Read an Excerpt
Making Sibling Teams Work
The Next Generation
By Craig E. Aronoff, Joseph H. Astrachan, Drew S. Mendoza, John L. Ward
Palgrave Macmillan Copyright © 2011 Family Business Consulting Group
All rights reserved.
The Crucial Generation
Welcome to the world of sibling partnerships. When it is the best of all possible worlds, brothers and sisters harmoniously and successfully run their family business for another generation and their family serves as a center of strength, joy, love, and support.
In your dreams, you say? For some families, these goals sound impossible. Yet, we have seen many sibling groups perform beautifully as teams, and we have also seen the transformation of dysfunctional, disharmonious sibling groups into high-performing partnerships. Our experience has shown us that teamwork consists of a set of skills and attitudes that can be learned, and this book is aimed at helping the siblings in your family business become an effective, cohesive, fully functioning partnership.
We have found that it takes the effort of three groups to assure that siblings can evolve into teams and work together successfully:
3. The siblings themselves
If you are a parent, meaning you are probably the founder of your business, you have the opportunity to position your children for success as a sibling team. Your role is not an easy one. Mastering it is somewhat like mastering the rhythm and intricacies of a dance. This book will help you understand the dance and, we hope, enable you to execute the steps with skill and grace.
If you are the husband or wife of a second-generation family business member, your role is tricky indeed. You may be both loved and in some ways feared by your spouse's family. We explain why and show how you and the members of the business-owning family can work toward a more harmonious, trusting relationship—one that not only supports your marriage but also supports the sibling team of which your spouse is a part.
If you are now or expect to become part of a sibling team running a family business, you have a more challenging role to fill than you ever dreamed of. How you and your siblings handle this responsibility is more than crucial. Not only do you have the responsibility of preserving the business, you must also make it grow significantly so that it can support your families and your children's families (and not just one family, as it did in your parents' generation). You must make a success of the business in your own generation and set the stage for the generation that follows you. What you do as a sibling team and how you do it will serve as the model for your children and will have consequences—good or bad—not only in their generation but in generations yet to come.
This is a very vulnerable time in the life of your family business. Most family firms don't make it to a third generation. However, we are dedicated to the proposition that you and your siblings can pilot your business and your family through this critical phase, and this book is designed to help you do just that. It is full of wisdom, tips, guidelines, and the experiences learned from other families. Nevertheless, we encourage you to "think outside the box." Our suggestions and ideas are meant to stimulate your own thinking. We call attention to the issues you must think about and talk about, point to the many tough decisions you will have to make, and offer suggestions for building and maintaining a smoothly operating sibling team. But ultimately, your challenge is to design creative solutions that best fit your family business and your family's situation.
Just as a given problem has more than one solution, a number of different sibling arrangements work. Here are four of them:
1. The "all in, all owners" team, in which siblings are employed in the business and all are owners. They interact frequently and function largely as coequals. Although they may have different positions, each has a say in major decisions.
2. The siblings "in the business" team, composed of only those siblings who work in the business. Every quarter or so, they meet with their other siblings who are not in the business. Those in the business interact regularly and hold frequent meetings.
3. The sibling ownership team consists of owner-siblings both inside and outside the business. While those in the business meet regularly to focus on operational issues, the ownership team meets periodically to discuss ownership issues.
4. The sibling board team occurs when all siblings comprise the membership of the board of directors.
These teams may overlap and, in the course of a generation, configurations may change—a sibling may leave the business, another may want to join, and still another may want to sell his or her stock. Teams are fluid, and the wise family will maintain flexibility.
This book is written primarily for sisters and brothers who work in their family's business and/or are very active owners—that is, they are involved, informed, and interested in the business, or want to get that way. They care.
Also keep in mind our bias: our goal is to retain the integrity of the family while serving the business. We believe that a strong, healthy family enhances the possibility for a strong, healthy business, and vice versa.CHAPTER 2
The Era of Sibling Partnerships
This could be called the Age of Sibling Partnerships. Where once a business was almost invariably handed down from a father to a son, we are seeing a major shift in which businesses increasingly are passed from a founder to a next-generation team of siblings.
The immediate future will see enormous changes in the leadership of family businesses in the United States. According to the recent American Family Business Survey, a massive study that we conducted in conjunction with Arthur Andersen and MassMutual, 28 percent of the family firms polled expected their CEO to retire within five years, and an additional 14 percent said their current CEO would semi-retire within the same period. The study showed that 11 percent of family businesses now have co-CEOs, and an amazing 42 percent are considering moving to co-CEOs in the next generation. Many factors drive this trend:
* Parents are increasingly inclined to welcome all their children into the business. Firstborn sons are no longer presumptive successors. The tendency of many parents is to treat all children as equals. In the business families that we work with, we are called upon less and less to help work out problems between an entrepreneurial father and a successor son and more and more to help families in the development of a next-generation team as managers and/or owners.
* Women are seeking more active roles in the management of their families' businesses and are more likely to be considered for top positions. In the American Family Business Survey, more than 40 percent of the families considering co-CEOs in the next generation said that one of those co-CEOs may be a woman. Finding daughters assuming leadership positions in what have been, until now, male dominated industries is no longer unusual.
* Young people are demonstrating more enthusiasm for the family business than ever before and, in our observation, are returning to the family firm in greater numbers. Perhaps one of the reasons for their enthusiasm is the seemingly growing trend toward appreciation for the family.
* Ever-accelerating change means that the knowledge of younger people is more valuable to their family businesses. Wisdom that was applicable in the past is less likely to be applicable now or in the future. Founders recognize the contribution that their sons and daughters can make in keeping a business on the cutting edge.
* The laws that currently govern estate transfers support the formation of sibling teams. Gifting stock rather than cash has tax advantages, and if you gift stock to all your children, then suddenly they've become business partners.
* Greater awareness that many successful sibling partnerships exist makes others more willing to consider such partnerships.
Perhaps your family is considering a sibling partnership for its business, or perhaps brothers and sisters have already begun the difficult but rewarding process of developing themselves into a team of leaders. Even if the prospect of a sibling team seems off in the distant future, you will see, as you read on, that farsightedness now will pay off for your business and your family should such a team come into being. It is not too early to start thinking about the possibility.CHAPTER 3
What Makes the Sibling Generation Different
Each generation of a family business is unique and faces its own special set of challenges. We believe, however, that the sibling team—frequently the second generation—faces some of the most difficult challenges of all. If you are a member of a sibling group, be prepared to spend enormous effort building and maintaining an effective team. The demands on your time and energy will be exceptional, and you will have to work very hard. However, the rewards will be great. What could be better than a harmonious, extended family able to enjoy the financial returns of a prosperous business and able to pass that business along to a well-prepared next generation?
We generally find the sibling partnership stage to be more intense and volatile than any other. As a result of their growing up together, the level of intimacy and emotionality is higher among siblings than, for example, the cousin generation that follows. And because siblings carry into the business all those memories and opinions of each other that they have held since childhood, the possibility for harmful misunderstandings is strong.
Unlike cousins, siblings have probably grown up in a business founded by their parents. They tend to be very emotionally connected to the business, to their parents, and to each other. Hence, the intensity.
What also sets the siblings apart and can lead to volatility is that there are fewer of them than there are cousins at the cousin stage. Because each sibling may own a substantial minority position in the company, a family business can be threatened when one sibling is angry, disenchanted, or unproductive and isn't functioning as part of the team. Buying that person's shares can wreck the capital structure or the strategic plans of the business.
Another characteristic of the sibling stage is that Mom and/or Dad are probably still alive, and they have an enormous influence on the team and on the business. They will exert forces that the siblings must learn to recognize, understand, be compassionate about, and cope with as a unit. Further, the siblings must develop the ability to communicate effectively and sensitively—again as a unit—with their parents about business and family issues.
On the plus side, their intimacy and shared experiences provide siblings in a family business with great motivation to live with and benefit from their differences.
Nevertheless, the differences can be profound, and it is crucial that brothers and sisters in a family business learn to tolerate and resolve them. Otherwise, differences and misunderstandings can become "historical" ones, painfully passed down through future generations.
To assure the continued success of the business and the family, sibling partnerships have four distinct and vital tasks:
1. Become an autonomous independent team. This means independent of Mom and Dad. And while parents will talk about how much they want this to happen, unconsciously they may not want it to happen and may not let it happen. The tug-of-war in which the sibling group tests its autonomy and the parents assert their power is almost as natural as night and day.
2. Take the initiative as successors. You can't just wait until the business is handed to you. Too often, the sibling generation waits for the parents to make the first move. The more the sibling generation takes responsibility for and control of developing themselves individually, developing themselves as a team, and seizing the initiative, the more likely it is that succession is going to happen in a timely and successful way. Yes, occasionally a patriarch will see sibling interaction as a plot or conspiracy to get rid of him, but that doesn't happen often. So, while taking the initiative may be somewhat risky, our experience suggests that the benefits outweigh the risks.
3. Put structure and strategies into place that will help the business grow significantly. You have grown up in a family that probably had a good standard of living. But the business needed to support only one set of parents and children. Now, each of you wants your own family to live at least as well as your parents and their family did. For that to happen, the business has to grow sufficiently to support all siblings and their families.
4. Position the next generation for success. The job is not done until the stage is properly set for handing off the business to your own children. This means putting into place policies, procedures, and structure that will support the success of the next generation of family business owners and leaders. A generation of cousins may not be able to do its job until the generation just before it finishes its job.
A number of factors unique to brothers and sisters will deeply affect how you work together as a team. We regard them as major emotional issues. Understanding them and realizing that every sibling partnership is affected by all or most of these issues will help you be more objective, more knowledgeable, and even more compassionate about dealing with them. Your increased awareness will truly empower you as a group. Let's explore what the emotional issues are:
* The controlling behavior of entrepreneurial parents. Many entrepreneurs are "high controllers." Combining an entrepreneur's tendency toward control with normal parental feelings can produce parents who want to govern the attitudes, the values, the opinions, the dress—in short, the behavior—of offspring, not just while they are children but throughout life. The business itself can feed the need to control. For example, a business-owning family can be highly visible in the community, giving parents concern about how the things their children do might reflect on the business.
* The effect of parents' behavior on the development of children's skills for success. While they usually don't mean to, parents may adopt behavior that precludes the development of the siblings as a team. For example, instead of providing opportunities to learn the skills of shared decision making, parents may make all decisions themselves. Instead of helping the next generation learn to resolve conflict, they may suppress conflict. Instead of encouraging the development of communication skills within this next generation, they create a system in which each parent communicates individually with each child. Instead of allowing learning from failures, they try to protect their children from mistakes. That creates massive pressures on members of the next generation not to fail.
* Sibling rivalry. As adults trying to work as a unit in business, members of the next generation need to see each other in new ways—even learning to know each other all over again. As individuals, each sibling may consciously have to strive for less dependence on parental approval to minimize the rivalry felt toward brothers and sisters. This situation can be remedied by siblings' approval becoming more important than parents' approval.
* "Adopting" your parent's "baby." (How hard it is for them to give it up!) It is often said that a business is the parents' "other child." They created it, just as they created their human children, and their feelings for it are profound, just as their feelings for their real children are profound.
* The age spread of the siblings. Those who are older are the first to enter the business and get a "running start." An individual with a running start gains tremendous advantages in a situation where the family is trying to develop an equal team. And, because they love their children equally, the parents may champion and support the underdog—the younger sibling, who hasn't had a chance yet or who hasn't had as much time in the business.
If the age spread is, say, eight years, at one end of the spectrum you have a 34-year-old who feels ready to begin leading the business and at the other end, a 26-year-old who is just getting started. At the same time, the family is already at a stage where decisions must be made about leadership succession, who gets the voting stock, and other major issues. It is important to look at how the difference in ages affects the team and to find ways to compensate for various perspectives, levels of maturity, and extent of experience or knowledge.
* Mother's tendency to want to "save the family." Often, a mother's desire to preserve the family is so strong that she may become involved to the point of manipulating or moderating any news that she picks up about disagreements or disputes in the business. Siblings need to be aware that this is a common pattern and to address it sensitively.
* The "in-law effect." In the second generation, for the first time, "outsiders," in the form of spouses, are introduced into the family and, by extension, into the family business. Unless care is taken, all sorts of negative emotions can surface: fear, mistrust, suspicion, envy. But, as you will see later in this book, with the commitment of siblings and parents, the in-law effect is manageable.
Excerpted from Making Sibling Teams Work by Craig E. Aronoff, Joseph H. Astrachan, Drew S. Mendoza, John L. Ward. Copyright © 2011 Family Business Consulting Group. Excerpted by permission of Palgrave Macmillan.
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