The Enigmatic “Most Trusted Advisor” (Part Two of Two)

The study focusses on the processes of advisors as they navigate their way through the complex circumstances ever-present in family firms and how they acquire specific characteristics in order to capture the attention and trust of key family members. Then the study follows the subsequent process as the MTAs facilitate the environment to gain “collective attention” of additional family members - with the second hurdle being based on accomplishment of the first.

Noting that the “proper attunement to family members constitutes the unshakable foundation” on which MTAs either succeed or fail, the MTA must have a strong sense of self in relation to others, as well as a contributor to the whole, along with a strong decision bias to others. Therefore, knowing oneself and one’s position within the family, which Strike identifies as “voice” (the trust in the relationship) and “weight” (the expertise the MTA brings to the relationship) leads to the MTA knowing how and when they can exercise influence, and knowing that they have the long-term trust in the relationship in order to do so. 

The findings of this study do go against the anecdotal evidence which circulates amongst many family business advisors that suggests ‘outsiders’ are able to provide more objective advice: “[a]dvising is often thought of a dispassionate activity that assesses the facts. Getting too closely involved with advisees may mean that objectivity, which is so crucial to the MTA role, is compromised and that they are no longer able to remain emotionally distant. The findings of this study suggest otherwise.”

In fact, to illustrate this point and demonstrate that objectivity is not an important criteria in a MTA, a family business owner is quoted as saying:

              

“The key component of all of this is one word: trust. Trust. Trust. Trust. If that doesn’t exist, forget everything. MTA could make many mistakes and we would forgive because he’s got a big bank account of trust with us and he can do no wrong to destroy that.”

Among the highly relevant findings in this article are extremely expressive and insightful quotes from a number of enterprising family members, owners and working MTAs which depict the trust within and importance of these otherwise mysterious and secretive relationships.

Strike recommends that advisors looking to develop into a MTA should focus time and effort on developing personal characteristics and self-awareness; gaining experience in advising capacities by working with family firms; expanding one’s expertise beyond a single area; and acquiring the ability to understand and become attuned to family members’ group dynamics, emotions and abilities.

Any professional advisor in any discipline, or any family enterprise professional working in any capacity with a family firm would benefit from reading this easily digestible article. With such interesting and relevant research findings, anyone working in close capacity with a family firm would likely agree that we must work together to advocate for more research in this area of family enterprise and related disciplines.

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The Enigmatic “Most Trusted Advisor” (Part One of Two)

In a study examining the intricacies of the unique role of “most trusted advisor” (MTA) in several family firms, academic researcher Vanessa Strike identifies the processes and characteristics which enable these enigmatic, full-time family enterprise advisors to earn the trust of family members, capture their attention and then facilitate collective change as a result of their earned trust and role in the family enterprise.

Published in the September 2013 issue of The Family Business Review and the first study of its kind focused exclusively on family enterprise advising, “The Most Trusted Advisor and the Subtle Advice Process in Family Firms” [http://fbr.sagepub.com/content/26/3/293.full.pdf+html] paints a portrait of the otherwise secretive and subtle phenomenon of the advice process by closely examining nine MTAs who work within six well-established North American family firms which have been around anywhere from 30 to 120 years.

Firstly and arguably most importantly, Strike identifies MTAs as quite distinct from what most professionals in the field of family enterprise consider to be ‘advisors’ or ‘consultants’ to family firms, who most commonly have several clients and work with different types of family enterprises.

Likening a MTA to a “quarterback” who is devoted to a single family firm for many years or even decades, this special role is deeply involved in the most detailed and private areas of the family relationships as well as the business. The MTA is heavily invested in the long-term success of the family enterprise system in which they work, even sometimes referring to the members as “their” family. Strike makes a point of illustrating that these MTAs shun the spotlight and much prefer to be hidden from view, quoting one MTA as saying “[i]f nobody knows who I am or what I do, then I know I’m doing my job.”

Being such a highly trusted and integral person involved in a family business, the MTA is highly skilled, maintains very broad-reaching knowledge and does not suffer a loss of confidence when the family’s needs warrant the hiring of experts or advisors who have more specialized expertise than themselves. The MTA is not at all threatened by these other professionals, but rather holds the goals of the family in the highest esteem. In some cases, the MTA is so well-integrated into the family as a confidante that neither the family, nor the MTA, even identifies their role as a “most trusted advisor.”

Until now, these MTAs have gone completely unrecognized and unstudied in the field of family enterprise. Previous research on advising in family businesses has focused on specific models or intervention processes, which presumes that the advisor has been brought in for a specific task or project, where the start and end of the relationship is pre-determined or defined. Instead, Strike wanted to look closely at advisors who act in an ongoing, “trusted advising capacity” and could have been a family’s accountant, lawyer, or member of an advisory board or board of directors, but was in fact a much more integral part of the family enterprise than any one of those roles would imply.

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Practical Advice on the Family Agenda, from the Family Business Consulting Group

In this extremely practical and succinct article, “Who Owns the Family Agenda?” the author outlines early and intermediate ways of going about instituting an agenda in a family meeting. Without patronizing or complicating the matter, the article describes in simple, straightforward terms the beginning stages of developing a family agenda and how a family might progress to a more sophisticated agenda-setting routine. While the topics on a family agenda could easily be endless, the article uses a few real-world examples of common issues faced by many enterprising families.

               Perhaps the most important point in this short piece addresses the fact that the most crucial aspect of a family meeting agenda is not what’s on the list but who takes responsibility for it and how will it be executed. The author suggests a beginner or informal way of learning how to manage an agenda; goes on to outline a more formal way of using an agenda to develop, manage and communicate the family’s goals; and finally discusses ownership and execution of an agenda for large or advanced families with a family office or a family council.

               In short, this article is concise, useful and applicable to any family member or enterprise advisor looking for practical advice on how to start or best use an agenda for family meetings. This article would be highly useful for anyone interested in taking the mystery (or the fear) out of the implementation of meeting agendas.

From FBCG article, Who Owns the Family Agenda?

http://www.thefbcg.com/Who-Owns-the-Family-Agenda/

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Family Foundations: Compensation, Governance and Regulation

Does compensation for directors of family foundations rob those individuals of the “selflessness that sanctions their work” or is it a valid incentive to get family members to participate?

This thought-provoking article from Wealth Management addresses the many factors involved in the decision to financially compensate directors of family foundations.

While there are glaring differences between the legal regulations of these matters in the U.S. and Canada, the questions surrounding the motives and principles of doing so remain the same.

The article provides great examples of how sound governance can help to clarify any conflicts of interest around director compensation and provides examples of several high-profile cases in the U.S. in the early 2000s which depict the opportunities for mismanagement and the tendency toward the abuse of funds.

With the total holdings of U.S. family foundations sitting at more than $200 billion, or 41 percent of all foundation holdings in the country, and family foundations giving away $13 billion in grants in 2004, the opportunity for abuses to take place is only growing.

Part of that problem could be a result of the current U.S. law on this issue. The Internal Revenue Service (IRS) appears to offload the responsibility of such decisions by simply requiring that it be “reasonable” under the “prudent judgment” of the foundation board, while the Canada Revenue Agency (CRA) is quite clear in saying that “directors may not be compensated for acting as directors of charitable foundations” (in the province of Ontario) and that regulation in other provinces is “silent” but also typically considered voluntary.

Regardless of regulations, the author includes guidelines and recommendations from non-profit organizations (including the fiduciary duties of care; loyalty; candor and obedience) and encourages family foundations to heed those rules. This article is absolutely worth a read for those interested in the governance practices of family foundations, regulation around compensation for foundations or non-profits, and the IRA’s laws around this issue.

You can find the article here:

http://wealthmanagement.com/philanthropy/compensate-directors-family-foundations-0

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