By CoraLee Baerg
The single greatest tool for success in a family business is communication. I know it sounds obvious, but time and time again, families act in predictable ways: assumptions, assumptions, assumptions. A lifetime of knowing each other, and failure to treat each other as business partners at the office and as family at dinnertime, can lead to assumptions based on feelings, not facts, and grumblings that are swept under the rug and left to fester.
“Of course Dad agrees with her, she’s always been his favourite” – an exclamation made by many a grown child, but exacerbated in family business situations. Relationships in a family business have so many more layers than those in a traditional business. Decades of shared experiences affect how family members in business deal with each other. Knowing each other not only in a professional work setting, but also through years of fun, fights, hair-pulling, and all sorts of adventures, affects how family members deal with each other at work. It’s hard enough being at a boardroom table and having your colleague’s idea be received better than your own, but now add the fact that it’s your sibling. Instead of thinking that perhaps the other idea did indeed have more merit, some siblings will be left thinking, “It’s just like when we were kids – Dad never takes my side.”
The sibling rivalry can either help or hinder family members and the business itself. Family members finds themselves wearing different hats: parent, child, sibling, owner, boss, manager, or subordinate; knowing which hat to wear at what time can be difficult.
Sibling rivalry can either help or hinder family members and the business itself.
To set the family up for successful communication, agreeing around the coffee table isn’t good enough; the family will benefit greatly from professionalizing and adding formality to the business. Here are a few examples:
• Invite a trusted advisor to your meetings to add formality. Having an advisor bring up hard topics can also be an easier way to get an item onto the agenda that a family member may be wary of bringing up on their own. The presence of an outside advisor can also allow a sensitive issue to be received more favourably in the room if it isn’t a family member bringing it to the table.
• Set a meeting agenda and stick to it – allow all parties at the meeting to add agenda items beforehand so all can be heard.
• Get that shareholders’ agreement done. A signed shareholders’ agreement provides clarity and confidence for all owners about what will happen should any of life’s unplanned events occur, such as disagreement, death, disability, or divorce.
Having a signed rulebook in advance of any of these unforeseen events means everyone knows what will happen, and the business will be protected. What about the non-business kids?
We’ve talked about the dynamics among family members working in the business together, but what about the ones who are not? If many family members are working together, those who are not in that group may feel like outsiders in their own family.
All too often, family get-togethers turn into mini-board meetings with a few family members in a huddle, discussing something so important it simply can’t wait until Monday. And so, the family members not involved in the business are left to feel like outsiders and may begin to resent the family business, which seems to bind some together and leave others feeling left out in the cold.
Once family time is considered sacred and not to be interrupted by business, it’s also important to try to find something the non-business kids can champion for the family group. Perhaps one can organize family get-togethers or trips. If the family has some group charitable endeavours, a non-business offspring could be the head of giving and find a role for themselves within the family that way.
Beyond being together and trying your best to have family time be family time, also consider what you do or do not communicate to the non-business adult children. Are they aware of which siblings are owners in the business and which are not? Or how they bought in? All too often these topics are kept secret, not necessarily by design but just from lack of communication or lack of consideration of what non-business members may be thinking or experiencing. Assumptions made by non-business children that the business has been given for free to those involved in the business can cause a great deal of harm in sibling relationships.
But armed with facts, all children can be aware of what has happened in the family business, rather than being left to imagine the worst.
Consider making estate planning an open book
A lot of business owners who started out quite modestly a few decades ago have achieved success beyond their wildest dreams – and it can seem a bit daunting to share the number at the bottom of the net worth statement with the kids. There seems to be an almost universal hesitation to share the whole financial picture with the next generation. The big question here is, why? What is the driving force behind secrecy?
Of course, you may want to wait until your kids have achieved a certain age or maturity level, but after that, why not share the estate plan so they are all equally aware not only of the family wealth, but the plan for its future. Sharing this information may be especially beneficial in a family business scenario in which both the business and non-business members could be affected greatly by who gets any remaining shares in the business owned by the older generation. Will business and non-business offspring be owners together in the business or will other assets be given to the non-business heirs, such that the business will be inherited fully by the “business kids”?
Whatever scenario the parents are planning for, giving adult children full information about what will happen with the estate, and more importantly, why, will give the children the best chance to maintain family harmony through a difficult time. The result will look different in each family business scenario, but arming all family members with knowledge, facts, and clear communication to dispel any assumptions or misconceptions will help to make both the family and the business stronger.
First published in the March 2019 edition of The Business Advisor.