John L. Ward’s scientific contributions

Sometimes with all the time and work required to become an effective and successful ownership and leadership group of siblings, it is easy to lose sight of what a family business is really all about: family. It’s about each sibling’s own family and extended family, Mom and Dad, brothers and sisters and their spouses, and nieces and nephews. Without their love, happiness, goodwill, and support, a sibling partnership can falter. If things aren’t working well for the family, it is fair to ask: why bother?

The appropriate management structure of an enterprise at the sibling stage will vary depending on the business, industry, markets served, number of employees, etc. It is beyond the scope of this book to prescribe optimal management structures, but it is almost certainly necessary to move the company away from the hub-and-spoke model of management that is common of many businesses at the founding stage. Hopefully, the company has grown to a size where running all decisions through a single-decision maker is impractical. At this stage we often also find the business faces complex choices, such as whether to take on debt to build a second plant or expand into another area or acquire a local competitor, that benefit from the wisdom and challenging questions a board of directors can put to management.

Love and strong family ties can blind some families to future risks. When siblings have trusting and close relations with one another, they often resist setting up formal processes and policies because they do not feel they need to create so many structures and systems to manage their company. After all, they grew up together, work well together, share a profound respect for the company and the legacy of their parents, and are simply very busy running the business from day to day. Sibling-owned businesses may occasionally succeed even when they set up only a few formal structures. Yet, even in those cases where harmony has prevailed among siblings, it’s a new ball game when the third generation starts to come of age and to enter the business. All of a sudden, parental allegiance may trump filial bonds and even harmonious siblings may find themselves in conflict if they feel their children’s future is at stake. As cousins mature, decision-making processes will eventually need to accommodate many more people. Three siblings may perhaps reach joint decisions on the fly, but when there are 17 cousins (who most likely do not all work in the business), new models are essential.

While proactively planning for the rise of the sibling generation will improve the odds of a smooth intergenerational transition, its accomplishment requires hard work, tenacity, and patience. There will be bumps in the road and roadblocks. We have alluded to some of these challenges throughout this book, but let’s take a closer look at some of the most common and serious obstacles that an evolving sibling team may encounter.

Successful transition to sibling generation leadership requires preparation and effort by all stakeholders of the family business. The complexity of the sibling stage in a family business typically requires adjustments in management, business governance, and the family’s decision making. Ideally, the senior generation works with the next generation to plan for these changes. Too often, however, generations clash rather than collaborate. Founders may not realize the difference between the owners’ role and management’s role because they have been doing both, and they may not always understand how differently their children will have to deal with decision making. In addition, many founders resist letting go of authority and will struggle with change of any kind. As a result, sibling team building often falls to the siblings themselves. This chapter will provide some guidance on the core elements the siblings should address in developing their partnership.

Some of the strong personality characteristics that enable entrepreneurs to succeed against the odds in launching their business may actually complicate the transition to the sibling generation. For example, children who are raised by controlling parents may not develop great self-confidence which could affect their ability to build a team or to make decisions on their own, (Deci and Ryan 1985) weaknesses that could affect their eventual sibling partnership. In addition, the effort of launching a business means a founder must often be away from home. These frequent absences can lead to particularly intense sibling rivalry as children compete for the parent’s very limited attention. In some families this intense rivalry leads siblings to grow distant from and even mistrustful of one another, adversely affecting their ability to collaborate as business partners. Sadly, some entrepreneur-parents like to foster competition among their children because they believe it will “toughen them up.”

Planning for the continuity of your enterprise has never been more relevant. As the baby-boom generation (persons born between 1946 and 1964) is reaching and passing the age of 60, our culture is facing an unprecedented “bubble” of individuals moving toward retirement age. In an extensive survey of family businesses, wealth management advisors Laird Norton Tyee found close to 60 percent of family business owners were over 55 years of age, and 30 percent indicated they were 65 or older (Laird Norton Tyee 2007). Further, the American Family Business Survey found close to half of family business leaders planning to retire within the next ten years (American Family Business Survey 2007), suggesting the process of succession is now underway or around the corner for countless business families.

The transition from the founding generation to the sibling generation is considered the most challenging of succession journeys for families in business for many reasons. Some significant ones include: the intensity of sibling relationships, the arrival of in-laws, and the difficulties the founder may have in letting go. We will touch on these and other challenges throughout this book. We start, however, with the overarching concept of complexity. Moving from one decider to needing to coordinate multiple decision makers for the business and the family is a fundamental change with a powerful impact. In addition, this complexity typically emerges in the context of important changes in the business (e.g., strategic, structural, technological, or financial evolution) and the family (e.g., aging parents slowing down) that increase the emotional intensity of every decision or change that must be considered in the process of transition.