Cowboy Family Office, or “Who Shot J.R.?” June 2020
If you are fifty-years old or older, I am sure you remember and were probably on the edge of your seat and frustrated you had to wait the whole summer for the fall series of Dallas to begin so you could finally find out “Who shot J.R.?” For readers under age 50, Dallas was an extremely popular TV series that ran from 1978 through 1991 about the very wealthy fictional Ewing family who owned a huge cattle ranch and major oil business in Southfork, Texas.
What made this the fifth longest running series (357 episodes) was not the success and entrepreneurial skills of the family, but the feuding, jealousy, greed, and power struggles within the family. The family makeup was Jock and Miss Ellie, the patriarch and matriarch; J.R is the older brother who runs the oil company, and Bobbie is his younger brother who runs the ranch and its related businesses. Staying with our cowboy lingo, J.R. is the black cowboy hat and Bobbie the white cowboy hat (they did wear cowboy hats, but not always black and white). On top of J.R. the bad guy versus Bobbie the good guy, Bobbie marries Pamela Barnes whose family is a vehement enemy and competitor of the Ewing family. There are many more characters that added drama and tension to the series.
I chose the Ewing family for this discussion for two reasons. First, they are a perfect example of what can, and usually does, happen in wealthy families. They are also a bad example of what a family office is and how to run one. The term “family office,” we prefer to call it the Family Enterprise Holding Company, is somewhat foreign to most people and families even though family offices have existed for thousands of years on every continent. Today, more wealthy families are creating a family office to keep their wealth from being lost when it transfers to future generations who have not acquired the skills, experience, and training to manage wealth properly and keep it growing to benefit the next generations.
Here are ten of the largest family offices in America: Walton Family (Walmart), Ford Family (Ford Motor), Cargill/MacMillan Families (Agriculture), Koch Family (Energy), Carlson Family (Multiple Enterprises), Roberts Family (Comcast), Murdoch Family (News Corp.), Frist Family (Hospital Corporation of America), Bechtel Family (Construction), Mars Family (Candy). To that list we can add familiar names like Getty, Rockefeller, and Kennedy.
But it is not the big guys I want to focus on. Family offices are formal structures used by wealthy families to protect, preserve, and grow wealth and create a legacy through multiple generations. The above list includes families that have lasted for over 100 years. I have been eating M&Ms for almost that long. But there are more familiar examples we can all relate to because some readers’ parents, grandparents, great grandparents, and great-great grandparents may have had a family office, albeit they did not realize it was one at the time.
Family farms and ranches have and continue to populate the American landscape, and they typically transfer from one generation to the next. Children born into a farm and ranch family grow up learning about hard work, dealing with the environment, fluctuations in commodity prices, cattle rustlers, and the dynamics of involving three generations of births, deaths, marriages, and divorces.
If you read my articles you may be getting tired of hearing this proverb, but it is a fact of life that bears constant repeating; “Shirtsleeves to shirtsleeves in three generations.” It describes the truth that 70% of family wealth will be lost each time it passes to the next generation and gone by the end of the third generation. However, the greater tragedy is the destruction of family relationships along the way. It dates to the beginning of mankind when Adam and Eve’s son Cain, consumed with jealousy, killed his brother Abel. It happens in every country on the planet. It is not a question of if, but when, unless steps are taken to intentionally overcome this assured destruction.
Two steps that can potentially keep this from happening are creating a family foundation and family office (Family Enterprise Holding Company), but I only address the for-profit entity here.
If you want your children to be prepared for life and to be good stewards of the family wealth, there is no better vehicle than involving them in the operations of a business. School can provide theory and methodologies, but without real-world, hands-on experience, children will struggle until they can get that business experience and the skills that go with it. Many never do.
It must be understood that running an effective and efficient family is the same as running a business–the family enterprise. Like any business, six critical elements must be in place to be successful. They are sales and marketing; production; distribution; administration and operations; finance, accounting, and tax; and human resources. The following are examples of some of the objectives that must be achieved if the enterprise is to fulfill its purpose.
- Have a viable and clear purpose and mission
- Add value to the world
- Have a well-defined and well-designed plan
- Execute the plan effectively and timely
- Constantly strive to improve operations
- Seek new opportunities and be able to adapt to changing situations
- Analyze the risks and rewards and make informed decisions
- Employ, educate, and train qualified personnel
- Empower individuals to act and be decisive
- Encourage social responsibility
- Be profitable and increase the value of the enterprise
- Be ongoing
- Provide for an orderly and timely succession to qualified leaders who can carry on the mission
- Identify and gain consensus on family values, objectives, a mission, and a vision that will allow the family to have shared clarity of purpose.
- Advise and guide the family in the development of a family mission statement and a plan that will effectively develop their abilities to attain significance.
- Assemble and coordinate a highly qualified team of professionals with the abilities needed to design and implement a plan that will lead to significance.
- Educate them on scriptural principles and creative solutions for properly utilizing the resources that have temporarily been entrusted to them, to make inspired decisions that result in good stewardship.
- Encourage and assist them to act immediately to implement solutions to help achieve the desired results.
- Provide ongoing accountability, encouragement and management that will foster confidence in their decisions and the results.
- Set a personal example of the above
I submit that the family farm and family ranch utilize all these points even though they probably do not realize it and have never committed them to paper. They have a viable and clear purpose for feeding themselves and whatever they do not need they sell in the marketplace. They certainly provide value to the world. They may not have a written design and plan, but they intuitively know what must be done and when it must be done to ensure a good crop.
They learn from their experiences, their successes, and their failures because the more they can grow the more they have to sell. The ability to adapt to changes goes without saying since they must deal with weather, insects, droughts, competition, and market conditions. They employee well trained people. Some are family and some are hired hands. On large farms and ranches they have foremen to manage the staff and workers. Farming takes tremendous skill, knowledge, and experience and the farmer cannot be everywhere all the time, so he must delegate responsibilities to trained managers and workers.
Farmers and ranchers are socially responsible because they take care of each other and must care for the land and environment to increase profits and the value of the enterprise or go out of business. Family farms and ranches strive to be ongoing and keep the enterprise in the family by providing for an orderly and timely succession to qualified leaders who can carry on the mission. Those qualified leaders are usually sons and daughters, grandchildren, and great grandchildren.
If the goal is to keep the family wealth in the family and pass it on to future generations for 100 years, the family farm and family ranch are good templates to emulate. If you partake of wine or beer, think about the brands you enjoy. Is it Coors or Mondavi? If it is meat or poultry, there is Farmer John’s and Purdue Farms, the parent company of Purdue Foods and Purdue Agribusiness. All family offices.
Now, think about the children and grandchildren who grow up in these environments. At a young age they are learning how to gather eggs, milk a cow, saddle a horse. By the time they are ready for college, they already understand if you do not work you do not eat because their food comes from their own production. They know what it is to sweat and get dirty and put in ten-hour days seven days a week because timing is critical and not always convenient. They understand hardship and difficulty because they cannot control the weather, a tractor breaking down at the wrong time, or bugs infecting their crops. Planning and executing the plan becomes second nature because everything needs to be in place and ready to go when it is time to plant and time to harvest, or time for birthing more calves or a round up for loading cattle on trucks and taking them to market.
They learn about finance, how much to pay for seed, fertilizer, feed and hay, hire and manage employees; and how to negotiate prices and volume to sell their products to the highest bidder so they can make the most profit and continue the process again when the planting season or birthing season approaches. They also learn about diversification and expanding into other products so one crop failure or a drop in beef prices does not put them out of business. They have learned how to invest their resource to get the best return.
Finally, they understand teamwork and responsibility to each member of the family and to the enterprise is more important than satisfying their own wants and indulgences because they will actually be happier and wealthier working together rather than attempting to divide the farm or ranch five, six, or more ways so they can each control their own little farm or ranch. They have grasped the fact that 70% will be lost each time a division takes place and the initial family farm or ranch will be gone, and eventually so will most of the little ones, leaving the family divided and decimated.
What if you created your family farm or ranch and exposed your children to all the benefits, lessons, and experiences they can provide? What if you stopped worrying about how much to pass on to your children and whether it should be equal shares to unequal people with differing skills and degrees of dependency or self-reliance? What if you stopped thinking of your family as a loose-knit group of individuals who have no responsibilities to each other or to preserving the family wealth and relationships because they only want what they can control? Would your children and grandchildren be better prepared to face an uncertain and unpredictable world if they grow up on your family farm/ranch, whatever that looks like for your family? Will your legacy be endowed for multiple generations?
24 “All who listen to my instructions and follow them are wise, like a man who builds his house on solid rock. 25 Though the rain comes in torrents, and the floods rise and the storm winds beat against his house, it won’t collapse, for it is built on rock. 26 “But those who hear my instructions and ignore them are foolish, like a man who builds his house on sand. 27 For when the rains and floods come, and storm winds beat against his house, it will fall with a mighty crash.”[i]
By the way, I am not going to tell you who shot J.R., but something like this, hopefully less extreme, could happen to your family unless you intentionally do what is necessary to overcome it. Will you build your house on rock or on sand?
[i] Matthew 7:24-27, The Living Bible