How important is it for families with financial ties to communicate?

Business Leader Post, July 31, 2013

Thomas D. Davidow, Ed.D.

As a recent article in WSJ.Money points out, the inability of family members to communicate effectively is often the reason that 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.

Communication is the primary ingredient for succession planning, whether it’s in a family business, a family office or a family foundation. According to Russ Prince’s and Karen Maru File’s study of failed family businesses (Attributions for Family Business Failure: The Heir's Perspective, April, 2004), the senior generation cited the reason for the failure as the incompetency of the next generation while the younger generation said that the failure was due to poor training. It sounds to me like they both agreed as to the reason for the failure, but that the biggest failure was the failure to communicate.

Family businesses suffer from communication because of osmosis. People are so close and live together for so long that everybody assumes that the other person should know what to do. That would require the ability to read someone else’s mind. Nobody can do that. It does not work.

Start with meetings. Go over the expectations for the week and review the results of the previous week.  Apply Robert’s rules of order and have an agenda.