Hannah Shaw Grove, executive editor of Private Wealth, recently spoke with Thomas D. Davidow, Ed.D., founder of consulting firm Thomas D. Davidow & Associates, about his specialty practice helping families increase the success and value of their biggest asset-their privately owned businesses.
GROVE: You have a very unique niche in the world of the wealthy. What prompted you to focus there?
Davidow: When I was in private practice 30 years ago counseling adolescents and families, with several additional years of training in family systems work and family therapy, it became clear that families often unconsciously cause problems to persist. For instance, if one person changes, the other members of the family usually resist. When everyone gets together, each person reverts to the behavior or role that they're comfortable with. I saw this behavior and its casualties over and over.
There are family businesses on both sides of my family, so I understand that no companies are immune to issues and a lot of the "bad" behavior isn't abnormal, just challenging. There can be a lot of confusion, ambiguity and hostility at the intersection of business issues and family dynamics. By helping families realize that the criteria for business success can be different from the criteria for family success, it becomes a lot easier to prioritize and set goals, isolate issues, remove stressors and improve communication.
GROVE: You bring up an interesting point. How do you help families navigate the decisions that might be bad for business but right for the family or vice versa?
Davidow: My protocol for engaging family businesses is that every individual that's involved in the management end of the business must be present at the initial meeting or I won't take them on as a client. There has to be buy-in from the critical family business members. When people agree to gather, it's a form of acknowledgment that there are problems and that they are part of both the problem and the solution. The families that choose to go forward believe in the strength of their relationships. They trust that they will be able to handle the weight of the emotional issues that will test those relationships.
Collectively, it's a drive for a successful business and family harmony. I leverage their trust and those dual goals, with selective facilitation and communication, into doing the difficult work of managing the intersection of their family business issues. A threshold issue is the understanding that the business is the client. Family decisions can corrupt the business. Making sound business decisions keeps the business healthy and gives the family choices.
GROVE: Without breaching any confidences, can you share an example of how that type of commitment might manifest itself and how it worked for an actual family?
Davidow: Family dynamics and issues are present whenever the family is present. You can't make decisions that are correct for just a single individual or just the family without eventually having a depletive effect on the business. Families need to accept certain realities, then establish priorities and ground rules and stick to them. One of my clients had a key family member with a long-standing addiction problem. As his behavior was covered up or overlooked, years of resentment had built up among the relatives and eventually the business was exposed to a criminal element. The family realized that an intervention was needed in order to stop enabling him, create accountability and set standards for acceptable conduct. They drafted a behavioral contract that he had to adhere to with performance criteria, measurements and reward systems. It called for total transparency and included specific things like "do not steal from the business" and "go to rehab." After two years he broke the contract and was removed from the business. It was an extremely difficult time for the family and the individual-there was a lot of anger and depression and guilt and animosity. Eventually he cleaned up, got a new job and did very well for himself and the family's business is now running smoothly. The family knew the problem needed to be addressed or it would place the business and him at even greater risk; they made a decision and they executed it to protect the business and ultimately the family member.
GROVE: Do you rely on a particular process to ensure families are committed to the mission?
Davidow: Yes. After the initial meeting, which I've mentioned, there is a collective decision to hire my firm. The next step is almost always an assessment. We meet with every family member, including spouses. We also meet with non-family key professionals and some key advisors. The findings are presented back to the family in a report, conceptualizing the history (such as a death or a schism between siblings) that has brought them to this point. We also present a series of recommendations about how to solve their specific issues and can be retained to help the family implement the recommended changes. Most families begin thinking about the process as an opportunity to ccreate a new legacy or return to the family values that were the source of their business success.