Governance Bites #122: family governance and operating with intentionality, with Sandy Kimpton

In this episode of Governance Bites, Mark Banicevich sits down with family governance expert Sandy Kimpton to discuss a crucial topic: what is true intergenerational success?
 Discover why family governance is about more than just wealth management; it's about developing human capital and preserving your family’s legacy and values. Sandy explains the power of "operating with intentionality", providing practical steps to align family and business. Learn how a long-term family perspective differs from short-term business thinking  and why an independent voice on a family council is essential.
 Website: https://kimptonandco.co/
 Sandy Kimpton leads an organisation focused on making a positive difference to families and businesses with sustainable intergenerational outcomes.  She is Chartered member of the IOD and is a director and advisory board member of several private family enterprises.  Her executive Chartered Accountant / CFO career principally centred on multi-generational family enterprises providing an extensive backdrop for the good, bad and ugly that can occur with the business & family intersect.  Combining business, executive and governance skills together with a holistic overlay of family dynamics & values she focuses on positioning the business, family unit and the individuals to all thrive.
 #FamilyGovernance, #FamilyBusiness, #SuccessionPlanning, #LegacyPlanning, #OperatingWithIntentionality, #IntergenerationalSuccess, #FamilyValues, #LongTermThinking, #Governance, #BoardOfDirectors, #Leadership, #WealthManagement, #GovernanceBites

Transcript

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Hi, my name's Sandy Kimpton and I'm looking forward to chatting with you today, Mark. Here today we're talking about family governance and operating with intentionality. Two second, a piece about me, I have an accounting background. I have worked extensively with multi-generational families throughout New Zealand. And I've also had some personal circumstances and it made me just stop and reflect on what is really, truly important in life. Now, the sum of all of that is what we now operate within my business, which is focused on really governance in that broader sense around families. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, today I am very fortunate to have the opportunity to spend time with Sandy Kimpton. Sandy, thank you very much for your time. You're welcome. You have a very, at least in this country, very unique approach to governance in that you work with, in particular, the wealth of multi-generational families. And that doesn't necessarily just mean family offices. So my first question for you is, what is family governance? Well, yes, you touched on a number of things there, Mark. It really isn't; a family office, that's being talked about quite a lot here in New Zealand, is really about the wealth management and stewardship. But I would, you know, pose the question to any family, what is really their definition of success? And governance encompasses so much more than just looking after the money. It really is also about ensuring the human capital are growing, as well, and are there. Otherwise you end up in a situation where you've preserved the money, but you haven't preserved the family, and you haven't preserved the legacy, the values, and really developed the people to really be all that they aim to be. And I would have a statement saying that, you know, true intergenerational success is where every individual is happily thriving in their own right, doing their thing, being a full person in their own right. None are left behind, and the family enterprise as a whole is flourishing. Right. Part of which, or will answer part of my next question, but I expect there's a little bit more to dig into, as well. How is governance in a family business, or governance of the family, different from governance of a widely held company, whether it's private or public? Well, the business is a business, right. So that's what you're talking about when you talk about being in a governance of a business. Within a family, the business is an aspect of the totality. Right. But there is also the values, the sharing of what we, who are we really as a family? What do we really believe in? What do we think? Now it's not about group think, it's not about sitting around and singing "Kumbaya". But there are, just like there are values in a business, there are values in a family. Many families don't take the time to think really through what they are, but I would say to the family, or to a family, "In 75 years time, who do you want"sitting in the room? What are they,"how are they acting with each other? What, how are the communications?"How is it working together? Are they?" You know, that's really what governance is about. That doesn't just happen. Sure, you can focus on the business, and the assets may be there, but other people in the room. It also comes back to what you were saying before about developing the individuals in the family, as well. In 75 years do you want a group of equals from the family sitting around the table, or do you want some inequality because some people are less educated, haven't had the opportunities that other people have. And equally, think about some of those words you just used, inequality, fairness, equal, those kind of things. Now everybody can have the same amount of money. Does that necessarily make them all equally happy? I remember we took a group of young people up into, around Silicon Valley, a study tour around in there, and had the opportunity to sit with Tim Brown, Allbirds, and his challenge to each of them was, "Remember to"think about what truly makes you happy." Now if, and we have this here in New Zealand, what I'm about to say, if actually keeping your business, you know, the second, the next generation's business, if being close to mum and dad, if being near the beach, being near, you know, relationship with grandparents, is something that's really dear to your heart, why would you want to go and, how is success being in the other side of the world with a multi-million dollar business? Yes. And so, it's those kind of things. Equal isn't necessarily fair. Yes, absolutely. But what you do want, and what I really always, within governance and intentionality, with a family, we will often ensure that there are some shared traditions, some shared situations, so that if the whole family is away on holiday together, the member who is a fantastic teacher, loves teaching, lives on a modest salary, and the multi-million dollar entrepreneur kid, can still remember to talk and laugh together and have fun, and their kids equally see each other as equals. Yes, right. What are the biggest governance challenges that are unique to family-owned businesses in these family conglomerates? I think it is recognising, so specifically thinking from a business perspective, recognising that their family is bigger than the business. And I would venture to say the family, the business and the money, obviously, it's kind of what makes the work good around. I'm not disputing that. But as I say, what is truly important? If we are just looking after one family member in the business, what about the other siblings? And I'm often sitting on an advisory board or governance board in the family and I go, but what about the others? Yes. And thinking broader about, there is more going on than just the business. Yeah, very much challenges around fairness there where you might have one or two members of the family that are heavily involved in the family business and other members that are not and balancing the fairness along those lines would be challenging in itself. How can boards help balance family interests with the long-term sustainability of the business? I think you always have, in my opinion, when I sit on family boards, I'm very conscious that the business is simply a family asset. Yes. And it is not the family itself. Now, what I mean by that is, when you're talking long-term, sustainable, it's going to almost sound like a contradiction, but if you have a view that the business is a family asset, then you make decisions with the long-term views of the family in mind, while still thinking about what's right for the business. Right. Now, an example, examples of that perhaps would be, maybe the right thing to do is put in a bunch of external managers because then there are no children that are going to have that sort of passion for the business. Let's govern this thing really well and make sure family ownership is really tied in and it's performing very well, and transition it more into that sort of space, and let it simply provide an income like the, many of the other assets in their portfolio do. Or it might be that there is a family member who wants to do a little bit of a spin-off off it. Well, that's great too, right. But equally, let's make sure those things will work. So it's being able to be aware that a long-term in a business, is very short-term in a family, and what is overall the right long-term call for the business. For the family, I mean. Right. So that suggests to me that the business will have its own board of directors, which may or may not have strong family involvement. And then you've got, separately from that, the family council. Would that be correct? That's fantastic when that setup is there. Right. And if it's not, at least that board around the table with the business, at least some people have an understanding of that family piece. Right. And beyond just the family. Right. That independence. Right, so you'd expect that the family would have some representative on the business board. Now, taking the family board or the family council, is there a role for independence, for an independent or an advisor or something on that board? How does that work? I would say it is actually essential. Okay. And I would say it's essential because it brings objectivity and independence. And you know, you imagine your own family and you I don't know anything about your family, obviously, but you're sitting there with your siblings and your parents, and maybe there's a partner involved, and they've got their families, and somewhere through the conversation you can still remember the person who slammed the door when X, Y, and Z happened. Which makes it sound like the independent person on a family board could quite often be playing the role of mediator, or. Correct. Right. Correct. And it's bringing it back to let's talk about today and let's give everybody else the grace to realise we've all had a chance to grow up. Okay. But that's very difficult to do when you're just the family members. Which does bring me back to,  bring me to the next question actually. How do you manage conflict when the family relationships conflict with the needs of the family business. Really conflict, conflict's about finding where the commonality is. Actually what truly matters. And I heard a great example, a workshop in conference I was in in the [United] States, and of course we know that sort of political views really play heavily in the States. And so there was this, the case study was where everybody in this generation literally hadn't spoken to each other in 20 years. But what they could all agree on was,"What would mum have wanted?" When you actually could get them to the table and quietly work that through. Now often a role as an independent means that that's individual conversations with a whole lot of people. There's a whole lot of back work that goes on in our roles. Yes. That actually, even to get them all to the table, and then keeping it about, "What is really important here?" And finding that point of alignment. When you can find the point of alignment it's where it actually starts to move forward. I'm finding you remarkably amazing at these segues, because my next question is around practical steps that the family business can take to align the vision for the family and for the business, the values, and also the governance structures. How do you align those things? See, I would often start with, I think it starts with the values. And that's having all of the adults in the room, when I say this is the family adults. And that might be anybody from 15 years old onwards. Right. But when you can get to the bottom of what those true values are, then you have something to work with. Now, and I'll give an example, and that sometimes can take months, by the way, to get to that point. Yes. And we had a fantastic situation with people I was working with where, and I'll be deliberately vague obviously, but, you know, my kids are just amazing, but kids don't pop out just amazing, and working with those young adults, and then going to the point where I had the privilege of hearing a younger person go,"Gosh, I thought our life was normal,"but I can see we just need to work at this.""Gosh, Dad, that team sport you made me play that I hated, I can see what I've" learned through that now. I'm going to have my kid do it." Right. And the amazement on their faces when they realized that actually there were half a dozen key things that these very different individuals all fundamentally agreed on. Wow. That's a privilege of my role. Yeah. That's exciting. Now when you can get, so that's step one of a practicality is working with a family and getting that alignment of, "What's really important to us?" Second is situating the business, now flipping into a business mode, being aware in a business what's truly important for the business. What role is this business playing in the family? Is it literally just a cash cow? Is it dad's passion business? That dad wants to keep doing, but what's it really role in the longer term plan? Where do values align or not, or is it literally just off like one of the bank investments, or the house value? So thinking through those logical pieces. So there's two. Yes, right. There's two. Now, at the start of this topic, you mentioned the idea of operating with intentionality. What does it mean for a family or a family business to operate with intentionality? Well, as I say, in my mind, and you know, there's good research backing this up and this is, actually I'll push across that thing, you made the comment,"This is newer thinking in New Zealand." It's not for our Māori whānau [family]. Yes. Very true. They're used to thinking in longer term horizons, but for many New Zealanders it is. But it's not in the US [United States]. No. This is very normal, they're used to. And it's just because there's been this sort of growth for a longer time. So coming back to your comment about intentionality, New Zealand was a country where it was fundamentally everything kind of was the same from one generation to the next. But now you've got quite a large disparity in the way people are growing up. And that thinking and, to all intents and purposes, New Zealanders often worked hard, made a living, did okay, and the kids go off and do the same. How do you build grit and resilience into a kid who knows that he just has to ask and the food, the car, the whatever, turns up in the driveway on Uber Eats. You know. It was a problem I always wish I'd had when I was young. So building that, that's very different to how dad or granddad did it, where - Yes. - I heard somebody say, "I just didn't want to milk the cows."So I had to go find something else to do." Yes. Now they're different outcomes. So, there's different backgrounds. So that's intentionality with families. It doesn't just happen unless you think about. And how do you teach something you don't know or you haven't experienced? And so you have to think intentionally about this, and just like you do with the business. And given the rate of change these days, none of us can expect to experience, or to have experience in what our children are going to experience. No. So yeah, a very big part for that. How do intentional governance practices contribute to the long-term performance and resilience of family businesses? Incredibly, because, I mentioned before, a long time in business is only a short term in family. So with intentionality, you're often doing a lot more decade planning. Now, in a business governance environment, you rarely talk about decade planning. You might, if you're listening to Neal Barclay about Meridian, but other than that, most people are not. But with families and family businesses, you are. Right. Because there may be that sense of what does this, where do we want this business positioned in the next 10 or 20 years? As I referred to. And where are we developing the skills for the various upcoming family members, the rising generation? So you mentioned a family council earlier. Often within family councils, will be sort of sitting having interns around the table. Now they're not interns of learning just about business, they're also interns around learning how mum and dad made decisions. How the family Christmas party was planned and did. Right. Or the family X, Y, and Z, it might not, you know, we're not all believers of Christmas, but... Family holiday, or. Family holidays. How did that happen? How was it thought through? I mean, you know, would your kids know where to start? Yeah, right. You've, I think, already given me one answer to the next question, there may be others. What lessons can non-family businesses learn from strong family firms? That are governed with intentionality, as you say. I think to think longer term, to think in a more sustainable succession planning way. What do we really want for this over the long term? We're often focused on that three to five year strategic plan, but we have to recognise in all businesses, where are we in the business life cycle? Yes. And as you mentioned, the rate of change is happening, and you know, you can read Jim Collins' book, "Good to Great", or"How the Mighty Fall", or any of those. And there's very clear steps in the business growth cycle. What families are good at recognising is, or sometimes good at recognising, is that we want this to go further. Yes. We might only want it to go further as money, or we might want it to go further as something the family holds. But either way, we will expect it longer. Yes. Yeah. And you have to do the same thing in non-family businesses. Are we at this point? I've seen this in my professional career. Oh, we're in a mature stage now. We need different leadership. We need a different way of thinking. We need a different thing. Oh, we're in a more sunset situation. How do we reinvent? What do we do? What are our next steps? That kind of planning should be happening everywhere. Right, yes, and you've also mentioned the succession planning, the bringing the next generation up and training them as well, which would be another great takeaway from what you've been saying, too. A final question for you on the topic, if you could give one piece of advice to families about operating with intentionality, what would it be? To sit as a family and work through what would be the shared vision of family success. Sandy, that's been really, really interesting. It's been such a different take on governance from what I've talked about before. I've really enjoyed it. The overlap with, as you say, with Māori governance is fascinating, and Māori governance is a topic I'm dying to dig into. I've got to find the right guest to have a conversation about that. Thank you very much for your time. I'll look forward to seeing you again soon, and to seeing you next episode. My pleasure, Mark. Thank you very much. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel, where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe and share the videos and podcasts.