Illustrations by Don Sparrow
Meet the Dilby family and Dilby & Sons Construction, founded in 1957.
Five family members own shares in the business:
In the Dilby family, there had always been a rivalry between Jacob and Julian, the two older brothers. Involvement in the family business had only made matters worse. Over Christmas, the tension had escalated. At the family Christmas dinner, Julian began boasting about his ambitious plans to expand his fly-in fishing camp. Equally fuelled by the Christmas cheer, Jacob reacted by venting his frustration at his brother’s increasing neglect of his responsibilities in the construction business. It did not end well.
The next day, the matriarch of the family – John’s wife, Mary – dreaded the thought of her family coming apart at this stage of her life. John was equally concerned, not only about the family, but also the business. Something needed to be done before everything they had built fell into disarray.
One challenge is to resolve, or at least manage, personal conflict. The other is to find a way to salvage a business after so much has been invested in it.
“I’ve seen this situation many times,” says Gord Stewart, Partner – audit and business advisory services, at KPMG in Canada. “One challenge is to resolve, or at least manage, personal conflict. The other is to find a way to salvage a business after so much has been invested in it.” The stakes are that much higher when families are involved, with the risk of seriously affecting family relationships, or making it impossible for a business to be handed over to the next generation.
Unlike people who are strictly business partners or shareholders, family members can be very hesitant to bring an outsider into what they consider “a family matter.” However, a skilled business advisor can do much to reduce tensions and move family members toward a mutually beneficial outcome. The first step is to set the rules and manage expectations. Each of the Dilby enterprises must be looked at objectively as corporate entities rather than sources of personal pride. An objective advisor can help determine what discussions need to take place, and who should be involved in those discussions. From a purely business perspective, the question has to be, What is best for each corporate entity, regardless of who controls it?
The situation with the Dilby family business may be relatively common, but it is nonetheless complex. All of the children, and their father, were hesitant about being as forthright as they needed to be. Even if they were to try, it is doubtful they could speak clearly and objectively. At the shareholder meetings, they all tended to focus on numbers, rather than allowing for agenda-driven, rational discussions about underlying issues. When a point of contention inevitably did arise, John tried to be a mediator, but flare-ups continued to increase to the point where Julian or Jacob seemed poised to storm out of the meeting or pursue actions that could seriously jeopardize everyone’s business interests. It was bad enough that the Dilbys could not clearly assess how the family and business relationships had come to this point; what should have been even more concerning was that they were at a loss to know where things might lead.
The much-needed objective eye is what an advisor like Gord Stewart brings to the table. In Stewart’s assessment, “John realizes that the time is coming when he will no longer be leading the business. His children also realize this. That is really what’s increasing the tension between the two brothers. Jacob is worried that if he has to take over, his brother won’t be there to help make decisions and perform key management duties. Julian, on the other hand, is worried that his older brother might try to unfairly remove him from the business altogether. Amid the tensions, Annette is becoming increasingly concerned about how all of this will affect her plans to grow her business. This is why the next step has to be succession planning, so everyone can calmly determine what will happen instead of worrying about what might happen.”
Focusing strictly on the business so it functions effectively is only part of the answer. Family dysfunction also needs to be addressed by a specialist with different skills. “I would suggest the Dilbys seek family counselling, which would involve spouses and everyone in the family,” says Stewart. As hard as a shareholder or partner may try, it is unrealistic to think you can truly separate family and business. The rivalry between Jacob and Julian might have begun in childhood, or perhaps there is acrimony between their spouses which is compounding the problem.
“These matters can be very complex,” Stewart concludes, “and at times it can be the pettiest of things that cause roadblocks. The Dilbys should not expect me to wave a wand to make things right. It can take months, even years, before things get settled. But I think with the help of an objective eye, they will see that the effort will be worth it.”
All names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), businesses, places, buildings, and products is intended or should be inferred.
First published in the March 2020 edition of The Business Advisor.