Craig Aronoff and John Ward are principles of the Family Business Consulting Group. This paper is adapted from their forthcoming book, From Siblings to Cousins www.efamilybusiness.com.
Cousins and the world they grow up in are vastly different from siblings and their world. These changing conditions have a profound impact on family dynamics and on how cousins can own and run a business together, write Craig Aronoff and John Ward
Consider a family we'll call the LeBlancs, owners of ALB Automotive, a very successful supplier to the auto industry. All in their late 50s and early 60s, the four LeBlanc siblings – Angela, Keli, Thom, and Peter – remember vividly how their father, the founder of the family business, ruled it with an iron fist.
"He expected us to do what he told us, and no disagreeing with him was allowed," recalled Angela.
"Even after we'd worked in the company 20 years," added Thom.
"Remember how furious he was when we told him that we just couldn't operate the business the way he did?" added Keli. "He just didn't understand that we couldn't copy his management style and still function as a team."
"Thank goodness Mom was there to smooth things over most of the time," Peter mused. "If it hadn't been for her, I'd have left the business."
"Me too," said Keli. "But our experiences with Dad did teach us that one generation can't run the business the same way the previous generation did. You can't even run the family the same way."
The LeBlanc siblings inherited equal shares of the family business. Three still work in it-Peter is chief executive officer, Thom is corporate counsel, and Keli heads advertising and marketing.
They have worked well as an owning team over the years and, as a result, the company has grown and prospered. It now has 4500 employees.
Among them, the siblings have 12 children ranging in age from mid-teens to late 30s. Three of the older cousins have worked in the business a decade or more and have risen to responsible positions. The three youngest cousins are still in school and haven't decided whether or not they want to join the business. (They know that if they want to work in the company, they have to meet the family's requirements for doing so and jobs that match their talents have to be available.)
The remaining six cousins are pursuing careers outside the family business and five of the cousins live outside Europe. Six of them are married and, so far, the LeBlanc siblings have 13 grandchildren.
Changing conditions in the family
The LeBlanc family epitomises what we mean when we say there is a world of difference between the sibling generation and the offspring cousins.
Siblings have more shared experiences than cousins do. Siblings generally grow up together in the same household and share the same set of parents. Cousins aren't subject to the kind of intimacy that brothers and sisters share. The cousins grow up in separate households and have different sets of parents.
Brothers and sisters are likely to experience that intense phenomenon known as "sibling rivalry." Patterns of behaviour developed at an early age can haunt their adult relationships. As one man in business with his older brother complained, "I'm 40 and my brother is 44, but there are times when suddenly I'm 10 again and he's 14." Nevertheless, strong feelings of kinship exist among siblings and they look out for one another.
While there's less rivalry among cousins, there is also less of a sense that "we have to take care of each other". But cousins also have the opportunity to enjoy friendships with each other that are unencumbered by the shared and often 'loaded' childhood experiences of siblings.
While siblings may stay geographically close, work in the business together, and share similar strong values, the cousins become more diverse. Like half of the LeBlanc cousins, many leave home and spread themselves into other communities. Values and points of view diverge, influenced by the spouses the siblings bring into the family and ultimately by the spouses the cousins bring in. Some cousins may join the business, but most make different career choices. Not everyone in the cousin group feels the passionate commitment for the business that nearly everyone in the family had in the founder and sibling stages. Some cousins may not even wish to be owners of the family business.
Diversity and loosening family ties in the cousin generation pose two major challenges to the cousins – how to gain shareholders' voluntary commitment to the family enterprise; and how to hold the family together.
Changing conditions in the business
The changes that take place in the family as it moves from siblings to cousins result in changes in the family's business as well.
In the sibling stage, most or all of the family members worked in the business. But in the cousin generation, proportionately fewer family members are employed in the business. Many of the cousins may not have the skills needed by the business or may simply wish to have an alternative working life.
Family members tended to hold the top leadership positions in the sibling generation. In the cousin stage, there's a higher probability that non-family executives will rise to CEO, chairman or other key posts.
In the sibling generation, all or nearly all the family members were on the board of directors. In the cousin generation, however, the number of cousins is greater than the number of family directors and in many instances, the family has moved to strengthen the board by adding talented, independent directors.
The family enterprise most likely began as one business. By the time cousins arrive on the scene, it may well have evolved into a complicated portfolio of subsidiaries and independent businesses with interlocking ownership. That is, all are owned by various configurations of the family.
Equal treatment of family members is often a key to success in the sibling stage. Siblings may inherit equal shares of the business, have equal pay and have an equal voice in decisions. By the cousin stage, treating everyone the same is no longer realistic or viable. Compensation will likely be more based on merit and some cousins may inherit more ownership shares than others.
Moving to a 'cousin collaboration'
All of the differences described above have implications for how the family is organised and for how the business is managed in the third stage. A sibling partnership was the centre of the family organisation and of business leadership and ownership in the sibling generation. Now that the family and the business are both larger and more complicated, the family must move toward a different form of teamwork and leadership. We call it the cousin collaboration.
We like the word 'collaboration' because it has such a positive connotation. The definition of collaborate is to work together. The key to a cousin collaboration is that it is voluntary. Each of the individuals involved is making a conscious commitment to work together with the others toward certain agreed-upon goals.
In a true cousin collaboration, the cousins come together because it's something they want to do. They aren't coerced by their parents to do it, and while they may be influenced by their history and the legacy that the business represents, they don't feel bound by their history and that legacy. They also know they have the freedom to opt out. By this time, the family has probably given deliberate attention to liquidity issues and has drawn up guidelines where family members can opt out of ownership and cash in their shares.
One key goal of the cousin collaboration is to make staying an owner so attractive that no one wants out. Keeping committed shareholders is extremely valuable in holding the family together and retaining resources in the business. Different parts of the family in different generations will be the source of future leadership for the company. However, the cousins need to assure family members that their participation is voluntary and that they have the freedom to withdraw from ownership if they choose.
They need to move from a consensus decision-making mode to one of democracy. Siblings have to agree to agree. Cousins, however, follow more often the mode of majority rules.