Former Secretary of Defense Donald Rumsfeld was widely ridiculed for his “what we do not know” response during a 2002 Department of Defense news briefing.
In part, Rumsfeld said about threat assessments, ‘As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.'
Assessing threats and planning strategically and tactically are just as important in business as they are in the military. Rumsfeld’s quote, whose origin is actually attributed to a D.H. Lawrence poem, reminds me of what Loyd Rawls wrote about the mission of a succession planner; ‘To provide for the continued success of the business through the next generation of owners and managers in light of predictable, probable and possible interdependent contingencies.’
In other words, there are things we know, things we know we don’t know, and also things we know we don’t know but don’t know what they are. Confused yet?
Things we know: Based on our experience in working with hundreds of family owned businesses, there are issues we can predict. For example, if a family member enters the business with no prior experience or training and doesn’t work their way up through the ranks from a very basic level, we can pretty accurately predict that there will be problems; problems like a lack of respect from employees and managers, a lack of understanding of the various roles within a business and their importance, and the potential for poor performance by this family member due to all of the above.
Things we know we don’t know: As business owners and managers, we are not expected to keep up with changes in tax laws, HR regulations, legal precedence across a broad expanse of case law, or at a more basic level, specifics of how technology within our business works. What we do expect, however, is that we have experts in our employ or as advisors, who specialize in these areas and can advise us in areas of importance to our business, so that we can make sound decisions and plan accordingly.
Things we know we don’t know, but don’t know what they are: These are the issues that can get us into real trouble because we don’t even know to be looking for them. It’s quite common when we speak with clients about issues such as planning for estate taxes that we find they don’t have an understanding of how an estate is handled upon death, are not aware of alternative strategies that involve both legal and financial plans, and haven’t a clue what types of life insurance they hold, how those insurance investments are performing and if they will even have coverage upon their death. They tend to make incorrect assumptions based on their original good intentions (and most likely someone’s advice) at some point to cover all the bases. It’s a complicated business and things change over time, so confusion is to be expected.
Understanding what we don’t know is an important aspect of business succession planning and my examples within the realm of estate planning are only a small portion of the puzzle. Accountants and attorneys are vital to the process, but are highly specialized in specific aspects of the overall process. Peeling back the layers of the onion and revealing the ‘predictable, probable and possible interdependent contingencies’ to the ongoing success of a business through future generations is a complicated process, but well worth the effort.
Like Rumsfeld, recognize that your own threats can come from many different angles, both known and unknown. Don’t worry about being ridiculed for what you don’t know. Instead, plan from a position of knowledge and strength.
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