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The trouble with family secrets

Every family has secrets. Trouble comes when families collude rather than talking honestly to each other about them.

Every family has secrets. Trouble comes when families collude rather than talking honestly to each other about them. When family members are in business together or are connected financially, those secrets often interfere not only with family relationships, but with the family business, foundation and even the family office as well.

The quality of relationships and the measure of a group’s ability to work together can be directly correlated with their ability to communicate with one another. Quality communication involves the ability to deal with existing realities and to respond to them quickly and efficiently. If family members can’t communicate easily, their relationships suffer, the family business suffers, and the business’s success and family’s legacy are at risk.

WSJ.Money recently pointed out that the inability of family members to communicate effectively is often why families lose their wealth:

“Researchers at the Williams Group, a family wealth advisory consultancy based in San Clemente, California, surveyed more than 2,000 affluent clans over 20 years, searching for an explanation to the boom and bust syndrome among families. The study found that 60 percent of the time, a trust and communication breakdown among family members played the biggest roles.” WSJ.MONEY, spring, 2013.

Strong relationships are rooted in transparency and integrity. The problem isn’t that family members are dishonest with one another; it’s that they can’t get to the heart of any issue because the secret stands in the way. They fear that discussing it will provoke such a strong emotional response that things will only get worse.

Secrets also have an insidious impact on family members, because they usually have an element of shame attached to them. Until it is vetted and discussed, the shame lingers.

Most of the time, the secret is essentially benign. When it is finally discussed, everybody is relieved, the tension is lifted, communication becomes much easier and the family business profits.

The following two cases are dramatic examples of how a secret can contaminate family relationships and have a negative impact on the family business. I do not recommend that a family with secrets as severe as these address them without professional help. Discussing or surfacing such provocative secrets would be, in most cases, too overwhelming for the family to manage by itself.

Case 1:
A 65-year-old founder wanted to develop a succession process for the next generation – two sons and a daughter who were going to have equal ownership of the business.

His two sons and his son-in–law were all in management, with the sons competing to become the senior executive. The older son was quiet and deliberate in his thinking, the younger was more charismatic. Both were capable, but the younger son believed that he could do a better job because he had stronger leadership qualities.

Thinking that a board of directors could resolve their sibling rivalry issues, the sons asked me to set up a board. Since I did not know if the family was indeed ready for a board, I told them that the first step was an assessment process.

Lo and behold, the younger, charismatic brother had a gambling problem. The “bad boys” would show up every two years and explain that they needed a check (usually around $150 to 200,000) or else...and the father would write the check.

Everybody knew the secret, but nobody talked about it. One might ask how they could have a business meeting with any integrity without addressing the issue. The answer: all family members were in a state of denial with the parents leading the charge. They preferred to enable the son by not discussing the secret. They found it too painful, too explosive and feared that the consequences would be too drastic.

I knew that all dialogue about the future ownership and management of the business had to start with this issue. I explained that unless the younger brother went to a treatment center for gambling, the chances of his being able to address his addiction successfully were slim. He refused. They relented.

However, we did design an agreement with severe consequences. Then he did it again: he gambled and withdrew funds without authorization (presumably to pay his gambling debts). He was gone 18 months later. He struggled for a while; turned it around and became a successful chief executive at another company. The family hired an extremely capable non-family member of the business to be the chief executive. The business prospered, and the brother was given the opportunity to turn his life around.

Case 2
A father left his fortune in trust and made his oldest son the trustee. His oldest daughter was suing her brother for mismanagement and wanted to separate her portion from the trust. The litigation was becoming very expensive, so they contacted my company.

It turns out that the oldest brother had sexually abused his sister. The fact that her brother had power and control over her future through his appointment as trustee re-created that dynamic every day of her life. It was intolerable for her, and while she had been severely criticised by her family for the suit, it was in fact a healthy and necessary act on her part.

After four months of preparation on both sides, I arranged a meeting with the brother and the sister with no explicit agenda. The brother came into the meeting, and before I could open my mouth, he apologised to his sister and wept. They talked briefly. While there was not a lot of reconciliation, the tension was broken, and the secret was out. They moved from litigation to negotiations. It took another nine months, and then they were free.

If you understand the importance of talking about secrets and are trying to figure out whether the secret is too provocative to surface without a professional, don’t do it. Do it with a professional and only when you are ready.

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