On June 9, BMO Family Office held the first of a three-part virtual series with Stonehage Fleming entitled, ‘The purpose of Purpose’. Focused on the pressing issues facing families stewarding substantial wealth on a multi-generational level, the session kicked off with a few words from Neil Hershcovitch, Head of Investments at BMO Family Office.
Explaining that he was proud of the shared purpose that defines BMO Family Office and the work they do, Hershcovitch set the stage for an insightful conversation led by Matthew Fleming, Partner, Head of Family Governance & Succession at Stonehage Fleming, Priyanka Hindocha, Director, Family Governance at Stonehage Fleming and Shelley Forsythe, Director, Family Enterprise Planning at BMO Family Office.
Four Pillars of Capital
Though Fleming spent the past 20 years at Stonehage Fleming, the 57-year-old only arrived at its door after two earlier careers – in the British army and as a cricket player. “Those experiences helped shape my role in the family business and enabled me to come to the business with an understanding of my purpose.”
He then explained how his family set about researching what families worried about most and what helped them succeed intergenerationally. The results of that research led to their use of a foundational framework they use with all families who ask for help establishing intergenerational success.
Referred to as the Four Pillars of Capital, they include:
1. Financial Capital – Everything that has tangible, quantifiable financial value, such as investments, money, family business, property and intellectual property.
2. Intellectual Capital – Leadership and skillsets within the family. This pillar not only helps families understand their skills but also recognize the gaps in skill sets.
3. Social Capital – The external brand of a family, and how the family business behaves within the communities they operate.
4. Cultural Capital – The values that hold a family together: its DNA, and its governance framework that ensures cohesion.
Each of those Four Pillars sit on top of purpose, explained Fleming, though purpose alone isn’t enough. And the pillars are bound together by communication, which is critical.
Shared Purpose
Shared purpose is the starting point for everything, shared Hindocha, including governance and decision making. It’s the backbone of a family’s sustainable intergenerational strategy and forces families to ask important questions: What do we want to achieve? What does success look like? How do we support each other to reach our goals?
Fleming explained how his research into purpose was inspired by the risks involved in not having a shared purpose. Interestingly, families weren’t worried about risks to their financial capital. Rather, the risks they were worried about included family disputes, poor leadership, failure to train the next generation and lack of planning. Those risks just happen to sit squarely within social, cultural and
intellectual capital.
Forsythe agreed that the Four Pillars were central to her work too, though she would add spiritual capital – whether religious beliefs or cultural considerations.
Finding Your Purpose
Every family has a different approach to finding their purpose, explained Fleming. For some it’s very obvious, for others less so. That said, the more obvious that purpose may appear, the less it may actually be, and the shinier the family looks from the outside, the greater the challenges they may truly face.
It’s important that conversations are had with an external non-family member, a facilitator, said Hindocha. And confidentiality is key, as it’s a good starting point for building trust. Additionally, having two people in the room of different age groups, and/or with differing agendas works well too. It’s good to start the process with discreet conversations with mothers and fathers to define the parameters. Individual meetings with relevant family members can then get a sense of goals and forms of communication. Connecting with family advisors, lawyers, accountants, etc., can help in attaining non-biased insight on family functioning.
Following individual meetings, key themes are highlighted, and conversations are facilitated around articulating the purpose. Advisors are not there to impose anything. The point is to create a safe space for people to unload, which then starts the ball rolling and gives a license to ask difficult questions.
Very often the next generation is running well ahead of the older ones in terms of thoughts on purpose, added Fleming. That said, the next generation often want to move forward quickly, offered Forsythe. But these conversations should be handled like a relay race where runners must maintain the same speed. Transitions can be emotional, after all, so patience is necessary.
“The perfect family to work with is one who just wants to give themselves the best chance of success,” shared Fleming. Unfortunately, most families only talk about their purpose when dealing with an unexpected event like death. But the best time to discuss purpose is not in the eye of an emotional storm. It’s very hard to work on family dynamics during a crisis, after all.
Another good approach is to try and ensure that your purpose is a bit generic and not directly linked to the business because that limits your strategic options, said Fleming. And purpose should come from within the family or it won’t be sustainable. Forsythe agreed, adding it must be consistent with the family’s values.
How & Why to Articulate Purpose
Starting is often the hardest part in the process, stated Fleming. “It takes one person who is thinking about those pillars, who is worried about the legacy, who wants the answers to questions that they need a safe space to think about.”
The onus is on the family to start these conversations, but advisors (as previously discussed) play a role as well. They have the advantage of hearing different perspectives. They also have an obligation to raise difficult issues. As Forsythe shared, a neutral party can be more objective and has the view from the outside in.
Bottom line, said Fleming, he’s never met a family who hasn’t benefited from thinking through their purpose. It’s a conduit for dealing with other things, helps iron out wrinkles and kickstarts communication where previously there may have been bottlenecks.
Defining success is key to a positive outcome. Some questions that arise from the process include: What are your aspirations? What does everyone want to do with their life? Being able to have that dialogue about what you’re passionate about, what you’re good at, is vital, shared Forsythe. After some reflection, one family member may decide their skills are best utilized outside of the family business, for instance.
With those questions answered, the family can create a code of conduct that defines how they interact together; it’s a good first step before even defining purpose and success.
Final Thoughts on Purpose
The pandemic has accelerated these conversations, shared Hindocha. With more time on their hands and more members sitting around dinner tables, families have had the time and opportunity to think about issues they may have avoided before.
Interestingly, people often get nervous about starting the conversation because it could lead to significant changes, said Fleming. If you revisit your purpose and it changes, that may impact your financial capital, how you run the business, your intellectual capital and a lot more.
But if part of your ambition as a custodian of wealth, or as an entrepreneur, is to make contributions to society, then you have nothing to fear from going through the process. “It can help create a shared purpose that reflects what you want. And then, any changes are being made for good reason.”
If you have any questions or are interested in learning more about creating a shared purpose, please contact your BMO Relationship Manager.
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