Forms of Decisions

Published: Feb 21, 2022

You’ve embarked on an adventurous journey for your family enterprise, and know that not all waters are calm and inviting.  You may have encountered some resistance to some of your ideas from your family. We encourage you to persist – “How to persist: Make small efforts each day. Be patient with the process. Focus on the path, not the destination.” Trust your judgment, and seek out the help of professionals from the Family Enterprise Advisor community when needed. 

As we noted when you began, “It’s a hard, it’s a hard.” Not many families persist through the difficult emotions and family dynamics of transitioning a family enterprise. That’s one of the reasons the studies show less than a 3% success rate of wealth transfer passed beyond the 3rd generation. Breathe, connect back to your why, be clear on the purpose of your wealth and persist forward. You can do this, one conversation at a time.

Let’s step back and look at what you’ve achieved so far: You said yes to being a family enterprise, you said yes to needing to liquidate, you said yes to defining what the liquidity will be used for, you have ideas of what things can look like going forward — and these are all things to be celebrated. Congratulations!

Now comes the difficult part, to get out of your own head and share your vision with the family.  Many, at this point, turn to experienced Family Enterprise Advisors to guide the process.  A skilled FEA can facilitate the family and help educate the process of decision-making.

Before you have everyone moving in the same direction it may take some time. The vision needs to be clear for all family members. Not everyone has shown up to run the same race, and to be sure you are all on the same team, many conversations must be held.  There is also a level of education needed: what is a family enterprise, what does it include?  What is wealth and how are the Financial, Intellectual, Social and Human capital assets all taken into account? What is the 3-Circle model and how do all the pieces of the business, the family and ownership intertwine and work together as one system? How do we deal with change and the ever-changing lifecycles within the family, the organization, the industry, ownership, and each individual family member? Have we taken into account the 4 L’s: Legacy, Liquidity, Lifestyle and Leadership? What about governance and how we come together to make decisions?

Being a Family Enterprise opens the door to learning many things together and the focus here is how to make decisions together.

The goals for making decisions together are to:

  • Preserve and enhance relationships
  • Build cohesion
  • Manage conflict
  • Remain free from political warfare
  • Continue to build together for the future benefit of all.

Do note that there are different decision making styles and you need to be clear which is best for your family:

  • Autocratic
  • Consultative
  • Group decides
  • Delegation

There must also be clarity on when is a family member a voice at the table versus a vote partaking in the decisions within the enterprise. A family may want to list qualifications to earn the right in family decision making.  And be clear on each individual’s roles and responsibilities. Some things to take into account are:

  • Emotional maturity
  • How they Contribute
  • Level of Flexibility
  • Being Informed
  • Do homework and be Prepared
  • Have Trust
  • And have the ability to put the needs of the group before the needs of self

There are three very important things to remember about group decision-making:

  1. In every decision there are roles and responsibilities
  2. Learning how to express various degrees of support even when the solution is not your “favourite”.  Inclusion is crucial
  3. Creating alignment and inclusion means, “think and feel together” not necessarily agreeing 100% on everything.

As a family enterprise it’s great to build consensus.  The 3 key principles in doing so are:

  1. Everyone has access to the same information
  2. Everyone’s input is valuable
  3. The decision is not made in advance

Other forms of decision-making are:

  • Unanimous
    • Unanimous decisions occur when all agree without reservation
    • Unanimous decisions are easier for trivial matters and very difficult for important/high pressure situation
    • Do not confuse unanimity with consensus
  • Consensus
    • Each person agrees to support the decision, though all may not agree, and gives his/her consent
    • Despite differing perspectives, all agree that they can live with the decision
    • Consensus is the process most likely to ensure that each persons input is valued, heard and considered
  • Majority rule:
    • Majority rule decisions are made when more than half the group vote in favour
    • Majority decisions, as with any voting situation, risk that you won’t have full support and that those not in agreement with the majority may do something less than helpful later
    • It also carries the possibility of establishing an “us” versus “them” mentality
  • Expert:
    • In this scenario, the group delegates the decision-making responsibility to an expert or small subgroup
    • This type of process is good for situations that do not require the entire group’s participation
  • Executive:
    • In an executive decision, the leader makes the call
    • The big mistake is that often the kind and amount of participation leading up to this decision making is not what it should be
    • The best decision-making is typically a highly participative executive decision
  • Default:
    • In this scenario a decision is made by action, or more likely inaction that forces a conclusion
    • It is a powerless form of decision-making and it is best avoided

As a family unit, you want to try to aim for consensus in all decisions. Majority rule for a small group is not good. Someone always feels left out. Aiming for consensus may take longer and more communication must take place and the end result is there is participation and therefore buy-in. This leads to having a very durable decision because it is self-enforced.

To reach this point in make decision together as a family where harmony is built even when perspectives are different is not always an easy process. Hiring a skilled FEA who can facilitate the family dynamics through these decisions will help the family make long lasting decisions that work to better unite the family in the long run.

Decision Tree Question: Do you want to engage an FEA or continue on your Decision Tree journey?

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