The M&A Industry Needs Its Own Family Business Awards
When the world’s largest speakers’ bureau sent me an email announcing that it had given me its Speaker of the Year Award, I was awash with emotion. My ego swelling with self-congratulation, I proceeded to moonwalk across my office – not pretty. I love awards. I fluked a couple of wins over the course of my odd career as a professional musician (odd because I can’t read music), banker, CEO of a multinational manufacturer, author, and now professional speaker.
There is something dangerous about awards – you only have to win a couple to fully appreciate their Pavlovian effect. Of all the awards out there, though, it’s the growing popularity of awards celebrating multi-generation family firms for their longevity that makes me cringe.
Rewarding the longevity of a business is irrational
These awards make me nervous because I can imagine founders doing their own moonwalk in celebration of their firm’s longevity – with new blinders on to the dangers that lie ahead. Longevity awards make me angry because they subtly label as failures the legions of smart business owners who exit by electing to sell their business.
It’s not that family business institutions and their annual awards programs aren’t well intentioned. It’s just that so many display the bias of their work by celebrating the longevity of family businesses with a missionary zeal. These awards don’t go to the family business owners who have probed the market, crystallized the business’s value and sold it. Instead, the “family business of the year” awards springing up in every family business organization affiliated with a university or college celebrate an utterly impossible and irrational idea.
When a firm’s perpetuity peters out
To be generous, I think it’s largely out of naivety that family business institutions bang the drum to declare that a successful family business is an old family business and that permanency and perpetuity ought to be a business’s overriding reason for being.
To be harsher, it’s a corrosive and disingenuous idea that preys on the emotional vulnerability of business families left feeling like failures in their own businesses when their perpetuity peters out.
When the ravaging effects of market forces visit these family businesses, the thought of exiting flies in the face of all the awards that say “work a little harder, communicate a little better and you’ll last a little longer.” What self-serving rhetoric.
Heads up, business owners: family business institutes aren’t risking their capital. It has never cost a penny to pander to the emotions that every business owner feels: at some point, all owners believe in their hearts that their business is their greatest legacy and that it should last for generations.
10 Truths behind the smiles of an award-winning family business
We’ve all seen the pictures of the winners of these family business of the year awards – the proud family business founder surrounded by his progeny, all sporting a look of multi-generational bliss. But really, who’s kidding who?
1. We know the family has the majority of their wealth stashed in one stock and are stressed about it.
2. We know that they know one stock doesn’t beat the Street for very long.
3. We know dad is going to stay longer than he should – especially if he’s the founder.
4. We know he’s likely underinsured and will likely leave as a legacy a whopping tax bill that will debilitate the family’s finances and shift the shame and blame to his kids when the business fails.
5. We know that the kids likely don’t love the business enough to go to the bank today or tomorrow or next year to borrow the money to buy it.
6. We know that death will likely be the event that triggers the business being passed to each child in equal amounts the way everyone got the same sized steak at the barbecue growing up.
7. We know these kids are going to battle over how the business should be run when both parents have passed on and the “glue” is gone.
8. We know there’s a good chance the kids will grind the estate down to zero battling in court over the value of the stock.
9. We know that the kids smiling in the picture go home to spouses who have been pulled into the family business dynamic and spun around like their washing machine does their whites.
10. We know that too many divorces can be traced back to the family business dynamic, where blood is always thicker than water.
But there they stand, month after month, on the cover of publications like Family Business Magazine, propped up by a publisher peddling a debilitating and impossible idea that a business can and should be built to last.
Really? Just give it some time.
The price of hubris
You couldn’t invent a more wealth-destroying machine than a family business that has been co-opted into believing the idea that “old” is good and that family control “forever” is the goal. Families who chase awards for their multi-generational excellence deceive themselves that their business is exempt from market forces and that their business is something more than an instrument of wealth creation.
These families pay an extraordinary price for such hubris. Fear that there can be no family, or only a lesser family, in the absence of the family business is the perverse flip side of the family business award coin. It is a nefarious award indeed that pimps the longevity myth.
Awards that make family business owners feel like failures
The one unassailable fact of family businesses is that they are an instrument of wealth creation, nothing less and nothing more. They are not a proxy for family. They are separate legal entities and like their more organic and human counterparts have an inevitable beginning, middle and end.
It is the end – the sale of a business – that these family institutes, with their awards for multi-generational endurance, utterly fail to acknowledge. To borrow a quote from an Every Family’s Business reader, “These awards are like stabs through the heart of family business owners who elect to sell their business to fund their retirements, their philanthropy and the dreams of the succeeding generations.”
Leaving many owners feeling like less, like failures, is an unintentional consequence of family business awards for longevity, but a consequence nevertheless.
Four new family business awards
It’s time for family business organizations to celebrate something more interesting, positive and inclusive and give awards that put multi-generational wealth creation on an equal footing with multi-generational wealth preservation. And if family business institutions don’t want to go down this road then maybe it’s high time that the M&A industry supported its own set of family business awards.
Here’s my list of new awards for everyone to consider.
- Liquidity Event of the Year – Inside Sale: Awarded to a business owner who works with his or her children to sell their business inside the family. (I don’t call this multi-generational – I call this a fresh start based on risked capital).
- Liquidity Event of the Year – Outside Sale: Awarded to a business owner who works with his or her children to sell their business outside the family.
- Redeployment of Family Capital Award: Granted to the family that reinvents itself by helping the next generation pursue businesses they’re really passionate about.
- Family Business Philanthropy Award: For the business owner who works with his or her family to use the proceeds of their life’s work to fund extraordinary good works to benefit their community, country and planet.
Playing the longevity game
Now these are awards that excite the imagination and acknowledge creativity and risk taking, which remain the two essential ingredients of dynastic family businesses. “Passing the business on” and “handing the business over” have always been code for “gifting” and “entitlement,” all in the name of playing the longevity game. The idea that awards would celebrate such a pointless goal is itself old and clearly well past its own freshness date.
Dr. Kevorkian? I’ve been called worse
Someone once described me as the Dr. Kevorkian of family businesses; upon reflection it’s an amusing comparison. For every misstep I’ve been rescued by commentators who have described my message as refreshing, timely and hugely supportive of business families.
Not surprisingly, though, I’m not the most popular writer and speaker with family business institutes, which are multiplying faster than the aging demographic of business owners they’re chasing as clients. Family business support is a little bit of a growth industry, with everyone from industrial psychologists to mediums hanging out their shingle and calling themselves “family business consultants.” The Family Firm Institute is doing a credible job of bringing some discipline, integrity and decorum to an area of consulting that is a tad out of control.
While I continue to build my business model exclusively around book sales and public speaking to support family businesses, it’s important to call out those who seek to knowingly or unwittingly prey on the emotional connection that families feel to their businesses.
It’s my hope that family business institutions reinvent their awards programs and celebrate family collaboration in the broadest context by honoring with equanimity the sale of family businesses either inside or outside the family. And if and when institutes make this change, we can begin to celebrate the only thing that can last – family.