At my son’s middle school basketball game this week, I overhead a young cheerleader say (to her coach!), “No offense to our guys, but I want the other team to win.” The coach is a friend of mine, so I caught her eye and we shared a good laugh. She certainly has her coaching work cut out for her!
Every time I picture that exchange in my head, I laugh out loud. It’s just so incongruous: a CHEERLEADER, whose whole purpose is to support a team in their pursuit of victory, pulling for the OTHER team. It just doesn’t make sense. And, as usual, the example got me thinking of family business. (Stay with me here!)
I have had the honor of interacting with several sibling groups over the last couple months and these groups fall into two camps: siblings who respect each other and siblings who do not.
The sibling groups who respect each other can lack a shared vision. They can lack structure and governance needed to effectively govern their business. They can be stressed by changes in their industry. But the foundation of respect and true appreciation for each other give them a base to come together and effectively work through these challenges. I’ve even seen situations where they come together to do the needed work and decide that one sibling is no longer aligned with the business vision. Departure of a respected sibling is difficult and strains relationships, but holidays and family togetherness are almost always preserved.
I’ve also observed sibling groups put in terribly difficult situations. Often, the siblings have been together for decades but don’t have the foundation of respect and true appreciation for each other. These situations were brought to mind by our young, confused cheerleader. Her role was clearly to cheer for one team (she had on the uniform for goodness sake), but she was rooting for their opponent.
These siblings love the family business and enjoy their roles within the business. They bring value to the organization with their competence and passion. And they deeply dislike their “partners” – co-managers or co-owners – who happen to be their siblings. How can you be professionally fulfilled when you love your work, but disrespect your coworkers? How can you be fully effective when your uniform puts you on one team, yet you feel like the opponent of the very team you’re supposed to be cheering for?
It is definitely a confusing and challenging place to be with stakes much higher than a 7th grade basketball game. I have deep empathy for adults who have devoted decades of their life to a family business and feel like their profession and passion can only be fulfilled if they stay in the business. However, staying in the business puts them in daily contact with folks they don’t respect.
If you’re contemplating becoming part of a family business in an owner or manager role, think deeply about your potential “partners” – the siblings (or cousins) you will interact with regularly. If you don’t respect or appreciate those folks, I urge you to pass on the opportunity. While our young cheerleader just needs a little coaching, I rarely see these feelings improve with time in the family business.
Accepting what others can and cannot give is tied to being the change agent. Strong family members accept that others are different and may not be able to give what they can give. Not everyone is a great communicator. Strong family members recognize that and check in. Brother is uncomfortable talking on the phone? Text him. Sister has trouble taking on too many tasks? Ask how you can help her. Of course we can point and say, “They should. . .” but why? Strong family members accept what others can or cannot give by adjusting their own behaviors to meet their other family members ½ (and sometimes ¾) of the way.
7) Don’t Dwell on the Past
Don’t dwell in the past, either. Stay in the present and allow your family members the same courtesy. Enough said.
8) Cheer on Other’s Success (no matter how small)
A healthy family I know sends out text messages to others in their family when something good happens. A family member I know shared his son’s success in making it to the Dean’s List his first semester of freshman year. Immediately, the brother texted his nephew saying “Great job.” This not only allowed the family member to share their success, they paid it forward by acknowledging the next generation’s success. It is a quick pat on the back. Strong family members find a reason to say to each other “Good job!”
9) Realize No One Owes Them Anything
As there is a distinct difference in feeling an obligation vs. an opportunity with the family business, so too is the belief that you have been blessed with the ability to do for yourself. Entitlement is the poison of families and businesses. No one, not even our parents, owe us a happy family business. We owe it to ourselves. It is when individuals feel fortunate to have a family business that they strive to make it better. Strong individuals focus on what they can give, instead of what they are owed.
10) Reflect and Adjust
The strongest leaders are those who reflect on their decisions and make changes. The strongest family members are those who review their behaviors towards their own family and make adjustments as needed. Did they hurt someone? Then they apologize immediately. Did they reach out to say, “How are you doing today?” Did they share in the joy of their nieces or nephews triumphs? Did they keep their mouths shut and open their ears? What did or didn’t they do, and what do they need to adjust? Strong family members reflect each day on their own behaviors and change what needs to be changed.
11) Don’t Expect Immediate Results
Strong family members understand that any relationship needs continuous attention. It is not a one-and-done kind of deal. A family I work with continually addresses the challenges they face. They realize that years of negative behaviors cannot change overnight and their family is now fixed. They look for incremental changes and face each day knowing that they are working towards something years from now in which they can look back on and smile.
Many of the families that we work with use their strong relationships as a competitive advantage for their business. The underlying trust and goodwill towards each other are distinct benefits when individuals know their family has their backs and are there for them. The workplace is a pleasant, productive environment where employees are confident in how decisions are made. However, there are also families where the relationships are a distinct disadvantage for the business. The tension between members makes the environment uncomfortable; the employees are not sure who to please or are getting direction from multiple members who disagree with each other.
Inevitably, when the relationships are troublesome, there is blame: “If I could just get my brother to stop meddling in my department;” or “She micromanages every action in her department.” I call it the “If I could just get them to…” trap. The finger pointing goes outward instead of inward. Strong families are made up of individuals who point the finger at their own nose and challenge their own behaviors.
Here are 11 behaviors that individuals from strong families do to keep their competitive advantage:
1) Don’t Waste Time Playing in the Pity Puddle
Life is full of challenges; it gets rough. Blend family and business together and it can be a tempestuous storm. Strong family members don’t waste time by thinking woe is me. They get themselves out of the Pity Puddle by focusing on their gratitude list. And they really focus on it. When I work with families who are having trouble, their homework assignment is to focus on what they are grateful about each other. And sometimes it’s hard! Strong family members don’t stay in the Pity Puddle long – they focus on gratitude list and add to it every day.
2) Laugh at Themselves and with Each Other
Strong family members realize that they are human and subject to some not-so-pleasing behaviors themselves. They fight against being defensive and are able to laugh when others point out their shortcomings. Laughter is a wonderful elixir. Laughter triggers the release of endorphins and produces a general sense of well-being. When we can laugh at ourselves, and with our family members, we can produce a shared sense of feeling good. Strong family members look at reasons to laugh at themselves and with (not at) each other.
3) See their Family through Rose-Colored Glasses
Strong family members look at their family and see the good, not the bad. We all have a choice in how we want to view the world; we all have a choice in what we see in individuals. Strong family members choose to look for the positives in their family, not dwell on the negatives. It is easy to say that your family is dysfunctional. Our own worlds are all about our perceptions of them. Strong family members tend to view their families as a source of strength and good.
4) Don’t Let Others Have Power over Them
Strong family members believe they control their own emotions. They accept that it is their choice to be bothered by someone else’s behavior. Strong family members rarely believe other’s drive them crazy. They are able to walk side by side without reacting. They check and control their emotions so they can interact instead of react.
5) Be the Change Agent
Strong family members don’t repeat negative messages about each other. They don’t keep their family stuck in the same place by waiting for someone else to change. They accept that if they keep doing what they’re doing, they are going to keep getting what they’re getting. Strong family members accept that they need to be the change that they seek in the situation. By being the change agent, and staying the course, others will be able to change, too.
“We’re doing it that way because that is what Dad wanted. And for as long as he is alive, that’s how we’re going to do it. It was Dad’s dream, he built it, he gave it to us, and that’s what’s important. We have to honor Dad.”
The statement silenced the rest of the siblings who were trying to have a discussion around the development of a shareholders agreement. The agreement was a “last man standing” contract where upon the death of the shareholder, their shares were retired and the remaining owners had a larger stake in the company. The sibling group of eight were in their 50s and 60s, and contemplating their own future. Some of the siblings worked in the company but most did not. One of the siblings had been diagnosed with a chronic illness that had the potential to shorten her life, and she wanted to understand the consequences of her ownership for her children. She understood the children were to receive the financial gain for the sale of the stock back to the company, but one of her children also worked for the company and hoped to become part owner one day.
While there were many facets to the discussion, I stopped the conversation and asked all of the siblings to step back a bit. Why would their dad want the agreement to read like that? What would be the purpose of formulating such an agreement? The fourth child answered, “Because he wanted the decision making to be consolidated so no one who was running the company would have to ask anyone else for permission to do something.”
I asked the remaining siblings if that was true. They all nodded in agreement. I proceeded to ask why their dad would have felt so strongly about consolidating decision making. Then another sibling told me the story of their dad, his father and his uncles. It was a story of destructive work habits and entitlement that strapped the company and angered the siblings’ father. He eventually bought everyone out and turned the company around. Their father had a very compelling reason to have the shareholders agreement written in the way that it was. However, it was now time for the siblings to come together to decide what was right for them as a group and their families going forward.
Each generation must navigate their own waters. Each generation must decide what is right for them, and what to pass forward. Each generation must face the tension of what is right for their nuclear family, and what is best for the whole and come together to negotiate a decision. And the successful negotiation can only happen through communication.
Often as consultants we are asked to speak or write on best practices. We are asked to give advice on what works best. The problem with those answers is that in order to be a best practice we must answer, “It depends.” The best answer is that each group must come together to review, to communicate, and to decide together a path that moves the family and the business forward in a constructive way. What is best for one family enterprise may not be the best for another.
I was reminded of this the past week when I listened to a webinar on the next generation and how they need to individuate and differentiate from the family. They need to become their own person and understand their own identity, their own strengths and weaknesses. When they can stand on their own, make their own decisions in a healthy way, these children become an adult who can bring a lot of positives to the family and the business, regardless if they work there or not. It is the same with each generation of a family business. They must understand where they came from, appreciate the hard work of the older generation, but decide what their own strengths and weaknesses are, what they need to do for each other as a whole in order to put their own stamp on the family and the business.
The next time you are in a family meeting, work in individual generations to decide:
What are our strengths as a group?
What is a potential area that could make us unravel?
What do we want our generation to be known for?
What happens if we do nothing?
Honor your past and hope for the future, but don’t forget to make (as a group) your own impact on the family business.
A common anecdote told by family business advisors quips that the first three things a second born child learns to say are “Mama”, “Daddy”, and “That’s not fair.”
Tensions and complications related to sibling partnership compensation are grounded in the early-formed, emotional quest for fair treatment between siblings. Like it or not, brothers and sisters compare how much time and resources they receive from parents and grandparents with that of brothers and sisters. This dynamic lasts throughout the sibling relationship – which on average is the longest in life – and must be confronted and managed if we hope to put together a successful compensation system for family members in our businesses.
Earlier this year I analyzed my 70 most recent client engagements and was not surprised at how many of them struggle with the question of siblings and compensation.
In 60 of the 70 family companies (86%), siblings work together on a frequent basis (at least one day per week).
Of those 60 family companies, compensation is a major issue in 54 (90%).
Of the 70 total companies, family member compensation is a significant issue in 58 of them (83%), regardless of whether siblings work together.
Though it may seem simplistic, many of my clients use the Golden Goose analogy to teach children (and adults) about their family business. Protect the Golden Goose from the Sly Fox (primary competitor) and it will lay Golden Eggs for its owner. If the owner gets too fixated on the Golden Eggs and forgets the Sly Fox, he’ll kill the Goose. Dead geese don’t lay eggs, and families miss them when they’re gone.
Compensation in sibling partnerships becomes more straightforward when viewed as an important part of keeping the business healthy for its owners. Owners want their businesses to grow profitably. Profitable growth is a result of excellent decisions made by managers. Owners understand that overpaying under qualified managers, whether family member or stranger, isn’t going to protect the Goose for very long.
Developing a Compensation Policy can help provide clear guidelines for the family to consider when analyzing sibling partnership compensation. Some important elements of compensation policies include:
The concern that any advantage given to family members working in the business will be seen by employees as family socialism superseding free-market capitalism.
Family employees will be compensated in the same manner as non-family employees, period.
Compensation levels will be determined by fair market value analysis.
Family member performance will be measured consistently and compensation adjustments made accordingly.
Family employees are expected to live within their financial means and not encumber themselves with excessive debt or rely on special disbursements.
Extra compensation, when deemed fair and reasonable by the Board and/or Family Council, will be provided through ownership and/or family channels.
As a mechanism for satisfying point number six, consider compensating family employees as owners or future owners. Provide stipends for serving on the Board or Family Council, provide a fair and reasonable dividend taken from profits when the company performs well, pay family members for special ownership-related research projects (e.g. A review of a top competitors strategy) or to serve on an investment committee.
Three siblings sat in a room discussing the details of a new shareholders agreement they wanted to create. Through a recent lawsuit with two other siblings, their current shareholder agreement, which had been put together by their father, had been helpful in defining settlement terms, but they knew it wasn’t comprehensive. The three siblings had gotten over the shock and hurt of the lawsuit, the dust had settled, and they were ready to proceed with a new shareholder agreement, but old habits had started to reemerge. They were stuck in a positional standoff. Eventually, after a year of building trust, they got to the point of having an honest and open discussion with each other regarding what they each wanted out of the shareholders agreement. They were (rightly) very proud of how far they had come.
They were also contemplating succession and their children were now employed in the business. One of the senior generation siblings suggested that since the three of them had come so far, it might be important for the next generation to sit in on the facilitated discussions regarding the shareholders agreement. They wanted the children to see that they could have tough discussions without being positional, judgmental, and/or defensive.
The meeting didn’t get very far through the parts of the agreement. There were a lot of side questions, a lot of meandering, but always came back on topic. Eventually, the three siblings went off on their own to discuss a few of the points on the shareholder’s agreement. After the siblings left, the next gen were asked what they thought of the meeting. A couple of them were confused about the lack of progress on the different points. Why was there so much discussion and meandering? Another was grateful to start hearing some of the terms that were used. He didn’t understand all of the different aspects of the agreement, so he was intrigued. And finally, the last one said he was happy to understand why they were making decisions about certain things instead of being handed a document and told “that’s how it is.”
The three siblings came back in the room and one of the next gen asked if they got anything done. One sibling answered that they got a lot done – they uncovered more questions. Two of the next gen were confused. They again said it seemed like the older generation siblings weren’t accomplishing anything. But the eldest sibling was excited. He told the next gen they accomplished so much more than just the points of the agreement. They gained trust and understanding and were enjoying the new found teamwork around the important document. They had come so far in their communication and were now enjoying solving tough problems together.
It was such an important illustration of how much the process matters when making decisions among family members. The next generation began to understand how to work together as future shareholders. It is incredibly important to teach the next generation many things, but most importantly, how to be a good partner. Next time you’re having an important discussion among the shareholders, keep these following points in mind:
Understand the process of making decisions is as important, and sometimes more, than the end product.
Exemplify what good communication and decision making can be for the next generation – they’re watching you.
Don’t hide difficult situations and conversations from the next generation.
Understand that the next generation wants to know WHY you made the decision you did.
Introduce terms that may be foreign, confusing, or misunderstood.
Don’t be afraid to veer off-topic for the sake of understanding. Just remember to come back to topic again.
Good decision making is so much more than good decisions.
Few people would ever allow someone else to choose their business partners if they were founding a company, but this indirectly happens quite frequently in family enterprise. Thoughtful and forward planning parents pass on the assets they worked so hard to build or steward to thier children, who then become business partners in addition to being siblings (or cousins).
While being partners in a family enterprise is deeply rewarding for many, each generation must reaffirm the partnership and work towards alignment in family and shareholder goals for the business and family relationships to function. Sadly, many family business members experience and focus on the stresses or conflicts in working together without every trluly exploring why they want to be partners in the first place, regardless of how they came into the partnership. Focusing on the latter is far more likely to produce the secure bonds that will allow both family and business partnerships to flourish.
Q. What about those of us who are not in the sibling generation?
A. If you are not a member of a sibling generation then much of what we talked about in the webinar is still relevant. For example, if you are a parent, you can think about how you raise your children and the effects this could have on them in the future if they are in a position of making decisions together. Even later generation businesses (cousin owners and beyond) may be affected by sibling bonds as there are plenty of situations where a family branch has to come to a consensus about how they might respond to a situation or decision and the ability to collaborate as a family unit could be very valuable.
Q. How about adopted children as siblings in family business operations?
A. Families will define ‘family’ in different ways – the ways in which families treat adopted children is often related to the age at which the children were adopted. In our experience most children who were adopted at birth or as very young children are treated the same as ‘blood’ descended children in the family. There may often be distinctions when a child is adopted into the family in adulthood – or as part of a second marriage. In this case I have seen those family members sometimes treated differently than blood descendents – from having no access to opportunities to work in the business nor ownership, to having the chance to make a career in business but not have ownership, to having access to it all. I know of a family where an owner adopted the adult children of her new husband and included them in her estate so they will inherit ownership just like any other member of the generation. In terms of working opportunities – whatever requirements are put to all family members should certainly also apply to children who have been adopted into the family.
Q. What do you do when the founder won’t let go?
A. This is a very common challenge. The best advice we can offer to siblings is for you to start to make the decisions that are actually empowered to make. The first one is to have an honest conversation with the founder. Ask him or her if they have any desire to retire, and if so when (some will honestly tell you no, some will say yes and mean it, and some will say yes but everything in their behavior suggests this is not likely to happen any time soon, or in a timely manner…). If they express a willingness to retire but you have your doubts you can certainly ask them about that they perceive as a reasonable timetable. Then you have to determine two things: do you believe them & do you have the patience to wait?
If you think it will be a long journey, if at all before your generation gets any real authority, then you have to ask yourself if you are willing to wait. If you find your patience is very strained by the process of waiting, you need to seriously consider getting out. Do not become a hostage of this situation if it is wearing you down – it will only damage your family relationships and will likely not do much good for the business either (especially if you become bitter, hostile, etc…). When you have a founder who is unwilling to let go it is sometimes much easier if you have siblings who understand your pain. In addition, if you have siblings then you make some joint decisions as siblings that demonstrate to the founder that you are able to work together. If you are not empowered to make decisions about the business – you could make decisions around how you would make decisions in the future when you do take over. For example, draft a policy on how perks will get treated in the business; determine if you would like to have a board and how board directors would be selected, etc… The exercise of working together will be a way for you to feel like you are moving the ball forward on things where you have a voice & as I mentioned, demonstrate to all stakeholders that the siblings can make complicated decisions together. This can go a long way to reducing the founder’s stress that everything will fall apart when they leave, and if their anxiety is reduced on that front, who knows what changes they may be ready to seriously consider…
Q. What is the best way to get siblings to begin sophisticated mode of communications?
A. The best way to ensure the siblings are able to really listen to one another. It is amazing to me how much can be accomplished if individuals will really give each other a fair hearing and seek to understand an issue or concern from their point of view.
If there is limited harmony between the siblings this may initially need to be facilitated conversations to help create the ‘safe space’ where everyone trusts that they can really speak their mind and be heard by others. When we work with families we almost always interact with each family member individually initially, to help us better appreciate the diversity of views or concerns, and to build an alliance and comfort with us, so that we can be trusted by all to create a ‘safe space’ where hard discussions can be had.
Q. How do you create an atmosphere of trust when the feeling is that only one sibling is the confidant of the founder?
A. If can definitely be a challenge when there is a ‘first among equals’ dynamic in a sibling group. If one sibling has far more access to information than the others this can breed distrust and jealousy. One important point for all families to bear in mind is that even if a member of the sibling team is the ‘most’ qualified to lead the business because they have the most experience or best knowledge – that person will not succeed if they do not also have strong ties to the family. Therefore, the sibling who is in that ‘favored’ spot has a challenge that they have to invest in their relationships with their siblings – and while they do not want to violate any confidences of other family members, it may be important for them to use the ‘special status’ they have with the founder to explain to that person that they have to share more broadly with the family or run the risk of creating mistrust between siblings.
Q. How do you get around entitlement – i.e. I’m an owner so I’m entitled to a place on the Board I’m entitled to make executive decisions?
A. As I believe we said on the webinar – entitlement is about the most toxic attitude you can find in a family business. Once a person believes that they ‘get’ to do things just because they are in the family the risk is that will compromise both family and business relationships. It is important to make clear to family members that if you have strong non-family executives, meddling family members who offer input on management decisions & expect their views to hold sway, are a serious risk for turnover. The best and the brightest employees will not tolerate this for long. Likewise, if you go to the trouble of putting together a serious and professional board, there is nothing that will kill its effectiveness faster than populating it with unqualified family members who are unwilling to work at developing skills & competence to add value – but rather feel their last name is necessary & sufficient.
Having said that – there are plenty of family businesses who want family on their board and do not have family who are as well qualified as outsiders. We would typically advocate for having some voice of the family on the board, but would suggest that this person should have as strong business experience as possible, or get some training around the governance role, etc. so that they are positioned to add value – not be a distraction. No one enjoys feeling useless, board members appreciate having some grounding so that they feel they can follow the conversation more effectively.
The bottom line is if a family member just feels entitled to warm a chair and are unwilling to put in any effort to learn how to do a good job, this is a huge risk (to the business and family – as all competent people will be angered by the presence of such an attitude) and should not be tolerated in any family.
“Siblings bring a unique dynamic to family businesses. The sibling relationship, arguably the longest of life’s relationships, add some of the most rewarding – and some of the most complex – aspects to life in and outside the business. It is not unusual for these complex aspects to become magnified when operating and growing a business handed to them by founding parents.
This process comes with tremendous challenges for siblings to fill the shoes of a founder while simultaneously figuring out how to move from a single leader model to working as a leadership team. Questions like who is equipped to lead, what kind of leadership/management configuration will be employed, who will serve on a board, and who will be simply “proud owners’, are just a few of complex issues that a sibling team will address.
One question that will be addressed in an upcoming Webinar, May 18 is how can siblings prepare themselves to be effective leaders of the family business? Besides completing degrees in appropriate management or leadership fields, siblings can also position themselves for success in many important ways by working explicitly on their partnership, for example, by committing to weekly or monthly owner’s check-in meetings to talk about the business in terms of the family’s interaction with it and with each other. This meeting should be in addition to any “official” board meeting or executive management meeting and can improve communication while staving off some of the challenges that come with sibling teams.”
For additional information or to register for the May 18 webinar click here.
With the Steelers in the Super Bowl again, there is more than the usual focus on the team’s owners; the Rooney family. The newspapers place an emphasis on the family’s history and family business legacy behind the success of this storied football team.
Reflecting on sports competition and business families, we are reminded every day of competition within the families themselves, especially the competition that takes place between siblings. Siblings may compete for:
Opportunities for jobs in the business and associated recognition for individual success;
Access to the family homes/ranches/cabins/boats for themselves and/or their children; and
Recognition of the value of their contributions in educational achievement, community or business performance, or for leading a family council.
Even when the competition is managed well by the brothers and sisters or restrained by respect for the most important issues, there may still be score keeping.
Friendly competition is a part of life with siblings, and it is more a “normal characteristic of the family culture” than a problem for many successful business families. In a football game, the rules are well known and understood, there are objective decision makers (the referees), and there is transparency (national television). These are also fundamentals needed in business families even when the competition is not so fierce.
Successful business families have well-understood policies for how the family relates to the business (the rules), use objectivity (independent directors and non-family managers), and find multiple ways to keep everyone informed (transparency). Also, from time to time, they bring up the fact that they are all now in their 50s and they still do things that look like they might be competing for their parents’ attention and favor – then they have a good laugh together at their own expense.