Earlier this week, I shared some thoughts on creating a flexible system to deal with the unexpected situations that naturally occur in family business transitions. While planning is very important to ensure successful transitions, the best plans will inevitably need to be adjusted ‘on the fly’ when circumstances change. So, how can families create decision-making systems that can deal with the unexpected? There are two elements to a flexible system – one is structural and the other emotional.
From a structural standpoint, the most flexible system is one that creates a place for making decisions and rules or policies that govern decision-making. The place for making decisions may be a regular family meeting, a family council meeting or a board meeting. The key to defining the place is to assign responsibilities for decisions to the appropriate parties and ensure that everyone understands who has responsibility for what type of decision.
The rules or policies that govern decision-making include the process for reaching agreement, which may be majority rule, by consensus or some other mechanism. The key is that the process is understood and followed. Other rules include defining who has a vote, what we will do if we can’t reach agreement, how long a decision will be binding, how often we will revisit it, and the process for overturning a decision. Many families capture these rules in a decision-making policy.
With the place and rules for decision making defined, a family system still has one ingredient necessary to address unexpected situations. That ‘magic ingredient’ is trust. No matter how strong the structure and rules are, if family members do not trust each other, they are not likely to abide by the rules or the decisions made using those rules. Trust is not arrived at by following a simple formula. It requires working together, building an appreciation for individual differences, respecting the opinions of others and a willingness to compromise and to forgive. Both ingredients in a flexible system require family commitment. So, while we can’t predict what circumstances we may face in family transitions, we can predict which families will weather them best – those who have put the hard work into developing the systems and trust required to work effectively together.