Laurie Barkman interviews Maryann Bell, a partner at Wingspan Legacy Partners, about the common myths and challenges facing next-generation successors in family businesses. Maryann shares insights on the importance of communication, education, and bringing in outside expertise to navigate the delicate dynamics of family business transitions.
Listen in as they discuss strategies for stair-stepping next gens into the business, assessing fit, and managing the transfer of ownership and authority.
This episode provides valuable guidance for family business leaders and successors looking to ensure a smooth and successful succession.
Enjoy the episode with Maryann Bell.
Show Notes:
– Common myths facing next-generation successors in family businesses
– Challenges family business advisors face, including uncertainty and communication issues
– Advice for families on embracing succession planning and bringing in outside expertise
– Importance of engagement, education, and clear employment policies for next gen successors
– Navigating the balance between leadership and ownership succession
– Strategies for assessing fit and managing non-operating family members
– Transferring ownership and authority, and the shift from owner-operator to owner-investor
Find Maryann Bell Here:
https://www.linkedin.com/in/maryann-bell-1212074/
https://wingspanlegacy.com/
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TRANSCRIPT:
Welcome to Succession Stories, where we identify how entrepreneurs can improve business value and transferability to ensure the legacy of your hard work. This is your host, Laurie Barkman, and you’re in the right place if you want to build with your endgame in mind. Succession Stories is sponsored by The Business Transition Sherpa, providing expert advisory services for your business transition journey.
Today on Succession Stories, I interview Maryann Bell, a partner at Wingspan Legacy Partners, about the common myths and challenges facing next generation successors in family businesses. Maryann shares insights on the importance of communication, education, and bringing in outside expertise to navigate the delegate dynamics of family business transitions. Listen in as we discuss strategies for stair stepping next gens into the business, assessing fit, and managing the transfer of ownership and authority.
This episode provides valuable guidance for family business leaders and successors looking to ensure a smooth and successful succession. Enjoy the episode with Maryann Bell.
Today’s guest on Succession Stories is Maryann Bell. I’m excited to talk with you, Maryann, about next generation succession. You’re an expert in family businesses and a partner at Wingspan Legacy Partners.
Welcome.
Excited to be here. Thank you for the invitation.
Absolutely. Let’s get started. What are common myths facing next generation successors?
Well, the overall myth or unfortunate tagline with family businesses shirt sleeves to shirt sleeves in three generations. What that means is that there’s a founder, entrepreneur, idea creator who starts a business. There’s a second generation that it passes to and they build a successful platform and then that third generation are, and I will speak kind of euphemistically, entitled next gen kiddos that have no capabilities, no engagement with the business and no pride of the business and it deteriorates to nothing.
So the family loses their wealth, they lose their place in society and that is a destiny. So I truly believe that’s a myth.
It is a myth and it’s something that we’re going to focus on today in this session of what can we do about it. Let’s talk about challenges. In regards to your role as a family business advisor, what do you see is keeping clients up at night?
Oh, gosh. I think the biggest thing that is the challenge of any business, whether it’s a family business or not, is thinking about succession planning. Of course, that’s where you come in and I know, I’ve listened to many of your podcasts, you provide great guidance and feedback and terrific guests to share their stories.
I think in particular, as a family business advisor, family platforms or family leaders come to us when, it’s interesting, when their next generation is between the ages of about 20 and 30. Those seem to be the right ages where you start to think about succession planning and what do I do? In some cases, we’ve had family leaders have a health event or there’s some conflict in the family, and they approach us to help them begin the process to mitigate uncertainty.
What do you think are some of the reasons for that uncertainty?
Look, I think the other thing that happens in business in general, in life, but also in particular, the wonderful and dynamic complexities of a family business is, there are many things we don’t talk about, and there are issues that seem to be complicated. It’s woven with family dynamics and love and protection and accommodation. I mean, we all have families, so I’m not sharing any kind of secret here.
Families work around individuals because they’re bonded by love, and that is a beautiful thing about families. But when you supplant that into the business arena, that’s not good operating procedures.
What’s one piece of advice that you can offer for families facing some of these challenges right now?
Well, I think that the mindset that I would say that every family business needs to have is, let’s think about communicating about the business, and let’s think about communicating appropriately for the age. Of course, you might not necessarily bring in your two-year-old into the business, but let’s think about being embracing the idea of succession planning and of transition, and not being pulled away from it. The second kind of tactical piece of advice, and this may be a little bit different.
I know you recently had a guest talking about building boards. Don’t be afraid to bring in outsiders. As prideful and as wonderful and as important as the family dynamics, culture, and heritage of the family are, most families that are able to pull through that third generation, engage with a professionalized non-family team, whether it’s at the operating level or also on the board level, bringing on outside advisors into the board and not just including family members.
I think that’s a great piece of advice. I serve on two family business advisory boards, so I just want to distinguish for our listeners. There’s different kinds of governance and you’re advocating for any governance where you have some independent advisors.
But just to distinguish in your mind the difference and why a company might choose an advisory board structure versus a fiduciary board structure.
Thank you, Laurie. That was a nice little tee up because it’s exactly the right issue for families. Most of the families that we work with have full control of their business.
And in some ways, it’s even the organic family, brothers and sisters, own it. On occasion, there’s a cousin involved. But the organic family has full control of the business.
And so they want to maintain that voting control. But an advisory board, and we have stood up several advisory boards, are really valuable platforms to bring in external experts, whether they’re subject area experts in the industry or, in many cases, complimentary expertise outside of just the core of the business, that can bring in valuable strategic guidance. And these advisors, as you suggest, are typically, they’re non-fiduciary.
They have no authority to vote the direction of the business, no authority to hire and fire the CEO. But they are certainly trusted advisors that can add to the dynamics of the room. Because just having family members on a board doesn’t necessarily formalize the type of strategic stewardship that’s really important for concentrated ownership of an asset.
What mechanisms or processes do you see as success factors? You spoke about the 20 and 30 year old next generation coming in. What are some of those key things that a company should consider?
Well, I think the starting point is engagement and education. And again, some of this is age appropriate, but I think getting young people aware of the family history, about the family stories, about the family values at the dinner table is very, very important. And it gives, allows a young person, regardless of their interest in actually entering the business, to understand the role that the family has served.
Because the truth of the matter, as much as the business is important to the family, the family is really serving the business and the business has more stakeholders than just the family. You know, the stakeholders are, of course, the employees, the entire community that supports the business. And in some cases, I was working with one of our families yesterday in Mexico.
And you know, they have a high integrity business. They have tremendous conditions for their workers and are very meaningfully representative of the best of their community. And so they’re not just representing their family, they’re representing their community and their country in a really, a really wonderful way.
So young people learning the stories growing up is important. But the education extends beyond that. And there’s lots of opportunities to create not just exposure and education, but platforms and policies to let to elevate that next gen.
I’ve had more and more conversations with business owners who are founders, where they’ve purchased a business. So husband and wife or one of the parents is working in the company, the next generation. They’re in their 20s, like you said, and they’re at a college.
They’ve had some work experience and now they’re considering what should they do? Should they come into the company or not? And what I like to talk about in terms of succession is that there’s a succession of leadership and a succession of ownership, and those can be mutually exclusive.
How do we determine who’s the best fit and in which categories?
Laurie, again, you’re singing my song. I’d say it may be a little more crassly. I say succession is really twofold.
It’s the butt in the seat and it’s the ownership succession. And I think both are really, really important. One of the things to complement this education and exposure that you can offer to young people is clear employment policies to stair step into the business.
What makes you eligible to be a candidate? In many cases, we recommend a certain level of education or equivalent work experience. Again, it depends on the industry or the family’s particularities.
You made another really smart comment, which is somebody may have chosen to do something different and then is considering to come back into the business. We strongly recommend a young member of a family, a next-gen, have work experience outside of the company, maybe even outside of the industry and outside of the region. In some cases, we actually even delineate five years or three years.
One family I worked with and they reversed their policy, had a 10-year outside of the family business work requirement. That’s a long time and that really sometimes can allow people to find another path. That’s okay too.
But if the real goal is to create a platform to give exposure and round out an education, three to five years is a starting point. But then once they are education, previous work experience, maybe living outside of the region depends on the family business. Those are nice prerequisites that are often articulated clearly, not just understood, but written into either a family employment policy or a family constitution.
We also like to very clearly articulate how do they advance in the company? How does their career path follow? Do they have a requirement to report not to family members?
Are they allowed to have supplemental coaching or mentoring from outside the business? Are they eligible for that professional development programming that many universities like yourself offer to young people as they advance through their career? Those are nice ways to really give clarity to that rising gen, that new entrant to the business on what the pathway could be.
How about the people who just aren’t a fit? Whether they’re not a fit to be an owner, they think they are, but then ultimately they’re not a fit, they have to be told the bad news. Or the opposite, where the next gen kind of wants to go another direction for whatever reason and they opt out.
Is it better to get them to opt out than to be told this isn’t for you?
You know, it’s interesting you say that because you’re exactly right. And I think that that’s where I think this level of we don’t talk about it needs to really be acknowledged that not every member of the family is a good fit. And quite frankly, not every member of the family will advance.
I mean, some people may look at this a really bad fit and the person is not producing or not conducting themselves in a way we can talk about code of conduct in a minute because that’s another issue that I think is worth addressing. I think that acknowledgement needs to also be included in the in the employment policies. And again, professionalizing the context would say families advancements through their career in the organization will happen through management and HR-related oversight.
And if the fit is not deemed to be mutual, then the family member would be dismissed as a underperformer would in any if any candidate. You don’t get the job just because of your last name. And I also think there needs to be articulation of if you choose not to go into the business.
Some families actually and again, it depends on the family and the family wealth situation provide access to capital for those who want to choose other paths. And they have a formalized almost like a lending platform that says, well, if you’d like to start another business, you can borrow money from the family with terms that are maybe generous, but there are formal terms. This is not just a giving money away.
This is a professional financing platform that allows you to pursue other opportunities, but that you would have to pay that money back.
Interesting. Well, what about on the gifting side? Have you seen scenarios where there’s a non-operating family member who, not that they feel entitled, but that the prior gen wants to do it, right?
It’s not like an entitlement thing, but more like a fairness thing.
Yeah. It’s interesting when you say that because the other thing is fairness is a very delicate issue because it’s a very subjective word. Equal is not always fair, and what families often do is distribute ownership of the business to their children on equal standings, and then oftentimes one family member continues to stay in the business, drive the business, lead the business, create value for the whole family.
Creating that, recalibrating that fairness, and particularly the authority. If one member of the family really has leadership role and the full authority of the business and the other family members aren’t really fully involved, but benefit, and again, family businesses in some cases choose to make distributions, so those people could be living on those distributions. Resetting that authority and ownership is something that’s very delicate among siblings, and going back to your point on the role of independent advisors, those are the types of governance reviews, compensation reviews, and ownership structure reviews that oftentimes either an advisor, such as Wingspan, or an independent board can be valuable in resetting that.
So that it doesn’t, and we’re not trying to get to the point of dismissing family ownership or removing them entirely. It’s just a reset to allow the family members that are operators in the business to concentrate their ownership.
There’s a baton handoff. I like this visual that we’re running and we’re handing off the baton and we’re not dropping it. It’s very smooth.
And the next gen taking it and doing something with it. There’s a power dynamic shift as well because the prior gen needs to let go. They need to move on.
How do you give guidance to that generation? Let’s call them Gen 1 just for sake of conversation. Right.
What guidance are you giving to Gen 1 in that shifting power dynamic?
Again, you’re playing this out very, very nicely. Laurie, what we talk about when we advise families is that it’s a very critical role to shift from that owner operator to the owner investor role. And in many cases, the owner operator who has grown the business, has elevated the platform, created wealth for the family.
I will say it’s interesting. Many of them, while they have been successful, they haven’t necessarily designed a bigger strategy platform. And that goes back to that board creation.
This board creation is really, really valuable in family businesses. And so having an owner operator shift to that owner executive, sorry, owner investor role on the board only, chair of the board, even chair emeritus can be the next step outside of actually taking a lead in the board. These are all really good pathways for certainly an aging person to have dignity, respect.
And let’s go back to this identity issue. So much of these wonderful family businesses are driven by individuals who have pride in what they’re doing both for their family and for their community. And so we don’t want to disrespect that platform, that authority, that identity, but we want to right set the level of authority so that there is room and that, quite frankly, it’s funny, I was talking to a family today in Turkey, an amazing Turkish family, where the first, the four brothers built the business at a wholesale level.
The next gen G2, the brother, sorry, the son, the oldest son of one of the oldest brother, I think, took on the retail business. And this was about 20 years ago. And the retail business was dismissed by the uncles.
The retail business was 5% of the business 20 years ago. Today, it’s 60% of the business. And of course, they’ve done internet distribution.
They’ve got a great social media platform, everything that they could never have imagined. And that actually couldn’t have happened. But the brothers, the uncles, have now all become that emeritus level.
The next gen is operating the business as chair of the board. And it’s a really nice, respectful transition. And it’s all allowed the business to do things it never would have done if those uncles were still in charge.
That’s a great example. Let’s talk about the future. What excites you about the future of family businesses?
Well, I think in general, I’m excited. First of all, I love working with 20 to 30 year olds. I’ve done coaching and mentoring with 20 to 30 year olds for almost 25 years.
And I’m as much as people can be cynical or they have a broad swath of millennials and Gen Zers. I am so much more encouraged than this dismissive attitude. I think there’s a lot more education and access to ongoing thinking through problems for young people today, whether it’s, let’s just go to one of the basics.
Family business is, again, going back to the we don’t talk about it, money is a big issue, but today, young people have a lot more access to financial literacy information, guidance and coaching on responsibilities with money, and I think young people take that opportunity and use it well. We see a lot of young people coming to do ongoing education that come back to some of the programs we oversee. There’s other programs, of course, an educational platform.
So I think there’s an eagerness and a willingness to learn and to, I love that you started with myth busting. It’s to myth bust and to learn and understand and to break, kind of dismantle this, we don’t talk about it culture that for whatever reason has often been part of lots of businesses in particular family businesses. So I’m very, very excited.
And I also think the pathways to involvement, engagement, and pride in a family don’t have to only be on the business operating side. So I think I see a lot of, we see a lot of families trying to create platforms, philanthropic platforms to activate that sense of pride and legacy, but it doesn’t necessarily have to be in the operating business. And so we see families, I mean, young people today, their sense of responsibility for each other and responsibility in stewards of the earth and on our environment is a much greater kind of character of this younger generation.
And that’s one of the ways that they absolutely want to engage. So, you know, there’s there’s encouragement on all levels because people are more informed. But also there’s more platforms and agency to make really thoughtful choices.
Maryann, we’ve learned so much from you in this interview. I want to ask and learn more about you. Tell me your origin story.
“What got you to your role at Wingspan?
Well, you know, like everything in life, there are chapters and I’ve had several chapters. My first chapter, a professional chapter, was in the financial services industry. I had the great pleasure of working with one of the largest banks in several locations, New York, Boston, and London.
I have a good friend who says a quote that I think is valuable. It’s not the grades you make, it’s the hands you shake. One of my friends in that earlier part of my career in the financial services world was our founder, Christina Wing.
We were professional colleagues and then became close friends. In addition to that time in the work I did in the financial services world, I also did the mentoring that I mentioned to you and did that more on a less formalized basis. We left London almost 15 years ago and I now live in Austin, Texas and have served on 12 boards.
In complement to the financial services world, I had a deep dive into the governance world and recognize the importance of structure and process and clarity. That’s been a lovely and very rewarding part of my chapter. Our founder, Christina Wing, started Wingspan almost three years ago and when it was started, she said, hey, what do you think?
To me, it was a great complement of some of the governance work I’d done. The financial services world gives you a nimbleness to work with wealth and a variety of different businesses. Then that young engagement and mentoring that I’ve been involved in.
It’s been a nice little combination of a lot of the things that are fun and interesting to me.
If you can go back in time and give yourself some advice, what would it be?
Oh, gosh. I think we all have to be more kind and forgiving. Ambition and goals are super important and I think those are very important because we all like self-improvement.
We all like to have achievement. But I think being kind to ourselves is something that we should be mindful of. Maybe my years in life have seen that.
I don’t want to say everything always works out. How you think it’s going to work out, that’s not true. But I think generosity of spirit, certainly to yourself is very important.
What do you like to do outside of work?
Well, we have a family of travelers and so we like to do all kinds of adventures. We just got back from Iceland, which I would strongly recommend for anybody. It’s a beautiful dynamic part of the world.
There was the volcano exploded when we were there, so that was another interesting dynamic.
Absolutely. I love to ask everyone who comes on the show if they have a favorite quote that inspires them.
Well, in our business, we like to say clarity is kindness or policies before it’s personal. So those would be my Wingspan quotes. But I do love the quote from Maya Angelou is that, you do the best you can until you know better, and when you know better, do better.
That’s great advice. Maryann, if people want to get in touch with you, what’s a great way to connect?
wingspanlegacypartners.com is our website. I strongly recommend anybody in family businesses to visit our website. Whether we work in a professional relationship or not, we have a lot of good advice.
We publish a newsletter monthly. We have audio casts of some of the podcasts that we do, and we have a lot of good reference material. No matter what challenge you may be facing, it would give you a perspective and a thought.
Then I would just say also, please don’t hesitate to reach out. The email to Wingspan is on our website. I’m more than happy to have a conversation with anyone.
Just to start to problem-solve in a conversation. And then if it turns out to be something that we can help further, we’d be delighted.
That’s awesome. Maryann, thank you so much for coming on Succession Stories. It was great to have you.
My pleasure. Anytime, Laurie.
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