In today’s Wichita Eagle business section, I have an article entitled “Family-owned businesses still power U.S. economy.” There are actually two main points in the article.

First, many people do not realize how many family-owned businesses there are – 89 per cent of all U.S. businesses. And these companies create 78 percent of all new jobs in our economy. Common examples of family-run businesses are restaurants, trucking companies, residential construction companies, auto dealerships, and all of the construction-related trades (electricians, plumbers, heating and air conditioning, roofers). As a result, the health of family owned businesses is crucial to the U.S. economy – and more focus and attention is being given to them.

The second issue is that the transfer of family owned companies across generations typically doesn’t go well – with only 30% successfully transferring to the second generation, and only 10% to the third generation. Previously, this has been attributed to estate taxes, but research now suggests that up to 70% of the failure rate of business succession is directly linked to a lack of trust and communication within the family.

So if you are in a family owned business, you really should be paying as much (if not more) attention to how well you are getting along as a family, maintaining connectedness and trust, as you do to planning for estate taxes. Think about it – be proactive and don’t let walls build up among family members. Talk. Meet together (and not just about business). And keep the lines of communication open – it will pay huge dividends for you and the business in the future.

There are books that come along that are destined to have a major impact in our culture. I believe Dr. Henry Cloud’s book, Integrity: The courage to meet the demands of reality may be such a book. Like Jim Collins’ Good to Great which has become an icon in the business world because of its simple yet powerful message, Cloud’s principles in Integrity are easy to understand but carry significant weight in their ability to help us understand ourselves, and improve ourselves.

At first blush, another book or message on “integrity” does not seem compelling. However, Cloud defines integrity differently – not solely on the moral basis of keeping one’s word or having your actions match your words. Rather, he defines integrity in terms of integration – integrating six major character qualities together into your whole person.

He proposes that six character qualities are required for effective leadership:

1. Creating and maintaining trust
2. Being able to see and face reality
3. Working in a way that brings results
4. Embracing negative realities and solving them
5. Causing growth and increase/li>
6. Achieving transcendence and meaning in life.

Throughout the book, he cites numerous personal examples from his consulting practice and gives helpful “word pictures”. One picture that I found helpful is that of the “wake” that a person leaves behind them (similar to the wake a boat leaves behind). There are two sides of the wake: the task side (what one accomplishes) and the relational side (how you impact those around you). Some leaders have a positive wake on the task side, but leave behind damaged bodies on the relational side (and vice versa).

The book is not difficult conceptually, but it is not a “quick read” because of the depth and meat which needs to be digested. Rather, it is one of those books that you read slowly, chew on, think about, and then come back to later for some more.

I believe Cloud’s book, Integrity, is one that all who desire to become better leaders – whether in work, at home, or in the community – should put at the top of their reading list.

Well, it happened again. In working with a two-generational family, the issue of taxes and personal values came up. Although there was a little bit of conflict, the real issue was confusion: “What should I do?” And the confusion was caused by an advisor’s sole focus on reducing taxes, rather than hearing the real desire of the client.

The matriarch is a very kind, gentle woman and she is also very generous. She and her deceased husband are classic examples of the “millionaire next door” (see Thomas Stanley’s excellent book of the same name). They were hard workers, frugal, lived simply, saved, and were wise investors. As a result, she has more than enough money for her needs and is able to share with others.

Because of some circumstances in the extended family (her children and their families), she decided to give a significant monetary gift to each of them. However, it was above and beyond their annual exclusion ($22,000 to each couple), and also went beyond her lifetime gifting exclusion (she had used up much of it previously). As a result, gift taxes were going to be paid on the gifts.

The question that came up was this. Depending on how the gift was structured and recorded with the IRS, it impacted whether Mrs. Y (the giver) paid the gift taxes or whether her children (the recipients) paid the taxes. And to complicate things, if she paid the taxes, the government would get approximately $30,000 more than if her children paid the taxes out of the gift they received.

Because of this last fact – that the family would be paying $30,000 more in taxes if Mrs. Y paid the gift tax – her attorney told her that the kids should pay the taxes. This made sense from the overall view of the family’s estate. However, Mrs. Y was confused. She wanted to share some money with her family, and yet by having them pay the taxes, it reduced the amount they actually would receive.

So Mrs. Y and I talked. After hearing the facts about the situation, and her resulting confusion, I told her, “This is really not just a financial decision. It is a values decision – about what is most important to you. Is it more important to you to avoid paying more to ‘Uncle Sam’ or is it more important to you to get more of the money to your children right now? There is not necessarily a ‘right’ or ‘wrong’ answer to this decision – it is more about what you want to accomplish.”

Mrs Y immediately affirmed, that in this situation, it was more important to her to get the maximum amount to her children, even if it meant paying more taxes. She then smiled and said “Thanks”, and communicated her desires (and decision) to her attorney and accountant.

Yes, the title reads somewhat like a National Enquirer headline, but it’s true – focusing solely on avoiding taxes (whether capital gains tax, income tax, or estate taxes) can lead to family conflicts.

This past week I had the opportunity to meet with a family, to review their wealth transfer plan and their plans for giving to charity. As is the case with many astute investors, this couple has experienced some significant growth in their assets as a result of some of their investments doing quite well. For example, one of their investments over the past year provided a 100% return on their initial amount invested (that is, they doubled their money). Plus it looks like the company they invested in will sell and they may receive as much as eight times their original investment! Obviously, this is “once in a lifetime” scenario which has gone well for them – it will create millions of dollars in investment income they were not planning on. (“Not a bad problem to have”, as most people reply.)

Here’s the real problem. In discussing what they should do with the extra $5 million they will be receiving, it became clear there was a difference of opinion on what to do with money. From the point of view of minimizing the capital gains tax they will be paying, there is one set of action steps they should take. From a philanthropic perspective – all of sudden having a large sum of money and seeing an opportunity to share with others, there is another set of potential action steps. And from a long-term planning point of view (investing the sum so that it creates additional income, allowing the “breadwinner” to retire early), there are other steps which could be taken.

So what is the right direction? What should this family do with their windfall profits?

It depends. On them. On their values. On their future plans and goals. On their worldview and life priorities.

That’s the point. And that is the discussion we started to have together (it is not finished yet). What is important to you? How do you want to “invest” this gift to you? Maybe we should look at balancing needs and perspectives, rather than use an “all or nothing” approach.

Unfortunately, however, most financial advisors focus solely on the financial aspect of financial decisions (and specifically, on taxes) – and miss a very important part of decisions involving money: values.

So, next time you are making a financial decision (I hope it is one where you have lots of extra money), remember – don’t base it solely on its impact on your taxes. There are a lot of equally important variables to consider as well.

This past Sunday, one of the lead articles in Parade magazine (the magazine inserted into millions of Sunday newspapers) was on emotional intelligence. The article was written by Daniel Goleman, who is one of the “founding fathers” of the concept of emotional intelligence and who has written groundbreaking books on the subject (I personally have found Working with Emotional Intelligence to be a helpful, practical guidebook on the subject.)

In my work with successful business families across the country, I have had the opportunity to interview over 60 multimillionaires (usually, their net worth ranges from $20 million to $100 million) by conducting a day long retreat with the business owner and their spouse. And clearly I have found an overlap between the concepts of emotional intelligence and these successful individuals.

“Emotional intelligence” is one of those terms and concepts that many people use, but often don’t know exactly what it is. (Part of this is due to the fact that it is a relatively new construct and different authors and researchers have defined the term in different ways.) However, two of the concepts tied to emotional intelligence are what I want to address.

In the retreat I conduct with financially successful couples, one of the questions I always ask is: “To what do you attribute your business and financial success?” And what is fascinating are the recurring themes that I have heard over and over.

Depending on the person’s worldview, one of the most common answers either is: “We are fortunate to be blessed by God” or “We were in the right place at the right time – it had little to do with me.” Both answers reflect a sense of the world and life being bigger than themselves personally. Yes, they brought some talent, skill, training or other characteristics to the situation, but part of their success had to do with factors outside of their control. (This first reason given is not directly related to emotional intelligence, but is a result of the emotional intelligence concept of “having an accurate view of one’s place in the world” – neither overvaluing oneself, nor undervaluing your significance as an individual.)

Probably the second most common response is, bluntly stated, “perseverance”. These people, who are now multimillionaires, report comments like: “We just kept trying — we never gave up.” “We hung in there through the bad times, and tried to learn from our mistakes.” “We just working our plan.” It is interesting (to me, at least) that many of these individuals had failed in business or financially (by declaring bankruptcy) prior to their current success. But, whether through a personal passion related to the goods or services they provided or just a characterological “bulldoggedness”, they refused to give up.

This concept of perseverance is clearly referred to in the emotional intelligence literature. Often it is described as “self-control”, “managing oneself”, or “self-discipline”. But the construct is clear – a key component of managing oneself emotionally is the ability to get up and go to work when you don’t feel like it, to persevere through difficult times, and to keep on task in spite of weariness and discouragement.

The third most frequent response given by wealthy individuals, regarding the “secret” to their financial success, surprised me somewhat, but it kept recurring across the interviews. They often reported: “We took care of our customers.” “We were committed to giving the best service possible to our clients, even if it cost us extra at the time.” “We were honest and fair in dealing with our customers, our vendors, and our employees.” Essentially, they chose to do what was best for others, even if it was costly to them personally at the time.

In emotional intelligence terms, this is based on the concept of “perspective-taking” and “empathy”. First of all, one has to be able to see a situation from another person’s point of view – to see what they want in the situation (known as perspective taking). Then, one has to be able to put aside your own feelings and desires, and act in a way which is best for another, which is based on empathy – having a sense of how another person is feeling – and choosing to respond to meet their felt needs.

What is fascinating to me is the fact that most of the multimillionaires that I have interviewed have come to the conclusion that a large part of their financial success is really a result of emotional intelligence — specifically, the ability to persevere and demonstrate self-control, and serving others as a core part of their business.

This is in stark contrast to the myriad of books and articles that focus on marketing, leveraging your money, or some specific investment technique. I think the message is: if you want to be financially successful, do what you do well; serve your clients, vendors & employees (rather than cutting corners); and keep at it in spite of the obstacles and challenges you encounter.