What Role Does Positive Psychology Play In Family Businesses?

Scott Friedman, a business lawyer based in Buffalo, N.Y., who often works with family businesses in dispute, has penned a new book, Family Business and Positive Psychology, about how harnessing positive psychology can improve relationships in a family-owned business and positively affect the bottom line. “We are hard-wired to make snap decisions, irrational decisions, and decisions based on fight or flight,” Friedman says. “And all these hardwired metal foibles get in the way—often unknowingly and inadvertently—but over time they create interpersonal challenges and create relationship problems within a family.” We asked the author to share his recommendations for small business owners.

  • “Because of the way our minds work, the susceptibility to systematic errors in thinking is always there. So family businesses would be well served by moving away from typical insular processes [of resolving issues] and engaging outside individuals to serve on the board or directors or board of advisors.”
  • “Through fight-or-flight reactions, we often wind up bumping into each other with fear-based responses to situations: greed and turfism, lying, anger. Someone is fearful about one thing or another and these are the modern-day forms of fighting or fleeing that create negative culture.”
  • “We often wind up in communication disconnects in family businesses. Our memories aren’t as perfect as we think they are; we like to speak more than we like to listen; etc. That can create a whole other issue in family businesses. I stress the importance of humility when faced with communication issues. We’re not as good at thinking and understanding and communicating as we think we are, and it’s important to recognize that.”
  • “Most families don’t stop and think about their core principles. It’s an irregular, ad hoc approach to making decisions. My recommendation is that they focus on principled actions and decisions. Meaning that family would be well served by bringing clarity to their core values—their vision, mission, policy and plans. Too many family businesses haven’t defined their core principles, and that randomness can erode intra-family trust over time.”
  • “There’s often a focus around conflict resolution strategies in the law. In the event of a family business dispute, the dispute will be resolved by mediation, arbitration. I’ll tell you, by the time families are that deep into conflict resolution, it’s too late. I have rarely seen a family wind up working constructively after they’ve sued each other. It doesn’t work well. There’s a difference between robust constructive disagreement and [fighting], but there needs to be an outlet to help families disagree agreeably. That might mean going to a family elder or to the chair of the family board of directors. It might be using a new [area] of law called collaborative law—which is when lawyers agree to represent their clients only up the point where an amicable settlement has been reached. In the event the issue goes to litigation, the lawyers disengage, so it creates an alignment of interest in reconciliation.”
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JCK Magazine Editor