Tag Archives: family psychology

03/8/19

Give Failure A Chance

In my last newsletter I referenced a Wall Street Journal article* that highlighted two issues not uncommon in family businesses: the value of experience and the rewards of failure. I addressed the first in that newsletter, pointing out the advantages of having next-generation family members gain experience by working outside the family business. In this writing I address the second issue: failure. The article connects failure and experience, saying that that the main reason veteran leaders (those I interpret as having experience) rarely fail dramatically is that they’ve failed before.

The value of learning from failure is incontrovertible. An internet search on “learning from failure” yields upwards of 500,000,000 results in a split second. Not all contain reasons and/or solutions that apply to family enterprises. Not all approaches to learning from and mitigating failure in family businesses apply to non-family businesses.

In family businesses, which may be risk averse, fear of failure can be a significant point of contention. They are often inured to tried-and-true methods of operation. So it’s not uncommon for a next-generation family member to hear from their elders:“ “Do as I told you. When you ‘re in charge you can do it your way.”

The psychological source of contention might be adolescent rebellion being acted out in the business. It might involve a parent not recognizing that the child has grown up. The child also might not realize they now need to build an adult relationship with their parent. It can also be an expression of a parent’s uncertainty of their continued relevancy. Or it may simply be that a first-generation parent has forgotten how they learned from their own mistakes.

Whatever the source it’s important to uncover and deal with it. If not, the future of the family and the business can be compromised; opportunities lost.

Giving a rising-generation family member authority to implement and run small or dear-to-the-heart innovative initiatives—risking their possible failure—allows growth and instills accountability. If they do fail—even dramatically—they will learn what doesn’t work; what not to do again. It’s a first step to becoming a veteran leader; a gain for the young person and the family as a whole.

* https://www.wsj.com/articles/the-truth-about-failing-spectacularly-11550293225?mod=hp_lead_pos9

 

07/7/17

Wealth Transfer And Human Capital

This week I am continuing to present ideas and passages from Maps for Men: A Guide for Fathers and Sons and Family Businesses by father and son authors Edgell and Thomas Pyles.

On page 186, the Pyles’ reference Family Wealth: Keeping It in the Family by attorney and family business consultant James E. Hughes Jr. According to Hughes, the top reason for failure of transferring wealth across three generations “is that family leaders concentrate on the family’s financial capital to the exclusion of its human and intellectual capital.”

The Pyles’ go on to present results of a study by Dr. Dennis T. Jaffe with Wise Counsel Research. The researchers identified a set of seven core qualities common among families whose net worth exceeds $200 million who, through at least three generations, have successfully transitioned their wealth. Among these: Active development of human capital.

When it’s so important, why is this core quality so often neglected? The Pyles’ research shows that the reasons are primarily psychological. Loss of trust, lack of communication exact a high price. Building relationships among family members; accepting weaknesses, developing strengths, encouraging ambitions, imparting values is essential for transitioning “talent” capital through the next generation, and thus ensuring the successful transitioning of monetary wealth as well.

The Pyles’ issue a warning: “Considerable creative and constructive effort can be directed at crafting sophisticated trust documents, elegant business plans, and family constitutions, but the keys to implementation are locked up in the family psychology.”