Podcast: Understanding Conflict in Family Businesses

Jonathan Goldhill (00:04):

Welcome to Disruptive Successor, a show for next generation leaders in family, businesses and entrepreneurs who want to disrupt the status quo and take their existing business to a whole new level. We all know that what got us here isn’t going to get us there. This show will provide inspiration, advice, and resources to help you create massive impact.

Jonathan Goldhill (00:31):

This podcast is sponsored by myself, Jonathan Goldhill, and my company, the Goldhill Group, where we provide coaching for growing companies. I’m Jonathan Goldhill, and my purpose is simple to guide entrepreneurial leaders in family businesses towards more freedom and fulfillment. I want entrepreneurs to get clarity around the changes that will make them and their businesses more successful so they can experience the same freedom I’ve enjoyed in my life. Our proven practices challenge business owners to think differently about their business and how they’re running it, and quite literally become game changers in our clients’ companies. Learn more at the Gold Hill group.com website where you can schedule your free strategy session.

Jonathan Goldhill (01:23):

Hi, it’s Jonathan Goldhill, and welcome back to another episode of the Disruptive Successor Show. My guest today is from one of the nation’s leading advisory firms for family owned enterprises and high net worth families. Since 2003, his firm’s custom solutions have helped hundreds of families improve decision making, manage disagreement, and maximize generational opportunity. Doug Baumoel is the founder of Continuity Family Business Consulting, which he founded in 2003. His expertise includes succession planning, family governance, corporate governance, conflict management, mediation, wealth integration, and more as a family business consultant with wide ranging educational and professional experience. That includes 25 years at the executive and operations level in both family and non-family owned firms in the US and Europe. Doug developed a unique systems approach to managing conflict within enterprising families, which includes a groundbreaking methodology known as the conflict equation. The equation is explained in rich detail in his book, deconstructing Conflict, understanding Family Business, shared Wealth and Power. Doug, welcome to the show today. Thanks

Doug Baumoel (02:47):

A lot, Jonathan. Great to, great to be here.

Jonathan Goldhill (02:49):

So I am reading your book. I have not finished it yet. It is so rich and so good. It’s, for me, it’s a, it’s a reference style book. It’s a book that I will go back to I haven’t highlighted and, and under underlined things as much as I would like, but it, that equation was mind blowing that you actually came up with that. And it, it must be the Wharton education or the Cornell University background that you’re, you’re one smart cookie. I is all I can tell you.

Doug Baumoel (03:23):

Well, actually, the, the origin story of the equation is somewhat interesting. Yes.

Doug Baumoel (03:29):

So when I was at Cornell in the late seventies, I had this fantastic professor who was my professor of astronomy. You know who it is?

Jonathan Goldhill (03:39):

No idea.

Doug Baumoel (03:40):

Carl Sagan.

Jonathan Goldhill (03:41):

Oh, okay. I think I’ve heard that name before. .

Doug Baumoel (03:44):

Yeah. So Carl Sagan was our professor, and it wasn’t so much a a a class on astronomy. It was about how to think about systems. And the big takeaway from that course was if you truly understand a system, you should be able to express it mathematically. And he would then apply that thinking to the cosmos and come up with really great examples of applying systems, thinking through equation formats to figure out how many stars are in the universe, how many planets could sustain, like, things like that. And so when I was struggling with my own family business, and the family business was actually in litigation or approaching litigation, and we were forced to sell the company actually through the litigation and family litigation, family fighting. And we had availed ourselves a family business consulting for about 15 years prior to that. But during that time, the last family business consultant that we had hired that, you know, like the rest of ’em weren’t very helpful to us. But the last one we had hired suggested that I go into this field. This was around 2000 mm-Hmm. . And he suggested that there weren’t enough folks with actual sort of MBAs and business experience and fewer with actual family business experience in the field. So I was thinking, well, why should I go into a field that I felt poorly served by and

Jonathan Goldhill (05:20):

Make it better, Doug, to make it better,

Doug Baumoel (05:23):

To make it better? So I thought, excuse me. I thought if I could understand what went wrong with my family, what went wrong with our family enterprise, and further, if I can understand why the consultants we hired were not able to help, I might be able to figure out a way to do this better. And what I came up with when I was considering this was a focus on conflict. I mean, why do family businesses call family business consultants in the first place? Some call because they’re entering a transition or expecting a transition, and they sort of want help, and they’re aware enough to understand that, you know, a little bit of help around the edges could be useful. My experiences when families are seeking urgent help is because they’re in pain and in family business pain is conflict. So I set out and, and actually the consultants that we hired didn’t really know much about conflict.

Doug Baumoel (06:32):

They understood best practices in family enterprise and in business family communication, but they, they didn’t understand the unique type of conflict that exists in family enterprise. And we can go into what that is in a, a few moments. But when I came to that understanding that epiphany that it’s about conflict, family business consulting at its core should be seen through the lens of managing conflict. And when I came to that sort of epiphany, and then I said, well, how do I understand that? How do I create a practice based on that? And I thought back to Carl Sagan. I ’cause that was my probably the strongest lesson i, I learned at, at both schools that I went to. And I thought about breaking down what went wrong in my family and in our enterprise, our business into the key components, and figuring out how those key components relate to each other and thinking it through the way I was taught in an equation format. And that’s what became the basis of our practice, how we train our consultants how we do our work, how we see our work, and became the basis of the book as well.

Jonathan Goldhill (07:50):

Well, it, it’s interesting. That’s a really interesting backstory about following Carl Sagan. And I guess if you had followed a Buckminster Fuller, you might have come up a completely different systems design completely . And maybe it would’ve been overly simplistic. But, you know, I think your book really is groundbreaking to me because it, it discusses conflict in such detail. I mean, who would’ve thought that there’s so many different levels and dynamics in, in conflict. And, and where I was last reading this last night, I got stuck in the litigation and dispute that whole chapter because frankly, I’ve, I’ve never been through that. And I thought, wow, this is like everything you’d want to know or don’t want to actually ever have to know. Yeah. About dispute resolution and the problems and, and power dynamics. And I mean, the overly simplistic thing is you just gotta be really careful about what you’re about to do. Because you might be sitting with, you’re probably gonna be sitting with these people at Thanksgiving dinner, and, you know, will you be able to do that if you go down that path? So yeah. But let, yeah. But let me turn, let’s, let’s talk about the distinction in family businesses from non-family businesses. And what distinguishes conflict in family business from non-family business. ’cause I know you’re, well, the,

Doug Baumoel (09:17):

Yeah. The, the major distinguishing factor between the kinds of I’ll call ’em conflicts that exist in non-family business versus those that exist in family business. The main difference is, well, there, there’s several differences. The first difference is that in a family business, the conflict is not simply over money or power. It’s about who you are and your place in the world. So me being a stakeholder in my family business, this is more than just what gave me a paycheck. This was what my life was about from when I was young growing up, sitting around the dinner table. The, my role in the family business as my father’s was, as the founder, was strongly connected to our identity. It was who we are and how we defined our place in the world. Well, you might identify with your career. I had other jobs. I worked at Polaroid as an engineer for my first job out of, out of college. My, I was proud about working for Polaroid. It was after all the Apple computer of it. Today. It was the high tech company to be at. I was proud of it, but it didn’t define who I was. My role in my family business defined who I was. And being an owner of that family business defined who I was. And in part who my brothers were. They identified with that ownership. Mm-Hmm.

Jonathan Goldhill (10:56):

 

Doug Baumoel (10:57):

In a non-family business, the disputes that come up are not identity basis. They’re substantive. They’re over, well, I didn’t get a good, good enough bonus or my boss, I, I don’t get along with my boss. Or, he is, he is unreasonable in some ways. And conflicts do develop and let me call them disputes, right? Disputes develop in non-family enterprise, sometimes they lead to litigation. They could be very extreme, but they’re much different. They’re not about who you are. And when your identity is threatened. And this is what distinguishes identity-based conflict from civil dispute,

Jonathan Goldhill (11:40):

Right?

Doug Baumoel (11:41):

And your identity is threatened. You’ll go to great lengths to protect, assert your identity. And when your identity is threatened, your amygdala gets triggered. Your fight flight or, or freeze brain gets triggered. And you, your rational thinking gets hijacked. You behave emotionally. And this is why conflicts in family enterprise become so emotional and so extreme. I like to say conflict in family enterprise, which is identity-based conflict has more in common with other types of identity-based conflicts, religious, political, ethnic type conflicts. And the solutions, or the approaches to manage conflict in family enterprise need to derive more from those other types of, of identity-based conflict management approaches than they do from civil dispute approaches. So while I’ll call it dispute resolution, mediation, negotiation, legal action those are approaches to manage disputes, civil dispute. They typically don’t work in family enterprise. And when I was a client to family business consultants, that’s pretty much what, what was delivered. You know, well, you have a conflict so let’s try to negotiate it or mediate it, or let’s improve our communication. None of that was very effective at all. In fact, ma, much of it made matters worse.

Jonathan Goldhill (13:22):

So let’s explain a little bit more about what, I mean, let’s, let’s dive even deeper into identity. So you talked about religious, you talked about political, ethnic, let’s identify, or let’s label or come up with what are a few other identities that people develop or identify with, because they could be many, I suppose. And what are those conflict resolution approaches within those other disciplines? Religious or political? ’cause I, I for one, have never been successful. I i, in a political discourse of agreeing, or, well, I shouldn’t say agreeing. I mean, I think those are ideologically based, and oftentimes it’s very difficult. We can just, we can shake hands and we can agree to disagree, and we can still love each other and trust each other. But, but, so talk a little bit about those other institutions maybe, or, you know, what are the, some of the other identities and, and how are they solved within those contexts? And, and or, and draw it into what, how you work with it. Well,

Doug Baumoel (14:32):

I’ll, I’ll speak I’m not an expert at Global Peacemaking. Right, right. I can’t speak to that. But the forward, I don’t know if you, you took the time to read the forward of our book. I did. It was written by Tim Phillips. Tim Phillips is exactly that person. That’s why we had him write the the forward, because he operates, he worked with Jerry Adams in Northern Northern Ireland. And he worked in the South African conflict in Nicaragua, I believe. So he is been all over the world managing those types of identity-based conflicts. And when we met him, we saw very much how, how strongly overlap is in what we do and what he does. And of course, with our work, it’s applied to family enterprise and his work, it’s applied to global political, religious, ethnic conflict. But the commonalities, the areas of commonalities are identity, identity-based conflict are what happens when your values, your beliefs, your beliefs about what’s fair, your beliefs about who you are, your skills, your competencies your personality. When, when those characteristics are not respected by another and not acknowledged by another conflict occurs, same kind of conflict. So I believe I’m competent to be the president of the company. My brother doesn’t believe that. But this is a core belief of mine. And my destiny is that family business. So I’m gonna fight tooth and nail to become, if, you know, if, if that’s the circumstance to be that president, because that’s the fulfillment of my identity.

Doug Baumoel (16:24):

So approaches and the book outlines sort of the, well, let’s start, before we get into the approaches, let’s talk about the components of conflict, please. That are common to both. So in any kind of conflict, religious, but any, even disputes, there’s certain commonalities. Those are, people have a, people and groups have opposing goals, right? They have, they have incompatible values, right. And they have historical impasses. Now, that’s a, the third one is kind of interesting because I think, so let’s, when you join the non, sorry,

Jonathan Goldhill (17:05):

Let’s define that. ’cause I think that’s really interesting.

Doug Baumoel (17:08):

So, historical impasses, when I joined Polaroid as a young new graduate, I didn’t bring any baggage to, to my office space and to my colleagues. There was no historical impasses, right? When I joined my family business you know, you bring all your family business, all your family baggage to that environment. So and in religious, ethnic, political environment, mm-hmm, , there’s a lot of history that’s important. Take a look at what’s going on in the Middle East. It’s all about the history. Exactly. A lot about history. Mm-Hmm. . So, so what one of the distinguishing features of identity-based conflict is it often involves to a larger extent historical impasses. Whereas civil dispute, less so, not impossible, but less so,

Jonathan Goldhill (18:02):

Right? So you have

Doug Baumoel (18:03):

The three basic reasons for conflict. People have opposing goals, incompatible values, and historical impasses. And I would challenge the, the viewers to the podcast to think about a conflict in their lives, any conflict, and start breaking it down into those three categories. Into those three buckets. Now, there are additional terms as you can, you know, you’ve read the book, there are a dozen terms. Mm-Hmm, , I’ll focus on the most important ones for now. So clearly opposing goals, goals can be negotiated,

Jonathan Goldhill (18:40):

Right?

Doug Baumoel (18:41):

Unless they’re existential goals, unless they’re, you know, you need that for your, for your, whatever it is, for your identity. But for the, for the large part, goals can be impacted by litigation, by force of some sort. And by negotiation, whether mediation of a direct negotiation, you can compromise your goals, harder to compromise your values, probably impossible. I can’t negotiate with you if you’re a Republican, I can’t negotiate with you to become a Democrat. Now, I could probably bribe you, or I could probably you know, apply some force to make you vote a different way. But I can’t change what you believe. And that piece of you, that is that Republican or Democrat, I can’t change that. I can change the behavior maybe, but not what you believe, not what you value.

Jonathan Goldhill (19:43):

And we can’t assume that just because families came from the same biological, you know, progenitor or whatever, you know, that they share those same values. Right?

Doug Baumoel (19:54):

Exactly. Exactly. Even

Jonathan Goldhill (19:56):

The same parents, cousins for sure can really, the values can be radically different as the family distributes.

Doug Baumoel (20:04):

And take one of the example values in the family business, that’s really at the heart of a lot of conflicts we deal with, and that is risk tolerance. Mm-Hmm.

Jonathan Goldhill (20:17):

.

Doug Baumoel (20:17):

So you can grow up in a family, and the one kid has high tolerance of risk. One has very little. That’s not something you learn in school or in, in, around the family table. It’s, it’s part of your makeup. And those get in the way in family business.

Jonathan Goldhill (20:35):

Yeah. I, because

Doug Baumoel (20:36):

They need to, to different decisions that one would make.

Jonathan Goldhill (20:41):

Absolutely.

Doug Baumoel (20:42):

And you can’t negotiate. I can’t necessarily negotiate with you to, to love risk. If you hate risk, if you’re not comfortable with it, I might be able to encourage you to take a risk in a given situation by protecting you against the downside or something.

Jonathan Goldhill (20:59):

Right.

Doug Baumoel (21:00):

Can’t change who you are. So what does work for addressing incompatible values is leaning into them and understanding who, who, your brother or sister or cousin, who they are, why they have those values. Developing a sense of empathy for those values, trying to sit in their shoes for a while, stand in their shoes for a while to see why those values work for them. And from that, from that work. And it is work. And it is risk taking a risk to, to really understand what’s going on in somebody else’s brain and why they feel certain ways that are really abhorrent to you. You can find opportunities to accommodate other people’s values. So you go from a situation where you start off feeling that those values that the other possess are incompatible with yours to a deeper understanding of who that person is, and a way, and finding a way to accommodate those values for the greater good, whatever that greater good is.

Jonathan Goldhill (22:20):

Well, that makes sense to me. But now, if we get to historical impasse, it seems like that’s almost, we’re now we’re delving into psychoanalytic or psycho deep psychological makeup of people. And unless we’ve done a lot of work on ourselves, or maybe don’t have to have done a lot of work on ourselves. But it’s difficult, I think, for people to get past historical impasse without some kind of help.

Doug Baumoel (22:53):

Well most often folks push historical impasses down, they don’t wanna deal with ’em. Right. And they don’t wanna deal for a couple of reasons. Number one, there’s power in being the victim, and there’s power in seeing the other as less than or as bad, or as a transgressor, people don’t wanna give up that power.

Jonathan Goldhill (23:19):

Sure.

Doug Baumoel (23:20):

And, and to spend the time, energy, and risk again, to sit in their shoes, find out what was instigating their behavior or, or where they were coming from there. So the point in, I’ll, I’ll get back to incompatible values and sorry historical impasses in just one second. But the point I wanna make is by understanding that conflict can be broken up in these different categories, it reveals that different approaches are needed to address each different component of conflict. So you cannot, for example, you can, mediation might work for some of the opposing goals. They’ll never work for incompatible values that needs a different approach. Now, let’s get to historical impasses. There’s really only one thing that works for historical impasses, and that is a forgiveness process. Yeah. When we start talking about forgiveness in a family, at a family board meeting, at a, at a corporate board meeting, you can see the eyes glaze over.

Doug Baumoel (24:31):

That’s not some place people wanna go. So we have defined it as a releasing blame process. And in the equation, we, we talk about releasing blame more so than forgiveness. But honestly, it’s a forgiveness process. And we we have a process and it’s a, it’s a very methodical approach to break down what went on in the past to find bridges amongst the various people involved, to reconnect, to understand, to apologize. So there’s a, a process. And we adapted that process from a very interesting book that was written by a woman named Janice Abrams Spring. And this was a book called, how Can I Forgive You? It’s a book about how couples that have experienced an infidelity, how those couples that wanna stay married and get beyond that, that that betrayal, how they can do so, how they can find a level of forgiveness to something that, you know, would likely destroy most marriages. So we saw in, in reading that book, and actually taking a course with her, that this was very adaptable to the work we were doing with our families, because yes there’s, I can imagine in, in infidelity in a marriage, this is a terrible thing to go to go through. But I, I would say confidently that the kinds of betrayals that happen in family enterprise rise to that same level.

Doug Baumoel (26:14):

And therefore, the methodology that she expressed in her book, which is a great book the, the methodologies that she outlined in her book are very adaptable to the kinds of betrayals and, and historical impasses we see in our work. So we’ve adapted that approach. We’ve changed it a bit for the corporate scenarios. But yeah, forgiveness. Yeah. That’s the approach that works for historical impasses. I think,

Jonathan Goldhill (26:49):

And it’s hard. Yeah. And I think there might be some other approaches. I’m, I’m not adept in them enough to speak of them, but one thing I’m studying right now is the polarity model for change, which is looking at the extricated or externalized parts of ourself that if you see consciousness as, you know, we’re, we’re one and the same together, that we’ve excommunicated a part of our ourself that may lie within someone else, and that we take a position and they’re in opposition. And so as soon as we take a position, there’s always gonna be an opposition. And so, trying to understand that, to make peace and align these two separated parts of ourself. But this is a, this is like deep psychological transpersonal, almost consciousness kind of work that’s challenging. Well,

Doug Baumoel (27:48):

No. So in our forgiveness process, we talk about four types of forgivenesses. Mm-Hmm. refusing to forgive. That’s a choice. That’s one type of forgiving. And there’s power in that, as I mentioned before. Mm-Hmm.

Jonathan Goldhill (28:02):

.

Doug Baumoel (28:04):

There’s there’s I didn’t prepare to talk about forgiveness, but there’s refusing to forgive. There’s, oh what we call cheap forgiveness. Mm-Hmm.

Jonathan Goldhill (28:17):

 

Doug Baumoel (28:18):

Cheap forgiveness is where you say yeah, yeah. It’s okay. It’s okay. It’s, you haven’t gone through the work of truly understanding and, and doing a deep dive into the motivation, et cetera. And going through the, the proper apology process to truly make it all right. So you push it down for a while and it’ll come up later. That’s what we call cheap forgiveness. Then there’s acceptance when the other person is not around or not willing to engage with you to do a, a, a bilateral process. And then there’s bilateral, we call it genuine forgiveness, which requires equal vigilance from both, both parties. So what you just described falls in between the second and the third. So the cheap forgiveness, and that’s a bad term for it. Janice Abram Springs called the religious forgiveness forgiving, because it’s, it, it aligns with my values as a, as a good Christian or Jew or whatever, a Muslim, whatever. Mm-Hmm. we, we see it a little bit differently. But for those that hold the same values, spiritual values, for example, you just described a spiritual approach,

Jonathan Goldhill (29:49):

Right?

Doug Baumoel (29:50):

To forgiving that could work for you as an individual in a process to accept what the transgression and reestablish a, a relationship with that person. ’cause You’ve done your own work independently of the other. If the other person shares your values and understands that process, you can do it together. And even though you’re not digging into the past and going through the apology and all of that, you can circumvent that if you share the, the spiritual values where forgiveness and moving forward are at the core of that belief. So maybe that’s too deep a conversation for, for this podcast. But a forgiveness process can work from a variety of perspectives. It can work from a spiritual per perspective. It can work from an, you know, rolling up your sleeves and doing the hard work of digging into the past. What happened? What do I have to apologize for? What does a meaningful apology look like? What does recompense look like? So yeah. But historical impasses in a family enterprise have to be dealt with one way or another.

Jonathan Goldhill (31:14):

Yeah. They’re not easy. Let, let’s, so let’s go back to sort of high level 30,000 foot view. Yeah.

Doug Baumoel (31:21):

Sorry, we did get into the weeds

Jonathan Goldhill (31:22):

There. That’s okay. What’s really going on when families are fighting over business or wealth? It, it’s, it’s just back to this identity issue, right? Yes.

Doug Baumoel (31:33):

They’re fighting over who they are. They want to be acknowledged for who they are, right? And they want to be under, they want their place in the world as they see it to be respected and acknowledged.

Jonathan Goldhill (31:49):

And when you try and deconstruct conflict, ’cause you’re going into highly co high conflict situations, probably that’s when you’re called in and you’re trying to deconstruct this, do you find that there’s, and I think I’ll use a technical term here term here, there’s a lot of confabulation going on. Members are, they’re, they’re frustrated about the business, but there’s really something maybe going on around the wealth, or there’s something going on around the, in-laws or the spouse. And so it’s, it’s almost like that whack-a-mole situation where you’re, you’re trying to get at what’s really the root cause here. And everyone’s got a different root cause because with some, it might be around historical impasse issues with others that might be around shared values and, and or opposing goals. I mean, this, well, that’s, yeah. That’s

Doug Baumoel (32:47):

Another thing that dis that distinguishes the kind of civil dispute that exists in non-family enterprise and in life outside the family that distinguishes that kind of normal dispute from the kind of systemic conflict that exists in family enterprise. Mm-Hmm. in civil dispute and in approaches to dispute resolution, the the frameworks typically involve two, maybe three people or groups at, at a time. So when you talk about mediation, you’re typically thinking about mediating between two groups or people, sometimes three in a family enterprise, a dispute that starts between a father and a daughter over something, you know, in the business quickly metastasizes, and the mother’s involved, the cousins involved, the sis siblings are involved, the kids are involved. So a conflict. So, so conflict is systemic in that way. It’s not, it’s it’s not sort of an individual isolatable dispute like you would have in another setting,

Jonathan Goldhill (34:06):

Right?

Doug Baumoel (34:07):

But, so, on, on the one hand, the complexity is its identity based conflict, which is very extreme and difficult to manage in its own right. And secondarily, it’s systemic. And by systemic, it involves, the whole system involves everybody. And everybody has a different perspective on the conflict. And they are all stakeholders in this conflict. They each want something out of the resolution. So it is complex, and it requires a robust process to, to address it.

Jonathan Goldhill (34:46):

And how long, I mean, how long does it take to address it? I imagine that people who call you in, they might ask the question upfront, like, how long is this gonna take? And you’ve, you have to answer that question. How, how

Doug Baumoel (35:00):

Do you Yeah, exactly. So now I think we have a reputation of being the conflict management people in, in this space. Mm-Hmm. you know, before it was, it was not easy. We’d have to say, no, it’s more complicated than you think. You don’t only need a facilitator for family communication. You know, we used to have to, that, that’s what the call used to be. Call used to be. I, we just need a facilitator for a family meeting we’re having. And you peel back the union with a couple of family meetings and you find, oh my God, they’re on the verge of a lawsuit or, or something. Right? Right. So we’ve taken that step back years ago, this, and, and that’s actually around the time. We we started writing the book and really coalescing around a, a more formal process to do this work.

Doug Baumoel (35:54):

So what we say to clients who call whether they’re looking for a, you know, a mediator sometimes, or a, a facilitator will say, this is what we do, and this is what we’re really good at. We will come in and let’s say a typical engagement for us is, let’s say three months. The first month, we don’t create any value. We’re just learning. We’re reading everything we could find. We work typically as a two person team, sometimes gender balance, sometimes skillset, balance. But typically a two person team I can explain why that’s so crucial in this kind of work. But, but rather, I’ll tell you what we do. Mm-Hmm. . So if we have a three month engagement, the first month we’re learning, we’re reading the shareholders agreements, the trust agreements we’re looking at the financials. We’re looking at emails that have gone back and forth and sort of gone viral in the family.

Doug Baumoel (36:52):

We’re interviewing each of the key stakeholders. Their spouses, typically we’re interviewing the C-suite, if it’s a company or the family office director, we’re interviewing key advisors their wealth manager, if that’s relevant. So we’ll come up with a list of maybe 20 people that we need to hear from, and we’ll hear from them in that first month so that we understand what’s going on, where all the moving pieces are. We also have several tools that we employ. You’re probably familiar with the genogram. We do a timeline. We do a, a stakeholder map. We do a variety of tools that help us understand the system. And all along we’re we have this conflict equation sort of burned in our brain. So when I’m, you’re the client, and I’m having a conversation with you, your perspective is that you are having a nice hour and a half conversation with two people that seem to know what they’re talking about, but where in our notes we’re teasing out what are your goals?

Doug Baumoel (37:55):

What are your values as pertaining to the issues? What is your history? And then when I speak to your brother or sister or mother, I’m finding out their goals, their values, their histories, and other factors that you know about from reading the book. Right? and then offline, and this is the value of having two people. We role play, we dig through all the notes we’ve taken, we find out where in the system there are opposing goals, where there are incompatible values, where there are historical impasses. And we’ve learned a lot about the system, how it’s cons, how it’s organized, et cetera. We understand the skill sets and the, the personalities of the people that we’re engaged with. So we have all of this rich data. The second phase or the second month, typically we’ll do triage. If there are relationships that have been broken that need some immediate work.

Doug Baumoel (38:53):

If there is, we will do that. If there’s education edu general education about dispute resolution, conflict management financial literacy how the business works. Sometimes we’re working with the people that are not in the business, but they’re owners or owners to be. We’ll talk about governance. We’ll do an educational piece so that we level set everyone. And then the final month or third will be coming up with options for the family. We’ll have learned enough about their system. We’ll have brought everybody up to a level where we believe they can sit around the table and make decisions about the options that we’re gonna present. And those options will be they can be depends on what’s going on. They could be a family employment policy for the, for the next gens to be successful joining and, and advancing in the business.

Doug Baumoel (39:52):

It could be changes to the org chart, changes to the ownership group. A negotiated change could be aligning on a new vision and mission statement. Could be developing a board of directors. We have no idea. We come in with a clean sheet of paper. And together, through that three month period, we’ll come up with not only structures that would help the family overcome or manage conflict, but also we’ll develop the individuals in the groups so that they’re better able we built that muscle for them to better communicate, to understand better what’s going on. And during this process, we’re also building trust. You look at trust a little bit differently than other folks do. I can go into that if you want, but trust building, trust in the system is crucial for this work. And sitting above everything that we do. Something that we call the family factor.

Doug Baumoel (40:52):

So we’re a family business consulting group, right? Consulting company. We work exclusively with family owned enterprises, whether it’s a family office, a family of wealth, family with a business. That’s what we do. Sometimes we get a call from a family that’s not really a family anymore. You know, they’re so dispersed and so late generation that they’re just people who share an asset. And maybe they get into an argument about that asset. That’s not our business, and we can’t help them. And we know why we can’t help them because they have no family factor. And this is probably the most important part of the book. It’s understanding the family factor. And we define the family factor. The strength of the, we define it as follows, is the, it’s the answer to this question. Is the family bond strong enough to leverage compromise, forgiveness, and a commitment to change? And from the first time we pick up the phone to speak to a prospect, we’re gauging that. We’re trying to figure out how strong is the family bond. They may be, they may be at each other’s throats, hiring lawyers lawyering up, ready to litigate. They may say they hate each other and don’t trust each other.

Doug Baumoel (42:15):

That doesn’t throw us. But if those relationships are still meaningful to them, if they still consider themselves family, we can help ’em.

Jonathan Goldhill (42:27):

Makes sense. You have an interesting definition of trust to go back to that as I read that section of the book, you, you boiled it down to one word, and that was predictability. And that’s an interesting definition. I thought of trust and it, I forget the source. It was someone and well, it was

Doug Baumoel (42:52):

We, we got that from Eric Erikson’s work on the eight stage development, right? Yeah. So Eric Erikson came up with a theory that there, that there are eight stages of human development. Mm-Hmm. . The first stage was, you know, we were struggling with these common definitions of trust. I’m assuming we can go on it’s past time, but

Jonathan Goldhill (43:13):

Yeah, that’s all right. Run along. If people are interested, they’ll stay tuned.

Doug Baumoel (43:18):

Great. So trust, when we started this work, we ascribed to the traditional definitions of trust. And we would get a phone call from a family and conflict. And they would immediately say, I don’t trust my brother or my sister or my parent, whatever they don’t trust. And that is polarizing. When you say, I don’t trust the other person, you cannot sit at a table and negotiate with ’em because you don’t trust them. So this, we thought originally that this idea of trust was crucial and defining it by the standard metrics that, that we started with was problematic. So most people define trust as well. I like you, you like me, we want the same thing so I can trust you. Right? So we hold back a little bit and said, no, that’s not trust. That’s affinity and alignment. Mm-Hmm.

Jonathan Goldhill (44:15):

 

Doug Baumoel (44:17):

Another. And so we said, well, let’s not use that as a definition of trust. Yes, your brother and you are at odds. So you are not aligned anymore. Doesn’t mean you don’t trust each other, but you’re not aligned anymore. And when you’re not aligned and you’re fighting in business, you stop liking each other so much. So you, you don’t have that sense of affinity anymore. Hopefully it’s temporary. So we decided to look for another definition. Another beautiful definition is feeling safe when you’re being vulnerable. Yeah. So wonderful definition. You want to feel safe with your family members. The trouble is when you’re in conflict with your family members, deep conflict, over existential identity issues your family will be the most cruel to you. They know how to push your buttons better than anybody outside the family. They know how to push your buttons.

Doug Baumoel (45:11):

‘Cause They put ’em in the, in the first place. They know what will be hurtful and they will use it because they’re fighting for their own identity issues and their own existential career and life issues. So it gets extreme. So if you base your definition on trust, on being able to feel safe when you’re being vulnerable, they’ll quickly say, well, I don’t trust you ’cause you said this horrible thing to me. So we were looking for a different approach. And by the way, there are other, there’s the trust equation. There are, there are other approaches to trust that typically speak to task trust. And I wanna make that distinction because it’s important. I, you know, if I, if the issue is painting my house and you’ve never painted a house before I’m probably not gonna trust you to paint my house. Right? Because there’s competency.

Doug Baumoel (46:05):

And if we’re not good friends will you have the care to do it? Right? You know, there, so there are equations and other, other approaches out there for better understanding task-based trust. We’re not talking about that. We’re talking about relationship trust. And so we came back to, well, what is reliable? What is a robust way to define trust in family relationships and in a family business environment that we can really use? And when things go sour, people don’t, if they employ this definition, they don’t run to their corners and say, well, I don’t trust you. And then how can we build trust if they’re already in those corners? And we came up with this idea that Eric Erikson had it right the first stage that he calls the trust stage when he describes an infant in the crib crying eventually, that in infant learns when, when he or she cries, they will get picked up, they will get fed, they will be held.

Doug Baumoel (47:19):

They develop a sense that there’s predictability in their world. And they have to successfully pass through that stage to get to the other developmental stages. And you can see this in these horrible orphanages around the world where the kids are not picked up. The issue that develops later in life for them is a lack of ability to trust. Because, you know, according to this framework, they haven’t success successfully passed through that first developmental stage of, of understanding that the world is predictable and you can trust that. So we adapted that to our work with family businesses by saying, if you know your stakeholder well, they may want something completely different from you. You may hate their values. You may think that your brother is gonna stab you in the back as soon as you turn around. But if you know them well, there’s some predictability in that behavior.

Doug Baumoel (48:18):

And if you know how your system works, if you know how compensation works, how getting a job in the family business works, how getting on the board works. If you know how distribution policy is set, if you know how communication happens among stakeholders within and without the, and outside the business, if you know how the system that connects you works, and you know the individuals well, you can sort of predict what others will do. That gives you power. That gives you the power to start making decisions beyond your own personal interests and instead for the greater good of the family or the enterprise. So if I don’t know my fellow stakeholder well, and I don’t understand the system that connects us, I don’t really understand how the business works. I’m not financially literate. So I don’t understand the, the, the system of money.

Doug Baumoel (49:21):

All I can do is protect myself, make decisions to protect myself against the world, that family business world. So again, if I understand my family members and outside the family as well, that are involved, and I understand the system, the business system or the wealth system that can connects us, there’s predictability. And if we equate that predictability with trust, I may, again, I may think that you, you want something very different from me, but I sort of can trust that I can trust your intentions. ’cause I know them. It’s when people start keeping secrets from each other. It’s when systems are not transparent. People aren’t educated in those systems. The systems are bad and broken. System of communication and transparency, corporate information. When those systems are broken or people choose not to be transparent, then people don’t trust the system. And, and the system, they don’t trust it.

Doug Baumoel (50:30):

‘Cause The, the system is not predictable for them. So when we use this definition and walk people away from expecting to be safe when you’re being vulnerable, walk them away from believing that the only way I could trust you is if we want the same things that I like you. And instead supplant that with this understanding that let’s go for predictability and build trust from there. And once you build that predictability, which can be built, I can get to know you. We can go on a family retreat. We can I mean, there’s so many things that we can do to get to know each other better in a family business context. We can have facilitated meetings just hang out more. And that’s the beauty of family retreats. They build trust, they build that sense of predictability. So we can build it and we can avoid the polarization that happens too easily when trust is defined by these very fragile metrics.

Jonathan Goldhill (51:43):

That’s great. Wow. Well, you are a deep subject matter expert and thank you. I’ve been learning a lot reading your book. I totally recommend it to others. I’ve already recommended to a handful of people. I, I don’t know if they’re gonna love my recommendation because it is pretty difficult. I think, I think it’s a challenging read for a lot of people. It’s, it’s not an easy read, it’s not a leadership fable or anything. It’s a, it’s almost like a reference book. You have another one forthcoming, or that’s the book that, that

Doug Baumoel (52:16):

Conflict. So conflict. Yeah. We are actually there’s a call for a second edition. So we were thinking about, there’s other books we wanted to write a book just on the family factor and just on a few other things, right? We write articles on, on each of those components. We have articles out there, build Building Trust and finding purpose and several of the concepts that are in the book. And for those readers or viewers that are interested, I, I’m happy to share some of those specific articles or chapters in other folks’ books. But we feel that the book we feel that a second edition is warranted for this book. It’s gotten yeah, it, it is it’s been adopted to beyond our expectations and we think we could we can add a lot to it. So we’ll do that.

Jonathan Goldhill (53:14):

I’m sure you could. I I think as a kind of a wrapping up here, as a final thought, I think it’s amazing that you can do this work in three to six months when I look at coaching as an ongoing lifetime kind of event for people who are wanting to professionally and personally develop themselves. There’s, there’s no end to the learning that one can do. And if a coach can deliver it then that’s, that’s an amazing value that someone can bring. But I would think that to keep things, like, to keep the system clean, once you’ve done, you’ve done your work and laid the groundwork and identified the areas where there may be distrust is ongoing, coaching would seem to be so compatible with what you’re offering because people need that. Otherwise it’s like a workshop or a seminar they go to, they learn and it all makes sense and then it, it devolves over time unless it’s reinforced. There’s, there’s needs. Well, I mean, there’s gotta be some kind of reinforcement and continuity of the conversation or conversation.

Doug Baumoel (54:31):

Well, in closing the success of our work sorry, the outcome of our work is typically significant change. Mm-Hmm. . So it’s not it’s not that they just learned something that they didn’t know before. Oh, of course. It’s that it, that as a result of our work, they might have rejiggered their org chart, they might have put in very significant new policies. The, the ownership structure may have changed, the shareholder’s agreement may have changed worse, of course. So there’s, there’s significant change that happens in our work, but you are absolutely right coaching. We, we are not coaches No.

Jonathan Goldhill (55:14):

And change constant in a company like that changes

Doug Baumoel (55:17):

Concept. So, so we rely on folks like you that when we’re done with the sort of the surgery we depend on folks like you to, to help families retain the benefits of the work for the long term and be able to do the tweaking as necessary. That’s why I’m thrilled you, you, you’ve embraced the book so that we can work together in the future. So that’s great.

Jonathan Goldhill (55:42):

Yeah. Yeah. And you know, as we talked about earlier in one of our conversations that, you know, family businesses fail, you, we talked about poorly managed business, which is the reason that almost all businesses that fail, fail. And the other one is unprepared heirs to take over the business and to be able to lead it with a new vision, you know, a reinvigorated purpose and keeping it relatively conflict free, hopefully. So and that’s,

Doug Baumoel (56:14):

Well I think my, from my world, conflict is the number one killer of family businesses. Yeah. All family, all businesses face risk. They face enterprise risk, they face regulatory risk and market risk. Right. But for family enterprises, the key risk they face getting along.

Jonathan Goldhill (56:34):

Yep. Got it. Makes sense. Alright, Doug, I’m so glad to have you. Pleasure,

Doug Baumoel (56:40):

Jonathan.

Jonathan Goldhill (56:40):

If people want to find out more information, they can go to continuity, family business consulting or they can visit

Doug Baumoel (56:48):

Jonathan Goldhill (56:52):

And they can find you on LinkedIn. I’m sure the spelling of your last name is B-A-U-M-O-E-L. Doug, great to have you on the show.

Doug Baumoel (57:03):

Pleasure, Jonathan. Thanks for having me.

Jonathan Goldhill (57:05):

Yeah. And folks, you know the drill, if you got some value from this, please share it and give us a good rating on your podcast listening application of choice. And don’t forget, pick up a copy of Doug’s book and if you’re interested in talking to the source, talk to Doug. If you’re looking for something else to prepare your heirs to take the business to the next level, give me a shout. Thanks again.

Jonathan Goldhill (57:28):

This podcast is sponsored by myself, Jonathan Goldhill, and my company, the Goldhill Group, where we provide coaching for growing companies. I’m Jonathan Goldhill, and my purpose is simple to guide entrepreneurial leaders in family businesses towards more freedom and fulfillment. I want entrepreneurs to get clarity around the changes that will make them and their businesses more successful so they can experience the same freedom I’ve enjoyed in my life. Our proven practices challenge business owners to think differently about their business and how they’re running it, and quite literally become game changers in our clients’ companies. Learn more at the Gold Hill group.com website where you can schedule your free strategy session. Thank you for joining us on the Disruptive Successor Podcast. If you enjoy today’s episode, please subscribe, review, and share with a friend who would benefit from the message. If you’re interested in picking up a copy of my book, disruptive Successor, go to disruptive successor.com.