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Abstract

Stonewalling is one of the four horse men in relationships indicating the beginning of the end. Stonewallers don’t share much about their world with others, a behaviour the agent is not necessarily aware of. This can have severe implications on successions, especially when all wisdom about wealth-creation and wealth-preservation is concentrated in one person. This constitutes Key- Man Risk!

In this article, we highlight possible reasons for stonewalling with insights from neuroscience about our decision making and results from studies in behavioural economics. We look at key drivers of decision making in situations of change and think of possible implications and solutions in a succession- context.

Decision Making – Main Features

All behaviours are outcomes of conscious and unconscious decisions that arise out of an interaction of environmental influences and influences related to the motivations and goals of a person. Emotions are an integral part of the decision-making processes. They can be defined as complex affective states in which cognitions are intrinsically embedded and they can lead to decisions, we later regret.

Decisions are context-dependent and based on our individual mental model of the world, which is constructed from representations of our past experiences. Building blocks of the mental model include attitudes, values and beliefs about self respectively others. It guides emotions and cognitions, which are at the core of decision-making processes.

The Triadic Model of Decision-Making

To simplify things, neuroscientists created the triadic model of decision-making. The model postulates, that decisions are motivated by rewards and by the fear of punishment, balanced by the CONTROL CENTRE.

The CONTROL CENTER (Prefrontal Cortex) performs executive functions: it neutrally calculates, estimates, predicts, anticipates, reasons, makes inferences and is connected to many parts of the brain. It is responsible for performance optimization and emotional regulation.

The CONTROL CENTER is linked to emotive brain regions, namely the REWARD CENTRE (Ventral Striatum) and the FEAR CENTRE (Amygdala). The REWARD CENTRE is stimulated by the anticipation of reward, the FEAR CENTRE is stimulated by the anticipation of punishment, which elicits survival strategies like freeze, fight and flight. The FEAR CENTRE impairs the CONTROL CENTRE, because this brain region absorbs the energy required to enact survival strategies. An impaired CONTROL CENTRE increases our propensity to behave ‘irrationally’, which behavioural economists call ‘behavioural biases’. This insight is essential to understand decisions in social-change processes!

The (Behavioural) Economy of Social Change

Any change can be interpreted as trade-off between meanings: we lose one thing and gain another. We ask ourselves: What does ‘lose’ mean to me in terms of my current ‘being’? And, what does ‘win’ mean in terms of ‘becoming’?

The CONTROL CENTRE predicts outcomes by conducting neural calculations of expectation values in terms of what we probably lose and win in the change process. The emotional system evaluates what it means to us and biases expectation values, driven by the FEAR and REWARD CENTRE.

Decisions about how to deal with proposed change are based on the same principal of risk- and loss aversion: is the expectation value of losing (the meaning of punishment) greater than the expectation value of winning (the meaning of reward) with higher ‘emotional bias-weightings’ attached to the expectation value of punishment, we tend to resist the proposed change!

Decision-Making Biases in Situations of Change

It has been researched how we deal with proposed change in a corporate ‘change-management’ context. Four biases have been identified and show, that we resist change systematically:

1. Negativity Bias: the brain’s main function is to keep us alive, so we assume the worst (anticipation of punishment), prepare for the worst and may seek protection from change-impacts.

2. Availability Effect: to make decisions, we prioritize the easiest available representation of information in our brains, often derived from emotionally salient events in the past. This makes us think fast, which is lifesaving in threatening situations, but it also prevents us from considering additional information that would enable us to make better decisions.

3. Attribution Bias: we need to find the meaning of cause, the source and reason for change. We are looking for accountability in the form of real or imaginary persons or, moral frameworks for our decisions. So, we need someone or something to blame. For (anticipated) negative outcomes, we tend to blame everyone and everything else, positive outcomes we tend to attribute to ‘self’.

4. Confirmation Bias: once we made a decision, we prefer to process information that confirm our decision as we want to find evidence that we are right! Thus, we tend to ignore information that challenge our decision. It gives us a sense of self, especially when we feel vindicated. But it limits our options and encourages self-fulfilling prophecies. If we take a negative stand towards the proposed change, benefits are hard to imagine. Hence, we resist change to avoid PUNISHMENT and seek REWARD for being ‘right’.

Proposed change in a social context with individuals who lack psychological safety do not openly communicate! Thus, mutual trust cannot arise! Transparency and visibility of what’s going on is poor. This creates an ambiguous, socio-emotional environment, in which possible change-outcomes are highly uncertain. That makes it difficult to predict ‘reward’ with sufficient confidence and the anticipated meaning of change-outcomes is biased to ‘punishment’, which we fear! Fear responses initiate and increase the biases described above. We can also apply this insight analogous to a succession context.

‘Change’ in a Succession-Context

Stonewalling

The fear of change elicits defense strategies like stonewalling to protect the status quo by not sharing material information, as transparency may accelerate the change he fears. However, stonewalling creates the illusion of safety, which can be dangerous for the stonewaller as well as for the wealth-succession. The stonewaller invests a great deal of mental and emotional energy to keep the wall up in an attempt to avoid all problems and stresses related to change.

Implications of Fighting Change: Stress

The patriarch is endowed to his legacy, which he values higher than any impartial 3rd party would do (endowment effect). Hence, he cannot simply dissociate to let go. He’s forced to stay associated and manage his resistance by keeping up that stonewall. Resisting change is an immensely draining strategy which ends in ego-depletion. This can create chronic stress.

Normally, stress is a short-term response to internal or external stimuli which helps us to overcome obstacles and it temporarily disrupts our homeostasis (i.e. the way our body remains on an even keel). It originates in the FEAR CENTRE (Amygdala) as a response to signals we perceive as threat to our autonomy. Stress responses are driven by actual, historical respectively imagined social processes that leave us with unresolved conflicts or, when we are emotionally constipated and deny ourselves the completion of emotional cycles. Other socio-emotional stressor-examples are the fear of social rejection, fear of being judged by others, the fear of failure and the fear of losing. In general, stress increases biases (irrationality) in decision-making-processes, reduces our capacity for patience, narrows our mind, makes us more selfish, reduces empathy and our ability to trust our self as well as others. This down regulation of the social engagement system inhibits cooperative behaviour.

The End of Wealth is Neigh

The patriarch is alone at the top and has no one to share the emotional burden with. Ego-depleted and chronically stressed, he has a higher likelihood of falling ill and dying quicker than expected. All happens very sudden, nothing is prepared, no one has a clue what to do or where things are.

The succession is in limbo and creates a power vacuum that can be exploited by so called ‘trusted’ advisers. The created vacuum of power also gives rise to destructive family conflicts. Thus, the legacy of decades of hard work respectively previous generations can be destroyed in a couple of weeks – a stunning asymmetry in time with high financial and ‘socio-emotional’ costs for all stakeholders.

A True Story

One of the business families we work with offers a typical case of what we mean with stonewalling. The grandfather started the family business. The firstborn male took over after the death of the founder and managed to scale up the business. In the meanwhile, the 3rd generation was growing up in a bubble, leading an exuberant lifestyle beyond their means. The patriarch was absorbed with creating financial wealth, ignoring the elephant in the room: the hidden risk of wealth succession. Attempts of the next generation to get information about the business or even to get involved was walled-off by the patriarch. He was successful, did not want to invite challenge and this is how he has always done it. Thus, he ignored succession-planning of any sort. In response to the behaviour of the patriarch, the members of the 3rd generation turned their back on the family-business and pursued other interests.

This family successfully managed the business turn around with the support of appropriate advisors, who were willing to consider the purpose of the family above mere numbers of excel spreadsheets and their own business interests. The sale of the business during the crises could have been detrimental for family wealth not, only in economic terms but also in the sense of relationships among family members and individual life perspectives.

More and more, we come across similar cases. They are symptomatic for the lack of ‘hidden succession- risk-awareness’ in business families. Key risk-driver is the lack of open communication and the stonewalling between family-members.