Congruency Based Family Governance
Future Proof Your Family
This was originally published in the family business network and education platform LORANGE NETWORK.
Introduction
Family businesses are the oldest form of business organization with cultural advantages that have been linked to the outperformance of family businesses over non-family businesses.
However, these cultural elements can also be disadvantageous, weigh on business performance and consequently potentially erode socio-emotional and financial wealth. Family culture is a key ‘system leverage point’, dubbed the ‘Family Effect’. The question is how to increase the advantages and decrease its disadvantages. The traditional answer to the problem is formal family governance. Some disagree!
Problems with Traditional Family Governance
Inspired by the age of enlightenment and the following mechanistic, industrial mindset of past centuries, social systems are viewed as machines that can be engineered and controlled according to Frederic Taylor[1].
The functioning of social systems would be ensured by rules and regulations that align all parts. Evidence of this is the corporate governance framework, which is often used as a template for family governance, but this strategy may come with unintended consequences.
The family system vs. corporate system
Family systems resemble non-linear systems, with emergent properties where individuals have different preferences and preference-reversals to form relational patterns according to the self-organizing principal through many iterations with reinforcing (diminishing) feed-back loops. Over time, they create a path-dependent system-trajectory. So, a family is an organism. While this is true for all social systems, corporate social systems are created in a more structured, rational way, plus they have more freedom-degrees because individuals can choose their employer, but they cannot choose their family. Thus, family systems are closed systems which makes them prone to chaos.
Linear measures for non-linear problems
In a linear, mechanistic world, we can control the outcome of a system, and this is how family governance is often perceived: the rules and regulations must be complied with and take away freedom degrees like a corset, at Times rendering the family system fragile.
Systems without sufficient freedom-degrees are fragile like a wine glass: severe impacts shatter the vessel because it lacks adaption capacity. In contrast, a football is resilient, it bounces back after the impact, and a Hydra becomes stronger — it grows back two heads after you cut off one! Thus, a Hydra is anti-fragile as it learns and creates freedom degrees after the impact.
Families are prone to earthquake dynamics in the sense that small issues can become very big over time and the family-system may oscillate because it lacks freedom-degrees. Once the amplitudes of the oscillations reach a critical magnitude, the earth starts shaking and the family governance edifice, respectively the family, are suddenly on the verge of collapsing into chaos.
A better approach to family governance is to view families as organisms, i.e., a dynamic complex system that are prone to chaos. They undergo frequent phase transitions triggered by shocks that challenge the integrity of the system.
Synchronising for congruency: creating a resilient base
What would you do if you build a house in an earthquake prone region? Wouldn’t you lay a resilient foundation that absorbs shocks before you erect the edifice?
In the context of family governance this means the family system must be synchronized and made congruent beforeformal family governance is introduced. This lubricates the social system and creates a commitment culture around an ‘attractor’, that is conducive to higher levels of ownership. It is more context independent than formal family governance, which in contrast, is context dependent, and it favors a compliance culture that is difficult to police.
How synchronicity works
Synchronicity opens ‘information channel capacity’ that according to Claude Shannon[2] is a function of bandwidth and the signal-to-noise ratio. Bandwidth is needed to create interest and thus, attention span which allows for active listening to what a sender transmits as verbal and non-verbal signals. Signal quality is of importance too. Often, transmitted signals are scrambled, fraught with noise that inhibits clear communication, which leads to misunderstandings that result in unhealthy feed-back-loops and morph into conflict and chaos.
Reality is subjectively created by everyone. Restricted information channel capacity systematically inhibits the creation of a shared reality and meaning space, which fosters information asymmetry, the main reason for conflict. This communication channel restriction is driven by a lack of synchronicity and social system congruency.
Synchronising relational patterns
The main reason why the human brain is bigger than it needs to be for survival is our ability to make social connections. One suggestion is to make use of that capacity which is more profound than our capacity to think and act rationally as required in the corporate governance model. The concept of bounded rationality was established by Herbert A. Simon[3] and was further substantiated by Daniel Kahneman[4] et. al.
The level of synchronization between individuals can be measured. It has been shown in hyper-scans, where two or more people have their brain activity recorded while being exposed to a shared stimulus, that brain patterns synchronize.
While listening to a story the language processing areas showed signs of synchronization and while people played music together, the reward circuitry responded, oxytocin — the hormone secreted when we feel part of a community — increased and cortisol levels, a stress hormone, dropped.
This is possible since our brains feature mirror-neurons that are active during social interaction and enable us to connect with others and to feel empathy and compassion for them.
This neural coupling extends to the heart- and gut brain as visceral reactions follow. Specifically, breathing and heart rates synchronize in social interactions. So, true synchronization becomes an embodied cognition!
Family engagement procedures synchronize the family system, which is paramount for it to become dynamically congruent so that it creates adaption capacity and allows the system to become anti-fragile.
Creating attractors
We humans are donkeys — we follow carrots! The carrot can be viewed as an attractor which is surrounded by an attractor basin. Particles (individuals) that are within the attractor basin converge on the attractor. If the attractor is strong enough it prevents particles from succumbing to other attractor forces. This inertia is usually welcomed in family systems because it inhibits centrifugal forces to become dominant.
Social attractors work when they are self-relevant for the individual. Attractors unfold their power in the space between stimulus and response, where human beings make choices based on their preferences. In general, engagement processes align the various realities into a shared reality, but one way to form an attractor is to co-create a family narrative, which is an example of family engagement that already nudges family members towards the basin of the emerging attractor.
Family narratives should be emotionally engaging and suspenseful to read, thus they are distinct from simple chronologies.
Emotions are arranging our memory because they signal what’s important to us. Hence, the story must elicit emotional patterns for the story to become an embodied cognition and to be stored in our various memories, which we depend on to navigate our world. The memory-encoding is enhanced when we engage the default mode network in our brains, which is active when we are not task focused, e.g., reflect and daydream.
Furthermore, it is essential to co-create a shared meaning by interpreting the story for the emergence of a social attractor.
Robert Shiller shows in his book ‘Narrative Economics’[5], that stories have a short half-live if they are not perpetuated. However, stories can inhibit evolution, a phenomenon evident in heuristics like ‘we always have done it this way’, or ‘we have never done it this way’.
To prevent stories from evaporating, respectively the inhibition of system evolution, it is important that family narratives are regularly revisited because of changing circumstances: marriages, a new-born successor, members of the next generation start their own business, divorce, or death impact the family system. Semantics change in the context of socio-cultural evolution. These changes must be accounted for to keep the family narrative active as functioning, social attractor.
Formal governance for efficiency
A documented structure introduces operational efficiency. But starting top-down with the structure on a global level to engineer behavioral and relational patterns at local levels is unsustainable, as this author has experienced and witnessed.
Family governance must emerge bottom-up from a synchronized, congruent local level. In a healthy interplay, the structure influences relational patterns at local levels that feeds back to the global level.
Summary
Charles Darwin[6] postulated that it is not the strongest species, but rather the one with adaption capacity who has the best chances of survival.
A dynamic combination of synchronization, congruency work and a formal structure creates social systems with sufficient adaption capacity. The family system is resilient and can become anti-fragile i.e., it learns and grows stronger after shocks.
Take away’s for future proofing your family:
1) View the family system as a dynamic organism
2) Synchronize the family system and make it congruent before discussing formal governance
3) Frequent revisits are key, because we only observe snapshots of dynamic systems that are in constant transition.
[1] https://en.wikipedia.org/wiki/Frederick_Winslow_Taylor
[2] https://en.wikipedia.org/wiki/Claude_Shannon
[3] https://en.wikipedia.org/wiki/Herbert_A._Simon
[4] https://en.wikipedia.org/wiki/Daniel_Kahneman
[5] Narrative Economics: How Stories Go Viral and Drive Major Economic Events, Robert J. Shiller
