3 MOST COMMON MISTAKES by family businesses that jeopardises their hopes and progress while embarking on the journey of institutionalisation
By SOCH Business Mentors LLP Posted November 4, 2023 in Family business
By SOCH Business Mentors LLP Posted November 4, 2023 in Family business
Since 2018, our research arm interacted with 300 UHNW & HNW multi-generational families.
The aim was to intently understand what, in their experience, was their biggest mistake when embarking on their dream of building a generationally thriving family. The three mistakes that family businesses realised while making their constitution are as follows:
Mistake #1:
THE MISTAKE OF FOCUSING ON THE COMFORT OF EMOTIONS WHILE DEVELOPING CONSTITUTION
The process that they chose held a low appetite for emotions. It focused largely on technical aspects of wealth, communication, family assets, relationship (even) taxation, etc. Hence, it avoided the discussion depth, bringing emotions among members.
Some families said that they as well as their consultants tried to keep the decorum of the meetings calm and comfortable. The real voices, concerns and views of people were not opened. This resulted in more than fragile actions on the constitution.
No one could live the constitution for more than a few months, and in a few cases in weeks, it was clear that the institutionalization hopes for the family had forsaken them.
Upon understanding why they think this mistake was made? They shared their family’s thought process behind their decisions.
I am listing a few reasons that we learned from them as the most common reason that made them fall prey to this.
(a) Their family was looking for an economic investment.
This is the most common mistake when it comes to signing a cheque for constitution development. For them, it was just an attempt to put family’s thoughts on paper, and hence, why shall they pay outsiders exorbitant fees?
Their thought process was, didn’t we, as the founding generation, have come this far so majestically, so why, in the first place, do we need an outsider, and why should it be expensive?
These families said:
What blindsided us was the thought that the Constitution is just a paper book and we don’t need any external asking for any investment. We failed to see that living the paper book by each member unequivocally and daily isn’t very simple, and we must have a holistic agreement with each of us done through an expert-led process.
We didn’t realize it would cost us far more if we failed to live the Constitution.
We have lost the relationship and its charm on an almost permanent basis. We can’t get back that with money.
Even if we stay together, the topic of the constitution brings fears of not-going-to-work-out-for-us types feelings.
Many families avoid emotions, thinking it is about the personal wealth equation they must sort out for their family and themselves.
All of the above led us to not look at practitioners and experts who invite wholeness of members and pay special attention to the individual’s emotions and emotions in the family context. Such practitioners know that if we are to live constitution for generations to prosper, ask for dear investments. This was our vital miss.
(b) Adopting someone else’s constitution and making few changes
This approach is to avoid the pain of emotions in doing it yourself, and mainly, it is about paying fees to experts.
“Many families avoid emotions, thinking it is about the personal wealth equation they must sort out for their family and themselves.
(c) Engaged our most trusted long-time-standing lawyers and CAs to draft a constitution or help them do so
This approach also holds the same reason as the bullet above
NOTE:
The process of making constitution cannot be a technical one. If it is only technical, overtime, the emotions will make it fail. Hence, the process must ensure that emotions of involved family members is consciously woven into, and not just superficially discussed.
This is important because when members arrive at a common agreement after speaking their heart out, the maturity gained while arriving is a legacy-class superior asset
This maturity is the true bedrock of sustaining harmony whilst all unite to take giant leaps of progress for generations.
Do realize that the rare class of process design is made conforming the complex decision science of humans from four points-of-view: Biology of the brain (the body), psychology (the mind) & emotions (the heart), and spirituality (the spirit). Such a rare process helps families make authentic long-term decisions easier to live (& live on via advanced systems) with – head, heart, and soul.
Mistake #2:
THE MISTAKE OF FOCUSING ON SPEED OF COMPLETION AND EASE OF DISCUSSIONS
This intent holds the seed to guarantee failure. It destroys those who involve their morale and trust in each other’s ability.
The process must neither be rushed nor be prolonged. Usually, making a family constitution takes between 18 months to 3 years depending on the size of the family, scope and other discrete factors.
The largest movement of hearts and minds happen during reflection time they give to themselves. The time for reflection, digestion, and acceptance is critical.
When the process moves too fast, family members have little opportunity to feel ownership of its results and sometimes may feel that the rush violates a sense of fairness. They may ask, “Why go fast? Is someone trying to do something we don’t understand?”
Our experience of designing and delivering successful processes suggest that each meeting should review, re-affirm and/or revise the previous meeting’s conclusions before they are voted and endorsed.
And, between the two meetings, the process must be designed to help individuals reflect, digest and accept the change to be ready to adopt.
The time between every two meetings is always richer, deeper and more moving, than the meeting itself. This is up to the experts who design the rare process of making a constitution, living it and living it on for generations.
As I said above, it should not take more than 18 months to 3 years since if it is dragged on for long, there is the risk of losing the family’s commitment to complete the process.
Mistake #3:
THE MISTAKE OF NOT UNDERSTANDING REQUIREMENTS OF SUCCESS FOR CONSTITUTION DEVELOPMENT
Many business-owning families, including most accomplished ones, fall prey to not understanding the key requirements of success.
Without giving more context, I am stating the key requirements for success of constitution development as below:
(a) Families must not think that any outside expert would draft their constitution on their behalf. Please read it again.
This means that sometimes, families to save themselves from the discomfort of discussion, call upon an outside advisor or consultant to write the family constitution for them. Remember, no external can write it for you.
They need to bring their expertise, frameworks, processes and talent to help you to write it on your own – The experts can facilitate the writing with their skilled team of drafters.
(b) Families who understand that they cannot make the mistake as listed above decide to hire expert teams to help them develop the constitution with their help.
This can be a great mistake if expert teams are only bringing experts and not the process with themselves, which should be far above the technical expertise of the experts.
The key role of experts is not just to educate you or give you questionnaires to fill. Their key role is to bring a specialised process that helps family members get to their most authentic depth and create a live-able constitution, that each one respects and chooses to live.
(c) The process design must have superior quality to weave experts and their expertise, making these two contribute 15% to the success of the process. The other 40% is dependent on the design of the process that is done with intelligence, wisdom, ultra-rare skills and abilities. The rest of 45% is the ability to execute with high grade of smoothness and efficiency for 18 months to 3 years.
The below pointers give a glimpse of how experts such as ourselves, focus on the process, its design and its execution to ensure success for our clients:
Process Design – When we design processes for constitution development, we imbibe mindfulness, sense, and consciousness to create an approach enabling family members to participate most authentically. The design absorbs the science of decision-making (the science of the brain, mind, emotions, and spirituality), human communication, wisdom, loads of patience, and love. As illustrated above, the process design, at SOCH, has 3 important contributors:
(a) Experts and their expertise (Weightage: 15%)
(b) The design of process (Weightage: 40%)
(c) Process execution (Weightage: 45%)
We are elaborating the highest contributor to the success of constitution process as below:
Process Execution – We execute in a way that includes expertise of a rare kind. Our teams of experts who design, govern and execute the process champions the following:
There are other common mistakes which can also turn into grave errors harming the results of constitutional development that family hope and desires.
What you must remember is:
We are not human beings having a spiritual experience; we are spiritual beings having a human experience.
And, after particle physics of Higgs boson, making a constitution is a truly enriched human experience that rare spirits observe and march for.
I ask you to note that how amazingly blessed and wonderfully placed you are as those individuals who are about to travel the road never travelled by you.
Be excited and truly grateful to your consciousness that is inching you towards such rare experience should you decide to take in its fullest form and not let any of the above 3 mistakes made. Life is short and living is much shorter. Live-on matters and your life can create that framework of eternal existence during your limited existence.