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Disasters:How They Occur and How to Avoid ThemIn Family Offices and other Family Controlled CompaniesMatthew F. Erskine, JD

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When Disaster Occurs in a Family Controlled Business, who is Blamed?The Usual Suspects:

An IndividualFamily LeadersProfessional AdvisersOR

An Institution: FinancialLegalAccounting

But Why Did the Disaster Occur in the First Place?

There is no one universal answer to why misfortunes occur. The fault is neither wholly with the individual leadership, nor the institution per se. Rather, the fault is with the way individual leadership and the collective that is the institution works together as an organization. The result is no one strategy imposed from the top down, or multiple incremental changes made opportunistically from below, work for all organizations in all cases.

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It begins with a Plan

A plan outlines how you achieve something in the future.3

And it meets reality

There is no one universal answer to why misfortunes occur. The fault is neither wholly with the individual leadership, nor the institution per se. Rather, the fault is with the way individual leadership and the collective that is the institution works together as an organization. The result is no one strategy imposed from the top down, or multiple incremental changes made opportunistically from below, work for all organizations in all cases. It is necessary, therefore, only to understand how the particular organization at hand works, not how every organization works. The need is find the specific problems facing the organization, and organizations specific core deficiencies, will prove the seedbed for misfortunes. 4

And

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In Reality, mistakes are due to

The Failure to Learn

The Failure to Anticipate

The Failure to Adapt

Misfortunes occur not just because of individual or collective fault of the people involved, but because of the failure of a competent organization to learn, anticipate or adapt.

Military Misfortunes: The Anatomy of Failure in War by Eliot A. Cohen and John Gooch; Free Press, 1990, 2006

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Which Leads to DisasterWreckage of Desert Eagle outside Tehran, Iran - 1980

When two failures occur, there is an aggregate failure, and when all three occur, there is a disaster that can threaten the very existence of the organization.

Military Misfortunes: The Anatomy of Failure in War by Eliot A. Cohen and John Gooch; Free Press, 1990, 2006

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To Learn Track hard and soft data, and Empirical cross-discipline research, Question why things are done a certain way, butAvoid needless killing of sacred cows

Create DoctrineProcesses and procedures, with The way to do things.

Organizations must track and analyze all data, hard and soft, in a manner that is neither slavishly accepting of the superiority of a model, nor equally unthinking in the reflexive killing of sacred cows in assumptions, traditions and the way things are done. Relentless empiricisms and a distain for a priori theorizing, needs to be most prized within the organization.

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To Anticipate Look for possible risks and opportunities, even if they are improbable,

Do the Planning for possible futuresAvoid Doctrinaire blindersGoal = Mental Preparedness

As Holistic a view as possible

None can make accurate predictions of the future, but by anticipating the possible risks that the organization faces in the future; both due to their own actions and the actions outside of their control, the organization can have a warning of the future. Forewarned, the organization is mentally prepared to match the required actions to meet the possible, though unpredictable, future risks and opportunities. Failure to anticipate the possible risks in the future is, at its core, a doctrinal failure. If the organizational doctrine of the organization does not encourage holistic thinking, then the narrow doctrinaire views will prevail.

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Our Role: Collaborate with Leadership To: See the Flaws, Take the Risks Needed to Fix the Flaws, Analyze Mistakes,

Create Knowledge from Mistakes, and

Move Forward

The weakness of organizations is their inherent fragility that results in their failure to learn, anticipate or adapt. Neither the whole blame nor the whole praise for the failure or success of the organization lies with the leadership or the collective institution of the organization. Leadership, however, is a key element in that the leadership has to understand that the organization probably is flawed, be willing to take the institutional risks to fix those flaws, and have the ability to analyze the possible causes (real or imagined) of defeat, learn from the defeat, and move forward based what they learned from this new knowledge. This is true whether at the strategic, operational, grand tactical or tactical level of leadership.

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SummaryDisasters occur because of mistakes

Mistakes can be avoided by learning, anticipation and adaptability,

Leadership is needed to make the necessary changes, and

We are collaborators with your Leadership.

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The Erskine Company offers strategic, confidential planning and guidance to owners of significant unique assets, including closely held companies, legacy real estate, and high-value collections.

With more than a century of experience working with generations of families, The Erskine Company has developed a unique process that helps entrepreneurs shepherd their businesses and other illiquid assets through strategic transitions, opportunistic growth, and crisis situations.

ABOUT THE ERSKINE COMPANY

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Matthew F. Erskine, the fourth generation of lawyers known for integrity and personal service, concentrates in providing legal and fiduciary services for owners of privately held businesses and unique assets.

Areas of Expertise:Complex interstate and international financial, tax and estate planning, and trust administration;Financial, operational and corporate planning (including private equity, mergers and acquisitions) for Family-owned operating businesses;Planning for and managing collections of fine art, numismatics, Americana and other tangible collectibles for collectors, dealers and artists;Integrating diverse, independent professionalsfrom accountants to money managers and insurance agentsfor a unified planning process;Funding and managing multi-million dollar private family foundations.

Although Matts family moved to Worcester County in 1645, they have been practicing law in Worcester since 1876.

Handling as many as seven generations of a single family in succession, The Erskine Companys focus has always been on providing clients with financial security and control of significant and unique assets.

MATTHEW F. ERSKINE

EducationSuffolk University; JD, 1987Carleton College; BA, 1982Lawrence Academy; 1978

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