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  The Brooks Family Business Blog The Brooks Family Business Blog The Brooks Family Business Blog The Brooks Family Business Blog The Brooks Family Business Blog The Brooks Family Business Blog The Brooks Family Business Blog Working with your sister? your … Continue reading →

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Now add the challenge of working with a sister or brother. You may like each other. Maybe even love each other as your mother has always hoped. But that doesn’t always translate to working well together. Just like many married couples, they may love each other but they have a heck of a time hanging wallpaper together or managing the checkbook.

So how do you work better together and become an effective sibling team?

In their article entitled The Shadow Effect of the Founding Generation on the Sibling Partnership (The Family Business Advisor, May 2011), Stephanie Brun de Pontet and Kent Rhodes describe how family culture during childhood affect the way siblings work together. The authors note the following influences: competition, controlling behavior, entitlement and powerful vision.

Competition: Some parents pit their children against each other, constantly comparing the performance of one to the other. So it shouldn’t be surprising if kids in the business are “always at each other’s throat.” De Pontet and Rhodes recommend that adult children acknowledge the influence of the “competition principle” and discuss candidly the steps they need to take to develop a more collaborative relationship. It may be worthwhile to share stories of how competition impacted their sibling relationship, then move on to building empathy and understanding between the siblings independent of the parental influence.

Controlling Behavior: Within the family or family business, parents may make all the decisions, so their children never get the opportunity to work together on anything of consequence. The authors recommend sibling teams carve out special projects, such as drafting a code of conduct or creating a next generation vision for the future of the business.

Entitlement: According to the authors, if parents have raised their children with an attitude of entitlement, “all bets are off.” Imagine trying to work with someone who has an exaggerated sense of importance, who does not have a strong work ethic and who thinks things are owed to them. Advice to the adult children: take an objective look at your work ethic and willingness to make sacrifices for the good of the whole. If you are lacking in these areas and unable to change, it is unlikely you can be an effective employee or member of the ownership group. (Yikes!)

Powerful Vision: Unfortunately, the stronger the vision and personality of the business leader, the more difficult it is for the next generation to find their own voice and purpose. And any deviation from the parent’s vision may be considered blasphemy. But the authors recommend that each generation examine the business and define their own vision and purpose for the business going forward. In addition to the challenge of coming to agreement on that vision, agreeing on the pace of change will also test the siblings’ ability to work together. With open discussion, respect for different points of view and willingness to collaborate, this type of work can be an important part of creating a cohesive sibling partnership.

De Pontet and Rhodes remind us that we will likely outlive our parents by many years, and we typically meet our spouse in our 20’s, so the people with whom we really share life’s journey are our brothers and sisters. While building a strong and effective sibling team can be challenging, the effort can be very worthwhile. Their recommendation: “If you have the opportunity and responsibility to deepen your bond to your siblings….. make the effort to do it right!”

Perspective: Rick, the 2^nd Generation CEO

Just what I was hoping for – another meeting, and this time it’s a meeting with family members where the group might have to make a decision on something more important than what they want for lunch!

Oh, and then there’s my irascible brother-in-law who wants to tell me how to run the business and is convinced I’m overpaid. Sure business is flat compared to last year, but we’ve done really well given the market conditions.  After he’s done criticizing me he’ll probably want to spend the rest of the time talking about how to get money out of the company.

I can’t wait!

Perspective: Ann, the Mom

When my husband, Richard, and I founded the business we could make ownership related decisions around the dinner table or on our drive to work. Now, with my three kids and their spouses involved as employees, owners or beneficiaries, there are more points of view, different goals, poor communication, misunderstandings and hurt feelings.

So I think it’s great we’re getting together to talk about the business and learn how to be a better ownership group. But I’m nervous about my daughters because Susan resents that her younger sister, Stephanie, works for the company and makes a pretty good salary. And my son, Rick, may be criticized for company performance over the last year or two. I think he has done a good job running the business even though growth seems to have slowed a bit.

For family get-togethers I’ve asked the kids not to talk about the business so we can enjoy our time together. So I guess the time has come for us to have family meetings where the purpose is to talk business.

I just hope the kids don’t fight with each other. I’d hate to have a family squabble ruin their father’s upcoming 70^th birthday.

Perspective: Susan, the Older Sister

I’m really looking forward to the upcoming family meeting. I’ve got a lot to say.

For example, even though I own as much of the company as my brother and sister, they seem to be getting all the benefits – good paying jobs, company cars, interesting travel, etc. I enjoy being a teacher, but it bugs me when they show off their new company provided iPads.

And Mom and Dad, of course I love them, but they draw compensation from the company as “consultants.” Really?  I don’t think my brother ever talks to them about the business.

But maybe he should. Dad said the business has been struggling to grow. Perhaps he should get back in there and help out. I know my husband, Bill, has a lot of good ideas to improve the performance of the company. He’s very entrepreneurial and now has his MBA. He’s not making much from a salary standpoint but someday we’ll make some make some good money when he sells some of his ventures. Maybe if my parents, brother and sister took less out of the company in compensation the value of my shares would be higher when we sell (which I hope we do soon).

In the meantime, if I could get some money out of the company like everybody else it would sure help with the bills and my husband could invest more in his businesses. I’m looking forward to getting this all figured out at the meeting.

Perspective: Richard, the Dad

I’ll admit I haven’t really spent a lot of time on this family stuff. I felt pretty good that I built a nice business with my wife, Ann, and that we had something we could pass along to our kids. My CPA suggested we do some estate planning, so the kids each own 25% of the business, with my wife and I holding on to the rest.  Based on the latest appraisal, that’s a nice little nest egg for them.

So my focus was on the business. I just assumed the kids would appreciate what Ann and I created for them. With my son now running the business and my youngest, Stephanie, working as the sales manager, that’s a Lucky Strike extra. They work hard and I think the business has done pretty well in a tough environment. But I’m a little out of the loop now with my wife and I spending more time at our place in Arizona and finally doing the traveling we’ve always wanted to do. But I call my son once in a while to see how things are going and offer some free advice. Maybe I shouldn’t say it’s free advice since I do get a quarterly consulting fee!

Anyway, I think Stephanie is right in recommending we have a meeting to talk about the business. My wife is quite strict in enforcing her “no business talk” rule at family gatherings, so a lot of issues or questions bubble under the surface. For example, Stephanie mentioned to me it bothers her that her older sister doesn’t think it’s fair that she works for the company and gets a salary, benefits, etc. Stephanie would like to use the meeting to hopefully clear the air by discussing her compensation and how she has earned it. As she likes to remind her brother, she turned down a higher offer at another company to come to work for our family business.

I’m just glad Stephanie didn’t ask me to run the meeting. The family business consultant my son retained seems pretty good. At a minimum I hope he can be objective and help surface issues and concerns without the meeting getting too emotional. I’m not really interested in a lot of hugging or crying. Then we’ll need his advice on how to address these issues in a productive way.

My understanding is that the purpose of the meeting is for the family to begin learning how to own this business successfully. It’s more complicated than I expected. I think if we can just clarify what we need to do as a group of responsible owners and get agreement on our goals and expectations for the business, then it’ll be less likely we’ll have family misunderstandings and squabbles that could negatively impact the business.

By the way, to make things even more interesting, I just heard that Rick and Stephanie decided to invite spouses (of course my wife was already included). I think in general it’s a good idea to be inclusive, but I just hope Susan’s husband doesn’t take over the meeting! I like Bill, after all he is my son-in-law, but sometimes he comes on a little too strong.

So I’m a little uncomfortable about this first meeting, but I think my kids were right to push for it. We’ll see.

Next blog: the perspectives of Susan, the Youngest Sibling; Bill, the Opinionated In-Law; and Jim, the Family Business Consultant

He was inclined to lead the meeting, but then he realized that he was in the middle of issues like family employment, executive compensation, dividends, etc. So he decided it would probably be best to have an independent third party facilitate the meeting. Wise move, because it also allowed him to share his opinions and leave it up to the facilitator to guide the family in discussing issues and resolving differences.

He hired a family business consultant (probably one of the few in the world at the time) and the first of many family meetings began. Over time this consultant and others along the way helped us by sharing “best practices” on issues like family employment, providing tips for effective family communication, and clarifying roles and responsibilities of shareholders and other key family business constituencies. They facilitated our discussion of how we could modify those “best practices” to best meet our needs. They’d listen to our various points of view, summarize the key points, add their informed perspective, and help us reach agreement on guidelines and policies.

For example, we created a family employment policy (subject to review and approval by company management) that described how family members could apply for a job, what their qualifications should be, and how they would be evaluated and compensated.The company appreciated our input on this sensitive topic.

We prepared “Guidelines for Communication” that we all agreed to follow when communicating with each other in meetings and by telephone and e-mail. We also established ground rules for communicating with management and our board of directors. The management team and board also contributed to shaping those ground rules – and they’re happy to have them in place. Why? Perhaps because of provisions like the one that discouraged individual shareholders from contacting individual managers and board members to push their personal agenda!

And we discussed the roles and responsibilities of shareholders in a family business. Being clear on our “R&R” helped us prepare the above communication guidelines. And we learned that as shareholders our primary legal responsibility, and legal authority, is simply to elect directors. Beyond that we really weren’t legally required to do much of anything, nor did we have the legal authority to do much of anything.

Hmmm. Legally, this doesn’t sound much different from a shareholder of a public company, right? But of course ownership of a family business is much different from ownership of a public company. Just to name one: as an owner of a public company, the typical IBM shareholder has no interest in ensuring that their 500 shares of stock pass successfully to their children. (Maybe some of their wealth, but not necessarily those specific shares in IBM.) And if the shareholder is disappointed with IBM’s financial performance or its approach to environmental issues, or if they think IBM executives are overpaid, that it carries too much debt or the dividend is too low, then they can simply sell their shares.

Not so easy to do, technically or emotionally, when those shares are in the company started by your grandfather 50 years ago.

Our family may be like yours – we’d like to keep ownership of the business in the family through at least the youngest (4th) generation.  With that goal in mind we’ve identified shareholder responsibilities beyond just voting for directors. “Owner Education” is one of those responsibilities, so, as described above, family meeting topics include understanding principles of good governance, learning about critical success factors for the business, and discussing financial matters important to the ownership group like estate planning.

When we gather as a family (now with three generations in attendance) we learn how to be effective owners, then take action to put key principles into practice. I guess you could say that since 1985 we have been guided by the wisdom simply stated by well-regarded family business author/consultant John Ward, “Responsible family business ownership doesn’t come naturally. It has to be learned.” But we had a head start – this quote is from the book he published in 2002!