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Key Ideas Newsletter . Fall . 2004 

 
Key Ideas for Family Businesses & Their Advisors
Brought to You by Jane Hilburt-Davis & Key Resources

As we enter this fall season, Key Ideas brings more resources for family businesses and their advisors.

In this issue…



Feature Article
Family Meetings: The Dangers of False Consensus

Several years ago, a social psychologist. Solomon Asch, performed a famous group pressure experiment in which an individual is asked which of two of four lines were of equal length. Other group members, coached in advance, unanimously picked a clearly unequal line. The tension mounted in the room because the uncoached subject wanted to be both accepted by the group and confirmed that he was right, as he was certain he was.

From this experiment, Asch asked the question: Under what conditions would people agree to see the same thing and produce false consensus, or in today's world, experience 'group think'?

Read the Full Article >


Tips & Tools
Who Gets Grandma's Pie Plate Workbook?:
A Guide to Passing on Personal Possessions!

from the University of Minnesota Extension Services

Here's a gem of a guide to passing on personal possessions. Written in workbook form, it includes worksheets which can be photocopied for use with the whole family. It is both practical and value-based. I have used it with several of the families in business that I work with and highly recommend it as a great tool for deciding what's fair in distributing property among the family members. The 'yellow pie plate' refers to any object that holds memories and meaning beyond the monetary value. This work book covers topics such as: "Understanding the Sensitivity of Transferring Personal Property"; "Determine what Fair Means", Determine Distribution Options: Establish Ground Rules"; Managing Conflicts if They Arise".

View Outline and Order Information >


Book Review
The Wisdom of Crowds: Why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations
fby James Surowiecki

In this fascinating book, Surowiecki explores the idea that "large groups of people are smarter than an elite few, no matter how brilliant-better at solving problems, fostering innovation, coming to wise decisions, even predicting the future." He begins with a story about British scientist Francis Galton who, while visiting the annual West of England livestock fair, came upon a weight-judging competition. An ox had been on display and members of the gathering crowd were lining up to place wagers on the weight of the ox. Eight hundred people tried their luck; they were a diverse lot, many 'non-experts'. When the contest was over and the prizes had been awarded, Galton borrowed the tickets and ran a series of statistical tests on them. He added all the contestants' estimates and calculated the mean of the guesses. Galton thought the average guess would be way off the mark but he was wrong. The crowd thought the ox would weigh 1,197 pounds. It actually weighed 1,198!

Read the Full Review >


What Would You Suggest?
Our Readers Provide Solutions!

In our last issue of Key Resources we presented readers with an interesting case study of two brothers facing a family business challenge. We invited you to respond and got some insightful suggestions.

View the case study with reader suggestions >


In the News
Corporate Governance by the Numbers: It Doesn't Work

from The Wharton School, University of Pennsylvania

Here's a new take on corporate governance. Wharton accounting professors, David Larcker, Irem Tuna, and Scott Richardson find that although lots of people are coming up with governance scorecards, and best practices and "selling this stuff, as far as we can tell, there's no evidence that those scorecards map into better corporate performance or better behavior by managers." They do think that corporate governance matters but after "puzzling over reams of company numbers, they are not confident that anyone can measure whether one firm's governance is better than another's at least, not by using typical metrics."

They conclude that structural indicators of corporate governance used in academic research and institutional rating services have a very limited ability to explain managerial decisions and firm valuation. Structural indicators include:

  • Whether a company has a lot of insiders on its board
  • Whether the boards chairman is also the company's CEO
  • Whether a single outside investor holds a big block of company's stock
  • Whether a company has a lot of debt
  • Whether it has a lead director

No matter how they parsed the data, as the article states, they didn't uncover any strong, consistent relationship. In many cases, in fact, "they even saw the opposite of what one might expect, finding for example, that companies with big boards report smaller abnormal accounting accruals which is inconsistent with prior research that suggests big boards are bad." They suggest that companies, worried about their governance, do nothing rash. "Our message is that there's not much evidence to back up bold claims and simply benchmarking your governance to best practices isn't going to be that useful."

They recommend that companies tailor their policies and practices to what works in your setting. As in all things, decide what's best for you, your company, and your family. Do your homework; decide what the board needs to accomplish and who is best for the job, the company and the stakeholders.

Additionally, always keep in mind the new rules for publicly and privately held companies, in the Sarbanes-Oxley Act. Here are a two links for more information on SOX:

www.aicpa.org/info/sarbanes_oxley_summary.htm

www.nacdonline.org


Readers' Poll
What Do You Think Leads to Family Business Success?

This month we're asking our valued readers to participate in a quick poll (it's simple and anonymous). Please click on the links below to weigh in. We will share the results in the next issue of Key Ideas.

For members of family businesses, what do you think is the one factor that most contributes to family and business success?

  • Family harmony
  • Agreement on business goals
  • Outsiders on the board of directors
  • Formal policies for next generation employment
  • Other

    Click Here to VOTE >

For advisors to family businesses, what do you think is the one factor the keeps good succession plans from being implemented?

  • Cost
  • Inability of founder to let go
  • Inability of next generation to take over
  • Lack of agreement on vision for family
  • Lack of agreement on vision for business
  • Other

    Click Here to VOTE >


Let Us Make You Shine
The WD-80 Program!

Twice as good as WD-40, we at Key Resources assist legal and financial advisors to help their clients run more effective family meetings and get to making better decisions about the business. Similar to the handy WD-40 we "loosen rusted parts and free sticky mechanisms". An attorney wrote, in a recent letter of thanks to us, "more than I thought possible was accomplished in the ownership meetings with your facilitation".

Ask us if you need help with:

  • Moving the family, board, ownership group from great plans to implementation.
  • Getting the documents signed!
  • Creating great strategic plans that don't sit on the shelf but are used.
  • Moving from conflict to accomplishments.
  • Dealing with complicated family issues that are negatively affecting the progress.

We are a nationally known group that tackles all these issues with results! Please Contact Jane Hilburt-Davis for more information on how we can work with you to help you shine in your work with your family business and family office clients!



Upcoming Events
What's Happening

Key Resources will be participating in the following events:

Moderator of
Institute for Family Owned Business Panel Discussion:
Women in Family Owned Businesses
January 12, 2005

Learn more at: www.usm.maine.edu

Massachusetts Society for Professional Psychologists
Love and Money: Consulting to Family Businesses

October 2, 2005
Learn more at: www.mspp.edu

The Family Office Symposium
Using Genograms to Map Family Values and Interactions
April 29, 2004

Sponsored by Financial Research Associates
Learn more at: www.frallc.com


That's all for this edition of Key Ideas. As always, feel free to contact us with feedback, questions or comments.

Until next time,

Jane Hilburt-Davis

CONTACT US:

Key Resources
40 Middleby Road
Lexington, MA 02421

Phone: 781-861-0586
Fax: 781-862-3499
E-mail: contact@familybusinessconsulting.com
Web: www.FamilyBusinessConsulting.com

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Copyright © 2004, Key Resources
This Communication Prepared by Human Service Solutions