Episode Transcript
Seon180 Season 2 - EP4
LESLIE-ANN SEON: [00:00:00] Be bold, take risks, lead by example, believe in your power. Say what you feel, mean what you say.
LESLIE-ANN SEON: I'm Leslie Ann. Seon host of the new podcast series. Seon one. Join me at Seon 180 on this journey of discovery and advancement.
LESLIE-ANN SEON: Hello, and welcome to SEON 180, the podcast series, where we encourage our audience to move beyond neutral. I am your host, Leslie Ann Seon. On our podcast series, we feature the voices and the people of the Caribbean, wherever they may be around the globe.
These are folks making real differences in their spheres of influence. Our guests have been where you are and their voices are meant to help inspire, inform, educate, and move you beyond your story. I invite you to check out my website SEON 180.COM or visit your favorite podcast streaming sites for current episodes as well as past shows. You can also visit my Facebook and Instagram page for weekly updates, tidbits and interactions with me, your host, and fellow listeners.
Today, on the show, we have a very unique guest with us, Dr. Annette Rahael, a family business advisor from the twin Republic nation of Trinidad and Tobago. Annette has built on her years of personal experience in a family business by pursuing more structured training in the United States, where this has been recognized as an area in need of specialized expertise.
She is the first person in the Caribbean to have received the advanced certificate in family business, advising she has written on the topic of family business and has presented at numerous family business conferences and workshops in Jamaica, Barbados, Trinidad, Jamaica, Grenada, and the Cayman islands. She works directly with family businesses throughout the Caribbean, in the area of family business governance, succession planning, next generation coaching, and organizational development.
She is uniquely placed to advise families in business on strategies and structures to ensure that their business is meeting the professional standards required to compete successfully. She helps family businesses address the challenges peculiar to family companies, such as smooth transitions from one generation to the next. She brings to the table a profound understanding of the commercial realities faced by businesses of all sizes in the Caribbean.
She is here with us today to chat about family owned business, the difficulties and challenges faced by these businesses, Generational wealth and appointing successes from an early stage to allow them to personally and professionally grow with the organization. Welcome Annette, and thank you for being here with us today.
DR ANNETTE RAHAEL: Happy to be here.
LESLIE-ANN SEON: Excellent. So, we are going to be chatting about family business, which is perhaps one of the oldest economic systems in the world. And, I think our audience would like to have an idea as to what exactly is family business, because I understand there are many definitions to this field.
DR ANNETTE RAHAEL: Yes. You know, in the early 1980s, when this field was recognized as a separate branch of management, the first academic journal devoted a family business, uh, Family Business review launched and the very first line in the very first article is what is a family business. Yes, simply because of what you've said. Uh, I was saying that over the years, there have been tons of definitions. And one that I like to settle on is, is Reggie Lin’s uh, definition— that a family business is one which has undergone a transition to the next generation or the intent is to transfer the business either by the ownership and/or the management to another generation.
So it’s either ready to have had transition or the intent is to have a transition.
LESLIE-ANN SEON: Good. So then that would cater for some of our, of our new startups, young husband and wife, or siblings or parent and child embarking on this enterprise. They can begin to think into the future.
DR ANNETTE RAHAEL: Well, yes, most family businesses with a single founder or sometimes even a couple, uh, are founded because of necessity. Maybe one partner's lost their job. Maybe they just feel that they want more flexibility in their lives. Um, and sometimes they don't think that far ahead is the intent to pass this on. But by and large, within a few years, once the business is successful, they do begin to think of their legacy.
LESLIE-ANN SEON: Right. And, and, and the legacy meaning, to pass it on to, to a next generation, um, et cetera, and continuing to be successful to get to that next step. So, so what are some of the, the challenges or the pitfalls that family businesses in the Caribbean face, or maybe just family businesses in general.
DR ANNETTE RAHAEL: Well, you know, today is Sunday, and all over the world, billions of Catholics are going to Mass, and some of them would've gone to confession. And, uh, in confession, no matter which part of the world you're in, no matter what language it is in, all the sins of the same. So, it is very much what we experience in the Caribbean is, will drive, in terms of the challenges facing family businesses. In the Caribbean, because our businesses may be a bit younger than some of the more established older businesses in America or Europe, uh, we are still very much at a stage where we have “Foot” running the business— family-owned and operated teams.
LESLIE-ANN SEON: Ah, Foot. Okay.
DR ANNETTE RAHAEL: Yeah. So a lot of them are flat-footed. Uh, so the family owned and operated teams, we have not yet gotten to this stage, uh, in more, in the countries where the family businesses have been around for hundreds of years, where they, the businesses have grown the family members who are able to serve and over the generations, the sizes of families are decreasing. So, we no longer has many available family members to be part of the FOOT. So, in the Caribbean, we are now looking at how do we say “family owned,” but not necessarily “family operated,” especially at the top echelons of the leadership of the business.
LESLIE-ANN SEON: Yes, and I, and so I, I imagine there is a difference between the family-owned and led and the family-owned and operated.
DR ANNETTE RAHAEL: Yes. Well, the difference with family-owned and operated was this family owned and is operated by others. And I hesitated to use the word professionals, because here's the reality. You have family members who are very professional and you have family members who are in the business who run it professionally, but often the businesses are good, like I said, the number of family members available, or the skills that the family members. So, when you get into a level where you have to have a lot of external people at the, the, the top of the organization, the family moves into more of the governance of the business rather than the operations of the business. And this is a challenge for all family businesses to separate the governance of the family from the governance of the business. And separate the governance from the operations of the business.
LESLIE-ANN SEON: Yes. A lot of times this is where the, the weakness lies. And I say that also in the context that a lot of the family businesses are founded by a patriarch or a matriarch, very dominant figure, um, perhaps autocratic in style and, therefore, finding it, um, difficult to move towards a more equitable governance system, and it's more of, you know, “I am in control,” and, and, that has been described as one of the primary challenges, um, in family business. Is that a correct description, you think?
DR ANNETTE RAHAEL: Well, yes, because a lot of these senior generation, especially the founders, find it difficult to let go. And with the, the way that modern medicine is treating us these days, uh, ninety is the new 70, right?
So people, people find that they have a lot of energy. There's very time with age. You know, God is the HR director for a lot of them and God calls them home—that’s when they leave. Uh, so, so some of them find it difficult, but the ones that recognize that it is going to happen, that for the business to be successful, you have to start creating a successor, plan for succession.
It's a long process. I I tell my next generation, um, successors, “before you sit in the old man’s chair, you've gotta carry his briefcase for 10 years. You’ve got be with, you know…because a lot of the, the knowledge, is tacit knowledge. It's not something that you can pass on by writing a manual—A lot of, a lot of the experiences these founders have. So, it is a question of communication talking, observation, teaching. So to make that transition from an operator to a teacher or trainer, is sometimes difficult for senior members of a generation, but those who recognize that they are going to die— is not when they, or if they're going to die, it’s when they are go to die—and recognize that at some stage, if they may themselves want to step out of the business, they begin to cultivate, uh, leadership qualities in the next generation.
LESLIE-ANN SEON: And that’s always helpful in the continuity of the family business, but I have found in my own experience that there has been an obstinacy, uh, towards passing the baton, um, towards relinquishing some of the control, um, to whether it's to siblings or, or, or, or to children, and the economics of the day, uh, certainly have changed from when they first, uh, began the business. And a lot of them don't like the idea of governance. Why is governance important?
DR ANNETTE RAHAEL: Well, you need to, as I say, separate the governance of the family from the governance of the business. Very often, family is used spill over into the operations of the business. So if you don't have a separate mechanism for making decisions and resolving conflicts within the business, and a separate one for doing so within the family, you end up collapsing the two, and the family brings the family baggage into the board room. So that's one, one very critical thing. Secondly, you want to ensure continuing any business, you want to have clean ears and fresh eyes. So, what you want in terms of governance, is maybe independent external directors on the board. If your business has gotten to particular size, you want to have that in order to bring a, a new look into the business, and the older generation, the senior generation as I prefer to call them, uh, is sometimes reluctant because they don't quite understand that it’s not just the economics that have changed— a lot has changed over their lifetimes—technology, the nature of business has changed. Uh, you're moving from products to services. You know, there's a lot that they themselves don't have personal experience with. So they're sometimes a little wary, a little skeptical. And, the succession generation has to be very careful, you know, they don't flunk this MBA that their parents paid for to the parents’ faces, you know—that “I know it all” kind of thing. So it's, it's a little bit of a dance.
LESLIE-ANN SEON: It is a, it is a bit of a dance. And, and, and what comes to mind is the immediate clash between the generations and their mode of thinking and their mode of operations and how they view it from a different perspective, particularly in the digital transformation age. When you're telling a patriarch who's 70, 80 years old, that the way he's delivering his products or marketing his services, you know, it's just archaic and you need to get into social media. There's a difficulty, um, in listening to the younger generation, isn't there?
DR ANNETTE RAHAEL: Sometimes, yes, there, there could be a difficulty, but like I said, those who are aware and want longevity, keep a open mind to what's what the next generation is saying. And look, I tell people there are three rules of real estate, right? Location, location, location. I say according to Ann Rahael, there are three rules of family, business: communication, communication, communication, communication. So you have to have a forum where people meet, discuss ideas, you know, and the value of an external director, if you have a board, it does not have to be a formal board. It can be an advisory board— is sometimes if you have wise and knowledgeable people serving in that capacity, they're able to mediate some of these conflicts. So they're able to look objectively at the issue, rather than father-son dynamics, father-daughter, mother-daughter dynamics.
LESLIE-ANN SEON: I like the fact that you mentioned it's communication, communication, communication, because it takes me back to an earlier comment that you had made, um, where you said that transparency, dispels suspicion. And, I believe that that is part of the communication process that you're talking about. And is, is the communication process to be formal or informal or it's a combination. What, when you say communication, what do you mean?
DR ANNETTE RAHAEL: It's a combination. Uh, it doesn't have to be formal. Sometimes formal communication is, is useful, especially if you have managers that you want to bring into the discussion. So, scheduled meetings, a scheduled agenda, all of that is very useful. Even within the family—having family meetings with a scheduled agenda, informing all family members of what's going on. That's a formal mechanism, which is very useful. Informal, uh, communication happens all the time around the dinner table from the time you're a child it's been transmitted. If you're in a family business, your parents are working together, or you have older siblings in the business, you hear it. So, it is a way of learning about a business and, and finding your voice to say and talk about the business. So, it is both formal and informal…
LESLIE-ANN SEON: Both formal and informal. And so we are using that communication for instance, to educate our children or even grandchildren on money management, um, from a very early age, because, of course you want them to come up in the family business.
DR ANNETTE RAHAEL: Well, you, you are teaching them about money because what you're looking to impart there is some common values, right around money. How you treat with money, how you treat with people who don't have money. Uh, what's the value of money that is family. My father used to say, uh, if you put money, a stack of money on your head and you make money your God, it can shorten you. If you put money below your foot and you stand on it, it makes you a tall person. So what he was communicating there was the value of, his value of what role money money has in your life. So, what you're teaching from, from around your dinner table and, and right through, is some common values. When you get to work together or even before that, the discussions need to revolve around a shared vision for the business. Where are we going with this business? What do we want to achieve here?
LESLIE-ANN SEON: Mmm hmm…and the shared vision, the shared perspective is, is what is important, because again, I come back to sometimes, to this singular perspective of the dominant matriarch or, or, or patriarch, who's really just trying to transcend their vision. And sometimes it brings friction especially, you know, there, there is a myth that you busted for me recently that, um, you know, less than 30%
of, of family businesses survive second generation, and we always hear the whispers that the, the pillow talk is perhaps the most destructive force, uh, in family business. Can you tell me why, uh, you were able to, to bust this myth for me and that, that it's not correct.
DR ANNETTE RAHAEL: Well, you mentioned two things there. I say the first one about the myth of a third, a third, a third, which a lot of family advisors used to tout at the very beginning of our careers. It was based on a very limited study, uh, over six decades of 200 manufacturing concerns in one area in America. Now, over time, manufacturing in America declined on its own so you, you naturally had food coming out of, of manufacturing. Secondly, a lot of family businesses may start off in one area and the business goes into decline, not through any fault of their own. I mean, let's take it the Caribbean. I don’t know if you're old enough to remember Leslie-Ann, where, what we used to do when we wanted clothing in the Caribbean is we bought fabric and we went to a seamstress, right. You would find a High Street at any town in, in any of our countries in the Caribbean dotted with stores that sell fabric. Yes. Okay. Yes, Fabric and paper patterns and all the rest of it. And you would have a lot of cottage industry people working as seamstresses in their homes, right? Well, that business has gone. Right. Because now everybody,… clothing has been manufactured in massive factories in China, Vietnam, wherever. And we now have clothing stores. So, if you were to look at, well, look at this, this business, I used to go buy my fabric that no longer exists. The same family may have transitioned into selling clothing or manufacturing clothing, or real estate development or whatever, food distribution...So, they remain as a family. The family wealth remains together. The business stays together, but the original business has moved.
LESLIE-ANN SEON: Right, right.
DR ANNETTE RAHAEL: The question of pillow talk was your second point. Look, it's in inevitable, especially in the founder generation. Uh, if you have a close couple, especially if the wife worked with the, the founder in the beginning, maybe before they had children, or maybe even while they, where children were small, the business got, uh, bigger and she was able to afford to stay home, let’s say, right? It's in inevitable that some, some men, some women come home and talk about their work. So you're talking to your partner with whom you, you shared all these life experiences, and they they're able to say something. The, the trick there is to ensure that you are saying the right thing to the right person in the right place.
So, even if pillow talk is informing your decisions, you do not go into the office the next day and say, well, this is how it's going to happen. And, whatever the issue is, is impacting not only your children, maybe other people within the business. It is more important and is more useful if the people talk is translated into, let's have a discussion about this and here are the different points of view, right? So, pillow talk is useful to some extent, but at the same time, you have to be careful how you translate into the the business.
LESLIE-ANN SEON: Correct. And so, when you're talking these issues through, are you doing it through the, the formal structure of a board of directors? Because so many of our Caribbean family businesses are small and when you say to them, when lasted, you have a board meeting, or when lasted, you have a shareholders meeting, they look at you as if you're nuts. What are you talking about? You know, this is a family business. We don't have these structures. Should we have them? And why?
DR ANNETTE RAHAEL: All right. Well, the, the idea behind a board of directors and really, I agree with you—it scares people away because they said we are not organized enough for that. We're not big enough for that. Uh, we don't, you know, the idea is that family businesses go through different, um, stages before you get to a very formal board of directors, like you see in corporate governance or in bigger institutions, right? They may start off with just a family talking about things then as they expand, they bring on the employee, which really is functioning as an “executive board,” a team of management. So they're beginning to share, right? And then eventually they may get to the stage where they bring in external advisors, but it doesn't have to be formal. Uh, but every family has somebody or some bodies with whom they may share information and get, get, uh, some kind of answers to their dilemmas or solutions to their problems. So in a way, you already have it operating. Even if you are having a Sunday lunch and around the table, you're talking business, you are having, you are having a shareholders or a board meeting. What may be missing is formal declarations, uh, especially things like, uh, declaration of dividends. Uh, or the appointment of auditors—all of that is usually handled in a small business. It's just handled by a stroke of a pen, maybe the accountant or the lawyer writes it up for them. So, that may be missing, but it does not mean the essence of what is to happen in a board is not happening.
Leslie-Ann: It's just happening differently.
Annette Rachael: It's happening differently. But I do, I, I do want to advocate that as your business —and it is not, like I say—could be an advisory board—there are a lot of, uh, liabilities that company directors have because of our laws or company laws as you, as well know. So sometimes, sometimes people who have a lot to offer are a little reluctant because they have a liability. Well, I say to people, listen, when you're thinking of starting a board, have an advisory board, it doesn't have to be formally appointed and legally registered directors. Let people get comfortable with the fact that you take advice and that you're doing everything in a way that will not rebound upon, upon them for any kind of legal liability, then you can become more formal, but it is not necessarily to look at some kind of job and say, we have to operate like that, no.
LESLIE-ANN SEON: Yes. I see what you mean. So, I'm getting the idea that it's evolving. It's incremental. You start off with your advisory board, not necessarily, um, in the formal structured way as, as, as we know it to be, but it brings me to the question that earlier, you mentioned about the importance of having external parties forming part of your governance system, independent directors. At what point should they be coming in and should independent directors be concerned about participating in a family business at that level? Because it's a fiduciary responsibility.
DR ANNETTE RAHAEL: Well, if you’re…, at what point they should come in, let’s start with that… at what point they should come in? At the point that the family is comfortable with it. Full stop. Right? The family has to be willing to—not necessary spill their guts, but open up a little bit more-so, the family has to be comfortable with sharing information, because if you're bringing people who are worth their salt to be external directors, you have to be transparent. You have to share the information. So when the family feels comfortable and when the business needs, uh, more than what the family, sometimes we have, I call it “incest” really, the same ideas circulating over and over within the family. So there's a recognition that we need some of this fresh ideas. Uh, we need injection of new thinking and the family's willing to expose their—I don't want to say expose their business, but at least willing to share information—That's a good time to bring in these external directors. Now, the thing with external directors is, like I said, they may, they may come on just as advisors, not necessarily fully appointed until the external directors themselves are comfortable, that this business is operated in a fashion that will not impact upon them legally.
Right. But that, that, and I, I want to say a little bit about two other issues here. Uh, the governance of the family is just as important as the governance of the business. Just as you have a board, a board of directors in the business, eventually you, you have to have what we call a family council. You should have a family council and a family forum, where people in the family who don't necessarily work in the business are kept abreast of what's happening in the business, are allowed an avenue to express some opinions, to ask questions, because what you want is an inclusive family, and this becomes very critical when the, you, you begin to have adult children who are getting married and bring in people from these are real external people, but they're coming in and they're coming in immediately. So you want to ensure that you're imparting the values that the family has cultivated over these decades, that if that they've transferred into the business, that the people coming into the family have a recognition and an understanding of those values….
LESLIE-ANN SEON: Because some people may say to you, that's when the trouble begins—when the new parties, you know, come in and dynamics change.
DR ANNETTE RAHAEL: Well, I always say if I had a dollar for every time some family business founder said to me, “Annette, my children get along well, you know, I have no problem. It’s when they get married and who they're married to,” I'll be a multimillionaire. I’ll have a ton full of dollars…And, it's not necessarily true, you know. When they take you take deeper, maybe siblings themselves are having some, some arguments among themselves or diversity of opinions and so on. And it brings me to one of the things that I feel— even before you get a board of directors, or you feel you're not, uh, big enough, or you feel there's a level of sophistication that you, you do not have, which is never the case. Once you own a successful business, you’re sophisticated enough to have a board, but what I recommend is that you begin to have discussions and at some stage go to someone like yourself and make a legal shareholders agreement that will, you see, because what you're doing there, you are setting precedent for the generations to come, right.
And you, you know, as well as I, some of the issues that go into a shareholders agreement about decision making and so on. Uh, the one thing though that I always insist that, well, not as far as I can insist to lawyers or to families, is that we consider provisions for a buy-sell agreement and move beyond the standard clause that you get in all articles of association, about how, how you sell and how you buy. Think it through because what you want to do is consider what will happen if one party wants to sell before the people want to sell, because at the point of a sale, there's a lot of emotions on both sides, because you don’t know what's prompting the sale. People may be angry or people may, I say, people may be migrating, you know, and they feel they want out of the business. And rather than wait till that, uh, episode is happening at the moment, it is better if you can plan for it in advance and put some parameters down, how are we going to value the business? How are we going to pay for them? What percentage can you sell? And so on. So no matter how big or small business is, it's important, because it removes some of the emotionality around an issue like sale, partial sale, or one shareholder wanting out, and there's nothing wrong. I mean, you're moving from founder to what we call siblings, teams and then the cousin consortiums. And from those cousin consortiums, you have more and more branches of the family, Right? And in family business, there's nothing wrong with pruning the trees—pruning the family tree within the business. So, some branches may want to go off on their own. You may get a sibling who is, uh, very entrepreneurial and feels that he cannot, he's shafing a bit to go off and do his own, his own thing.
Yes. And there's, so there's nothing wrong with it. You know, people have to rid themselves of this “everybody has to stay together.” I believe it, it ties you together, but not bound you together. So a buy-sell agreement allows people to exit in a way that is fair, transparent, and, and graceful, and most of all, not damaging to the family, because remember, I'm a family business consultant, family and business. One hand cannot clap. Harmony of the family; Success of the business, is what people like myself are after.
LESLIE-ANN SEON: I understand. It’s family dynamics and it's the business dynamics. So. the, the importance of that shareholder's agreement resonates with me from, you know, the legal standpoint. Um, would you say that that is an important part of the succession planning in, in family business, that document?
DR ANNETTE RAHAEL: Well, yeah, and, and in succession planning, you, you have to have a lot of documents, right? But that is a very important one because you see, succession is twofold. You have ownership, succession, which your document will govern— How many shares to be distributed? What is the percentage of shares going to this person and what happens when he shares including buy-sell, and then you have leadership succession. And, and what we, what we do a lot is we collapse it two and a lot of founders feel that they're not going to pass on, you spoke of the people who never let go—They don't want to pass on the leadership until they pass on the shares, which very often is as a point of their death. I, I urge people to separate the two. If you feel you want to hold onto the majority of shares or all of these shares fine, but then you have to go for the leadership succession, which is training your next generation, having them work together, so that ultimately, a leader almost arises from among them organically. It's not an appointed person. It's a recognition that this is a person to take us to the next level. And you get that kind of buy-in. And then of course, if once that person has been… person or persons have been identified, because I also believe in shared leadership, you can have teams. They don't have to be flatfooted. Right. The family-own and operated. Work, any business, then you, you have a series of things you need to do. You need to have these people rotate through the business, learn about the business, learn about all aspects of the business, attend meetings. I, you know, go learn some about family, business management, develop some emotional intelligence— all the characteristics that the seniors have had the senior generation have had by just virtue of their experience and their longevity in life and so on. So you begin to do all of that. And then you announce the date of your retirement, which is the most fungible thing I've ever seen. I've had people say to me, Annette, that's it. At 70 I am out of here. And this well, and a lot of times what has happened, especially the founding generation is the business has been their career, their hobby, their extra marital affair. It has been, it's been everything. So they have not developed any avenues for, for life after this obsessive 150% involvement in the business. So I tell the next generation, now look, you know, when you're in the forties or fifties, we begin to think, you know, there is life after this business and you can be creative about it. One of the, the members of the Mars family, the Mars chocolate family…When he retired, he recognized he still had a lot in him. He went off and started a gourmet chocolate business. It was not competing, cuz that's very important, was not competing with a mass production like Mars. But he still had this urge in him. He must have had a sweet tooth still on… So he had this urge in him to keep running a business related to chocolates. So we did a small and at that stage of life, a lot of people are not looking to make money…
LESLIE-ANN SEON: Its to pursue their passion.
DR ANNETTE RAHAEL: Correct. And, and, you know, and so he stayed within passion, but you know, if you begin to think of what else can I do?And like I say, if you, if you can transition from being an operator to a coach or a trainer, or even a consultant or an ambassador for the business, you have different roles. Nobody's putting you out to pastures as a senior generation member…
LESLIE-ANN SEON: …Which is the fear. That is the fear, Annette. Let's be frank.
DR ANNETTE RAHAEL: Well, and, and so it's incumbent upon the next generation to some extent to give the senior generation that recognition and to carve out a role right? So, sometimes they stop being a CEO and they just become the chairman of the board or whatever. And then on the senior generation side, they have to recognize that the role is now different.?.And learn how to make that transition.
It's not an easy thing, especially if you're a founder. If it's from second to third generation, it works much easier. Or third to fourth, it works easier. But the founders are people that have a lot, because this is their baby.
LESLIE-ANN SEON: This is their baby. This is their world. Yes, it's, it's very, very difficult, um, to relinquish this control and to, you know, abdicate that responsibility that you've been carrying all your life. How do I announce that I am retiring at 75? Why should I?
DR ANNETTE RAHAEL: Well, you’re not going to abdicate. And actually your success is the fact that you have created a business that is organized in a way that it can be passed on. So it's professional enough, that there are protocols in place, that it's easy to have all these checks and balances, right? And that you have also created a family that understands how to manage wealth and how to grow wealth, not just manage it, how to be entrepreneurial. So your success is not the success of this particular business is worth how much money at this point in time, but that you have grown into position where it can transition into a different kind of structure and you have developed a family, nurtured a family that can work together, and have ownership and grow it for future generations. That is your success as a founder.
LESLIE-ANN SEON: And I believe that is your legacy. That is the essence of passing on this generational wealth. Absolutely moving beyond your, your personal story. But I, I, I, I want to, to probe you a little bit more and say to you that there is a point at which where there is this resistance to, uh, appointing a successor or perhaps an argument about who the successor should be, and where do you determine is the best point at which you need a family business advisor, as Annette, to come in and nip what could be a very destructive dispute in the family business?
DR ANNETTE RAHAEL: Okay. Well, I have worked with all different levels founders, sometimes call me years before. My more successful families have been people who have recognized that their next generation is in their teens and may be showing some kind of interest. So they begin to call someone like me in from then, start thinking and planning. What are the policies we are going to put in for the family? How are we going to build a bridge between the family and a business, but create a boundary between the family and the business, which is a nutshell, is, is what I tell people I do as a family business advisor. Right? So if people recognize early enough that this is something, the, the businesses value, they want to have it pass on to the next generation. The sooner they get started on developing that shared vision among the next generation and putting some of the policies in place, putting some of the procedures in place, uh, with regard to how the leader will be chosen and recognizing look, you know, like I say, I have a passion for shared leadership because it really, for me, I tell the next generation you know, does it really matter what your title is. If you are joint owners, does it matter if you’re the CEO or you are the COO or whatever. I mean, these things are important and this is important perhaps in a business card and so on but the reality is the real decision making is joint. So as far as I'm concerned, you could be Mr. Universal, you could be Mr World or you know, or Ms. universe and Mr. World—it doesn't really matter that much. You have a responsibility to share the information and to involve others who very often are your equal shareholders.
LESLIE-ANN SEON: Very often are equal shareholders.
DR ANNETTE RAHAEL: Yes. So you have to have some kind of mechanism either for some joint decision making or for, especially what we call passive shareholders, those who do not work in the business, to feel that they have some kind of a say. And this is where, uh, a formal board of directors comes in, because then they have the ability to help choose the people to sit on that board, to represent them because you don't want every family member sitting on the board. It defeats the purpose.
LESLIE-ANN SEON: It does. It will.
DR ANNETTE RAHAEL: …You know, but you look, I tell people, I have a model when I talk about family business. You have to have a tactful business. You have to have transparency and transparency is very difficult, especially around money. Especially when you have active shareholders who work in the business, passive ones who do not, they, you know, and the active shareholders don't wanna share their salary or their purse. Bad news… transparency, especially like I say, around money. Havs accountability, which is where a board will help. Who's doing what? Are we doing what we say we are going to do? Have communication, family meetings, management meetings, executive meetings, board of directors meetings— communicate, communicate, communicate, which is often boring for the person who's working in the business, head of the business and a member of the family because he or she's living the issues and they have to go and repeat it and explain it. But you know what, that's part of the job. When you have that transparency, accountability, or communication, trust becomes natural, because you can't teach trust but those things, engender trust. And when you have all of that in a family business, you have the ingredients for success going forward…
LESLIE-Ann Trust is earned.
DR ANNETTE RAHAEL: That’s right. And it, and it evolves over time and it comes from the transparency and the communication.
LESLIE-ANN SEON: Awesome. I understand clearly the message that you're sending. Do you have some parting words for us, uh, for family businesses, whether we are just starting up or we're in the middle of thinking about moving on to the next generation? What, what can you tell our audience?
DR ANNETTE RAHAEL: Well, I, I will say stay with the process. The fact that you even own a business is kudos. Especially in today's environment. So, you know, what do what is necessary to hold onto it as, as you and your family decide going forward. And you are the backbone of the economies throughout the world. Look, I don't have the statistics of the Caribbean. We, we get statistics of America, Europe, maybe, but I guarantee you, 90% of the businesses in the Caribbean are family businesses. If you look around, it is only perhaps, uh, financial institutions like the, the international banks or even the local banks, or maybe it's a very big insurance companies. And even those now are, uh, being run and owned by families. So you have an important role to play in the economy of the country in which you live.
LESLIE-ANN SEON: Very important.
DR ANNETTE RAHAEL: So stay with it, uh, uh, avail yourselves of, of whatever advice you need. Uh, educate yourself. Look, the internet is full of information about family business governance, so it's very easy to learn and because, like I said, it's, it was only maybe early eighties that business schools all over the world began to recognize that family businesses are subset of, of business management and they need particular attention.
LESLIE-ANN SEON: And specialized attention. You, you, the, the comments you made triggered a thought to me that the paucity of information on Caribbean businesses and its contribution to GDP and our different, uh, national economies. We should, we should start looking at that, Annette.
DR ANNETTE RAHAEL: Leslie-Ann, I don't want to say I've given up. It’s so difficult to get reliable information, you know, because of the archaic ways in which we collect stuff…information.
So in my, my own case, I, I went to the, the, the statistical, um, office in Trinidad and I said, listen, can you give me a list of all our registered companies and their directors. I said, I will then get some bright, young techno star to devise a program to tell me if two or three directors have the same last name I'm going to assume as a family business. Well, no, they don't have information like that. If I, if I tell them I want to know directors of this particular company, they can give it to me. So, the way we collect the information, the way we sift it, uh, is, is, is like I say arcahic, so until we get to that level where the information is easily accessible…I mean the University of the West Indies. I've had discussions with them, you know, there’s lots, I mean, every couple years I get calls from somebody doing a master's thesis are now doing their DBA in Barbados or Trinidad, I wanted to work on family business, but the paucity of information and the difficulty in getting it, you know, but the moves that that we do too, we will also get family business owners to talk. Look, it's not that, I read somewhere that family businesses are not just closely held, they’re hermetically sealed. Nothing goes in, nothing comes out. So, but I think with many family business when they get to a bigger stage, where they're sharing my information with their staff, with external directors, they begin to be willing to share information with the general public as well, because it helps dispel some of the myths around family businesses, that they, you know, all of that I think is that transparency, as a group, will help.
LESLIE-ANN SEON: Yes. Yes. And it would be great because you, it, it can also assist in supporting, uh, family businesses and becoming a resource for accessing expertise and assistance, as you know, on day to day decisions or long-term decisions. I think it's important for us to consider.
DR ANNETTE RAHAEL: Yes, let's talk. There's a youngster listening somewhere there that’s going to take it on.
LESLIE-ANN SEON: Yes. We'll send a message to UWI, to, to take it up as a special project.
DR ANNETTE RAHAEL: Oh gosh, it is. But it is difficult, like I said, because of the way we collect information, but who knows, maybe somebody out there has a good idea of how we can do it.
LESLIE-ANN SEON: Yes. Let's see how let's see how we get that done. Thank you so much, Annette. Have a lovely Sunday afternoon and uh, thank you for imparting all this very informative, uh, expertise of yours on family business advising.
DR ANNETTE RAHAEL: Thank you for having me. I’ve enjoyed it.
LESLIE-ANN SEON: Thanks a lot. Bye bye.
Thank you to our sponsors Century 21 Real Estate, for continuing to take this Seon180 podcast journey with us. Thanks to our guests for joining us each week and for viewing the episodes on various social media sites. It’s been an amazing and insightful journey and I am so very grateful for your support. Engage with us. Tell us your thoughts. Send us your questions. Feel free to suggest guests for upcoming consideration for episodes. We love hearing from you. See you next time on SEON180. Remember, please visit my website at Seon180.com and check out my favorite podcast listening sites to view all past episodes from season one and season two.
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