By Barbara Spector

Family Business and Positive Psychology, by Scott E. Friedman • American Bar Association, 2013 • 197 pp., $119.95

Author Scott Friedman is the managing partner at the Buffalo, N.Y., law firm of Lippes Mathias Wexler Friedman LLP, and his new book is published by the American Bar Association. Despite these legal connections, Friedman devotes a lot of space in Family Business and Positive Psychology to pointing out deficiencies in traditional family business planning, which often emphasizes the creation of legal documents.

"[F]amilies in business together spend an inordinate amount of time and money with their professional advisers defining and documenting their dispute resolution mechanism of choice," Friedman writes. "While such planning no doubt serves important purposes, families in business together would be better served by bringing into sharper focus methods of how to disagree constructively and preempt conflict."

Friedman contends that an approach based on research in positive psychology—the study of happiness—can counteract what he calls "failure factors" that erode trust in the family. "Strategies, structures, and safeguards can give every family member and stakeholder a sense that decisions made in their business are fair, principled, and smart," the author asserts. "When familial trust has been organizationally and structurally established, other 'traditional' planning strategies, such as estate plans, retirement plans, and succession plans, can be executed more smoothly and effectively; until then, however, traditional planning in a 'low trust' environment is likely to result in procrastination and disappointment."

Friedman has been studying positive psychology and its potential applications to family business consulting for years. In the Summer 2010 issue of Family Business, he co-authored an article on the subject with Dan Baker, Ph.D., a psychologist and organizational consultant best known for his book What Happy People Know.

In Family Business and Positive Psychology, Friedman cites studies in neurology and evolutionary biology, pointing out that "fight responses" (such as angry or argumentative behavior) and "flight responses" (like social withdrawal or substance abuse) are instinctive reactions to stress rooted in fear, a vestige of humans' hunter-gatherer ancestors. By consciously choosing to move past "ancestral brain" responses and lead with the "modern brain," business families can see the possibilities that lie ahead and build family cohesion through forgiveness, according to the author.

Friedman suggests that family business owners create a culture emphasizing encouragement, appreciation, altruism, civility and compassion, among other attributes. He provides a diagram to illustrate the "appreciative inquiry" planning model developed by Daniel L. Cooperrider, a professor at Case Western Reserve University's Weatherhead School of Management, which challenges organization members in a positive way by emphasizing "a continuous cycle of improvement."

Friedman has developed what he describes as a formula for effective decision making: the P/E ratio, or the ratio of principle-based decisions to expedient decisions. A family's goal, according to Friedman, should be to operate only in the numerator, so that all decisions are made in accordance with the family's core values. This serves to increase trust within a family over time, Friedman contends.

Another strategy Friedman recommends for increasing trust and harmony is to implement governance strategies. This advice mirrors that given by most family business consultants: Form an independent board and a family council, and create family documents, such as a code of conduct and family constitution, that spell out policies in writing.

Planning for eventual transition of the family business and family wealth to the next generation, Friedman recommends, should include consideration of ways to prevent "affluenza" as well as how the senior generation will spend their retirement years. Creating an ethical will—a document or video that details values to be passed down to descendants—can help the next generation understand the decisions behind the wealth transfer, Friedman notes.

The author includes examples of real-world business families he believes are putting positive psychology principles into action. While several of these examples are helpful, one is an odd choice: Friedman offers a quote from Jimmy Haslam, CEO of Pilot Flying J, describing Haslam's father's advice to "be humble and ask a lot of questions." In 2013, Pilot Flying J was raided by federal agents investigating fraud the company allegedly committed against its customers. Ten former Pilot Flying J sales officials were awaiting sentencing on fraud charges as of April 2014.

The book includes an appendix entitled "The Family Business Scorecard," which helps business families assess the areas they need to work on to create a positive culture. More superfluous is a chart that ends each chapter plotting Friedman's "success factors" (the converse of his "failure factors") along an x axis that indicates time and a y axis that indicates low to high trust.

The scientific and psychological studies Friedman cites are interesting, and his governance recommendations are sound. His book is a call for more family business advisers to "expand their planning paradigm and skill set, directly or in collaboration with other professionals, so that they can help their clients engage in a more holistic planning process." Friedman makes a solid case for the application of positive psychology in family business governance and transition planning.

Copyright 2014 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.