March 2016 eNewsletter

A Perplexing Question

Larry Grypp, President of the Goering Center

“Are you ready?”

When it comes to leadership succession in a family business, that’s the central question — but to whom does it apply?

After many years conducting the Goering Center’s Next Generation Institute, we have observed that succession is often pegged to the retiring owner’s readiness to leave. After all, they have a legacy at stake. They are often in the final push of business growth initiatives started years before, and may also have risen to a position of influence and impact in the community. For some, the role of CEO is inseparable from their sense of identity.

Tough to walk away from that.

According to The Conference Board, a global, independent business membership and research association, the average tenure of a Fortune 500 CEO is 9.7 years. In public companies, it is the board of directors, not the CEO, who determines how long the CEO will be in place.

While we can debate the short-term mentality or vagaries of public company governance, the principle remains that the CEO can be a poor judge of when it is time to go. There has to be something that at least nudges the decision, and perhaps even forces it.

In a family business, the CEO is likely the largest shareholder, particularly when the CEO is also the founder. They are a steward of the family’s wealth, with all the incumbent duties to lead and fortify the company for the future.

Yet that same person is challenged to look in the mirror and say it’s time to step down. In many ways, they are their own conflict of interest.

During his career, Bush Brothers’ Chairman, Jim Ethier, established a mandatory age 70 retirement for the baked bean company’s CEO. Ethier believed that preparing the incoming CEO was a key duty of the retiring CEO, and at a recent conference of family businesses, he said the timeline should be determined by when the successor — not the CEO — is ready.

Yes, that reflection in the mirror will be a challenge when a successor is not prepared and waiting. But with foresight and focus, it is possible.

How Dads Can Prepare Their Daughters to Lead

Amy J. Katz, Ph.D., President, Daughters in Charge

Fathers who own family businesses are realizing that their daughters have the potential to be their successors.  If you are a father who is grooming a daughter to take on a leadership role in your business, the following suggestions may help:

  1. Recognize that your daughter will be viewed as a leader, no matter what her role is. She is likely to be a source of curiosity for your employees, and her actions will be scrutinized. It is still difficult for women to gain respect for their leadership skills. You can set a great example by respecting her point of view, challenging her when needed, and giving her responsibilities that directly impact business results.
  2. Decide how you would like her to refer to you at work. Some fathers instruct their daughters to call them by their first name at work, and “dad” outside of work. Figure out what is best for the two of you. There’s no real right or wrong here, but many father/daughter pairs find it easier to use first names at work. It can help to set a boundary between work and home.
  3. Encourage your daughter to learn all aspects of the business, from equipment to finances. This can be a great credibility builder for her. Make sure she spends time learning from your employees and interviewing them about their roles, their careers, and their ideas about the company. Ask her for her impressions, and listen to them. It’s likely that she’s heard some things that are worth your attention.
  4. If possible, have her report to someone else, preferably a non-family leader. It can be very difficult to give feedback to your daughter, and for her to receive it from you. Respect that she and her manager will develop a working relationship without your interference.
  5. Invest in objective assessments of her personality and skills. You may have no idea about your daughter’s strengths in a work setting or which skills she needs to develop. Consider encouraging her to talk with an organizational psychologist or an executive coach. If your daughter is going to be a leader in the business, the more she understands about herself and others, the better.
  6. Include her in as many meetings as possible, but give her a role to play. Daughters like to be included, but they also like to feel they are making a contribution. Encourage her to ask questions if she needs to, and also to assert her own ideas. Talk together about how you will handle disagreements. Make sure she understands that developing the ability to influence requires respect for alternate viewpoints.
  7. Check your assumptions about your daughter at the business door. The daughter you raised is no longer a child or an adolescent. Just because she didn’t handle her allowance well doesn’t mean that she can’t develop and manage a budget. Like many people, her behavior at a workplace may be quite different from her behavior at home. Resist the temptation to tell stories about her as a child.
  8. Give her increasing responsibility … when she earns it. You do not want your daughter to be viewed as “daddy’s girl”, with special privileges. On the other hand, don’t go overboard in the other direction and limit her opportunities for growth because you are afraid of showing favoritism.
  9. Pay attention when she suggests opportunities for innovation. Family businesses can be insular and so tied to the past that they ignore or deny the need for change. Your daughter is likely to have friends working in other settings and to understand new ways of doing business. Be open to her influence.
  10. Begin discussions of succession planning as early as possible. There is a phrase emerging now about “sticky batons”, which refers to the difficulty parents have in letting go of leadership. You may not be close to retirement, but it’s important to prepare your daughters and sons for succession. You don’t have to make any commitments, but succession involves a set of strategic decisions about the business and about your family. It is important to start early.

Phishing Emails and Other Cyber Security Threat Preventions

Rick Maxwell, President & CEO, Full Service Networking

We recently held a program for the Cincinnati community entitled, “IT Security for the Small and Middle Market”.  This program offered an overview of current cyber security threats, along with IT best practices and insurance solutions to reduce and transfer organizational risk.

An FBI special agent from the cyber security division of the Cincinnati office presented an overview of the current cyber security challenges that are facing area businesses, nonprofits and K-12 schools.  Unfortunately, no one is immune to the evolving data security threats.

One such prevalent attack affecting organizations of all sizes is known as “phishing”.  This is the attempt by thieves to secure sensitive information such as usernames, passwords, and outright money theft by impersonating a trustworthy resource by way of an email correspondence. 

The Verizon Data Breach Investigation Report 2015, states that as much as 80 percent of all malware attacks are phishing attempts - 23 percent of these being infections embedded on emails, with 11 percent residing on an attachment.

The FBI special agent specifically warned the attendees to be mindful of prevalent phishing deception tactics that attempt to get you to transfer money to their financial account.  Here are two examples that he provided as current nefarious tactics:

  • Criminals are purchasing similar internet domains to create emails that at a quick glance appear to be correct.  As an example, my email is  By simply purchasing the domain – – the criminal employs a slight change that a busy executive could easily take at face value as my authentic email.  Under this scenario, the criminal urgently instructs our Controller to wire payment based on a compelling, fictitious business reason with an urgent timeframe. 
  • To further increase their odds of success, criminals are utilizing LinkedIn to identify newly hired Controllers/CFOs, who are eager to quickly turn a request from their new employer. 

These phishing attacks can also include requesting valuable intellectual property targeting a supply chain, under the fictitious event that information needs to be quickly sent in order to secure a new customer or multi-million dollar opportunity.  Further, because smaller companies traditionally are less aware of phishing tactics, cybercriminals will target the smaller companies that have strategic relationships with larger companies and corporations.  Corporate espionage can be just as valuable as outright stealing money or, in some cases, more damaging.

To combat this threat, the FBI special agent’s recommendation is to always use a common sense approach.  For instance, prior to taking any action, directly phone the person requesting unusual one-time actions to obtain verbal approval.  This is especially sensible if it involves any transfer of money or intellectual property.  

Furthermore, companies need to adhere to industry best practices.  Examples include investments in multi-level defense strategies, such as deployment of an active firewall, email spam filtering, anti-virus protection on all Microsoft Window operating systems (PCs and Servers), encryption, secure VPN remote access, set up a separate guest wireless network and force password resets.  Additional tools, such as OpenDNS, provide protection against crypto locker / ransomware attacks by outright denying access to websites that are either not properly certified or have identified malware residing on them.

In 2015, Hewlett Packard Enterprise’s Annual Cyber Risk Report indicated that Microsoft Windows represented the most targeted software platform, with 42 percent of the top 20 discovered exploits directed at Microsoft platforms and applications. Therefore, it’s imperative to keep current by applying operating systems (OS) security patches regularly to reduce vulnerability and exploitation.

Even with deploying all available prudent technical protections, your organization will still have exposure to some level of risk.  Therefore, we always recommend exploring Cyber Security Insurance options with your insurance broker to limit your liability and to counterbalance your exposed risk, based on the human element.

Even as you apply IT best practices to limit your exposure, be diligent as it relates to the protection of your business data, because Cybercriminals tend to seek out easy targets in exploiting their victims.  This topic is worthy of a continual review with your internal team and managed IT partner.

High Performance Starts With the Leader

Diane Egbers, Owner, Leadership Excelleration, Inc.

For over 12 years, Leadership Excelleration, Inc. has partnered with the Goering Center to bring Leadership Development (LDI) to their members.  Together, we realize that the strength of an organization and the key to building a culture of high performance begins with the leadership team.

Last year, Gallup released a survey on the state of the American manager. They found that only 30% of employees are engaged at work and the manager accounts for a 70% variance in employee engagement.

Gallup’s survey confirms that managing a team is not the same as effectively leading and engaging a team.   Their survey also reported that only 35% of employees at the management level feel engaged at work.  That’s not good!  We need to motivate our leaders in order to engage our teams.

Developing and empowering leaders produces a trickle-down effect.  The first step in the development process is to recognize what style of leader you are.  This is one of the first things we do in LDI.   Through assessments and workshops, we identify your strengths so that you will understand the best approach to effectively engage your team.

As a leader, recognize that employee engagement doesn’t equate to high performance; it’s a small subset.  Just because your employees are showing up and doing the work doesn’t mean they are fully vested in the culture.  Here are some indicators to consider:

  • Are you able to retain your top talent?
  • Are you consistently obtaining your goals?
  • Is there leadership continuity?

To determine if you are creating a high performing work culture, assess your team and ask the following key questions:

  • Is the team aligned to the vision and mission?
  • Is the team actively engaged and involved?
  • Do you create consistency and an environment that can easily adapt to change?

Throughout the Leadership Development Institute we provide the tools to address these considerations, which results in developing strong leaders who generate high performance cultures.

Over the next several months, I’m going to break down the components in my monthly blog.  Follow along at

Your IRA Has Potential For Good

Susan Ingmire, President, Ignite Philanthropy Advisors

Ready to step up your giving?  In December 2015, President Barack Obama signed into law a permanent IRA Charitable Rollover provision, locking into the tax code a tax-advantaged avenue for older Americans to make charitable gifts of up to $100,000. 

The legislation (H.R. 2029) cleared the House by a vote of 318-109 and the Senate by a vote of 65-33, signifying solid bipartisan support of the permanent use of IRA retirement funds as a charitable giving vehicle.  President Obama signed the measure into law just a few hours after the Senate vote. 
H.R. 2029 includes a number of important tax provisions, several of which affect charitable giving.  Most notably, it retroactively reinstates the IRA Charitable Rollover provision (originally enacted into law in 2006) for all of 2015; and removes any expiration date on the provision, thereby permanently extending the Rollover into the future.  This means you can use your IRA for good as you file your 2015 taxes and in future years.

According to Independent Sector*, the new law permanently extends the ability of individuals of at least 70 ½ years of age to exclude from gross income direct charitable distributions to qualified charities of up to $100,000 per year.  Because distributions are not treated as taxable income, they are not eligible for a deduction on your personal income tax return.  Independent Sector, along with 19 other influential national charities, lobbied to make this legislation a part of the permanent tax code, rather than an uncertain tax benefit requiring annual Congressional approval.  

In keeping with the provisions approved by law in prior years, it is likely that contributions for 2015 can be made until April 15, 2016 to one or more qualified charities; although donations to community foundations may be excluded. Details of the legislation are still rolling out from the IRS, so check with your tax preparer on the advantages this option offers you.  As you may know, the taxes on IRA distributions – particularly from your estate – are unfavorable.

Why not give during your lifetime?  Just think of the impact for good you can make with up to $100,000 per year. 

Please note:  This article is not meant to provide legal or tax advice.  Always consult your tax preparer before initiating any charitable gifts from assets in your estate and in particular, distributions from your IRA.  

*Independent Sector is a leadership network for nonprofits, foundations, and corporations committed to advancing the common good.  Its nonpartisan coalition collectively represents tens of thousands of organizations and individuals locally, nationally, and globally.  

Surrender, Sell, Exchange, Readjust

Terence L. Horan, CLU, ChFC, President & CEO, HORAN

Winston Churchill had it right in some cases. When it comes to life insurance, the best advice may be: “Never Surrender.” Many of us have life insurance policies that may no longer seem useful. 

A number of reasons lead to that conclusion:

The original purpose of the policy no longer exists. (e.g. The children are grown and death is no longer an economic disaster or loan obligations are repaid.)

Policy loans have been an expensive drag on policy performance or the value of the policy would be of greater benefit to you now than at your death.

Permanent cash value life insurance policies are not performing as originally anticipated due to low interest rates and reduced dividend schedules.

No matter what the actual reason, a common reaction is to cancel the policy and eliminate the insurance company’s obligation to ever pay out the promised death benefit. If the canceled policy has a cash value, that cash value will be paid to the policy owner less any policy loans.

The amount of life insurance surrendered each year is surprising. A 2008 industry study showed that Americans age 65 and older give up about $112 billion in life insurance benefits each year, either by surrendering their policies or by letting them lapse.

Other options are sometimes more financially sound and should be considered:

  • Transfer the current policy cash value to a new life insurance policy with lower costs reflecting current mortality and perhaps more earnings potential and/or investment options. An exchange can offer the same or higher death benefit for a lower premium.  This exchange can shield a policy gain from tax or preserve a policy loss to be used against future gains.
  • Transfer the policy to an annuity. The transfer is tax free in most cases. The annuity payout, which is a combination of principal and interest, will be taxed in a favorable manner. When the exchanged policy is at a loss, the annuity can increase in value up to the cost basis before any annuity payments would be taxable.
  • Elect a tax-free transfer from a life insurance policy to a long term care policy. Relatively new products exist in the market that combine life insurance and long term care benefits. This type of policy is guaranteed and paid up with a single lump sum premium. 
  • Donate the policy to charity. You may be entitled to a tax deduction.
  • Take a reduced paid up policy if the contract is a whole life policy.  No additional premiums will be required, but some portion of the death benefit will continue in force for life. 
  • Sell the policy. This option may be available if you are 65 or older and if the policy has a death benefit of $250,000 or more. An investor can maintain the insurance and be willing to pay you more than the cash value of the policy, or in the case of term insurance, provide a payout that would otherwise not exist.
  • Seek external financing to pay premiums. If you have a large insurance policy, you can negotiate with a bank to pay premiums in exchange for an assignment of a portion of the policy cash value. 
  • Bank financing can be a good strategy when there is a policy loan at a fixed interest rate that is well above the rates offered by a bank. You may be able to markedly reduce the interest payments when exchanging a policy loan for a bank loan. 

When offered the German terms of surrender during the Battle of the Bulge, commanding General Anthony McAuliffe responded, “Nuts.”  Make sure you are exploring all of your options before surrendering.