The Tragedy Of The Commons: How A Life Crisis Effects Family Wealth

Grandad presenting at a multi generation family home meeting. -Getty

Steven S. Rolfe, MD, a physician, psychiatrist and psychoanalyst authored an article in the January 27, 2021 edition of the FFI Practitioner on the effect that a personal life crisis has on a family-owned businesses. He cites examples where the sudden life crisis of family leadership on a business has jeopardized the wellbeing of not just the business but of the family as well. He states:

“Strategic planning, governance, and business processes take a back seat to the immediacy of the leader’s life crisis and how the crisis will be managed, ignored, or denied by the leader and the stakeholders in the organization. Response to the crisis largely determines the future and well-being of the business and the family.”

This is an excellent article that I strongly recommend reading. There are some things that estate planners can do to help.

In most cases, a family leader plays the role of the governor of the engine that is the family wealth. The leader has the personal authority to set agendas and make decisions between competing demands on the common resources of the family. So long as they are able to act in such a way, disputes do not rise to the level of threatening the viability of the family enterprise. In Systems Dynamics there is a name for this situation, The Tragedy of the Commons.