Examples of Each Type Abound
Anyone who has spent any time in the family enterprise world has surely encountered a variety of different versions of sibling partnerships.
Sometimes sibling groups come together and end up working so well together that people are rightfully impressed by the way they can combine into what appears to be a “1 + 1 + 1 = 10” arrangement. That’s good, and maybe even great.
Other times, things might start off on the right foot, but after some time, and typically after the previous generation has fully exited, they may be lucky to find themselves staying even, i.e., where 1 + 1 + 1 = 3. If you were expecting at least a 5, then 3 feels pretty bad.
And of course when you read about disaster family business stories on the front page of the newspaper (remember those things?) well then it’s often more of a case of (1 + 1 + 1) X 0 = 0, or maybe even a negative number, or downright ugly.
Avoid Ugly, Strive for Good
I don’t want to spend too much time on the ugly version, except maybe to say that before things get ugly, they usually go through some “bad” on the way.
I’d rather share some ideas on what you want to look for when things begin to turn bad, and encourage folks to cut their losses well before they get to ugly.
Let’s talk about some examples of good, and look at what families are doing right, and concentrate on the positive.
I was recently privileged to serve on a committee charged with determining the winners of a competition that some family businesses have entered to choose an annual award winner to be announced this fall.
The three finalists all shared certain characteristics that made me think of this topic, and I think there are definitely some lessons worth sharing.
From Autocratic to Democratic Leadership
Family business literature typically talks about G1 being a one-person show, that hopefully moves on to a sibling partnership in G2, on the way to becoming a G3 “cousin consortium”.
The three FamBiz we judged were all past G2 and yet they were each currently involved in transitioning to a group of their offspring for the first time, since each of the past generational transitions were of the “father-to-one-son” variety.
Perhaps one of the secrets to FamBiz longevity is to avoid passing the company down to more than one child or branch (?)
The biggest change that occurs when going from one leader to a few is that autocratic decisions no longer typically work as well, and are usually not deemed acceptable by the other sibling partners.
Learning how to “make decisions together” is something I talk about a lot when discussing the importance of family governance.
Family Governance? Not Again!
“Oh boy, here he goes again”, I can almost hear some of you thinking.
But once again discussing the three finalist business families we looked at, they had all been working on their family governance for at least a few years now, and each of them had done so with the help of at least one outside expert brought in specifically for that task.
If you are hoping for a “good” sibling partnership, one key is to begin working on your family governance, so that it has a chance to evolve while both generations are still involved.
While each generation learns how to deal with the transitions involved in moving from one to the next, the siblings in the rising generation also learn how to work together effectively, or at least that’s what’s hoped for.
Avoiding Bad Before It Gets Ugly
The key to avoiding ugly is to be able to recognize a situation that has a likelihood of turning bad.
Sometimes families recognize that certain siblings will not likely mix well in a business context, and so they transition to one of their offspring and find other ways to treat the others. That’s one way to avoid “bad”.
But once a sibling partnership exists, as soon as things start to get sticky, there’s still a chance to avoid “ugly”, but it almost always involves getting some outside help to allow the important conversations to happen in a productive way.
See Getting Legal Advice for your FamBiz vs. Lawyering Up for more on ways to react before things get too far out of hand.
