Fund Operating Companies or Make Passive Investments?

How the Dickinson Group agreed on Its goals.

About six years ago, Nancy P. Bruns’ family faced a key decision: Was the family office interested in operating businesses or passive investments?

They engaged an outside facilitator to help them work through the issues. The first step: sending a survey to the family, both to prepare family members for the upcoming discussion and to give the facilitator and board members a sense of where the family stood.

“We sent a survey ahead of time so people could start thinking about these things,” says Bruns, who is chairman of the board of the Dickinson Group, a seventh-generation West Virginia family firm focused on natural resources, real estate development, renewable energy, mezzanine financing and private equity. The company traces its roots to 1813 as a producer and distributor of salt.

The facilitator then led a day-long strategic planning session in which family members discussed the survey results and how those translated into their investment goals.

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“There were a few points of disagreement — a few outliers asking why we aren’t distributing more money — but overall, we were on the same general page,” Bruns says. “There wasn’t much conflict, and everybody seemed to have a good attitude about it. They felt comfortable expressing their opinions.”

Building on a firm foundation

Getting to this point — where a family can tackle a difficult question in a way that makes everyone feel heard and accept the outcome — is not just the result of a one-time decision like choosing the right facilitator or sending a well-worded questionnaire. The foundations are laid earlier, when the family establishes its goals and values.

Bruns’ story illustrates several lessons that can be helpful to families and family office professionals at all stages of goal setting, whether they are having initial conversations after a liquidity event or reevaluating a decades-old investment strategy.

Start with core values. A discussion about family goals may be instigated by a specific question about investments, as it was in Bruns’ case. But overarching family goals and values are different from an investment policy statement, though the two are related.

Bruns’ family had previously created mission and vision statements, at the same time that it formed an investment committee.

“We spent two days exploring our values, what our goals were as a family and what we wanted for the future back then — and we revisited that work at this meeting to make sure we were still on track,” Bruns says.

This big-picture goal setting is an important foundation for answering more specific investment questions. A liquidity event can throw families immediately into financial decision making — tax optimizing, setting up trusts, evaluating wealth managers.

“In families that have an aspiration to be multigenerational, at some point you need to ask: ‘What do we want as a family? What’s important to us? And how can our business or the investments of our family office help us accomplish that?’” says Torsten M. Pieper, an advisor with Generation6.

There are several dimensions of goals and values to consider. Some families have a clear purpose that is grounded in their values: They may want to help the environment, for example, or cure disease. If not all family members agree with this overarching goal, that could be an obstacle to investing together.

“If you don’t have some synergy, you’ll have a very difficult time creating a combined investment platform,” says Rhona Vogel, founder of Vogel Consulting.

There are more practical questions, as well.

“If you have a family that’s interested in giving all their money away during their lifetime, and other family members want to grow the wealth to a new level that’s going to provide for their kids and grandchildren, you have a problem right out of the box,” Vogel says. “It’s critical to understand those goals and objectives and how the differences can be bridged – if they can. Sometimes they can’t.”

Get everyone’s opinion. If several vocal family members are advocating selling the business, for example, or pursuing a new investment strategy, longtime family dynamics could make it difficult for those who are uncomfortable with the idea to voice their disagreement. Those dynamics will need to be overcome before the family can have healthy discussions.

The survey that Bruns’ family sent out is one way to ensure that everyone’s voice is heard — even the voices of those who do not want to speak up in a large group.

“Family members were very receptive,” Bruns says. “They felt like their opinion mattered.”

Another option, which Vogel uses in her work with families, is to use both group discussions and individual interviews.

“You have family members who will not talk about their point of view in the room with other members. They will nod their heads in agreement, and then when you get them out of the room, they’re in a completely different place,” Vogel says. “It’s very, very important to have individual discussions and group discussions.”

Follow through. For family members to trust the process going forward, they need to know they were heard.

For Bruns’ family, the day-long session with the facilitator was not the end point.

“We gathered a lot of great information, brought it back to the board, and digested it,” Bruns says.

The board discussed the results of the family discussion, then communicated to the family what actions they would take as a result. At the next annual meeting, they shared a new strategic plan with the family.

“We continued to work with the facilitator — I talked with her monthly during that year. It kept that consistency so we didn’t get off track,” Bruns says.

Long-lasting benefits

Bruns’ family ultimately decided against operating businesses themselves.

“We didn’t have the experience necessary, or the human capital. We didn’t want to own and operate a business 100%,” Bruns says.

Their work achieved the immediate result that they wanted: an answer to the immediate question about the family’s investment strategy. But the benefits of having these conversations go beyond that. The process can help the family develop healthy ways to disagree with each other and resolve those disagreements.

“Just because we are family does not mean that we all get along. Getting along requires a lot of conscious work,” Pieper says.  

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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