Hard Side vs Soft Side: Distinctions that are no longer helpful — if they ever were

Former Practitioner editor and FFI Interdisciplinary Award winner Henry Krasnow asks some provocative questions about interdisciplinary consulting and advising in Hard Side vs Soft Side: Distinctions that are no longer helpful — if they ever were.

Possibly the most important lesson I have learned from many years as a business lawyer is that Tarzan was right — “Jane, it is a jungle out there.”

Unless a business has the luxury of at least a small monopoly — a unique patent, a staggeringly valuable brand, or a temporary lack of competitors — new companies will eventually take advantage of its every weakness.

The importance of a business coming to grips with this reality is that the inefficiencies that result from family turmoil on one hand, or benevolence on the other, weaken the company and make it more vulnerable to becoming prey for a hungry competitor that will be as cold-hearted as the most aggressive predator.

There are hundreds of thousands of pages of literature written by intelligent, caring and well-educated people about how families are the best owners of a business, or how a business is best conducted as a family, or a family is best conducted as a business. Of course, this is what families that own businesses want to hear, although undoubtedly some of these books have been written to generate new consulting business — or raise the morale of the author’s clients and not to promote wisdom.

But regardless of the motives of the authors, the survival of any business, whether owned by a loving family, a dysfunctional family or millions of total strangers, depends upon the business being wisely run as a business and not as a social service agency or any other organization designed to promote family harmony or being guided by any other agenda other than maximizing profits.

That is not to say that family harmony is bad. Quite the contrary, family harmony is good if it leads to wiser business decisions which lead to more profits (which often lead to more family harmony). But, harmony, respect and love among the owners cannot override the need to run the business as a business. Simply put, these characteristics should be seen as strategies to make more money — a requirement in a very competitive world.

Those who are in the business of providing consulting services to family businesses do not do the best job when they lose sight of the fact that, regardless of their long and distinguished educational background, consultants should never give up the quest to know as much about how the business works as possible.

Lawyers, accountants, and other professional so-called “hard side” advisors who work with businesses are painfully aware of their need to learn more about business—how it is done, the importance of cash, the mechanics of leverage and finance, the eventual consequences to being exposed to risk, the mindset of those who do it, and what “doing business” means to those who have been successful at it and who have made the most money.

Successful business owners often do not have the educational credentials of those of us with graduate degrees, nor the vocabulary that we sometimes use to show off our education. But we, the community of advisors, should never fool ourselves into thinking that we are smarter than the business owners. There is no doubt that they can learn from us, but we all too often forget how much we can learn from them about their area of expertise—making money in their business.

In looking over the offerings at family business conferences, I am often disappointed and surprised by the lack of interest in, or demand for, courses or presentations about business, e.g., basic accounting, principals involving shareholder or owner disputes, finance, leverage, marketing. Even in mature organizations like FFI, there has been no demand for an Executive MBA course for those with psychological, social work or therapy backgrounds.

Why have so many tenaciously clung to the artificial, and ultimately distancing and limiting distinction between those on the “soft side” and those on the “hard side?”

It has always seemed to me (a lawyer) to be a distinction with no purpose other than allowing the “soft siders” to dismiss the need to understand, use or appreciate the skills and insights of those on the so-called “hard side.”

So… is it time to abandon this distinction? To reorganize curriculums? Rethink at the conceptual level the premises behind certain conference presentations? Even the criteria for the Interdisciplinary Award? I think so!

About the contributor

Henry Krasnow is an FFI Fellow, former editor of The Practitioner, and the recipient of the 2003 Interdisciplinary Award. He is a partner at Krasnow Saunders in Chicago and can be reached at [email protected]