The five “D’s” of family business disruption:

Every family business has a story on how it has been shaped, how it has overcome adversity, how it has celebrated success and how it has capitalised on opportunities. This richness in experience throughout the generations has also shaped the family legacy and highlights just what the family values (their not negotiables) are.

A common theme in these stories is “disruption” due to one of three adverse events being Death, Disability or Disease especially the untimeliness of it occurring. These events have caused the family members to rapidly assume positions of management, leadership and / or negotiator for and on behalf of the family.

As an accredited Family Business Adviser, I contest that these three “D’s” can be discussed when undertaking the “family genome” process with the family. It enables the family to discuss some of the “undiscussable” items in a safe and confidential environment. This is critical because sadly death, disease or disability may well have been congenital.

More importantly the “disease or disability” may actually have been an addiction or a mental illness that we now understand and accept however 50 or 150 years ago these things were held as “family secrets or scars” that were never discussed and certainly never “aired” in the public domain.

That briefly addresses three of the five “D’s” of family disruption.

Number four is Divorce, which is certainly more prevalent now than it was in past generations. This adds a number of dynamics to the family business because it has the obvious impact on the family wealth. However there are a number of emotive areas that are trending now and I suspect will become more relevant in the future.

It is emotionally stressful when a divorce occurs however when children are involved it is traumatic for them and everyone involved. I would like to put a slightly different perspective on this based on the statistics. Firstly, the vast majority of times the children live with the parental mother regardless of visitation rights. Secondly, if the wife “came into the family” the children have the family name regardless of the custodial outcomes. Thirdly, and I argue, the most difficult, is the grandparents because they remain the grandparents regardless of the divorce outcome and what might have influenced the “split”.

This third perspective is one that must be discussed within the family AND must be included in the Family Charter to ensure there is clarity surrounding this eventuality. It is not only critical in “managing” the consequences of the divorce, it is also critical if or when the parties remarry or enter another relationship that produces children.

Finally, it is the real purpose of this article to introduce the fifth “D” of family disruption. It is not well known, certainly not in the international “theory” of family business nor is it intuitive. It is the propensity of every family business to “Don’t Care”.

What, I hear you gasp – A family business that doesn’t care, garbage. True, every family business does care, is passionate and focused. HOWEVER every family business “does not care” to put the undiscussables” on the table and have a robust, rational and complete conversation about then.

An undiscussable will be different for each person and/or generation because their knowledge of “it” varies significantly. In addition, older people were bought up in an era where a range of topics, that younger people discuss openly, were never spoken about. Furthermore, people just do not like articulating their “feelings” openly therefore they “bottle them up” until a small event makes then explore.

It is also not an undiscussable that causes people to “clam up” or be reticent about bring up a topic. In a significant number of instances the argument or dysfunction arises because the parties are focused on the person rather than the issue or cause of the issue. When this occurs the underlying problem is not understood, not obvious or just completely ignored therefore cannot be addressed in a rational manner that benefits the family and the business.

So why bring this fifth “D” of Family Business disruption out into the open. We all know that families can be “dysfunctional” and we all know that families in business are unique. It is because of the fifth “D” that makes every family in business unique as it is this segment that drives behaviour and habits. It is also this “D” that causes “values clashes” within families that eventually result is divides that become toxic and collapse the business.

What can be done about these five “D’s” of family disruption? This is a vexed question because it raises the issue of governance within family business. Professional service providers can develop great structures and documents for corporate governance (business and family) however to completely address all five “D’S” of family business disruption requires an understanding that there are three segments of family business governance – Corporate, Operational and Values.

Posted in Articles.

Leave a Reply