We recently held our annual Fall Forum in Chicago. This year’s theme was “The Butterfly Effect,” which reflects the theory that a change as subtle as the flap of tiny wings can profoundly change the world.  The same can be said about the family enterprise.  Every choice you make (or don’t make) has the potential to ripple across your family, your investments, your philanthropy and your family businesses.

This is why clear decision making processes play an important role in preserving wealth across generations. As speaker after speaker pointed out, successful multigenerational families are a product of design. They have mechanisms in place to address the issues which most commonly trip up other families, everything from leadership transitions to conflict resolution.

Decision Making Processes and the 100-Year Family

Saybrook University Professor Dennis Jaffe and FOX Founder and CEO Sara Hamilton each presented on the key qualities of enduring family enterprises at the Forum.  Jaffe noted that while the founder is defined by the business he or she created, it is the subsequent generations that make the decision to stay together. They are the ones who make a conscious choice to change the culture of the family from one centrally led and paternalistic to one that is more collaborative in nature.

Hamilton added that family decision making requires increasingly sophisticated processes with each subsequent generation. Decision making processes must evolve with the family as it grows, becoming more dispersed and encompassing more households. Decision making moves from the founder’s dinner table to the board room to the family retreat and finally to the private trust company. These are the processes necessary when a family begins to move towards that collaborative culture Jaffe discussed, from an enterprise dominated by a single voice to one ruled by many.

The Leadership Challenge

While the family enterprise becomes more collaborative over time, it still needs leadership and direction. A number of sessions tackled the thorny issue of who takes over when a family leader is about to retire.  As Carl Robinson, managing partner at Vantage Leadership Consulting pointed out, family leaders cast long shadows and not everyone is comfortable in the role.  In another session, Mark Nash of PricewaterhouseCoopers LLP discussed the firm’s annual family business owner survey. The results were sobering. Fifty-six percent of the respondents reported a leadership transition would be an issue within the next five years, but few had a plan to address it.  Nevertheless, 52% intend to pass their business on to the next generation and 76% want to keep the business in the family to some extent.

But deciding to stay together means preparing for a leadership transition. That means putting processes in place to educate, develop and/or identify new leaders, and processes to solicit feedback from the family and reach consensus. This is a reality that a lot of first and second generation families are just coming to grips with now and it will be interesting to see how many of those families will become the kind of successful multigenerational enterprises Jaffe and Hamilton described at the event.