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Need advice? Think twice before you turn to your business adviser

Fredda Herz-Brown  is a managing partner of the Metropolitan Group. andrew keyt  is executive director of the Loyola University Chicago Family Business Center

Make sure you choose a facilitator or adviser with the right credentials, advise  Fredda Herz-Brown and Andrew Keyt. If he is inexperienced in managing family dynamics, you could risk deepening an already underlying emotional conflict

When a family is in the midst of dealing with a highly charged and important business issue, they often reach out to their most trusted advisers to help them. The problem is that advisers – financial, legal or otherwise – rarely have experience and training in the family issues that form the foundation for most family business problems. Advisers have an important role in counselling the family business but with the ever increasing pressure to produce profits and cement one's relationship with the client, they are often unwittingly pushed out of their comfort zone or knowledge base by the compulsion to be the 'be-all' and 'end-all' to their client. Families ask their advisers to facilitate family meetings or help resolve family disputes purely based on their trust for the work the adviser has done for the family in the past.

While advisers want to provide this valuable service to their clients, they are rarely equipped with the skills necessary to manage very challenging emotional dynamics. The pressure to be needed and thus 'important' to their client often pushes them to operate outside of their areas of expertise. Perhaps because these client-adviser pulls and pushes are so emotional and therefore unwitting, there seems to be little thought given to the potential negative and long-lasting emotional scars on the family client. In addition, what families often are not aware of is that a mistake in managing the family dynamics has the potential to create lasting emotional scars on the business.

What would be helpful for a family to understand is that family business systems are extraordinarily complex and demand someone who can understand and work with the complexity.
As shown by the Davis and Tagiuri's three-circle model, family businesses have three distinct but overlapping systems: the family, the business and ownership. Each system has a different function for both rewarding individuals and measuring performance. Families operate on the basis of emotional connections and with the goal of nurturing, while the business and ownership elements tend to focus more on specific outcomes. The systems of management and ownership function much more as meritocracies.
The trap that your family's trusted advisers run into occur most often when trying to assist with family meetings. The common mistake is that they see family business disputes as being resolvable using the objective measures of success from the management and ownership systems. What is not appreciated in these situations is that disputes over legal, business and financial issues often cannot be resolved by using objective criteria because they are being driven by underlying emotional relationships or conflicts. Attempting to resolve these disputes without addressing the underlying emotional issues could mean lasting damage for both the family and the business. Without understanding the emotional issues and agendas the facilitator can inadvertently set off a family argument that has long-term roots. Worse, the facilitator takes sides in a family business issue without realising its emotional basis and applies a solution which leads to the family business losing a trusted family employee.

Facilitator's role
The most important job of the family meeting facilitator is to be aware of and attend to underlying emotional conflicts that drive many family meeting discussions.
Knowing these emotional drivers assures that underlying conflicts will not be played out passively through surface level family business issues. To accomplish this feat, the facilitator must have a strong understanding of family dynamics, as well as an understanding of their own family dynamics and emotions. More specifically, understanding the emotions that underpin the current situation is also necessary. All of these help to assure the facilitator can remain neutral and unbiased.

A family should select an adviser who understands the family system concepts and their application in their work with clients.

Conflicts in families and family businesses don't exist only in the present. They are often reflections of unresolved conflicts from previous generations.

Psychological projection is extremely common in family firms. The essence of this concept is that an individual tends to project their emotions and/or responsibility for situations on to others, blaming them for what has happened, or is happening.

A common correlate of projection is triangling. This occurs when the tension of the emotions or communication between two individuals is too intense, and these individuals draw a third party into the conflict to reduce tensions.

While some conflicts are driven by underlying emotional issues, there are times when the family business problems are the result of real biological or mental health issues such as alcoholism or bi-polar disorder or a combination of the two. Without the ability to define and diagnose or have an understanding of these issues, advisers can deepen a family's sense of helplessness around challenging family business issues.

All systems lean towards maintaining the status quo; it uses less energy and feels secure to family members. Families are no different. However, part of the reason for maintaining equilibrium are the emotional forces.
An inability to find adaptive solutions may not not necessarily be due to lack of knowledge or skills, but rather that there is either no way to break out of the current pattern into something new or the setting provides no safety for that to occur. An adviser who fails to recognise the emotional patterns that keep the family in place risks exacerbating these troublesome patterns.

What many families fail to realise is that advisers sometimes unconsciously seek to resolve their own personal issues through their relationships with others. Without an awareness of the unresolved issues for the adviser in their own life, they often unwittingly provide advice based on their own unresolved needs rather than the needs of their clients.

It is important for families to realise that while mistakes on legal, accounting or business issues may result in concrete financial and business consequences, overlooking these important emotional issues can create lasting effects for the family and their ability to resolve business challenges.

The right credentials
The most common result of overlooking these emotional issues and often the initial reason for the family's call to an adviser is the stalemate on important family business issues. Many advisers we have talked to report that families they have worked with have often experienced such stalemates: a buy-sell agreement is negotiated but not signed; a plan for expansion is developed but never executed; a succession plan is never implemented because the family fears that to do so might acknowledge the underlying emotional conflict that feels like it will tear them apart.

A more serious consequence not fully understood by families is that sometimes the 'solutions' proposed by advisers can actually reinforce and deepen the existing emotional and family issues. In some cases, they may even become embodied in wills or trust documents.

For instance, instead of addressing the lack of accountability that has produced a child who is incapable of handling money responsibly, families create trusts to ensure the family member does not have to take responsibility for their actions. Instead of addressing the fact that family members have different risk tolerances, families only approve the most conservative of family business investments. Instead of addressing the underlying feelings of being three separate family branches, and wanting to protect the interests of a family branch, buy-sell agreements are created that reinforce these feelings of division.

What we see in these situations is that both the family and the adviser enter this relationship in good faith, seeking solutions for the family. Through advisers stepping outside of their areas of expertise, and families encouraging them to do so, underlying emotional conflicts are overlooked, and agreements are created that reinforce and deepen the conflicts. This end result is often the opposite to what the adviser and family intended. In the end the client may direct their anger and frustration towards the adviser who is operating out of their league. Instead of a family deepening their relationship with their trusted adviser, the relationship ends up being put in jeopardy.

Given the real potential for major negative impact, how does a family evaluate potential advisers to help run family meetings? At a mimimum, you should:

- ask for your adviser's credentials in dealing with family dynamics. Training in dealing with family dynamics is a must;
- ask how many family businesses they have worked with and in what capacity;
- get references from people who know the adviser and their capability in conducting family meetings;
- ask the adviser their view of how such issues as sibling relationships, parental relationships, money, leadership etc might be handled in a meeting.

The challenges of family businesses are varied and complex. For families to ask their advisers to facilitate their family meetings without the proper training creates the potential for disaster. Families must be thoughtful and deliberate in choosing qualified advisers to help them through difficult family issues or risk deepening family conflicts.  

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