I'll be the first to admit that estate planning for the family business owner isn't easy. Many families don't even engage in the process. Those that do rarely execute on the entire plan. Why is it that those families most in need of estate planning (family business owners) are also statistically the least likely to plan? Maybe we, as advisors, need a new framework for approaching the issues facing family businesses.

A recent book, Family Business as Paradox,1 shows that many problems in family businesses are actually paradoxes, based on the fact that a family business is, by its very nature, a contradiction. Fortunately, as the book illustrates, successful, multi-generational family businesses have figured out how to manage these paradoxes and in many cases turn them into a secret of their success.

Paradoxes, according to the authors, typically can't be solved like other problems. They can, however, be managed, taking into consideration both what's good for the family and what's good for the business. The goal is to maximize the positives for both the family and the business. Rather than choosing between the business and the family in resolving paradoxes (“either/or” thinking), the authors' goal is to show that it's best to choose both sides of the paradox, rather than one or the other. This is known as “both/and” thinking.

Paradoxes have always existed. Philosophers, writers and theologians have long sought to understand our world by probing the paradoxes around us. Though often confusing or frustrating (think of a Zen koan), most paradoxes feature a level of complexity that typically holds some kind of truth. Many of history's great thinkers not only examined specific paradoxes and the general phenomenon they represent, but also built complicated systems of thought that incorporated paradoxes. Some of these worldviews are fundamental to Western thought, society and culture. The work of diverse thinkers, such as Hegel, Kant, Shakespeare and Einstein, suggests that a paradox isn't something to be afraid of, but something to be embraced, understood and ultimately wielded as a tool to promote progress.

The authors state that what family businesses need isn't a brand-new, simplistic answer, but instead, a return to the more classic, time-tested methods of problem solving of the world's great thinkers. Specifically, family businesses are, by nature, replete with problems that are really paradoxes. Learning to identify and manage paradoxes brings special value to business-owning families and their family businesses. Managing paradoxes requires patience and novel thinking, not prescriptions. And developing the ability to manage paradoxes is crucial for business families who don't want to and needn't choose between their business and their family.

So what's a paradox? The authors define it as comprised of two sides that appear to be opposing, but are in fact mutually supportive. Family businesses are uniquely positioned to harness the energy inherent in paradoxes. That's because family and business are in and of themselves a paradox. The interests of both the family and the business may frequently seem to conflict. Those in business families typically know of these conflicts and have therefore built a higher tolerance for the ambiguity contained within business and family conflicts.

Managing paradoxes requires special capacities and capabilities, including a special empathy to see both sides of the paradox. According to the authors, managing paradoxes is as much an art as it is a science. When family businesses approach very challenging paradoxical problems with curiosity, long-term perspective and world-class problem solving, they will achieve better solutions.

Not surprisingly, paradoxes tend to be found at key points of conflict within a family business. The conflicts families in business face are a natural result of the differences in the interests of three intersecting constituencies: family, management and ownership. Yet, most families typically view the conflicts at these intersections as unique to the family and personal in nature, rather than structural or situational. Natural conflicts also arise as one generation transitions to the next.

The authors state that these conflicts are inherent; they're predictable, pervasive and persistent, presenting themselves at some point in the history of every family business. Examples of the problems family businesses face that are discussed in the book include: (1) which family members can be employed in the family business; (2) who will serve on the board; and (3) who will own stock.

The book walks the reader through key steps in family business paradox management including: (1) identifying the contradictions that are present in family business conflicts and problems to understand the nature of the inherent paradox; and (2) using established frameworks to maximize both sides of the paradox. According to the authors, mastering these steps will help family businesses capture the energy in the paradox to both bond the family and propel the business to a successful future.

Interesting stuff.

Endnote

  1. Amy Schuman, Stacy Stutz and John L. Ward, Family Business as Paradox (Palgrave MacMillan 2010).