Four Voices: Managing love, loyalty, family wealth and succession through the generations

By John Vamos

From Italian, English and Mexican proverbs to Arabian or Chinese parables the curse of family business is always the same. Namely, that the first generation makes it, the second generation enjoys it and the third generation destroys it! Rags to riches and back again in three generations.

But it doesn't have to be this way.

This book

• Language: English
• Publisher: Business Coaching Systems Pty Ltd
• Release date: Jun 1, 2022
• ISBN: 9781922764089

John Vamos

John Vamos is regarded by many as the father of the Business Coaching Industry 1n Australia. Pioneering the Thinking Systems approach to Organisational and Executive Coaching, the methodology Vamos developed has been successfully applied in over 5,000 organisations in three continents. Whilst many take the teaching pathway, John has always preferred the doing pathway. This has led to personally facilitating Strategic and Operational Plans for over 500 Enterprises in Australia, New Zealand, Singapore, India and the United Kingdom.Businesses in Australia that have applied Vamos' Eight Steps to Perfect Business Strategy include all sectors and Business Models. Major Airport Corporations and Telco's, Not for Profit, Technology, Manufacture, FMCG, Retail, Construction and Consulting Service providers have all enjoyed double digit growth thanks to the value derived from a suite of programs that have stood the test of time.Today, John spends much of his time reflecting on the lessons learnt from personally coaching over 900 business executives, 500 organisations and working actively in the field - clocking up over 22,400 hours, workgroup facing, as lead facilitator.These reflections on the obstacles to perfect performance are found in the pages of this book and in the companion publications; Elephants and the Business Laws of Nature and Four Voices.

Book preview

This book is dedicated to the many families that have embraced, tested and applied the approach described in these pages; families that have evidenced that the formula described in Four Voices works.

They have shown, without qualification, that the Four Voices approach can successfully bring rigour, accountability, harmony and sustainability to families that share love, loyalty … and wealth.

– John Vamos

First published in 2022 by John Vamos

© John Vamos 2022

The moral rights of the author have been asserted

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission.

All inquiries should be made to the author.

A catalogue entry for this book is available from the National Library of Australia.

Project management and text design by Publish Central

Cover design by Pipeline Design

Disclaimer: The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.

Contents

Acknowledgements

About the Author

About You

Introduction

PART I

PART II

PART III

PART IV

PART V

References

Acknowledgements

I would like to thank the many families that have put their collective future and harmony in my hands.

Our shared learnings have shaped the thoughts and pointed me in the direction of the science that this book promotes.

Their application of the solutions outlined prove the efficacy of the model and will hopefully help many other families that face similar challenges.

This book has come to life over a number of years thanks in large part to my friend, colleague and co-author Karen McCreadie. Her patience, powers of interpretation and sharp filter for what matters and what doesn’t has brought both my thoughts, and the Jackson Family, to life. The book would never have seen the light of day without her.

Thanks also to Lesley Vamos for her wonderful illustrations. They truly capture the moment and make the Jackson Family very, very real!

About the Author

John Vamos has worked alongside businesses for over 35 years, including many of Australia’s most successful, wealthy and enduring family dynasties. Regarded by many as the father of business coaching in Australia, John was certainly the first to apply ‘business coaching’ as a professional designation. Over three decades he has also been the lead strategic facilitator for many of Australia’s top 200 public and private companies.

A law graduate with 15 years of financial advisory experience overlapping 35 years as a business coach, John has witnessed first-hand the unique and especially complex issues that face family enterprise. He has met countless struggling business leaders inside family enterprise who are confused by the reality they find themselves in – everything from succession issues to business dysfunction to sibling rivalry to family disunity and fracture.

The creator of the highly successful Thinking System suite of tools, John uses these tried-and-tested techniques to address these and other thorny family business issues. The Thinking System can liberate any type of business from any type of challenge, but the rewards of resolution can be especially miraculous in family business.

John is the author of three books. The first, You Don’t Think as Smart as You Are, explored how our being human challenges productivity. The second, Elephants and the Business Laws of Nature, looked more closely at these issues in the context of business management. And this book, Four Voices – his magnum opus – is dedicated to unravelling how those same human issues play out in family enterprise. And more importantly, this book explores and explains exactly what to do to defend love, loyalty, family wealth and succession through the generations.

Over a number of years, together with colleagues at the Centre for Management and Organisation Studies at the University of Technology, Sydney, I have been researching the field of business coaching. While there are many offers in the marketplace, our findings are that none is as distinctive, nor more useful in terms of business improvement, as the methodology of organisational coaching that John Vamos has pioneered. Having watched his coaching in action, we can see that the questions that have been devised [in the Thinking System] act as prompts to unlock potentials that were already there but otherwise lying dormant.

– Professor Stewart Clegg

About You

Let me tell you a really quick story. If you relate to it or resonate with it in any way, read the book. If you don’t, use it as a door stop and move on …

While attending a family business conference held at a stunning resort I got chatting to an older bloke who had a very successful manufacturing business employing around 2,000 people. After telling me a little about his business, he asked what I did. So, I explained that I work with businesses just like his to help them navigate the additional challenges of family enterprise. He was intrigued and went on to outline some of the challenges he was facing in his own family business. His wife had been instrumental in the business – in fact, she had started it, but he had turned it into something that was scalable. He employed his sister, who worked in operations, as well as his daughter and his son. His son had made a significant contribution, having created a proprietary process that was now the business’s main point of difference in the marketplace; and his daughter was also making a positive impact, leading the traditional front end of the business. He also had two other children who were not involved in the business. Although his son and daughter’s roles were fairly clear and didn’t really cross over, there was unspoken angst around what was going to happen in the future. What he described was the typical Gordian Knot of complexity that weaves through every family business.

It was clear these issues were causing him deep concern. After a few minutes he turned to me and said, ‘So, what do I do?’

By the time we arrived at the new venue for the next session, a walk of about 15 to 20 minutes, I had outlined what he should do and in what order. Essentially, I explained what’s in this book – giving him a snapshot of the importance of eliciting the four voices from the business and family, and why.

He looked shocked. Grabbing my arm, he spun me around so we were no longer walking side by side but facing each other. Clearly, he had thought his question was rhetorical.

‘So, hang on – are you telling me there is a way do to this? For years I’ve been told by accountants, consultants and lawyers that this is just the way it is in family business. Some sort of pecking order would sort itself out eventually. Are you telling me that’s not true? Are you telling me there is a proven way, a system or formulae, that will sort it out?’

‘Yes. That’s exactly what I’m saying. There is always a best way to do anything – including a best way to manage love, loyalty, family wealth and succession. All you need to do is apply thinking systems to the Gordian Knot and the challenges unravel.’

This book is that best way.

If you want to know how to unravel that Gordian Knot right now, once you’ve read the introduction and chapters 1 and 2 you could skip forward to part III and read from there. You will get the answers you are looking for. But you won’t fully grasp the problems. This is a little like the parable about giving a man a fish versus teaching him to fish. If you skip to part III, and I fully appreciate your desire to do so, the book will give you the fish. But because you don’t fully understand why the Gordian Knot was created in the first place, you may find yourself repeating patterns and behaviours that made the knot in the first place. As such you may not reap the full benefits of the book.

I get it. You’re busy. Businesses don’t run themselves and family businesses, as this book will attest, bring exponential issues to deal with. But I strongly recommend you learn how to fish. Read part I and part II because they set the scene and allow you to fully appreciate why the answers laid out in part III onwards actually work.

What you will read in these pages, wherever you decide to start, is the story of families in business – including the management of their wealth and effective succession. It is also worth noting that the value in these pages magnifies as the wealth, sustainability and complexity of a family business increases.

Like beauty, most of us recognise that wealth is relative and it can mean different things to different people. Wealth may mean a level of freedom to spend quality time with those you love. For others wealth could simply be measured in dollars and cents. No one version is any better or worse than any other. Just because a family has money does not make them superior to a family with limited resources. This is especially important to remember, should you find yourself marrying into a family with different financial resources than those you grew up with.

This is not opinion and nor is it any type of social commentary. There is no inference or suggestion that wealthy people are better, smarter, more important or happier than those who are not wealthy. In fact, the irony is that the only category of people in the world who know for sure that money doesn’t buy happiness is the wealthy!

But for the purposes of this book, let’s define wealth in a way that further helps you decide if you will benefit from reading it:

Establishment wealth (level 1): This is the wealth created by the founder of the business. The challenges we explore in these pages are unlikely to derail establishment wealth. But if you’re at level 1 and want to make sure you reach level 2 and level 3 then you should read this book.

Foundational wealth (level 2): This is the wealth that extends beyond the founder. Typically, this means more than enough has been made for the founder to live comfortably and have sufficient resources to help their children, parents or siblings. If the foundational wealth is wrapped up in a business you want to pass on to the next generation, then you will almost certainly be subject to some of the challenges in this book. You must read it.

Generational wealth (level 3): This is the wealth that extends beyond the family. If you have more money than you or your children could ever reasonably use or spend in your lifetimes, you have accumulated generational wealth. If you find yourself in this position, then you face the challenges that inspired me to write this book! And you will be subject to ALL the problems and opportunities we are about to explore. You are also most at risk of the family business curse (more on that shortly). You can’t afford not to read this book.

Bottom line: financial wealth can be a blessing or a curse. Whether it ends up being a blessing or a curse for you and the people you love is inextricably linked to your understanding of and appreciation for the four voices.

IF YOU HAVE MORE MONEY THAN YOU OR YOUR CHILDREN COULD EVER REASONABLY USE OR SPEND IN YOUR LIFETIMES, YOU ARE AT GREATEST RISK OF THE FAMILY BUSINESS CURSE AND YOU CAN’T AFFORD TO IGNORE THE CONTENTS OF THESE PAGES.

Introduction

There is an ancient Arabian parable that explains what typically happens to the wealth generated by family business:

The first generation retains the desert qualities, desert toughness, and desert savagery … they are brave and rapacious … the strength of group feeling continues to be preserved among them. They are sharp and greatly feared. People submit to them.

Under the influence of royal authority and a life of ease, the second generation changes from the desert attitude to a sedentary culture, from privation to luxury and plenty, from a state in which everybody shared in the glory to one in which one man claims all the glory … others are [in] … humble subservience … the vigour of the group feeling is broken … But many of the old virtues remain … because they [the second generation] had direct personal contact with the first generation …

The third generation, then, has completely forgotten the period of desert life and toughness … Luxury reaches its peak among them … Group feeling disappears completely … People forget to protect and defend themselves … In the course of these three generations, the dynasty grows senile and is worn out. ¹

In the United Kingdom there are various versions of this idea but my favourite is the Lancashire proverb, ‘There’s nobbut three generations atween a clog and clog.’ In Italian it is ‘Dalle stalle alle stelle alle stalle’ (‘From the stables to the stars to the stables’). In Mexico it’s ‘Padre noble, hijo rico, nieto pobre’ (‘Noble father, rich son, poor grandson’). In China, ‘富 不过三代’ (‘Fu bu guo san dai’) is straight to the point – ‘Wealth does not pass three generations.’

In essence, when it comes to family wealth there is a curse active throughout the world. Namely, that the first generation makes it, the second generation enjoys it and the third generation destroys it! Rags to riches and back again in three generations.

One of the most well-known and often cited examples of this phenomenon is the Vanderbilt empire.

Back in the late 19th century, Cornelius Vanderbilt – known as ‘Commodore’ – was the Jeff Bezos of his day. He was worth US$105 million – equivalent in today’s money to about $205 billion. ² Starting with a borrowed stake of $100 from his mother he piloted a passenger boat on Staten Island in 1810. He expanded into the steamboat business and went on to build a railroad empire. When he died in 1877, he was the richest man on earth. Despite Cornelius believing his sons were not up to snuff, William Vanderbilt expanded the railroad business and doubled the family fortune. But it didn’t last.

Within just 30 years of the old man’s death, no member of the Vanderbilt family was among the richest in the United States. It has been observed that by 1972, when 120 of his descendants gathered for a reunion at the Vanderbilt University, not one of them was a modern ‘millionaire’. One of his grandchildren is said to have died penniless.

In less than three generations a business empire and its fortune were gone.

William K Vanderbilt, one of Cornelius’s grandsons, even went so far as to say, ‘Inherited wealth is a real handicap to happiness. It is as certain a death to ambition as cocaine is to morality.’ It is easy to scoff at William’s statement believing it was him and his fellow third generation (G3) that destroyed an empire. And yet, my experience has proven, without qualification, that this is rarely G3’s fault. It’s the behaviour, attitude and actions of the founder – or generation one (G1), in this case Cornelius Vanderbilt – that determines whether their legacy will be preserved or not.

IT’S THE BEHAVIOUR, ATTITUDE AND ACTIONS OF THE FOUNDER – OR GENERATION ONE (G1) – THAT DETERMINES WHETHER THEIR LEGACY WILL BE PRESERVED OR NOT.

This book explains the practical science and psychology of why this happens and most importantly how to use governance to avoid it. Governance is the systematic process that seeks to fully answer the question, ‘How do we make decisions?’

Of course, the curse is not inevitable – G2 and G3 may be as successful as, or even more successful than, the founder. When we investigate those who are, we discover that their success is always aided and abetted by G1’s positive actions. These actions are only possible – or, at least, are far easier to accomplish successfully – in the hands of the founding generation (G1).

Too often, the generation that seeds the wealth (G1) thinks the critical rules and lessons learnt in the making of the money are the same as the knowledge needed for the defence of the money. And yet, the management of an enduring multigenerational family business and the governance of wealth is a completely different science to the science of entrepreneurship and making money. While each generation must learn the ropes of their respective industry or business – be that property development, hospitality or constructing railways – there are very few lessons to be learnt about the starting of that business that are necessary or applicable to family governance, succession or continued growth. The inventor or founder of a business is never going to successfully transition that business to the next generation and beyond by teaching those individuals how they invented a product or started that business. The information and knowledge needed to develop a business, take it forward and maintain and develop wealth for each successive generation are very different from the entrepreneurial mindset so often present in the founder.

If G1 is serious about succession and wants to create an enduring legacy, their job is to master stewardship and put things in place that will allow G2 (and beyond) to be ready for succession.

Like so many G1s, Cornelius Vanderbilt believed his children unworthy. He was irritated by what he perceived as a lack of appreciation for the hard work he’d put in to create his business. In his eyes he’d cut the ground and made all the sacrifices and they couldn’t even be trusted to do the easy bit – maintain and build upon what he had created. He didn’t appreciate that maintenance and building is every bit as challenging as creation – just different. Vanderbilt was also still locked in money-making mode and, as a result, he didn’t pay attention to the governance of his wealth or ensure the readiness of his heirs which could have, in turn, ensured the survival of the empire. This is often G1’s error.

The error G2 and beyond make is that they believe that they can inherit their father or mother’s job. Just because someone had the same surname as the founder does not entitle them to take over the reins of that business when G1 steps down or passes away. G2 can inherit shares, rights and influence but they can’t inherit a job – they can only earn it. This fact is obvious in all areas of life – except family business. If one of your parents is an eye surgeon and they die suddenly, you don’t expect a phone call from their hospital to say you are now their go-to eye surgeon and you are expected in theatre in two hours. The idea is ludicrous and yet it is expected and almost inevitable in family business.

(As an aside, apologies to the G2 reading this who may be offended by the notion that G1 was the ‘lone’ wealth creator. I feel you. You were there too!)

It’s impossible to dismiss the universal aphorisms that speak of family business failure as old wives’ tales or stories such as the Vanderbilts’ as anomalies, because the curse is also borne out in statistics. In Australia, for example, although the estimated wealth in the family business sector is $4.3 trillion, the first-generation wealth is $3 trillion, second-generation wealth is $987 billion and third to fifth generation wealth $346 billion. ³ The wealth of the family deteriorates significantly from one generation to the next. In Australia, the average age of a family business is just 32 years. ⁴ Effective succession is clearly still an issue in family business; and yet the sector and each individual business offers huge advantages to the family, the economy and the wider community. Finding a genuine solution that can reverse the decreasing wealth trend from generation to generation is paramount – hence the motivation for this book.

While we may think of family business in terms of the millions of small and medium-sized operations that underpin many global economies, almost 35 percent of Fortune 500 companies are family owned or controlled. Family businesses account for 50 percent of United States gross domestic product (GDP), and they generate 60 percent of the country’s employment and 78 percent of all new job creation. ⁵ In Australia, family businesses account for around 72 percent of all businesses. ⁶ And yet, when you look at the generational shift of those businesses, 60 percent are first-generation family businesses, 24 percent are second generation and just 14 percent are family businesses that have survived into the third generation or later.

If the curse is true, and the statistics certainly indicate that it is, then the shirt sleeves to shirt sleeves boomerang represents a colossal waste. Not just the staggering loss of the accumulated wealth but the human cost too – the people who are no longer employed by these businesses, the communities they no longer serve and the breakdown of family connection, love and loyalty that the curse renders inevitable.

But it doesn’t have to be this way.

Managing love, loyalty and family wealth successfully generation after generation comes down to your willingness and determination to allow four distinct voices to be heard:

The business (or balance sheet) must have a voice.

The individuals (founder and family members) must have an individual voice.

The family must have a collective voice.

The family community (spouses and generations that follow) must have a voice.

Governance and stewardship are what facilitate the emergence of these crucial voices and we will explore these in much more detail later in the book. But first, we must push past the symptoms of the curse to reveal the real cause of failure and family disintegration.

How Our Minds Work Against Us

Before everything – our role in the family, our role in the business, our level of wealth – we are all Homo sapiens. As such we are equipped with a brain, and yet we are not taught how that brain works, how best to use it or how to navigate its quirks. Most of us have next to no scientific or psychological insight or understanding of how our brain operates, so we don’t understand its significant neurological and evolutionary limitations. And we certainly don’t appreciate that many of the problems we face in all aspects of our life, from relationships to business challenges or financial worries, can be traced back to these limitations! We constantly look outside for solutions or reasons for the various challenges we face and yet most of them emerge from the six inches between our ears.

WE CONSTANTLY LOOK OUTSIDE FOR SOLUTIONS OR REASONS FOR THE VARIOUS CHALLENGES WE FACE AND YET MOST OF THEM EMERGE FROM THE SIX INCHES BETWEEN OUR EARS.

You may have bought this book expecting answers about family business, and it will deliver those answers – but you will need to be patient. Most of the problems you face inside and outside the family business are because you and everyone you interact with is a human being. Once you understand a little more about how your brain works (chapter 2) and the five limitations this creates (part I), you will be able to recognise their influence and, perhaps for the first time, appreciate their impact. Without this insight it’s impossible to help the founder and members of the family to find their own individual voices. Understanding the human dimension helps to elicit these crucial voices.

This insight also allows you to appreciate that when you are dealing with a family that is bound together by blood and history, where everyone is in possession of an unruly and undisciplined brain, any illusion you harboured about how the process ‘should be easy’ can finally be laid to rest.

To make these limitations more real for you, I’ve introduced a fictional family, the Jacksons (you will meet and get to know them in chapter 1). I’ve chosen to create the Jacksons to better illustrate the unique and complex challenges faced by many of the well-known family businesses I work with, while also seeking to protect those families’ lives, experiences and identities. It is the universal experiences, or what is shared by family enterprise, that are important, rather than who the families are. We will come back to the Jacksons time and time again throughout the book to demonstrate the various issues, their implications and more importantly what every family business can do to navigate the inevitable landmines hidden in every family enterprise.

If you belong to a family that has worked with me, and you happen to be reading this book, you can relax now … you aren’t in it!

By anchoring to the limitations of the human mind and explaining how they play out in the world of the Jacksons, I’ll show you how, left unchecked, our humanness can and will negatively impact a family business and succession while magnifying the problems of wealth management and defence.

You will, for example, meet the Jacksons again in part II, when we unpack happiness. Why? Because, in my experience, it’s a fundamental lack of happiness that often triggers my first meeting with a prospective family. The founder or husband-and-wife team are invariably wealthy. They have worked hard, battled the odds, raised a family and founded a successful business – often creating the type of wealth many people only dream of. And yet they are not happy, and neither are their descendants.

They know they should be happy. Often, they will even say so – ‘It shouldn’t be like this. We should all be happy’ – notwithstanding everything they’ve accomplished and all of the joys and benefits they experience in their lives. I have sat with countless families, seeing the pain and the burden etched on parents’ faces as they tell me of the dysfunction among their children. I have also seen the distress etched on G2’s faces as they explain the dysfunction and rage either among their siblings or directed towards a parent.

We need to understand happiness far better than we currently do. More specifically we need to appreciate the twin enemies of happiness that are amplified by wealth, not solved by it. Namely, uncertainty and complexity.

WE NEED TO APPRECIATE THE TWIN ENEMIES OF HAPPINESS THAT ARE AMPLIFIED BY WEALTH, NOT SOLVED BY IT. NAMELY, UNCERTAINTY AND COMPLEXITY.

Uncertainty and complexity are increasing for all of us in modern life. We have to make more decisions by breakfast than our ancestors made in a month! These forces are amplified still further in family business and jacked up on steroids where wealth is added to the mix. Part II is therefore about recognising that in a family business you’ve got all of these diverse forces, each ramping up the complexity and uncertainty. As a result, the business also needs a voice to dial down the noise that can come from the competing individual voices of the founder(s) and family members.

Most of us say we want to be happy or happier. It is a universal goal, and yet we don’t appreciate how these forces impact that goal. Too often we assume that money is the answer. As a result, those that don’t have enough money set their targets on the wrong goal and those who have achieved wealth get to feel especially guilty because they have what everyone