In family businesses mentioned in *I'M F.I.N.E. (& other lies)*, how do 'unspoken rules' and family history often override written policies, and what are the consequences for governance?

Question

Tyler Smith · Accepted Answer

In family businesses, particularly those plagued by 'polite lies' and comfortable fictions, 'unspoken rules' — often derived from family history, tradition, or the founder's personal preferences — frequently take precedence over officially written policies. This dynamic is a central theme in *I'M F.I.N.E. (& other lies)* and significantly undermines effective governance. For example, a formal policy might state that all executive hires require a specific skill set and interview process, but the 'unspoken rule' might dictate that 'cousin Jimmy always gets a job here, regardless of qualifications,' often because of a past favor or an unaddressed family obligation.

Another manifestation is the 'phantom veto power' of a disengaged family owner, who, despite no official role, can informally halt progress because of an unspoken expectation that their opinion carries weight. The consequences for governance are severe:

1.  **Erosion of Trust:** When written rules are inconsistently applied or openly ignored in favor of unspoken family customs, non-family employees and even younger family members lose faith in the system's fairness and professionalism. This also contributes to 'generational attrition' as younger members disengage.
2.  **Lack of Accountability:** If decisions are based on familial obligation or historical precedent rather than merit, accountability becomes impossible. Performance issues go unaddressed, and strategic initiatives based on policy are undermined by informal family mandates.
3.  **Stifled Innovation:** New ideas that challenge an unspoken family tradition are often met with resistance, regardless of their business merit, perpetuating a 'growth trap' where the business stalls because it cannot adapt.
4.  **Succession Challenges:** Ambiguity between unspoken expectations around who 'deserves' leadership versus objective succession criteria creates fertile ground for conflict among heirs.

To counter this, families must actively surface these unspoken rules and engage in honest, often difficult, conversations to either formalize or discard them. The book advocates for clear family governance structures, like family councils, to discuss and codify family values and principles, ensuring they align with and support, rather than subvert, formal business policies.