MANAGING a family business is already a complex affair. “Family” and “business” are intertwined into a mix of so many challenges, from business to family values and generational differences.
In coaching family-owned businesses, I usually pay close attention to the family issues that are often carried over to the business. By default, the founder, the spouse, the next generation successors and grandchildren will continue to be relatives after the transfer of the business. Adding the issue of strong emotional experiences (both positive and negative) and it quickly becomes obvious that in most families the relational dynamics far outweigh the financial or business issues.
Governance and succession in a family business are perhaps the most critical elements among the many unique challenges of family businesses. Many marriages end in hostile separation or divorce, and many adults have children from their first marriage. Many of these parents will remarry, perhaps adding new children to the marriage, creating a blended family. A blended family can include half-siblings, step-siblings and children from the current marriage.
Managing a blended family can be a key moment for the survival of a family business, especially when families procrastinate, are unprepared, lack the strategic perspective or are caught up in emotional issues.
The do nothing or ‘bahala na sila’ attitude
A KPMG study highlights the need for an extra space to be made for complicated family trees, which may involve children from a previous marriage, offspring from an extra-marital affair, adopted children, or some other form of half sibling. Because of the potential for emotional upheaval, some owners avoid the issue entirely, adopting an attitude of “Let them figure it out when I’m gone.” This mindset to me is a dangerous setup and will have dire consequences.
Sibling rivalry is a very real problem even in “regular” families, so it is even harder to imagine the extent of competitiveness and jealousies between adopted, half- and step-siblings.
The children of a family business owner’s ex-wife, for example, may feel left out, but the children of the new wife will now have more “say” in the family business. The permutations of the family setup are numerous, but the insecurities and jealousies triggered as a result of these blended family members can manifest into a full blown conflict if left unresolved.
If the business owners/parents are not clear on explaining things, everyone can feel confused. This can breed jealousy, insecurity, hurt, competition, and significant loyalty conflicts.
Extra-marital children have rights
Legally, extra-marital children do indeed have inheritance and other rights, and any inheritance claims – provided paternity can be proven, for example – will be favorably awarded by the courts.
When incorrectly handled, the dividing of an estate or family assets can get acrimonious under such circumstances – and it could well negatively impact the future success and sustainability of the family business.
To mitigate drama and in-fighting down the line, or when you are no longer around, it’s in the best interests of both the family and the family business to ensure that the family unit is a cohesive and strong one.
To promote harmony between siblings, step-siblings and half-siblings, you can start the process of initiating governance starting in the family and then as they reach employment age transition to the business governance. The following are some tips that you can immediately implement:
- When they are still below the age of majority, you must start assessing the children’s preferences and determine their individual strengths, skills and talents.
- Initiate and create a forum where a family business adviser will facilitate discussions between siblings and half-siblings about the roles they would like to or expect to play in the business.
- Strongly discourage a sense of entitlement – insist that everyone exercise humility and treat each other with respect. This includes respecting the non-family members working in the business.
- Start the process of aligning ownership as it gets complicated when your children starts having families of their own and you reach retirement age.
- Create a formal sounding board – like a family council – where grievances can be aired and resolved.