In one case, dissension over who should lead brought significant upheaval to both sides of the business and family equation. Infighting between four siblings played a large part, as two of the children entered into the family business and two stayed away, but benefited from stock ownership. As with any family, the siblings had different skill sets and attributes, which led to assumptions about who should be considered for the leadership role.
The heir apparent had a highly valued skillset: he was a great salesman, and he eventually became CEO of the business. His sales skills led the way to the executive suite, but his siblings did not respect or admire him as a leader.
That lack of respect became a serious issue when the family patriarch died and an economic downturn caused the business to struggle. Stress mounted within the family, and the siblings outside the business became convinced that as CEO, their brother was stealing from the business and running it incompetently. Accusations flew, and the battle between siblings began to hurt the business directly.
The situation eased after the CEO bought his siblings’ shares out. Unfortunately, the resolution was hard fought, came with significant legal fees, and put a dent in the legacy of the family business. Had the family managed succession early and defined what was “fair” to all siblings, much of the damage could have been avoided.
How could a similar situation be avoided for others?
- Address succession early. At the outset, families should establish a values-based decision-making process. The family should agree on axiomatic principles or a mission statement, which should then serve as a foundational part of the company’s organizational documents. Without having this conversation early, the business will suffer more than any individual ego.
- Speak with a unified voice. The family must speak with one voice. Messages and statements about the family’s positions should not be delivered until the family has deliberated and reached consensus. If the message coming from the owners is not unified, it will impact all employees within the business. In some cases, non-family members could notice the division and use the rifts to their own advantage.
- Be clear about what “fair” means. In a family context, fairness comes down to equal opportunities for siblings and respecting all family members. In a business context, it means rewarding those who excel. Many times, as in the example above, this view on fairness causes a larger conflict.
Laying out these terms can be tricky. Nobody wants to hear that they are considered unqualified and their sibling will be taking over the business; families need to create consensus around those moves in an effort to keep all parties in good graces.
Succession planning is a significant undertaking. Families that work to understand the qualifications of the next generation and take the planning process seriously can preserve the business—and family harmony.