For most families, dealing with mentally incapacitated loved ones often remains a private matter. This is not the case, however, when the affected individuals or their relatives happen to be owners of a family enterprise.
When cognitive decline sets in, or an addiction is raging, or a severe mood disorder is present, the potential for harm goes well beyond the personal realm. Entire businesses can be damaged if such problems aren’t addressed appropriately.
It is imperative that family office personnel develop strategies for addressing mental incapacity promptly – or, better yet, proactively – for the safety and well-being of the entire business and family ecosystem.
Consider the following scenarios that I have encountered in my work as a neuropsychologist and family wealth consultant:
- Sharon, a 72-year-old CEO, was recently diagnosed with Mild Cognitive Impairment (a condition that is often a precursor to more severe dementia). She cannot make important business decisions prudently and efficiently, largely because she can no longer discern or remember the critical inputs for those decisions.
- Priti is an engineer and heir apparent to the family enterprise. A workplace injury has led to a severe pain disorder and depression. She is nowhere to be found during a critical period of technology changeover in her factory, leaving her operational team rudderless and in disarray.
- Omar is employed in public relations and fundraising for his family’s philanthropic foundation. The company’s accountant has just uncovered evidence that Omar has been illegally using donations to cover up a gambling problem.
The nature of family office work is such that personnel often have an unusual degree of emotional closeness with their employers. This means that dealing with scenarios like the ones above can be much more emotionally fraught than might be the case for people working in government, for example, or in non-family-owned enterprises. Feelings of loyalty, denial, fear and protectiveness can interfere with speaking truth to power and in finding people the help they need.
Family offices, advisory boards and companies alike need to create the governance structures and human resources policies that will make it easier to flag malfeasance and impaired performance.
Here are some of the specific practices I recommend:
- Write detailed job descriptions for every position in the family business, family office and board. Without agreement on what is required of workers at every level, it is impossible to identify what constitutes substandard performance.
- Create clear Respectful Workplace guidelines that spell out what to do in the event of harassment, bullying, sub-par performance or otherwise problematic behaviour. Train employees how to address concerns in a respectful but assertive manner.
- Develop a feedback-rich culture for all personnel (including owners), with formal performance-review mechanisms that identify the key deliverables for each position. Be clear about conditions for remediation versus termination.
- Invest in the best employee benefits package possible, with special attention to ensuring adequate access to skilled psychological service providers. Mental health problems are the leading cause of vocational disability and absenteeism, but most benefits packages provide insufficient funds to assess and treat them.
- Develop succession plans that take into account the risk of longevity-related cognitive impairment. This can include the requirement for baseline cognitive screenings for key personnel and mandated follow-up assessments at prescribed intervals.
- Ensure that corporate boards are not just advisory in nature; rather, require them to adopt a fiduciary standard to safeguard the business instead of sparing the feelings of the founder or heirs. A fiduciary mandate includes the obligation to temporarily or permanently remove an incapacitated leader from business operations.
- Protect family members from having to make the wrenching decision to remove an impaired loved one from the business. Other employees or board members must have that power and obligation, and the training to know when to exercise them.
It is rare for entrepreneurial families to feel they can spare the time to create such policies; rarer still is the enthusiasm to do so.
Family office personnel do a tremendous service when they exercise foresight and initiative in this regard.
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