By Prof. Enrique Soriano
Every founder’s dream is to watch their children grow up to become responsible adults, eventually join the business, and work as a team to ensure the business becomes successful. Unfortunately, 7 out of 10 family-owned businesses do not make it to the third generation, and research has shown that one of two primary reasons contributing to a failed family business is sibling rivalry, which all too often leads to conflict.
The other reason is the founder’s control and reluctance to share power, which leads to a failed succession in the event of an untimely death.
This article is the second part of Roby’s story where he showed signs of stress related to family issues, most notably with his siblings overtly displaying traces of entitlement. He also sensed other deep-seated issues that his parents callously ignored. In many instances where he raised these issues to his father, the oft-repeated answer would always be, “It is a small matter, Roby. Why don’t you channel your energies on the business instead of complaining about your siblings’ work ethic.” When he raised the same issues to his mother, the usual response was, “Don’t be too hard on your siblings. They’re not like you. They also have families of their own. Allow them to also take a break from work.” It was clear that the parent’s unwillingness to confront these problems that were “bubbling beneath the surface” caused Roby so much anxiety.
While the business was showing signs of recovery and growth, the family enterprise went into overdrive and pushed its expansion into other geographical areas. Despite his constant fear of the future and helplessness in resolving sibling entitlement issues, Roby continued to exude passion and commitment. But in 2013, on the eve of his birthday, Roby finally summoned enough courage to talk to his father and pour out his emotions. “Papa, I only have one birthday wish and that is for our family to be united and be stewards of this business so we can continue your legacy. The only gift I want is for our family to go through a governance journey where we are clear with our roles, be accountable for our actions, define where we want to be and embrace what we will be known for in the future.” That paved the way for the introduction of governance to the family.
Sibling rivalry is a term most often associated with children — young brothers and sisters struggling for their parents’ attention. But when the rivalry continues well into adulthood and spills over to the business reinforced by the adult children’s ownership rights, you can expect that the conflict will almost always be disruptive – and destructive.
According to author and behavioral psychologist Dr. Denise Federer in her Bottom Line Behavior article, “Differences between values and perspective between siblings may be exacerbated when they are working together. While they may tolerate each other’s idiosyncrasies in a family setting, it is not as easy when their livelihoods may depend upon one another. Factored into this equation might be power struggles and competition for parental approval. These dynamics can become even more complicated when there are difficult past histories, protective spouses, step brothers and sisters, and other siblings who may or may not work in the business.”
Federer adds, “Often times the conflict between siblings can be managed when the parent is there to make the final decision. In fact, not wanting to hurt their mother or father can be the catalyst for adult children putting their differences aside. However, when a parent leaves the business, whether through retirement or an untimely death, it can throw the family and the business into chaos. All these factors build the case for developing strategies for ensuring strong relationships and transparent communication between siblings.”
From introducing best practices to documenting solid ground rules to making sure the structures are in place all the way to creating a compensation policy that is performance-based and fair, my advice is to set your adult children up for success long before you decide to step back.