Dennis Jaffe is a founding member of the Aspen Family Business Group. www.aspenfamilybusiness.com
Passing the baton of leadership to the next generation is often fraught with problems. Dennis Jaffe outlines the hurdles faced by two sets of siblings and describes how they achieved harmony in their relationships, as well as ensuring success for their businesses
Two families had members of the second generation that were having a tough time working together. The first family was reeling from the sudden death of their father. His five children – aged 20 to 42 – each had roles in the family business. In the year that he has been gone, they have begun to bicker and the business has suffered. They had all worked with their father as individuals, and now that he was gone, they did not know how to work together.
In the second family, the father was still presiding over the business at 86, with no plans to step aside. While his three sons and a daughter expected to inherit ownership, they were aware of strains between the two who worked in the business and the two who didn't. They wanted to begin to think ahead about where the business was going, but every time they asked him about getting a consultant, he turned them down. They felt they couldn't move ahead.
These two families were experiencing a nearly universal experience. While the father may be benevolent or despotic, the effects are the same – the second generation do not see each other as partners but rather as rivals for his attention. They look to the father not only to decide who will be the business heir, but also as the source of love, personal validation and of course money. Their sense that their generation will have a winner and several losers – a successor in the business, and those who are not picked – tends to split the members of this generation from each other.
Many families also have a legacy of paternalism and dependency, in which adult offspring, who are quite mature and capable, are held in relationships through legal structures where they are treated as if they still are children. Some countries have trusts where ownership and control over assets are in the hands of trustees, who make decisions for the beneficiaries. A trust created to keep a business unified or to avoid taxes, is a vehicle where the parents exert control over their heirs.
The emotional dynamics of families also play into this – a parent remembers the irresponsible behaviour of the child, and does not have much opportunity to see their later mature adult behaviour. So the parents conclude from early mistakes that their children need to be taken care of and cannot act responsibly. Their own blind spots foster this impression. They find it hard to transfer control to the next generation because they still see them as eternal children.
The two families mentioned were discovering that leadership and control had to be different in their generation, but they were finding that they weren't prepared to create an appropriate team to lead the family. In both families, all siblings would inherit ownership in roughly equal terms, making them business partners. They had to learn how to create a team to oversee the business, and to continue their family. The second family had to question how to respond to their father's resistance to them getting together. They asked him what his concerns were, and he said: "The first thing you will decide together is that I am out," revealing his greatest fear. Why do you need to get together, wait until I am dead, he was asking. They responded that they wanted to get together not to deal with the business today, but to consider how they would move the business in the future. They were concerned that since they didn't have a lot of contact with each other, they didn't know how to be business partners.
As a generation, the heirs have to make a major shift of mind and behaviour, from seeing themselves as children of successful parents, to a group of equals, with different roles, visions and values for the family and business future. While as siblings they are a captive group of partners – they did not choose each other – they have to learn to work together not as rivals, but as a team. While the power and wishes of their parents are important, they also need to see themselves as having the power to make some shifts in their legacy, and to take responsibility for moving it forward. They have to grow up and become empowered. Their parents can't do this for them.
Every generation has to renew their commitment to each other and to the business. First, they need to decide if they want to remain together. Some siblings may be on a different path, or simply not able to work with the others. The family has to provide a path and policy for one sibling to leave the family's unified business structure. Many family feuds brew because one member could not escape the others.
A new generation in a family can develop their unity and vision by creating a statement of who they are and what they want together. One famous example of this comes from the third generation of the Rockefeller family. After a father and his only son and heir, came a powerful and fractions group of five brothers, all of whom wanted to be active in the family's affairs. As they grew up, they sensed the potential for conflict and disagreement as each pursued their own paths, and so they got together, and created a mission statement.
While there were many strains in their partnership, this mission statement formed a framework for their co-operation for the next generation. Every second generation must find their own reason to remain together. Just being business owners isn't enough—they need a deeper purpose about more than just the business. It must be crafted by the whole group together, not inherited from the parents, or set by one family leader.
The second challenge for a second generation team is to respect the leader of the family business – even if they have not chosen him or her – and work with that leader. Siblings resent often the chosen business leader, and in turn the leader, given power by the parental generation, feels that he or she does not have to pay attention to the other family members.
The second generation leader must realise that family leadership involves collaboration and sharing of information and some power with other sibling owners. Dad's style of not sharing much information must give way to a desire to listen, and a willingness to discuss and explore alternatives. The family leader should remember that his brothers and sisters are his business partners.
A second generation family business struggles with boundaries. The business may be growing, with more professional management, and more distance from the family. But since the family team has a controlling ownership of the business, they must see themselves as a team of stewards working together. The two families each learned how to work as a team to decide the direction and future of their family enterprises. They each respected the anointed family CEO, but as a brother, the CEO got help from his siblings to act very differently than his father. Each brother was not a solo entrepreneur or business leader, but a steward for a family, whose voice he listened to and respected. The family team, meanwhile, were remaining connected as a group of families while they build a set of activities that extended beyond the business.