Journal of Financial Planning: November 2020
Moira Somers, Ph.D., C.Psych., is a professor, family wealth psychologist, and executive coach. She has a longstanding interest in the factors that influence effectiveness in financial advice delivery, and is the author of the bestselling book, Advice that Sticks. Dr. Somers consults to financial professionals and regulatory bodies around the globe.
The author would like to thank James Grubman, Ph.D., for his helpful comments on an early draft of this article.
Sharon is a force of nature. At 72 years of age, she’s spry, she’s fearless, she’s the president of a multi-million-dollar family business … and she’s quietly becoming demented.
The saga of the dementing leader is a real-life drama playing out with increasing regularity in executive offices around the country. In farms and finance, in manufacturing and medicine, business owners are living and working longer. As a result, the odds of a leader becoming mentally incapacitated while still ‘in the saddle’ are rising. This is particularly germane to CFP® practitioners on two fronts: many work with business owners who will be experiencing cognitive decline; and many are business owners themselves who will be experiencing decline.
Identifying a Cognitively Impaired Leader
In my work as a neuropsychologist and a family wealth consultant, I have a front-row seat to the chaos created by a cognitively impaired leader. Here’s what it looks like:
- Decisions being made, revoked, and remade
- Angry outbursts or tearful breakdowns in front of customers or employees
- Stalling of key company initiatives
- Suspiciousness about employees and family members who are actually doing their level best to be respectful and helpful
- Failure to meet crucial deadlines for every kind of deliverable imaginable: tax or compliance filing, product shipping, paying employees, or wrapping up arrangements to sell or transfer the business
- Departure of talented managers due to frustration and the need for self-preservation
- Decline in company valuation as word leaks out about the company’s internal problems
- Increased family conflict as loyalties are questioned and wagons are circled
Past a certain point, cognitively impaired leaders become incapable of understanding or stopping the damage they are causing. Loss of insight and memory eat away at their ability to do the right things for themselves, their business, their family, or their fellow shareholders. This should not be confused with emotional denial, or an unwillingness to face the facts. The leader truly doesn’t see what is obvious to everyone else.
When board members, business partners, or family members wait too long to address these situations, the range of available responses becomes severely truncated. The few options that remain can feel heavy-handed, disrespectful, or humiliating to a once-great executive. Things start looking like that old game of hot potato, with each person passing responsibility for the problem to the next person in line.
Pre-Planning and Intervention
Clearly, then, pre-planning and early intervention are key. Companies and boards need to be proactive, creating procedures and policies that head off chaos and heartbreak at the pass. Such policies can perform double or triple duty, as they can readily be applied to people whose cognitive impairment stems from substance abuse or severe mental illness, as well as from dementia.
Sharon, the business owner introduced at the beginning of this article, was the poster child for proactivity. Knowing that Alzheimer’s disease had run through her family line like a train, she was determined to protect her company, her board, and her reputation should the disease come for her. And now that it has, her family and colleagues have nothing but respect and gratitude for her courage in having done so.
Dementia-Proofing Steps
Here are some of the dementia-proofing steps I recommend to the enterprises I work with:
- Write detailed job descriptions for every position in the company and advisory board.
- Create a feedback-rich culture for all personnel, with review mechanisms that include feedback around the key deliverables for each employee (including interpersonal effectiveness).
- Beef up the company’s benefits package to ensure mental health issues and substance abuse problems can be properly assessed and treated.
- Institute a requirement for baseline neuropsychological assessment at the age of 65 for anyone in key decision-making roles. Re-test every five years (or sooner, if feedback mechanisms are revealing performance problems).
- Develop succession plans that take into account the risk of longevity-related cognitive impairment.
- Ensure that board members are required to act in a fiduciary capacity when confronted with evidence of malfeasance or impairment.
Sharon’s own cognitive decline was flagged by the mandatory neuropsychological re-testing she underwent at age 70. The ensuing flurry of medical appointments resulted in a working diagnosis of Alzheimer’s disease. In the past two years, we have worked diligently to put appropriate supports and safeguards in place for everyone. Sharon has accelerated the onboarding of her successor. She is continuing to carry out a number of corporate duties that remain well within her capacity, and she has relinquished activities that are best done by others.
Neither Sharon nor I know how long she can continue to work (or, indeed, will want to work). But we do know that her proactive commitment to safeguarding her company has also safeguarded her personal legacy. Other business owners and their advisers would do well to follow her example.