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Helping Family Businesses
Prosper Across Generations®

Winning with Ownership Team Defense

Dear Advisor:

Following a consultant’s suggestion, my kids and their spouses aged 30-45 have been meeting quarterly for several years to build their “sibling ownership team.” I recently attended one of their meetings and they still seemed to squabble like infants. There was a big blow-up about one sib and spouse not attending all of a group meeting and the in-law stalked out of the room. We have good management that includes several of the kids, a solid board and a sound business. But, having seen their behavior, I’m doubting that the kids could ever run this business without me and I’m giving more thought to selling. What do you think?


Conflict among family owners is a major cause of family business failure, so your concern is entirely justified...but you and your children and their spouses have been investing considerable time and money for a long time to insure against such eventualities.

As you know, family business contains both offense and defense. Good offense is provided by excellent strategy and execution, and by a proactive board that pushes the organization forward. Good defense is assured through managerial and financial controls, accountability to an attentive board, and by an effective ownership team.

Our research and experience tells us that family businesses are vulnerable to destructive reactions to conflicts that emerge from the inability to process often legitimate differences that become evident in response to problems that naturally emerge in the course of business and relationships. This game is won by constraining the negative impacts of these reactions. In other words, fundamentally, the way to win is not to lose — and that is very different from the way you win as management or as a board of directors.

Critical variables related to being an effective ownership team include:

  1. Commitment to the family and business
  2. Shared goals and values
  3. Confidence and trust in the processes established for management and governance of the business
  4. Understanding of the business and its strategy, structure and finances
  5. Ability to maintain reasonably harmonious relationships even in the face of differences

While we have little information with which to evaluate your situation, we would urge you to use the five variables above to answer your own question. If all of your children and their spouses have been meeting quarterly for years, there’s probably a good level of commitment to the family and business. Do they share goals and values? Do they trust the systems and processes, like the good management and board you’ve put in place? Have they spent their time in meetings learning about the business and its strategy, structure and finances? The fifth variable, maintaining reasonably harmonious relationships given personal differences, is obviously the focus of your concern.

Here’s our advice:

  1. Don’t overreact. All groups have their squabbles and the blow-ups. Moreover, it is not unusual for even adult offspring to revert to child-like behavior in the presence of a powerful, respected parent.
  2. Don’t solve the problem. Encourage the next generation to continue to work through their differences in their own ways. Investment of time, emotions and energy in family group processes often arises as an issue, especially for in-laws.
  3. Remember, the game is defense. All the football clichés apply here, like “winners never quit and quitters never win.” Patience with process is the name of the game as it relates to the sibling ownership team. When you are playing defense and you’re ahead on the score board (as you are with a good business), you can afford to be patient. As your children have confidence in you, have confidence in them.

If you have other reasons that cause you to consider selling the business, continue to think about it. But if you are primarily motivated by occasional instances of the behavior you observed in the next generation, we suggest you worry more about your own reaction to conflict and less about whether your kids’ relationships can weather a bump in the road.

The Advisor

 

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