Dollars and Sense …
CPAs: How the Most Trusted Business Advisers Help Business
Families
 By
Henry D. Landes
November, 2001
Doctors have tremendous influence over most of us due to their
knowledge of how the human body works and our trust in them as persons.
Likewise, accountants have considerable influence on the owners
and managers of family businesses.
Because of demonstrated competence in often wide-ranging financial
and business matters. But more importantly, because CPAs have earned
the trust of their clients.
How, therefore, can accountants honor that trust when business-family
clients are faced with the normal, but often extremely complex,
issues of The Succession Zone? This is the period of high risk for
both the family and the business when ownership and management undergo
transition, a process that frequently exposes an emotional minefield.
(The Succession Zone begins when members of the next generation
first enter the business … and ends when the senior generation
turns over control and retires.)
What are the unique competitive advantages brought by the CPA
to business families in transition?
First, families in transition need top-flight financial advisers.
While succession surely involves "more than number crunching,"
CPAs are uniquely positioned to provide clear-headed financial advice
during the sometimes perilous journey through The Succession Zone.
Second, trusted accountants are frequently the founder’s
or senior generation’s primary executive coach, helping them
to pass their "final test of greatness"—namely,
a good transition. Trusted consultants also often gently, yet firmly,
help to mentor and test new family leaders and owners.
Third, CPAs can help coordinate the work of lawyers, family business
consultants, insurance agents, et al., who surround the business
family. The family needs someone deeply trusted by all family members,
who keeps all parties in this highly complex process focused on
the goals and talking to each other throughout the transition. In
this mix we believe that accountants often have the clearest "lens
of perspective," thereby enabling them to play the leadership
role on the business family’s team of consultants.
And fourth, CPAs share important commitments and values with families.
While not experts on family dynamics, trusted CPA advisors nonetheless
(like their business family clients) count both work and family
life as vital. They take each into account when making decisions.
For example: Junior’s soccer game is juggled with a client
meeting. A three-day getaway with your spouse to celebrate your
20th anniversary means that no midnight oil will burn in your office
this weekend. And duties on the church building committee sometimes
call for afternoons away from the office. Business families, whom
CPAs advise, face the same juggling challenges—but in spades.
To be sure, accountants want to be helpful, but the confidence of
many CPAs fades just a bit when the tax returns, valuation reports
and balance sheets are laid aside and the nitty-gritty of complex
family relationships rears its intriguing head.
Family businesses face a whole set of complexities and troubles
not experienced by other businesses, as family issues and business
issues frequently get tangled together.
Where can CPAs develop the competencies to work more effectively
with business families?
The Closely Held Business Task Force is sponsoring a seminar on
April 29 in Philadelphia titled "Building Competitive Advantage
in Serving Family Firms." This seminar will provide a practical,
down-to-earth model and tools to help accountants guide business
families through The Succession Zone. You’re invited!
A Family Business Model
At the Delaware Valley Family Business Center we’ve developed
a model which helps business families (and their advisors) understand
and manage the many forces at work (see graphic). Built around a
scale metaphor, our Model to Help Business Families Thrive places
the FAMILY in the center, at the foundation—the circle of
love. Yes, the family in all its glory, conflict and paradox; always
trying to keeps things fair, balanced and in harmony. Then doing
a balancing act on the scale are the OPERATING BUSINESS—the
circle of competence, and OWNERSHIP—the circle of control.
It’s an incredible challenge to honor each of the three critical
elements—family, business and ownership—within a growing
family and highly competitive business environment. Compensation
is one of many potentially explosive issues for a business family;
highlighting the tension if not intense conflict between family
values ("Let’s treat everyone the same") and business
values ("Let’s pay according to performance or contribution).
The bad news … the good news!
The bad new is that business families don’t make it. Fewer
than one in three family firms survive to the second generation!
And the statistics only get more grim moving to the third and fourth
generation. But there is good news! There are excellent resources
available to help business families to beat the odds.
How can CPA firms help business families beat the odds?
While financial analysis and counsel is still vital, properly trained
CPAs also can help business families by:
- Initiating regular FAMILY MEETINGS which become the "Research
and Development Labs" for building the "family infra-structure"
necessary to handle the complexities of a business owning family.
- Inviting family members to share their dreams, values and passions…about
the family and the business. And then putting common understandings
or POLICIES IN WRITING. We call them "Commitments of the
Heart," durable written agreements which clarify expectations,
minimize misunderstandings and conflicts and build remarkable
"family fuel" to propel the business forward.
- STANDING WITH THE FAMILY in the face of inevitable conflicts
and discomfort (which are part of every family’s journey),
offering empathy, patience and hope as each family member works
through the emotion-laden issues.
- ASKING THE HARD QUESTIONS, often best posed by a trusted, objective
outsider. This may well include no-holds-barred conversations
about the owner’s eventual death, and the dire consequences
faced by families and businesses that lack proper planning.
- SPEAKING THE TRUTH IN LOVE to both "seniors" and "juniors,"
even when you wonder if such candor may jeopardize your relationship
with the business family.
- Promoting if not LEADING COLLABORATION AMONG ADVISORS; CPAs
don’t necessarily need to "operate" in every case,
but they should at least know how to refer you to a competent
"surgeon" (and perhaps "scrub up" yourself).
Our time together on April 29 in Philadelphia should be both fun
and fruitful—as together we work toward the attainable goal
of building competitive advantage in the service of family firms.
The preceding will be covered … and much, much more.
As accountants gain a clear understanding of the issues facing
business families—and how to work at them—then "the
doctor will be in" when these families come calling.
The work of CPAs, after all, is not just dollars, it’s sense.
Submitted for Polaris Newsletter, 11/20/01
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