Using Wisdom to Build Strategy in your Family Business

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Using Wisdom to Build Strategy in your Family Business

This article is being written collaboratively by two people. That fact of two people working together on something is by itself the single most important element of this article. It is a demonstration of our premise that a family business, or any purposeful gathering of human beings, requires for its success relationships that are organized by an attribute. We advocate that the attribute of “wisdom” is that key organizing attribute.

This article is being written collaboratively by two people. That fact of two people working together on something is by itself the single most important element of this article. It is a demonstration of our premise that a family business, or any purposeful gathering of human beings, requires for its success relationships that are organized by an attribute. We advocate that the attribute of “wisdom” is that key organizing attribute.

Beyond presenting the fact of our writing here being a product of collaboration, in this article, we will give some background on who this pair of writers is and how we came together. This is for the purpose of giving pointers on what creates productive collaboration.

Next, we will give a model of what wisdom is. This model is itself a value-added product of collaboration insofar as I doubt either writer would have come to this understanding of wisdom on their own. Then, we will give practical applications of how to add wisdom to the workings of your family business or, again, any other purposeful gathering of human beings. The “why” for adding wisdom is adding value to your family/business.

This pair of writers met through a mutual colleague and were attendees at a March 2022 meeting of the Aspen Family Business Group. That meeting was attended by family business consultants and the goal was to create new knowledge together by digging into a topic.

Jonathan (me) and Joyce, the writers of this article, met just within this year and have had no prior work together. Professionally, I come from a religious, pastoral care background and have been serving the “flock” of families in business for 12 years now. Joyce’s professional background is 22 years in corporate life as a C-suite executive and the last 12 as a transformational strategy consultant, CEO, and board member for private companies (most are family owned and a few are private equity owned).

Our differences stimulate creativity and insight.

Significant to our premise in this article, Joyce says of our work, “‘we come at these issues from opposite directions.” The importance of this is addressed by Brian P. Hall in his book on values, The Genesis Effect:

It is our values differences that stimulate creativity and insight. However, if we do not have minimal values[1] priorities in common the relationship will be unsustainable. What is required, then, is to keep these two dimensions in constant tension. (Hall, Foreword, 2000 edition)

That is, Joyce and I have enough common ground for a working relationship and enough difference to inspire, mutually, new ideas. This aspect of our unique relationship speaks to the benefit of sameness/difference in family business.

Wisdom is using the energy of Hall’s balance-in-tension well. Each family/business structure is a set of relationships and as such is a wellspring of opportunities for creativity and innovation. When worked with wisdom, this wellspring supports positives. Without wisdom, results are likely chaotic and unproductive.

Turning now to wisdom, we begin 3,000 years ago with King Solomon of The Hebrew Scriptures. According to King Solomon, wisdom is gained from God, confers success, provides guidance in life, protects from evil, and provides a land hold, i.e., a place to be. Wisdom exhibits knowledge and understanding. (Proverbs 2: 6-22)[2]

Of wisdom’s two components, knowledge is facts, data. To define “understanding” as used in Scripture, we find this formula from Gary E. Stevenson:

To our knowledge we add experience, which should lead us to a level of wisdom. (Stevenson)

Now we have arrived at our definition of wisdom for this article: wisdom is the value of knowledge plus experience that accrues to a person of faith. We define faith as a resource connection to a wholeness greater than any self or substance.[3] And, we extend this definition of wisdom beyond being of a person but also to being of entities such as a family/business.

And turning now to the pragmatic, we have created The Magidovitch-Hrinya Business Wisdom Model for working with wisdom in practical ways. It reads like a mathematical formula:

  1. [wisdom = (knowledge + years) x action] where knowledge and years are multipliers of action
    1. In the Ideal
      1. The range of knowledge is from 0 – infinite
      2. The range of years is from 0 – infinite
      3. The range of action is all possible actions
      4. So infinite knowledge + infinite years leads to action of infinite wisdom, i.e., God-like
    2. In the Practical
      1. The range of knowledge is measured as relevant education/training with a number given to the years of training in each field. For example, Certificate, 1; Bachelors, 4; Masters, 7; Doctorate, PhD, 12; PostDoc, 15
      2. The range of years is measured as years of relevant experience
      3. The specified amount and knowledge and experience leads to human actions of a certain wisdom
    3. In all cases for the model, the value of action is 1. Any action taken, including a no-action decision is, in terms of wisdom, a unit; the wisdom measure is determined by knowledge and experience.
    4. Plugging in values to the model yields a wisdom score that maximizes at about 45. This is given a maximum educational attainment level of 15 and a maximum relevant experience of about 30.[4]
  2. In this model, then, to modify the level of wisdom of the entity’s action, modify the inputs to the entity of knowledge and experience by introducing or removing education, consultants, persons with certain qualifications (advisors), directors or a board of directors, etc.

With our Wisdom model defined, we now turn to the evaluation of business strategy. Using the “practical components” of our Wisdom Model, we look at who we have included in the strategy discussion and what elements of strategy should be under discussion.

As for who is included, we note their knowledge as evidenced by degrees, certificates, testing, etc. We tally their years of relevant experience. Relevant experience is keyed to the elements of strategy under discussion.

Next, we plug in the years of practical experience per field per person.

This results in a quick, graphic appraisal of each person’s contribution by field to the wisdom of the strategy making process. This is then placed opposite the fields of expertise needed for the strategy under discussion. These fields of expertise should be prioritized in order of importance. We can now see if we have wisdom in the participants aligned with needs for wisdom given the specific strategy being discussed.

The result is a picture of what wisdom we are bringing to the strategy discussion. The picture highlights where we are missing wisdom and the rank in importance of where that wisdom is missing. The picture of “missing” wisdom guides what we need to do to improve the wisdom of the ultimate productive outcome of our strategy discussion. With wisdom well defined, we now transition to a practical definition of strategy.

Strategy is a plan of action to achieve a major vision. A plan of action, a roadmap if you will, allows all stakeholders to assist the business owner(s) to address the world’s dynamic risk environment.

Consider some of the many risks in today’s business world: rising costs driven by inflation, changing customer preferences following the COVID pandemic, technology shifts by your competitors driven by efficiency imperatives, supply chain disruptions. How is your business model keeping up and staying competitively relevant? Our Business Wisdom model is very important to consider all the risks and opportunities carefully and fully for your company’s future.

With these rapidly changing market dynamics and the significantly shorter timeframe business owners must execute a strategic direction, the need for creating the process of incorporating wisdom to consider all perspectives is high. The critical process steps are detailed below:

  1. CREATE OR ADD TO YOUR BOARD OR ADVISOR GROUP: How can a family business easily gain external perspectives? Never has there been more of a need for an external board of advisors or directors. These individuals, if wisely chosen to include a unique and diverse set of knowledge and experience, can add significantly to the views of the family and/or company management.
  2. ESTABLISH EDUCATION PROCESSES: Ensure that your entire family, board, and company management have the most updated thinking about the economy, your industry, your competition, and current company situation. Invite expert guest speakers to participate in your next family and/or board meeting. This will ensure everyone is current with their understanding of the challenging and potentially more difficult future business environment.
  3. HIRE A CONSULTANT[5] Here, we refer readers to our book, The Keys to Family Business Success, 2011, Dashew, et al, The Aspen Family Business Group, chapter 11: Working Effectively with Advisors.
  4. CREATE A FAMILY STRATEGIC RETREAT: Use a strategic retreat format (e.g., a day or two away from the company location) which can be very helpful to allow many diverse perspectives on the strategic options and ultimate direction of the company – depending upon the family structure and number of generations as many family members as practical should be included. An external facilitator can be hugely helpful to take good notes, bring out diverse thinking and synthesize outcomes for execution by the company’s management team.
  5. KEEP STRATEGY TOP OF MIND: Then once a plan of action has been established, keeping strategy on every board agenda (or family meeting) is very important to check in on success and rapidly determine which aspects of the plan are working well or going off the roadmap.
  6. CREATE KEY PERFORMANCE INDICATORS THAT SUPPORT MEASUREMENT: KPIs can be set for the core elements of the strategic direction to allow measurement and assessment:
  1. Financial Results/Capital requirements
  2. Operational capabilities
  3. Strategic Risks
  4. Technology requirements
  5. Employee Engagement (critical to understand Culture, Compensation)
  6. Talent Review (important to understand if the right people are in the company to execute the strategy)

With wise strategy in place, the company will have an executable plan of action to enable the family’s vision.

That’s a wise roadmap to successful results.

Here we add two caveats for the use of our wisdom model.

First, we emphasize the importance in the wisdom model of each person being connected to a wholeness greater than themself.[6] That connection is the conduit by which wisdom transmits from and to a person. Without it there is no wisdom. A disconnected person may have an abundance of knowledge or experience but will not possess wisdom and their actions will reflect that, unnecessarily limiting the entire group’s contributions to an overall plan.

Second, while the model does not have a limit on the number of individuals included in the “wisdom score”, several persons larger than the entity can handle from the aspects of logistics or information processing reduces the accrual of wisdom to the entity.

For example, we could imagine a strategy discussion for a family business that might work well with ten people but be unproductive with a hundred. We offer a tip here that if the arrangements for the strategy discussion seem to be including too few or too many individuals, consider professional facilitation over the process. Such facilitation would build a successful process for the entire group’s benefit.

A strategic retreat creates space for many diverse perspectives.

As for the best use of The Magidovitch-Hrinya Business Wisdom Model, setting up a retreat and giving a day or more of focus to running through the model maximizes its value added. Here is an overview of the structure of that retreat:

  • Session One. To develop wisdom scores, gather your stakeholders and start with scoring their knowledge and experience. (For both knowledge and experience, for each participant, use the arithmetic mean of a self-score and of others’ scores for them. Add the knowledge and experience number for each person. This will yield a wisdom score that contains self-report and how others see them. The mean of individual scores is the group’s wisdom score.)[7]

Take a break after the session on wisdom scoring. We suggest something fun, active, and maybe a meal. The importance of the break is that we want to avoid using the wisdom scores from the prior session to define the wisdom needs developed in the strategy session. There might be a temptation to see as wisdom needs what we have just described as wisdom assets, so to speak, trying to fit a square peg into a round hole.

  • Session Two. Determining needed wisdom areas. Returning to running the model, the next step is looking at what wisdom-needs your strategy building requires. The discussion in this session is asking among the stakeholders, in what fields is wisdom needed to make good strategy decisions. Once the fields are delineated, rank order them. Here, a group ranking is most valuable over the ranking of each stakeholder.

Session One and Session Two have yielded Wisdom Scores and Wisdom Needs. Given that in Session Two we have come up with a group rank ordering, we have then already taken a big step toward developing a shared vision for strategy.

  • Session Three. The work in this step is to look for a match between the group’s wisdom assets and wisdom needs. The question is, do we have the wisdom we need or is their missing wisdom? If missing, what can we do to find & fill that in?
  • Session Four. Tactics. Developing an action plan. This Session could follow immediately upon Session Three if our run-through of The Wisdom Model showed we had the wisdom we needed in the fields we need it. If not, the missing wisdom issue would have to be dealt with before going on to developing the action plan.

Numbers are not enough. The strategy must feel right and engaging.

As for the action plan, be it now or in the nearest possible future, it would include success measures, KPI’s and business metrics. But numbers are not enough. The measures also must include that the strategy and the process for achieving it feels right and engaging to the stakeholders. Often a quick survey of participants through an inexpensive resource like www.surveymonkey.com can yield an engagement score the group can use to benchmark engagement and measure engagement improvement over time.

[1] Hall’s definition of values is: Values are those priorities which we act on that mediate our internal images and transform them into our everyday behavior. (Hall, p.11)

[2] Proverbs 2:6 For the Lord gives wisdom; from his mouth come knowledge and understanding. 7 He holds success in store for the upright, he is a shield to those whose walk is blameless, 8 for he guards the course of the just and protects the way of his faithful ones. 9 Then you will understand what is right and just and fair—every good path. 10 For wisdom will enter your heart, and knowledge will be pleasant to your soul. 11 Discretion will protect you, and understanding will guard you. 12 Wisdom will save you from the ways of wicked men, from men whose words are perverse, 13 who have left the straight paths to walk in dark ways, 14 who delight in doing wrong and rejoice in the perverseness of evil, 15 whose paths are crooked and who are devious in their ways. 16 Wisdom will save you also from the adulterous woman, from the wayward woman with her seductive words, 17 who has left the partner of her youth and ignored the covenant she made before God. 18 Surely her house leads down to death and her paths to the spirits of the dead. 19 None who go to her return or attain the paths of life. 20 Thus you will walk in the ways of the good and keep to the paths of the righteous. 21 For the upright will live in the land, and the blameless will remain in it; 22 but the wicked will be cut off from the land, and the unfaithful will be torn from it. (Proverbs 2: 6-22)

[3] This spiritual terminology is part of a view as to where we get guidance in deciding what is the right thing to do. In family business we often stand at crossroads. We ask, “Who will be our new CEO?” or “How shall we grow our business?” Consciously or not, in these moments we seek guidance. Broadly speaking, this guidance comes from realms, the realms of the spiritual and of the empirical. I stand with a foot in both worlds and hope not to be split in two. As Rabbi Jonathan Sacks would say, “What science and religion should both be teaching us right now is humility and awe, knowing how small we are in the scheme of things, and how dangerous it is to destroy what it took almost infinite time and space to create..”(← NOTE)

[4] As a note of caution, a result of 45 is not ideal. That would mean that all the persons have achieved maximal levels of experience and that suggests that all the group members are near retirement. That is a vulnerability. An ideal wisdom score, then, is near 30 as that suggests a good mix of experience levels.

[5] The Aspen Family Business group has specific tools for how to bring in a consultant. We refer the reader to our book, The Keys to Family Business Success, 2011, chapter 11: Working Effectively with Advisors.

[6] Traditionally, this is a person of faith though our model allows for non-religious understandings of this connection to a wholeness greater than themself.

[7] If this run through of the Model causes us to change the makeup of our team, we compare the pre post wisdom score and expect the post score to be larger and, by field, shaped to the strategic decision-making needs.

Author(s)

jonathan magidovitch
About the Author
JONATHAN MAGIDOVITCH

Jonathan advises family businesses in both the US and Israel. He consults with families in business on goal setting, role development, governance, communication, transition, leadership and culture building.     ( view bio )

About the Author
Joyce Hrinya

Joyce leads A&R Strategy Partners, a transformational strategy and process improvement consulting firm she founded twelve years ago to bring diverse senior leadership experience to mid-sized family owned companies.     ( view bio )

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