Seeking external advice: a matter of trust Alan Reddrop & Paul Mabarrack

‘ Haven’t you [a consultant] ever been out there on the road trying to get in to see a business and just been shut out and not known why? The answer is: they’re a family business – they solve all their own problems, they don’t use people like you’ Craig E Aronoff, co-founder and principal of The Family Business Consulting Group (Astrachan, 1996, p 518)

Survey of family business CEOs o the size, generation of the business, o recognition as a family business, o intent to pass on to the next generation, o awareness of family business issues (defined), o whether external advice had been sought, o the type of adviser selected and reasons for the choice, o the perceived value of the advice o and whether it had been acted upon, o what had deterred those not seeking advice from doing so.

Issues of which family business aware Issue % Need to plan for succession 55 Mismatch between family and business goals 39 Conflict between family members affecting the business 38 Governance: company board, family business council 33 Recruitment and reward of family members in the business 31 Need to finance ownership without relinquishing control 21 Reconciling shareholders’ demand for liquidity and the needs of the business for investment 19 ‘None that I am aware of in my business’ 14

AdvisersThose seeking advice from named source, % Accountant 81 Business ‘peer’ 41 Solicitor 41 Family business adviser 24 Bank 18 Friend 14 Family member not in the business 11 *multiple selections were invited **** Most frequently used sources of advice

Percentage citing choice Have known a long time44 They are trustworthy44 Recommended by a colleague in business14 Recommended by business associate9 Recommended by BEC or RDB9 Recommended by FBA6 * *multiple selections were invited Reasons for choice(s) of sources of advice*

Reasons why *% citing the reason ‘Professional advice is too costly’19 ‘Unaware of relevant advice’10 ‘We do things our own way’8 ‘These matters are of too private a nature’7 ‘I like to keep my own counsel’6 ‘They would not understand our business’4 *multiple selections were invited What deterred respondents from seeking advice ?

‘The advice was received was valuable’ Percent Strongly agree26 Agree 51 Neither agree or disagree21 Disagree1 Value of advice received

percent totally 27 in part70 not at all3 Adoption of ‘valuable’ advice

‘One of the incumbent co-directors will not seek advice. They believe it is no-one’s business but their own and that they know best. They are happy for the successors to pick up the pieces after they die. Successors know this lack of direction will make for painful/costly succession’. A respondent’s reason why advice was not adopted

o family business people predominantly do recognise their businesses as such o they are aware of family business issues arising o they do seek advice, but not necessarily from paid professionals o they usually value and act on it o trust permeates their actions. Themes arising from the survey

Today’s themes o indispensability of external advice o peer advice o trust o the trusted accountant o adviser skills formation o the impermeable CEO o a Council of Elders

The Trust Equation T = C + R + I S where T = Trustworthiness C = Credibility R = Reliability I = Intimacy S = Self-orientation Maister, Green & Galford, the Trusted Advisor, Free Press, 2004