LUCY rejoins the family business.
After separating from her husband, Lucy called Irene one night and decided it was time for her to come home and rejoin the family business. Whether it was planned or not, it was obvious that Lucy’s re-entry would reinforce and embolden Irene to raise the matter of governance, business direction and the unfair ownership distribution.
It was just a matter of time that the original distribution of shares among the children would end up becoming an urgent and sensitive issue. And with Lucy siding with Irene, the children are heading toward a collision course ready to draw swords with the slightest disagreement.
Clearly, the brothers understood that their sisters felt betrayed with the unfair ownership structure created by their deceased father but they chose to ignore it.
Over time, the business continued to grow and there were attempts by the sisters to discuss the ownership structure, including the major contribution of Irene. But in several occasions, the brothers deliberately avoided discussing the injustice related to ownership. Avoiding the “forbidden issues” ended up with heated discussions, resulting in intense and volatile relationships among siblings.
One day, Irene decided it was time to seek advice from a third-party family business advisor.
The first meeting was tense and the siblings felt awkward discussing a myriad of sensitive issues with me. My role was to listen, but there were times I had to interrupt them as the discussions ended with a lot of finger-pointing. After hearing all sides, I finally made my position very clear.
I went to task by addressing critical issues related to family involvement, ownership and the business. Below is the process as well as my intervention in creating a governance system for the family:
a. Helped resolve the ownership and business problems in a fair process
b. Assessed the state of family and the business
c. Facilitated a discussion in developing long term goals for the business
d. Helped the family craft policies that will govern family- business relationships
Established a family council to provide a discussion forum
e. Provided a forum for family members to participate in policy making
f. Prioritized the “sensitive agenda” like ownership, decision making, conflict resolution and define the ground rules
Developed a family constitution
g. Encouraged family members to identify their values and sense of purpose and why they have to work together
h. Documented all the rules and the agreed-on principles among the siblings
Developed a succession plan
i. Helped them lay out their role changes
j. Prepared documents that will make retirement timely and unequivocal
Without the appropriate governance tools, the transition of the family to a sibling partnership right after the death of the patriarch was a key risk factor that led to a breakdown in communication, ineffective decision-making and frustration and conflict.
When there was no intervention, the desire to dissolve the family enterprise became so intense that on the day I met Irene, she confessed that she already reached a tipping point and ready to confront her siblings with her plans meant to further shatter the business: to fight her siblings, to sell her shares or challenge them to sell the enterprise.
I told her to try family and business governance. She answered back, “What if it will not work Prof.?” I said, “The greatest failure is never to have tried at all.”