Transcript | PULSE Episode 09
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R. Adam Smith:
Welcome to the PULSE podcast, personal conversations about life, leadership, and legacy, with inspiring founders, entrepreneurs, and leaders of industry. I am R. Adam Smith founder of Wisdom Board. I'm pleased to host this podcast episode. Wisdom board is a fast growing digital leadership platform powered by curated content, blue-chip services, valuable human capital resources and an expansive expert network. Wisdom Board is dedicated to empowering excellence for private companies at the board level.
R. Adam Smith:
Today we're joined by Kristi Daeda of The Family Business Consulting Group, a fascinating platform that provides very valuable resources for the family enterprise across governance, operations, and other resources for the family and their successors. I'm here today to share more about her business and career path as well. Kristi, It's great to have you on the podcast today.
Kristi Daeda:
It's a pleasure to be here. Thank you, Adam.
R. Adam Smith:
Yeah. So tell us about your career prior to starting this company. I'd love to hear more about your background and then we can talk about the business as well.
Kristi Daeda:
Yeah, absolutely. I've done a few things in my career, but I think the center of my focus has always been around the intersections of people in business. I spent time in human capital and recruitment, did some employee engagement type work, managerial roles, those sorts of things, and really always was passionate about the challenges that come when people run up against business processes or when business processes don't serve people. And I frankly was not terribly familiar with the family business field until joining the firm in 2013. But what I found when I got here was that this particular space is all the complexity of people in business together in an entirely new way. It's a Gordian knot of love and money and work for the family members who were involved in their family owned enterprises. And those three things tend to be the things that are most important to us in our lives.
Kristi Daeda:
So for people who are working in family businesses, owning family businesses, all the things that happen on a day-to-day basis, there's a lot riding on it. And so, to be in a space where I can work with really talented people who are helping families navigate these challenges, I found it fascinating. And it's been a really great place to be for the last several years.
R. Adam Smith:
It is terrific and The Family Business Consulting Group is also itself like a family businesses, founded back in 1994 by two founders and then over time, they've managed the business as a family with a very tight partnership it seems, which is also very relevant to your clients as well. Tell us about your primary services that you are offering your clients these days.
Kristi Daeda:
Sure. So we work with multi-generational family businesses across industries and geographies, and really what we're working on is how to be good co-owners, co-leaders, co-managers, together. About 80% of our clients are probably have some sort of operating company, 20% maybe post-liquidity and managing other assets together, but they all have very important decisions to make together. And families are not necessarily hardwired for being a team. We have our own relationships, parent-child relationships, sibling relationships, cousin relationships. But when you get into the family business setting, you have to be able to engage in a different way.
Kristi Daeda:
And so what we do is help families put in place the structures and behaviors that help them do that. That includes certainly succession planning, jumps to mind for a lot of people, governance, conflict management strategy. We talked to families a lot about vision and mission and what they want to achieve together in the world and we help them learn to be the kinds of leaders and managers and owners that they need to be to achieve those visions over generations.
R. Adam Smith:
That's great and so your firm has touched 2,600 families across North America, and also in many other countries worldwide. How do you guys interact with such a broad range of families and what do those engagements and projects look like over time?
Kristi Daeda:
So our early founders came out of academia and were teachers at heart. They had observations from their own education and professional experience, and that they gleaned from the families that they interacted with. And they started to write and teach on these topics, which has given us a lot of reach over time. Now there's been over 40 books in print by members of our firm, significant speaking at universities and family business centers around the world.
Kristi Daeda:
And the way that we tend to engage with families is really variable. We believe that if you've seen one family business, you've seen one family business. They're all a little different, family cultures are different, family dynamics are different, their goals in the world are different. So what we do is we approach it typically from looking at it as a how do we get you from point A to point B, we help the family define what point B looks like, and that could be, we want to transition leadership in the next generation in five years, or we still want to be a family owned business, two generations from now.
Kristi Daeda:
And then we help to define the intermediate steps that they need to do in order to get there, both in terms of the enterprise and the family, because we found that over focusing on one or the other tends to mean that the other one was suffered. So you really have to look at building strength and continuity in the family and building strength and continuity in the business at the same time. And that it shows up differently with each family.
R. Adam Smith:
That's great, and you continue to grow. So you've made some hires recently with Asin Nurani and then also with Richard Wolkowitz and Lisa Morel. There's been some nice growth at the firm. Obviously the family office and the super entrepreneur community continues to grow both through succession, expansion, and also liquidity it's built up over the last decade.
R. Adam Smith:
Maybe share a bit of your thoughts on how you all interact with family enterprises or family offices, or single family offices around governance. We're focused on bringing excellence to the table for governance so that our clients and entrepreneurs have those resources to improve their governance for their firm, for their legacy, for the culture of their employees, maybe some commentary on that and how FBCG does get involved in governance for your families.
Kristi Daeda:
Absolutely. It is so important research and our experience have shown that there are really three pillars that lead to successful family business continuity: a defined strategy, good communication practices between the family members, and governance. And governance can be a collection of tools for decision-making, but certainly corporate governance has been a big piece of our practice throughout the history of the firm.
Kristi Daeda:
We help families understand what good governance might look like. Many family businesses are very entrepreneurial and they are not particularly interested in bureaucracy, and a board can feel bureaucratic to somebody who doesn't have one. So we help them understand that how they can leverage a board for strategic insight, for oversight to help them with stakeholder management, for both sort of family ownership and management concerns. We help them define the culture of the board and what kinds of conversations they think that they could best benefit from, and define then also what are the skillsets that they need from independent directors.
Kristi Daeda:
We do have a executive search style function for placing of independent directors for family boards. So we have the ability to help families navigate that entire journey from what we sometimes refer to as the kitchen table board, which is where many of them start, to a fully functional... with committees and defined agendas and effective management reporting that helps them to grow strategically, think about new business options, expand their general reach in ways that they may not have been able to with their existing management team, just bringing new resources to the table that they can leverage.
R. Adam Smith:
And sometimes those resources are not part of the family. I see that you have recently set up a peer group for non-family leaders because the family businesses or family offices, they don't necessarily have the depth of succession or children or staff within the family, so they need to bring in outsiders. So you're creating some of these meetings and sessions with your team, with Amy [inaudible 00:09:27], Barb Dartt, it's very interesting.
R. Adam Smith:
Tell us about that and what is it like to hold the hands of both the families bringing in outsiders and then the outsiders coming into the family? How does it affect the board of directors at times for these businesses?
Kristi Daeda:
Yeah, it's a very interesting dynamic. I think historically many entrepreneurs and sort of the family business paradigm. I mean, it used to be primogeniture right. So the stereotypical founder was a dad, he passed the business to his oldest son, and that's how things went about. But as people have developed more understanding of alternate models, we're seeing more families who are interested in becoming owning families, but not necessarily operating families. Their children want to be owners and stewards. They want to be involved, but they may not be the next CEO or CMO, and they may have their own entrepreneurial interests.
Kristi Daeda:
So with that bringing in outside talent, both as non-family executives and as potentially independent directors, that becomes a great way to bring to the table, new insights, new ideas, and additional sort of manpower to achieve what they want to achieve together as a family. What we would do in those situations oftentimes is helping the family to define what it means to be a family business, and that there are many models and helping them understand the meaning of family ownership and the role that the board can play in acting in accordance with owner's interests.
Kristi Daeda:
So one of the things that we may talk about is, what is it that owners want? We talked about ownership alignment, helping them to define what their vision for the company is, and that becomes the board's mandate. And so when we're looking at helping them to build a board that can operate effectively, the owners knowing what they want helps to inform what the board is charged with overseeing at the management level. And so it's leveraging all of these tools and places where we can have these important conversations and helping them understand, where does ownership play a role? Where does the board play a role? Where does management play a role? Where do family play a role? And have all these people interact and respect each other's contributions and ensure that they're all moving in the same direction, which can be, it can be a bit of a... it takes some attention over time. Let's put it that way to help put those in place.
R. Adam Smith:
Certainly it sounds like a very hands-on, but you're scaling and the business was growing and you don't need to serve every family office for every family enterprise, just the ones that needs you, or that reach out to you for your services.
R. Adam Smith:
Where do you see the firm going in the future? And also, what are you seeing in terms of either the activities or advising private companies involving family offices as investors or selling to a family office or having a family office as a co-investor into the company?
Kristi Daeda:
Sure. So there are... Family businesses remain really the most prevalent business model in North America and around the world, they drive well over half of our GDP. So we expect that family businesses are going to continue to have generational challenges and needing to be planning for succession. You need to be planning for growth. But you've hit on an important trend, which is that while the traditional family business model has been these, we have our widget company and it's got our name on the door and we passed the widget company to the next generation that families now are thinking about diversifying their holdings. They may or may not choose to retain their original operating company. There are a lot of opportunities out there for them to think differently about what it means to be a family enterprise, either with or without their original operating company.
Kristi Daeda:
And those needs are in many ways the same and in many ways new. So it's still about family members having enough education to make good decisions, being able to have tough conversations. How are we going to measure success together? Who's going to be accountable for that success? What governance structure is required as we move from an operating company to a holding company? Or as we're integrating other kinds of investments, does the governance system that we have now still serve? And so helping them to think about... I think all family business work is in many ways about evolution because the family changes over time and the business changes over time. These new models for family businesses, they're becoming more and more common. It's a different kind of evolution. So again, in many ways it's the same and in many ways there are new questions and new matters that they need to consider.
R. Adam Smith:
That makes a lot of sense and we see a great deal of evolution generations also, of course, technology. And then next we're discussing in terms of direct investing the private capital markets, as well as these family businesses either seek to recapitalize or have co-investors as I've seen a great deal of last 10 years, that will continue to grow as well as that's an exciting area for you guys to also advise on.
R. Adam Smith:
Kristi, It's been a pleasure to include you today as a guest in Wisdom Boards, PULSE podcast series.
Kristi Daeda:
Thank you so much for the opportunity.
R. Adam Smith:
Yes, I look forward to learning more about your career experiences and The Founding Business Consulting Group.
R. Adam Smith:
PULSE is a digital collection of personal conversations with respected private company experts. PULSE listeners enjoy lightening lessons, wisdom and journeys of interesting people. PULSE is a production of Wisdom Board, the trusted leadership brand dedicated to empowering private companies to achieve excellence in the boardroom. Wisdom Board lives on LinkedIn and online at wisdomboard.co. Please subscribe to our podcast available and at all major channels, including: Apple, Google, and Spotify. I am R. Adam Smith, founder of Wisdom Board. Thank you for listening to the Wisdom Board PULSE podcast.