Control is more than governance

This was a fun one to write. I was in a brainstorm, I love brainstorms, and this Newsletter popped out revealing to myself more perspective on the topic of control within family enterprise.

Control in one obvious sense is specifically family governance. Meaning the systems of the family to make decisions and align actions in accordance with family goals. Yet in the brainstorm, my mind turned to the family wealth equation, and the topic of control became a lot broader and a lot more nuanced than a look at simply governance systems.

FW = R (HC + RC)

When thinking about how your family’s Resources (R) exist to amplify your human capital (HC) and relational capital (RC), it is helpful to think of long term family success (FW) as your family legacy. Strong family legacies require multiple generations of family members to look backwards, forwards and within themselves and say “yes, I’m doing good and our family is doing good.”

Control is much more difficult within a family enterprise when they aspire for seven generations of success. Within this larger time frame, it is easier to make the tradeoff of your personal time and comfort in exchange for greater stewardship. Families define success as something more meaningful than the superficial, hedonic, satisfaction readily available in exchange for money for any one family member. Meaningful family legacies happen when you are fulfilled by contributing to the greater family (and/or humanity’s) goals.

There is a really big tradeoff to make within the concept of control. When considering long term family legacy, when the goal includes building strong wealth stewards for generations, the easiest form of control (dictatorship) must be discarded and a harder form of control (democracy) must be adopted.

Professionals consider the topic of control from the lens of their subject-matter expertise. Within this framing, progress in control will typically focus on governance structures. These are critical topics; like our skeletons, but skeletons are not enough to make us humans.

I would contend that a controlling family member retains control until all aspects of control have been removed except control through influence. This would include all sorts of control mechanisms, a Chairman still retains significant control levers, even as one vote. A protector of a trust certainly has a big control lever. Experts even contend that they have witnessed withholding of love and financial support for a family member in an attempt to control their behaviour.

I haven’t witnessed this personally. Sounds very rough!

The point is that letting go is hard to do. Being left to only influence is certainly fearful. No advisor will recommend ceding this much control because truly only the controller of the family enterprise will be able to determine for themselves when that transition is appropriate.

Control is often something of an invisible system, an unwritten governance structure. Control of this sort is far more relevant to understanding how individuals develop and how the family’s relationships operate towards success or failure. How influence is more than powerful enough to impact legacy.

As one aspires to the role of Elder, the transition from control to influence is the key perspective. Giving up control does not mean checking out. Mining for ways to reduce control to just influence, that is the tricky journey.

Mine for those opportunities!

In the brainstorm, in thinking about what a book about control within family enterprise would look like, I was of course drawn towards the conventional family governance discussion. Building effective Boards, empowered wealth stewards, and effective trusts, are three of the topics that first came to mind.

The richness of the topic arrived by thinking broadly:

• when you consider that culture eats strategy for breakfast,
• when you realize that humans are HUMANS and we act with emotion as well as reason,
• when you consider control from a broader perspective,

you see control as just another topic that strong family cultures can tackle well and weak families cannot.

FAMILY LEGACIES PREVAIL FROM STRONG CULTURES

Control does not have to be an insurmountable topic with wealth creators.

“Succession” as a term is often replaced with a more continuous and less serial term like “transition” in family enterprise. Because regardless of the size of their wealth, strong family cultures seem to always leave meaningful family legacies. These families will not let our human frailties overwhelm our collective vision of leaving the world and those we care about in it a better place than we got it.

Once those in control recognize that the time after their control is more important to consider than their time “with the crown”, control simply cannot impede family success. Yes control is a difficult topic. But like family enterprise’s most difficult topic, death, our fears and discomforts around control should be tackled head-on.

Us Family Champions won’t stand for anything less 🙂

To the journey,

Adam