Tax and legal advice, facilitation or mediation – when is which type of advice most appropriate?
What is the difference between facilitation and mediation? When do I need a tax or legal adviser, when a mediator, and when a facilitator? We have been asked these and similar questions particularly frequently in recent weeks. Why is that?
There are two main reasons for this. The first being that, due to the increasing volatility of the economic situation, there has been a significant rise in demand for sound advice to strengthen the crisis resilience of businesses and entrepreneurs. The second reason is that economic or structural crises expose weaknesses in business models, operational inefficiencies or unresolved conflicts all the more clearly.
Consequently, external advice and support are expected to provide tailored and rapidly effective guidance in crisis management. However, this can only be successful if the appropriate areas of advice are selected at the outset when clarifying the scope of the assignment.
Legal, tax and business management advice: external specialist advice
How can I transform my company into a different legal form? What will the tax implications be if I relocate to another country, and how can I structure this in the most tax-efficient way? What is my company worth?
Answers to questions of this kind are primarily provided in the form of specialist advice, guidance, opinions, concepts or expert reports, and should include one or more recommendations for action that are tailored as closely as possible to the specific problem at hand. As such issues generally concern a wide variety of legal, tax and/or business management areas, the advice of not just one expert but a group of experts is often required.
Process advice: external facilitation of business processes
Process advice involves the support provided by one or more process facilitators (also known as sparring partners) to individuals, groups or organisations, who facilitate their decision-making, development and/or the implementation of solutions in the context of specific challenges. Where this support is provided on a one-to-one basis, it is also referred to as coaching.
Typical issues that may be addressed in process advice include, for example: Should I sell my business or dare to hand it over to the next generation? How can we identify suitable successors? How do I position myself entrepreneurially for the next phase of my life? How do I respond to my family’s request that I take over as chair of the supervisory board?
While clients seeking specialist advice ‘merely’ need to provide all the relevant information and clearly define the scope of the assignment, they are deeply involved in the process advice itself.
Conflict facilitation: external support in conflict resolution
Conflict facilitation is a specific form of process advice. In this context, mediation is an explicitly structured, and in some cases legally regulated form of conflict facilitation. What all forms of conflict facilitation have in common is that they transform seemingly incompatible objectives, views and approaches into a solution that is acceptable for all persons involved, even if this often requires highly emotional discussions. Unlike in arbitration proceedings, the persons involved can work out this solution almost entirely on their own.
An integrative approach to dynamic advice processes
Our experience has shown that despite a careful selection of the advice approach at the outset, it may become apparent during the advice process that additional forms of advice are required to achieve the intended objective. The following simplified example illustrates how quickly advice and change processes can lead to revised or newly defined advice objectives:
An entrepreneur seeks the assistance of a process adviser on the question of the ideal succession plan. During this process it becomes apparent that a child living abroad is also intended to receive shares in the company. This, in turn, may give rise to substantial tax liabilities. In order to assess this accurately, specialist advice is required (e.g. regarding taxation and a business valuation). Based on the relevant findings of the assessment, it may be determined that such a succession plan would place a considerable burden on the company’s liquidity.
The development outlined in this example could cause a conflict to arise with the company’s growth-oriented executive management, which should ideally be resolved through conflict facilitation. This means that, in addition to specialist experts from the tax and business advice sectors, at least one conflict facilitator must also be brought in. The fact that these additional advisers must now be briefed on the entire situation not only costs time and therefore money but also carries the risk of information gaps.
Conclusion
The ideal advice approach must be identified, amongst other things, by clarifying the scope of the assignment before the advice process begins. This may involve specialist advice or process advice. In dynamic advice processes – which are common in family businesses – an integrative approach can help to avoid shortfalls in time, money and information.
