Tag Archives: cousins

Power without Knowledge – An Unnecessary Burden

Mike Fassler
Mike Fassler

In my work with sibling or cousin shareholder groups, I often encounter unprepared, or “sudden” shareholders.  These individuals come into ownership of their family’s business as a result of a gift or the death of a parent with little to no preparation for the role of owner.  As these shareholder groups come together to align for the future, a challenge they face is that some of the shareholders who now have decision-making powers have not been equipped with the knowledge on how to effectively manage this responsibility.

Often the “sudden” shareholder becomes dazed and confused about what being a shareholder means.  Questions like: “What are my responsibilities?”; “How much time do I have to commit?”; “Do I have to do real work if I am a shareholder?” “What if I really don’t want to be an owner – what are my options?”  arise in their minds.  They don’t really understand what ownership of the family business means to them or the broader family.

This situation can bog down the governance process and lead to ineffective decisions as the shareholder group seeks a threshold level of knowledge to “get up to speed.”  In addition to the time each individual shareholder may need to wrap their mind around their rights and responsibilities, the group of shareholders also has to learn to collaborate as a team of owners – something that doesn’t just happen by virtue of kinship! The governance process tends to slow to the pace of the family shareholder with the least knowledge.

A critical component of multi-generational family business continuity is a cohesive shareholder group.  The better prepared the family is for transition of ownership from one generation to the next the smoother the transition will go.  A key part is preparation of all potential next generation shareholders through a deliberate next generation shareholder development effort.  By learning about being an effective shareholder well in advance of a triggering event, the family and the business will be better equipped for continuity and will not run into the unnecessary burden of power without knowledge.


Siblings to Cousins: Ownership Goals for Growth, Risk, Profitability and Liquidity

Amy Schuman
Amy Schuman

In the transition from siblings to cousins, families are often called to define the ownership role for the very first time. In earlier stages, a relatively small family allows for more direct involvement of family owners in business operations and tends to put issues of ownership on the back burner.

It is at the cousin stage when ownership goes – frequently for the first time – to a significant number of family members with no direct involvement with the business. It is common for cousin owners to have minimal natural contact points with the business they now own. The majority of cousin owners do not have careers in the business, and some likely live a great distance from business operations.   There is much to understand about the ownership role  – and some excellent resources exist for further reading (see below). In this post, I’d like to focus on the opportunities contained within an ownership goal setting process.

Owners need to know enough about their assets to be able to set educated goals for their performance. What level of return is reasonable to expect? How much risk would be needed to achieve different levels of return, and what is our risk tolerance as an ownership group? What is a realistic expectation for growth of our enterprise at this point in time? What returns should we expect in terms of asset appreciation and liquidity?

A few of my clients have dubbed this goal-setting process “GRPL”, based on John Ward’s suggested four ownership goals of Growth, Risk, Profitability and Liquidity (see article referenced below).

Realistic family ownership goals will vary widely according to factors such as industry of business – age of business – location of business – and many others. But grappling with the GRPL goals allows a large, potentially dispersed ownership group to have a focus for their learning and involvement in their business as owners. In fact, ownership education can provide a clear mandate for the Family Council, which tends to coordinate shareholder education.  Ensuring the ownership group develops the knowledge they need to articulate clear and achievable ownership goals is an investment in the ownership, management, and family circles of the family business system.

In my experience, Boards of Directors welcome the ownership goal setting process with enthusiasm. Written and agreed-upon goals from owners makes the Board’s task easier, especially as independent directors join the effort. They know owners’ expectations, and can conduct themselves in the boardroom accordingly.

Some management teams may initially have reservations about the owners setting these goals.  As the management team is so intimately involved in every aspect of the business, they may question ownership’s ability to set realistic, informed goals for asset performance. However, if management has a role in educating owners about their industry and the company’s competitive position in the market, they usually becomes enthusiastic supporters of the process. Instead of having to worry or wonder if their decisions and actions are aligned with ownership’s expectations, management can now more easily evaluation their actions against stated ownership objectives. I’ve had CEO’s tell me that they sleep better at night, knowing more clearly the owners’ shared goals for the enterprise they have been entrusted to lead.

There is much more to explore in this regard. Hopefully this post has whetted your appetite to learn more. Please feel free to share your questions or experiences with ownership goal setting here, and to explore the resources below.

“What do Owners Do?”, John L. Ward, Families in Business Magazine, June/July, 2003

Family Business Ownership: How to Be an Effective Shareholder, January, 2011,  John L. Ward, Craig E. Aronoff, Stephen L. McClure, Palgrave/MacMillan

“Why Family Business Owners need a Job Description”, Jennifer Pendergast, Family Business Advisor, June 2010


Siblings to Cousins: Fear not the Larger Group

Amy Schuman
Amy Schuman

Many families are daunted by the task of transitioning from a relatively small sibling stage to a larger and more complex cousin stage.

However, there are advantages to the larger cousin group that may not be readily apparent, for example:

  • First, the cousin relationship is usually less intense and history-filled than the sibling relationship. There is more distance and healthier boundaries between cousins than between sisters and brothers. This can make conflict resolution and decision-making easier with cousins, even if the group is larger.
  • Second, the larger cousin group is usually more accepting of policies, procedures and ‘one person, one vote’ approaches than the smaller sibling group. Siblings can be more uncompromising and inflexible, expecting to see their preferences prevail in the smaller group – each perhaps at times assuming that they would get to be ‘the decider’ as their parent had been.  Cousins tend to have an easier time with the notion of collaboration and shared authority.
  • Third, the greater diversity in the larger cousin group can bring valuable strengths to the family and the business. Diversity in geography, age, lifestyle, occupation, and hobbies brings tremendous richness and a plethora of perspectives. Families that can be open and welcoming of this variety find themselves greatly enriched, more resilient and over time, more reflective of the wide world.

As you move from siblings to cousins, rather than being daunted by the larger size and complexity of the ownership group, consider exploring the advantages and finding ways to harness them to your benefit!

Our book, From Siblings To Cousins, Prospering in the Third Generation and Beyond,  (Aronoff & Ward) is a great primer on this subject.

A helpful article that explores the dynamics of later cousin groups is: “The Challenges of a Large Shareholder Group”, by Klett and Weichers in The Family Business Succession Handbook, available from Family Business Magazine.


Classic Dilemmas

by John L. Ward

Classically, families transitioning from sibling parents to successor cousins face the challenge of transferring wealth and power by common rules shared by all the branches or by each parent deciding what’s best for their children. The questions where parent/branches could disagree:

  • At what age should next generation receive dividends, income?
  • At what age should next generation receive stock and voting rights?
  • At what age should next generation attend board meetings as observers?

Parents, of course, have the right to disagree on what’s best for their children. On the other hand, equivalency facilitates transparency and goodwill among the families.

As with all dilemmas, what to do is a matter of respectful balance. One family said it well:

“We coordinate and set uniform policy as much as possible


respect that parental privilege comes first.”

That reminds us of a family seeking to balance the family-first or business-first dilemma. They speak to it in a paradoxical way:

“The business always comes first – but for the family.”

Please share any dilemmas or paradoxes you face as a family in business.


Sibling and Cousin Teams Making Decisions

Kent Rhodes

Sibling and cousin leadership teams present unique challenges to enterprise owning families. Questions about everything from strategy to new hires are sometimes complicated by the mix of sibling/cousin owners who also serve as a part of the management team.  How those decisions are made and who has the final say about them can become a sticky issue

While collaborative leadership may be a desirable goal to many families, decision making by consensus is rarely easy and never efficient. The result can be that decisions are made unilaterally, which while saving time, may fail to take into account important strategic or even tactical views from other family leaders/owners working in the business. Quite unintentionally this approach can lead to lower quality decisions over the long haul and create tensions among owners.

So, what is a leadership team supposed to do when at first glance, the choices seem to be to make decisions efficiently but with the possible impact on the quality of relationships with fellow owners/managers (who are also brothers, sisters, and/or cousins) or drag discussions along wasting valuable time, energy and resource? Here’s a suggestion to consider: As a team, agree what kind of decisions require the teams’ input, individual teammate’s perspectives or are tactical, operational decisions that don’t require any further communication. This helps identify decisions that demand a higher quality outcome through broader input from the family leadership/ownership team. Stick to this practice, checking in with each other at an on-going owner or management meetings to make sure the highest quality decisions are being made for the benefit of both the enterprise and the family, rather than at the expense of one for the other.


What Defines a Family Member?

Bernie Kliska

How does one determine who is a member of the family?

Last May, the U.S. Census Bureau reported that in 2010 married couples represent 48% of U.S. households.  The remaining households were comprised of single parents, live-in partners (same or opposite sex), divorced, separated or unattached individuals.  Further confusing the picture are blended families that are a hybrid of more than one family of origin.

The U.S. Securities and Exchange Commission issued a guide defining who is considered a family member (Dodd-Frank Act), which stated in-laws were not considered family.  Under this act, unmarried and same sex couples living together could be considered as family members. 

With so many variables, how do we decide who is a family member?  The answer can only come from the families themselves.  There needs to be a willingness to discuss the issues around this question without insult and recrimination. 

While this conversation may not lead to a consensus, it can generate an honest, powerful discussion on deciding who should be included in establishing policies for the business, as well as family and estate planning.  Having this discussion also helps emphasize to the family the importance of working together on complex matters.

Shifting notions of what constitutes ‘family’ is yet another variable that can challenge the senior generation’s dream that the family will all work together and stay together.  In our experience, if the senior family members are open to considering a sometimes broader definition of family, then the most important part of his/her dream… a supportive family and a successful family business…can be more likely to still come true.


Inherited Partners

Chris Eckrich
Chris Eckrich

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.