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Spring 2013

November Current Thinking Column

Sunday, November 23, 2014

Balancing The Emotional Ledger: Revisited

by Joe Paul

Several years ago, we devoted a column in our newsletter to the Emotional Ledger. In the next few months, we will be expanding that discussion in the context of contextual theory. This will include topics such as, one’s relationship to posterity, the ledger of merit, trustworthiness, the revolving slate, destructive entitlement, constructive entitlement, among many others.

You might not realize it, but you have two “sets of books.” One of the books is for your business—tangible and under the control of your bookkeeper. The other book, the “emotional ledger,” is invisibly intangible and under the control of no one. Yet, the emotional ledger defines what is possible in a family. While the business ledger keeps track of the money, the emotional ledger is self-organizing and monitors factors such as the level of trust, the earning of merit in the family and the indebtedness/entitlements of each of your family members.

Every family has an emotional ledger, but families that own businesses sometimes have a harder time with it. This is because the two ledgers often become entangled. Eventually, emotional ledger issues like mistrust among family members begin to have a profoundly negative effect on the bottom line of the business ledger.

The concept of the emotional ledger was formulated by Ivan Boszormenyi-Nagy, a Hungarian psychiatrist/family therapist and founder of contextual theory. He was most interested in the relational ethics intrinsic to all social species. Attention to reciprocity is a common factor in all social species. The emotional ledger accounts for what is given and received in familial transactions with one another. The accumulation of merit by showing due consideration for others moves the family toward trustworthiness. The disregard of fairness in transactions within the family leads the family away from trustworthiness. Based on factors such as the willingness to show due consideration, a person earns merit in their family and constructive entitlement. Another family therapist, Murray Bowen, delineates the emotional ledger as follows:

“The lower the level of differentiation, the more likely the family, when stressed, will regress to selfish, aggressive, and avoidance behaviors; and cohesiveness, altruism, and cooperativeness will break down.”

One measure of a balanced emotional ledger in a family in business is the capacity of the family to encourage the individuation of successors. The individuated successor has found a way to maintain a calm, non-reactive presence when confronted by anxiety of others; e.g. his sibling/ business partners, his parents or senior non-family executives. He has a clear sense of purpose and can convey that sense of purpose to those who follow his lead. If the family business system is not accustomed to having an individuated leader, the less mature members of the stakeholder group will attempt to sabotage a new individuated leadership style. The individuated leader stays calm and understands the normality of human systems to resist change. At the same time, he steadily makes new requirements of the family and the business.

Balancing both the financial and emotional ledgers while developing a successor can become very complicated, as discovered by one father a few years ago. Jim was his father’s successor in a manufacturing business. As he neared his targeted retirement age, three of Jim’s four children were working in the business. His only son, Bo, with 20 years in the company, was the COO, managing both manufacturing and sales. Bo had taken the company from $3 million in sales to $9.6 million in the last five years. Jim’s middle daughter, Joyce, had become the Personnel Director seven years ago. His youngest daughter, Betty, was hired to be the Office Manager four years earlier. Although Jim was very uneasy about it, he yielded to the pressure from his wife to pay his three children in the company the same. 

His oldest daughter, Ruth, didn’t work in the company. Jim felt that she was a difficult child to raise, always seeming to have a chip on her shoulder. For years, Jim tried to persuade Ruth to join her siblings in the company, but she would have no part in it. She married well was well-off financially—no pertinent need to join the company. As delineated in Jim’s estate plan, Ruth, along with Jim’s other children, would each inherit 25% of the ownership of voting shares in the company. Jim and his wife were satisfied with their estate plan, but were not prepared for their children’s reactions. 

Ruth reacted to the estate plan by threatening to withhold her children from her parents if Bo became the next CEO. Between gritted teeth she said, “ I will be at every board meeting with my sisters. We have discussed this, and if we don’t approve of what our dear brother is doing, we will begin a search for a more compatible CEO. We have lived our whole lives with you making us feel we are stupid, Dad. But I guarantee you that I won’t passively accept the same relationship with Bo that I have endured with you.” Joyce squirmed in her chair and Betty began to panic as the two sisters suddenly found themselves in a split loyalty between their sibling and their parents. 

Ancient wisdom tells us that the “sins of the father will be visited upon the children into the third and fourth generation.” This is especially true for the successors in a family business. Jim was seriously physically abused by his own father, for whom he had also worked. The resulting emotional wounds led Jim to decide that he would never punish his children physically. While he was successful in controlling the physical abuse, he still had a tendency to let problems slide for a long time in an attempt to avoide conflict, only to later explode at a minor offense. When he finally did explode, his kids would feel their grandfather’s red hot rage alive in their dad. Each of his children found ways to stay connected with their father in spite of the poor messages he gave them when he was angry. Working for him was a way to be connected and maybe someday earn his blessing.

Bo’s family and business were full emotional ledger issues. Trust was seriously eroded, Ruth’s destructive entitlement was a significant problem, there was little concern for others, and the adult children’s hunger to earn merit in the eyes of their family was thwarted. It was in this state that Bo sought out the services of an executive coach, Matt. Having been trained to work with family businesses, Matt chose to help Bo individuate while staying connected to his family. We will hear more about how Matt helped Bo in a later blog. However, I can tell you that Matt focused on helping Bo to maintain a “calm, non-reactive presence” whenever a member of his family was overcome by their anxiety. Using one little trick to help Bo remember to stay calm, Matt instructed him to use the phrase “nevertheless.” For instance, if Ruth barged into his office saying, “What makes you think you can be CEO?” Bo would respond, "I understand that you have no faith in me yet as the next CEO, nevertheless, I think that I have the knowledge and skills to protect our assets just as I have done for the last four years. I hope to earn your trust.”

Matt highlighted that the act of creating a response using the words “nevertheless” will help you focus on being calm when interacting with Ruth, letting her know you understand her concerns and that you are not going to fight. Matt also asked Bo to memorize a line from the poem “If” by Rudyard Kipling:

"If you can keep your head while those around you are losing theirs and blaming it on you…”
-Rudyard Kipling



The Aspen Family Business Group will soon be publishing a book entitled, Balancing the Emotional Ledger: Axioms and Guidelines for Counseling Families in Business. Watch for announcements. 

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