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Avoid Sibling Rivalry Before Transferring the Family Business
February 05, 2009
In families with multiple adult children, transferring ownership of the business to the next generation can be a sensitive matter. Sibling rivalry, especially when it comes to determining roles and responsibilities, can intensify and spark battles that can hurt both the business and the family.
Sources of contention
Many factors can contribute to sibling conflicts, power struggles and, ultimately, a failed succession plan. For example, siblings may have differing visions for the business or opposing management styles and business strategies. Or one may lack confidence in another’s ability to perform his or her job.
But sibling-owner conflicts typically aren’t just about business matters. Often, they arise from interpersonal issues.
Case in point
Katherine and Rose became business partners after their parents retired from the furniture manufacturing company they founded. Rose was displeased that their parents made Katherine, who’d been with the company for only two year, a 50% co-owner. Katherine had an MBA and several years of experience as an executive at a Fortune 500 company. Rose had been the creative force with the company for many years.
Their parents describe both daughters as natural leaders and strong visionaries. So, they knew they’d have differing visions for the company. But they never imagined there would be constant conflict and power struggles.
Seven possible solutions
So what can Katherine and Rose’s parents do to help keep the burgeoning sibling rivalry in check and ensure their company’s continued success? Here are seven possible solutions: 1. Establish a leadership model. The family should collectively decide on a basic leadership model that spells out how the two daughters will work together, both day-to-day and long term. It doesn’t have to be just one sibling taking on the role as leader. They could be co-CEOs or a leader could be designated for a set period of time and then the position would pass to the other sibling.
Conduct strategic planning. This will help establish a shared vision of the company’s future and provide a foundation for each sibling’s role and responsibilities. The process also will help reinforce goals and values and identify areas of disagreement.
Share the power. Regardless of who is CEO, each sister should have a degree of power — particularly within a well-defined area of expertise — and the authority to respectfully challenge the designated leader. The sisters should listen to all points of view, accept the final decision and work toward its implementation.
Establish an outside board. To avoid deadlock on key decisions, the family could establish an independent board of advisors to facilitate debates and provide a resolution when Katherine and Rose are unable to agree.
Create communication agreements. The family could develop a communication agreement to help create a culture in which effective communication becomes an everyday practice. The agreement would document how the sisters should interact, resolve disagreements and make decisions.
Get professional help. To keep deep-seated sibling rivalry and personality clashes from penetrating into and damaging business ventures and operations, the family could hire a family business coach. The coach, often a trained psychologist, would facilitate the transfer of power, help the sisters work together as business partners, and mediate agreements on who is to do what and each sister’s expectations.
Have an exit strategy. In case either Katherine or Rose chooses to retire or withdraw from the company altogether, the family should execute an exit strategy before transferring the business. The exit strategy should outline the conditions for the sibling withdrawing and address pertinent issues such as compensation and retirement benefits.
Whatever steps they take, Katherine and Rose — as well as any siblings looking to share management of a company — should document all arrangements and agreements in writing. This includes anything pertaining to compensation; responsibilities; stock transfer capability; and the disposition of stock in the event of death, disability or retirement.
Keep the peace
Transferring ownership can be a complex proposition for any business, but in a family-run operation the intricacies of personal relationships often lend an extra measure of complexity. Learning how to work together can strengthen relationships — and the family business — for generations to come.
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