annual, short-term incentive. But I see many families putting in place a long-term incentive plan that bridges 3 or so years that is tied to the preservation and risk-managed growth of the overall value perspective that immediately comes to mind.

Cory: Well, I love that you talked about that alignment and how different it is from a strategic plan that depends on the longevity of the business, not the quarterly return and how that shows up.

As the market’s expectations, understanding that as a non-family executive or even hiring those non-family executives. How does the approach change? Because you’ve got some time that, as you said, the muddiness of ownership, and those circles are mudding. But also, the fact that the family may be being compensated as owners, changes the way that view compensation.

But when you non-family or non-ownership, it changes things, and sometimes the culture as far as compensation needs to be a little different.

Gerry: The whole area of compensation within a family business, both for family and for non-family could take an entire interview process in and of itself.

As it relates to non-family executives coming into a family business and understanding how different that dynamic may be as we were going through the interview process with this particular family, with the VP of HR, we got down to a lead candidate.

I actually would have what I I’d have an interview with that person on one. Where I somewhat jokingly spent time convincing them not to take the role. And the intent there was to make sure that they were fully aware of what it was that they were stepping into.

Making sure that they understood the environment that they may have worked in before, which I would have a sense of, and how different that environment would be in this role that they were potentially going into.

And I will say I’m kind of blowing my own horn a little bit here. I will say that each of the non-fan executives that we ultimately hired actually came to me afterward to thank me for having that discussion with them.

Because they recognized that they would have not been fully prepared for the difference that they were facing as they it is. Understand that you’re joining a family business. It’s different.

It’s different as it relates to compensation around the family members in the business and non-family members in the business. But again, Cory, that’s a whole separate conversation, and happy to do that as a secondary discussion at another point in time.

Cory: I think that would be great, Jerry, because, I threw a lot into that question. I think that it was quite loaded. There’s so much there as it relates to compensation and development, and how you tie that in.

So, I would love to do that and have another discussion with you at a future point.

Gerry: Absolutely willing to continue that part of the conversation.  

Cory: Awesome! Great. Now Jerry, as we end or near the end of our conversation today, there are a few questions that I ask before we wrap up. Are you ready for the tough ones?

Gerry: Sure. Alright.

Cory: What is one key strategy that you believe is essential for building a successful family enterprise?

Gerry: It’s thematically going back to what I’ve said before.

Maintaining the lines of communication, recognizing that there are different dynamics at play in a family business between the family, the ownership, and the business. Quite frankly, this may sound self-serving to me and to those of us who are family enterprise advisors, engaging an outsider to help.

Facilitate and manage those conversations, because sometimes trying to do that internally. There’s too much history. There’s too much emotion. There’s too much baggage. Engaging in, an independent third party to help facilitate those conversations it is actually beneficial to the family.

Generally speaking, they get to a point where once they’ve had that facilitation a number of times. They need the facilitation less. And in fact, with some clients, and there was one client for a period of time that I’ve worked with for a little bit of time, and then things would end and I would think, okay, we’re done, and then I’d get a phone call saying, where are you? We need you back.

I have my own personal perspective My job is to get them to the point they can have those conversations without a third party. If a third party has to keep coming back in, then I don’t think I’ve really done my job.

Cory: Right. Like raising a child exactly. How can you develop the skill set and let them fly?

So that’s great. And I think making sure also that it’s not considered a failure. I think bringing everyone once in a while is maybe not a bad thing, but maybe less and less than for different reasons, I think, is great.

Now, what would you say is the most common challenge that you see in family enterprises, as their when it comes to wealth transition and generational continuity?

Gerry: What I find quite regularly, not consistently, but quite regularly, is that sometimes the active generation has a perspective that says, This is how I got to where I am today.

My children need to follow the same path. The children are inheriting wealth or a business in a very different environment in a very different world than what their parents experienced.

Sometimes the path that the next generation needs to take has to be different than the path that the act of generation has taken, and I spend time helping both sides understand why that’s not a bad thing, and why that’s actually a good thing. Why it’s okay, why it’s right for that process to unfold.

There’s one family that I’ve been working with for some time and there are actually 3 generations active in the business. The 2nd generation really wasn’t connecting with the 4th generation. Because of that expectation, the 4th generation had to go through the same process.

Again, much dialogue, much discussion, and much open communication, and they eventually both got to a point where they understood each other’s perspectives and recognized that the pathway was different.

Cory: That’s beautiful. I love that bringing perspective and helping them see through the lens of the other. You might have answered this perfectly already, but any one strategy that might help overcome this beyond what you’ve shared?

Gerry: Absolutely not.

Cory: Good. That’s great. The adage goes once you’ve met 1 family business. The issues may be consistent across family businesses, but the approaches and resolutions, very tend to be unique to that particular family.

Gerry: Yeah. And part of my role as an advisor is to help them figure out what that looks like.

Cory: Now in your experience, what are the top 3 qualities that successful family enterprise leaders possess?

Gerry: Leaders and family advisors.

Cory: No. The leaders in the in the enterprise. If they’re leading from the active generation or they’re developing those skills as the next generation.

Gerry: It’s a really good question, Cory. I’ll put a few thoughts together. I’m not sure that they’re complete, but what pops them on 1st and foremost is a recognition that the ability to recognize that what got us here as a family is not necessarily what we need going forward.

The other element of leadership quality is recognizing that you don’t need to be an expert in everything. Being comfortable surrounding yourself with people, and resources, either within the family or within the business or outside that have more experience than you do. Of more expertise than you do. And being willing to listen to what is being provided to you.

Cory: Love it. That’s great. I think recognizing that you don’t want to or don’t need to be an expert and surrounding yourself with smarter people and I think that’s a great one there.

And, Gerry, before we conclude our discussion, I want to highlight where our listeners can engage in more conversations you’re having or where they can find you.

Gerry: They can reach out to me through the contact information, that I’ve provided I have a website, myeradvisorygroup.com. They can email me, and I’m assuming you’ll put that contact information up on the initial podcast.

Happy to engage in the conversations as in if, they want to reach out.

Cory: Fantastic. Now, Jerry, I wanted to make sure that we’ve covered everything, today. Is there anything else that you’d like to share with our audience that we didn’t get a chance to touch on?

Gerry: There’s probably a multitude of things that we didn’t touch on. But I think the core themes of what I hopefully was getting across, I think those are the baseline, to pay attention to. I think the last closing comment I would make is how to package this.

Successful family businesses, family enterprises in a multigenerational environment, and transitioning from one generation to the other. Recognize that decisions need to be made based on policy not based on emotion or situation or the individual.

The best example of that is families establishing a family employment policy. What are the circumstances or what are the requirements of how family members can come into the business?

I mentioned that only to emphasize that the transition away from individual or situationally based decisions to a policy-based decision serves the family best, better because then everyone can wrap themselves around the policy as opposed to a situational or individual-based decision, which creates us and their outcome.

Cory: Love it. I appreciate that.

That is a great piece of advice Gerry and I appreciate you sharing that. All of the expertise that you’ve shared, very much appreciate you taking the time with us today. I found our conversation very valuable and I hope that our listeners do as well. Thank you for your contribution.

Gerry: You’re quite welcome. Thoroughly enjoyed it myself. I always quite love having these kinds of conversations.

As we wrap up this episode, we invite you to contemplate the valuable insights Gerry has shared. 

Whether you’re actively engaged in a family enterprise or providing advisory services, Gerry’s expertise illuminates the intricacies of navigating generational transitions and fostering enduring legacies. 

Throughout our discussion, Gerry drew upon a wealth of experiences from his extensive career. Some key takeaways include recognizing the pivotal role of accountability in addressing succession challenges.

We must hold the next generation accountable for their development and the essential experience to smoothly transition into new roles. Take a moment to consider, ‘What proactive steps are being taken to prepare for this transition?’

Similarly, accountability extends to the active generation, underscoring the significance of letting go and stepping away. Additionally, it’s worth noting that, in certain cases, an outsider—rather than a family member—may be better suited for certain roles. It’s crucial to emphasize: as a non-family executive, achieving equal status is unlikely. You won’t be regarded as family, and it’s essential to remain mindful of this reality.

For further guidance and a deeper exploration of the key themes discussed, reach out to Gerry Meyer through Meyer Advisory Group. All relevant information and links can be found in the show notes.

Disclaimer: 

This program was prepared by Cory Gagnon who is a Senior Wealth Advisor with Beacon Family Office at Assante Financial Management Ltd. This is not an official program of Assante Financial Management and the statements and opinions expressed during this podcast are not necessarily those of Assante Financial Management. This show is intended for general information only and may not apply to all listeners or investors; please obtain professional financial advice or contact us at [email protected] or visit BeaconFamilyOffice.com to discuss your particular circumstances before acting on the information presented