What's Preventing Progress? Six Questions to Ask When Family Enterprise Decisions Stall
Paul Edelman, PhD, PCC
Executive Coach and Family Enterprise Advisor
When a family enterprise struggles to move forward on an important decision, the explanation is often that people need to communicate better.
Meetings become frustrating. Discussions revisit the same arguments. Decisions that seemed settled are reopened. Family members may conclude that someone is being unreasonable, unwilling to listen, or resistant to change.
Communication may indeed be part of the problem. But before recommending a solution, it's worth understanding what's actually preventing progress.
In my work with family businesses, family offices, and their advisors, I look at several factors that can interfere with effective decision-making. Some involve relationships and individual behavior. Others involve governance, organizational structure, authority, or competing objectives. Often, several are operating at once.
The challenge is to understand how they interact and determine what needs to change.
Six Questions Worth Asking
1. Are people pursuing competing outcomes?
Family members may appear to disagree about a particular decision when they are actually trying to accomplish different things.
One person may prioritize business growth, while another wants greater liquidity. A founder may want to preserve family control, while a successor wants greater independence. Family members may agree that succession planning is important while holding very different expectations about what succession should accomplish.
Understanding what each person wants, and what they may be trying to protect, can reveal possibilities that remain hidden when the discussion focuses only on competing positions.
2. Is decision authority clear?
Who has the authority to make the decision? Who needs to be consulted? Who must approve it? And when is a decision considered final?
These questions become particularly important when ownership, management, and family relationships overlap.
A CEO may be held accountable for results while lacking the authority to make important operational decisions. Owners may disagree about which matters require collective approval. A founder may continue to exercise informal authority after formally delegating responsibility.
When decision rights are unclear, even capable and well-intentioned people can find themselves repeatedly revisiting the same issues.
3. Do governance and organizational structures fit the enterprise's current needs?
Arrangements that worked when a business was smaller, ownership was concentrated, or the founder made most decisions may become less effective as the enterprise evolves.
Changes in ownership, family participation, business complexity, or leadership can create new requirements for governance and organizational design.
Sometimes the appropriate response involves clarifying responsibilities, changing reporting relationships, establishing decision-making procedures, or redesigning governance arrangements.
But structural changes should be evaluated in relation to what the family and enterprise are trying to accomplish. A new committee, board, or policy may accomplish little if the underlying objectives remain unclear or the people involved are unwilling to work within the new arrangements.
4. Do leaders have the capacity and support to carry out their responsibilities?
A family member may have the appropriate title but lack the experience, authority, judgment, or organizational support needed to succeed.
Alternatively, a capable leader may be constrained by an arrangement that makes accountability difficult.
It's important to distinguish between a leadership development need and a structural problem. Sometimes both require attention.
For example, a successor may need to develop greater confidence and judgment while the senior generation learns to delegate authority and allow decisions to stand.
5. Are relationships and history interfering with decisions?
Family enterprise decisions rarely take place in isolation from the family's history.
Past disagreements, longstanding roles, perceived inequities, and differences in how people experience authority can influence how current proposals are interpreted.
A suggestion that seems straightforward to one person may carry implications for another person's identity, standing in the family, or sense of fairness.
These considerations can affect whether an otherwise sensible organizational or governance change is accepted and implemented.
6. Are people working from the same information and assumptions?
Family members sometimes disagree because they are operating with different understandings of the facts.
They may have different information about financial performance, ownership arrangements, succession requirements, or the risks and opportunities associated with a proposed course of action.
Before interpreting disagreement as resistance, it's worth determining whether everyone understands the available information, the assumptions underlying different proposals, and the implications of the alternatives.
When Several Problems Are Operating at Once
Consider a hypothetical family business in which two generations repeatedly disagree about how much authority should be delegated to a newly appointed CEO.
The senior generation believes the successor needs to demonstrate better judgment before receiving additional authority. The successor believes it is impossible to demonstrate that judgment when important decisions are routinely second-guessed.
Meetings become increasingly contentious. Both sides conclude that the other isn't listening.
It would be easy to define this as a communication problem. But a closer assessment might reveal several overlapping issues.
The senior generation wants to protect the business and preserve its legacy. The successor wants the opportunity to lead and establish credibility. These are legitimate but potentially competing objectives.
The company's governance arrangements may also be unclear. The CEO is accountable for performance, but the owners have never established which decisions belong to management and which require owner approval.
Leadership development may be another consideration. The successor may need additional experience with certain decisions, while the senior generation may need greater confidence in the successor's readiness.
The question then becomes how to address these different factors.
One possibility is to clarify decision rights, identifying which decisions the CEO can make independently, which require consultation, and which remain with the owners. Another is to establish a process for reviewing performance and expanding authority as demonstrated capabilities develop.
But before agreeing on a new arrangement, the participants also need to consider what each alternative would mean for them. What would the senior generation need to relinquish? What accountability would the successor assume? What safeguards would protect the enterprise without undermining the CEO's authority?
The appropriate response might involve governance changes, leadership development, and facilitated conversations about competing expectations.
Simply improving communication would leave important questions unanswered. Changing the governance structure without considering the people who must work within it could create a different set of problems.
Diagnosing the Problem Before Choosing the Intervention
When I'm brought into a difficult family enterprise situation, the initial concern may involve conflict, leadership, succession, or an inability to reach agreement. But the presenting problem doesn't necessarily tell us what needs to change.
My assessment involves understanding what different participants are trying to accomplish, how decisions are actually made, where authority and accountability reside, and whether existing governance and organizational arrangements support the enterprise's needs.
For example, what appears to be resistance to leadership may reflect unclear decision rights. Recurring interpersonal conflict may be reinforced by an ownership or governance structure that repeatedly puts people at odds. And a proposed structural solution may be difficult to implement because its implications threaten something important to the people involved.
Identifying these relationships helps determine which interventions are appropriate. Sometimes the answer involves clarifying authority, redesigning governance arrangements, or changing organizational responsibilities. Sometimes it involves executive coaching, leadership development, or helping people work through competing objectives. Often, several approaches are needed, coordinated with the family's legal, financial, and other advisors.
The assessment also considers the implications of different approaches. A governance change may resolve an immediate impasse while creating new questions about accountability, influence, or participation. An agreement that settles today's dispute may leave the family poorly prepared for the next consequential decision.
The objective is to help clients understand the situation well enough to choose and implement changes that address the underlying difficulties while strengthening their capacity to make future decisions.
A Final Question
When a family enterprise is struggling to make progress, I often find it useful to ask:
Are we trying to solve the problem we've identified, or have we adequately examined what's producing it?
A problem that appears interpersonal may require changes in authority or governance. A proposed structural solution may be resisted because it threatens something important to the people involved. And what looks like a lack of leadership capability may reflect unclear responsibilities or conflicting expectations.
Understanding how these factors interact helps determine whether the appropriate response involves governance changes, clearer decision rights, leadership development, addressing interpersonal dynamics, or some combination.
Before deciding how to move forward, it's worth understanding what's getting in the way.
About the Author
Paul Edelman, PhD, PCC, is an Executive Coach and Family Enterprise Advisor with
Edelman and Associates. He works with family enterprise and family office leaders, family members, and their advisors on complex decisions involving leadership, ownership, succession, governance, and rising-generation readiness.
Learn more at www.edelmancoaching.com.
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