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It's not family conflict or poor communication. Family offices often experience paralysis through prudence—when governance constraints accumulate until they substitute entirely for judgment.
Popular explanations for family office dysfunction often miss the structural cause.
Siblings fight, generations clash, decisions stall
But: But many unified families still can't execute on investments or philanthropy
Family members don't talk, alignment breaks down
But: But heavily communicated families still experience decision paralysis
No clear governance structure leads to chaos
But: But hyper-structured family offices often perform worst—process becomes the problem
Boomers and millennials want different things
But: But single-generation family offices also struggle with decision velocity
IRSA research identifies a four-stage pattern in family office governance failure:
Governance structures are created to protect the family from bad decisions—committees, approval thresholds, waiting periods.
Each past mistake adds a new constraint. Constraints never get removed. The governance system grows heavier.
Eventually, following the process becomes more important than making good decisions. Rules substitute for thinking.
The family office becomes unable to act. Not because family members disagree—but because governance prevents action.
Key insight: Family office paralysis isn't caused by too little governance—it's caused by governance that has displaced judgment entirely. The solution isn't more process; it's less.
Time-sensitive investments pass while waiting for committee approval. The best opportunities require speed the governance can't provide.
When in doubt, do nothing. The safest choice within the governance structure is no choice at all.
Staff focus on following procedures correctly rather than making good decisions. Success means 'following process.'
Because internal governance is too slow, actual decisions get outsourced to consultants and advisors—who face different accountability.
Not all constraints are bad. The key is distinguishing between:
Prevent catastrophic, irreversible errors. Worth the decision cost.
Example: Requiring family council approval for asset sales over $10M
Substitute process for judgment without protecting value. Should be removed.
Example: Requiring committee review for routine operating decisions
Solution: Periodic constraint audits focused on decision velocity, not just risk management. Ask: "What decisions are we not making because of this rule?"
Family office governance often accumulates constraints over time—each past mistake adds a new rule, committee, or approval threshold. Eventually, the governance structure substitutes for judgment: following process becomes more important than making good decisions. The result is paralysis through prudence.
No. While conflict can slow decisions, many family offices with aligned, harmonious families still experience paralysis. The cause is structural: governance constraints that accumulate over time and substitute rules for judgment. Conflict is a symptom, not the root cause.
By distinguishing between protective constraints (which prevent catastrophic errors) and displacement constraints (which substitute rules for judgment). Protective constraints should be preserved; displacement constraints should be removed. This requires periodic governance audits focused on decision velocity, not just risk management.
Because the problem isn't lack of process—it's excess process. Adding more governance to fix governance failure typically makes things worse. The solution is governance reduction: identifying which constraints actually protect value and which merely prevent decisions.