Consider the following common family business problem. The family managers want to retain as much capital in the business as possible, to have reserves against competition and to fund good growth. The family shareholders not working in the business feel the majority of their net worth and personal security are tied up in the business, and thus favor higher dividends. Think of this as the growth and liquidity paradox – seemingly contradicting needs, both valid.

Perhaps a compromise is possible, permitting a limited number of owners to redeem some of their shares back to the company. Neither side is fully satisfied. The business must give up capital, even if only in the short run. Some family members must sell some of their family heirlooms.

Families who manage paradoxes well know that when facing a paradox such as growth and liquidity, there is no simple solution, only ongoing management of the tension between the two desirable options. They know that choosing one side to the exclusion of the other will not make the issue go away permanently. Finding a way to pursue both, although difficult, is the best path forward.
Business – owning families are very familiar with such problems, such contradictions. PARADOX CAPACITY AND CAPABILITY

Family businesses are successful for many reasons. They have a longer time horizon than most non – family firms, as they view the business as crucial to perpetuating the family into future generations. They have greater consistency in leadership, as the baton is handed from one generation to the next. And they have a strong, supportive culture rooted in the familys traditions and values.5 These and other factors are some of the reasons why family businesses are so successful, but recognizing these factors doesnt describe how the success is achieved.

One of the fundamental reasons family businesses achieve long – term success involves their ability to confront and manage contradictions. Within these contradictions are paradoxes – like the one introduced previously, growth and liquidity. Families address these by developing an internal capacity and capability to live and prosper in the face of contradictions and paradoxes – whether they realize it or not.
How do family businesses develop this capacity and capability? From our work with family businesses over many decades, across national and cultural boundaries, a theme has emerged: from their inception, family businesses are confronted regularly with paradoxes; the successful ones learn how to manage them effectively.

Why does this phenomenon surface in family businesses in particular? Because, although the family and the business need each other to achieve long – term success and fulfillment, they represent inherently divergent points of view. When family businesses are confronted with problems, two perspectives typically emerge that appear to be in conflict – that of the family and that of the business. Upon closer consideration, however, these two viewpoints prove to be not mutually exclusive but mutually supportive. Thus, a family business, a family and its business, is the “ultimate paradox.” This book will explore, in depth, the common paradoxes that confront family businesses. It also will provide a variety of approaches that family businesses can use to develop the capacity and capability to manage these paradoxes.
The capacity and capability to manage paradoxes relies on four foundational factors:
First, there must be recognition that not all problems should be treated the same way – some are clear problems to solve, others are paradoxes to manage.

Second, there must be appreciation and acceptance of the ambiguity and uncertainty inherent to paradox – the rush to resolve the situation must be resisted.

Third, there must be acceptance – even appreciation – of the inherent tension in the two seemingly opposing sides of the paradox; this tension contains useful energy that can be harnessed to bond the family and propel the business to long – term success.

Finally, people must develop the necessary skills and abilities to manage the paradoxes successfully.