Constructing strong business relationships remains a challenge for brothers and sisters. Here’s some nuts-and-bolts advice.By Ellen Frankenberg
Way back in Spring 1997, I wrote an article in Family Business entitled “Sibling behavior decoded” (see the Articles Library at www.familybusinessmagazine.com). Nine years later, the topic still resonates with family business owners. Building strong sibling partnerships is one of the biggest challenges for business families.
Suppose your dad has decided to transfer the family business to you and your four siblings in five equal shares, even though your two youngest sisters have never worked in the business, and have no plans to do so. What must happen to make this partnership successful?
1. Deal with “unfinished business.” The sibling relationship is the longest relationship in a person’s life, since sibs usually outlive parents and appear long before spouses. Competition and rivalry are built in, as surely as one baby displaces another in a mother’s arms. If there are any unhealed wounds from childhood, now is the time to deal with them.
An investment in a weekend retreat with a facilitator who can introduce conflict management skills and interpret family dynamics may be an economical idea, especially if the childhood scrapes were significant enough to fester into adulthood.
At the end of the weekend someone may decide that becoming a responsible owner of the family business is not a priority. You may then, with good legal and financial counsel, develop a buy-sell agreement to consolidate ownership among those who are committed to the business. Both your business and your family relationships may benefit.
2. Write job descriptions and draw an organization chart. When Dad was the unilateral decision-maker, there wasn’t much ambiguity about who did what. But in a professionalized business operated by several equal partners, it’s critical to determine who will fill what niche, and how responsibilities will be delegated. Who will be accountable to whom? What kinds of performance reviews will be conducted? Who will determine the goals against which performance will be measured?
Will Joe, an “idea guy,” manage a complex department, or will he be given a marketing assignment and report to Sam, his younger brother, who can expedite any project he encounters? An objective assessment of key business competencies using tools available on the Internet, such as the Devine Inventory, can help identify how each partner can best contribute to the business.
3. Determine the rhythm of your communication. Some partners prefer stand-up morning meetings lasting no more than ten minutes. Others like to hold weekly lunch meetings away from the office.
Monthly sit-down reviews of financials (lasting no more than an hour) will help you stay attuned to your business. Your financial advisers can help you design a one-page “dashboard” report covering the critical metrics for your business—sales per week, inventory turns, overtime hours or profit per product.
In-depth quarterly or semiannual reviews of company performance, relative to strategic plan, can help you determine if you’re heading in the right direction, or whether you’re ever going to reach your destination.
While the partners’ style should determine how often they meet, no meetings at all is not an option. Fear of opening a can of worms will only lead to more worms.
4. Don’t let the sun go down on your anger. On a calm day, develop a written agreement about how you will manage conflict. For example, agree to get together within 48 hours of an incident. To avoid an escalation of the disagreement, focus on reviewing facts and sharing feelings, neither of which is debatable. “When you blew off the meeting with our premier customer, it made me mad ...”
Long-term relationships work best with a 5:1 ratio—five positive interactions for every negative one. (And there will be negative ones, even in the most harmonious families.)
What’s your current positive-to-negative ratio with your partners? When was the last time you gave your sister a compliment?
5. Build an effective family forum. As families grow, with spouses and adult children added to the mix, it makes sense to convene the family stakeholders once or twice each year. Agenda items for these family forums might include: reviewing information about best business practices, developing policies for family participation in the business, building support for company strategy, and sharing financial data (so everyone understands why there will —or won’t—be dividends this year).
Partners who know they have the support of all those who will benefit from the success of the company— without second-guessing from uninformed family members—will work together much more confidently.
6. Take your board of advisers seriously. If your family has five equal sibling partners, each with different competencies, it might be a good idea to select two or three to represent all the family owners on your board of advisers. You can rotate the terms so everyone has a chance to serve.
This arrangement leaves room on the board for business leaders from companies that are one step ahead of yours. These outsiders will provide expertise that doesn't show up on your payroll—and will challenge your managers when needed.
Even though the owners retain the final vote, outside experts who can analyze significant business decisions in collaboration with family members provide assurance that the final decision—whatever it may be— is well made.
7. Develop a sibling code of conduct. Clear, written guidelines may prevent the kind of hostility that can destroy a business. For example, who gets first choice for the NFL tickets? How frequently will company equipment be used for home projects? Whose alma mater gets a hefty annual donation? How much social interaction (dating?) with employees is acceptable? What financial information (about, for example, extra gifts from Mom and Dad, prenuptial agreements, personal lawsuits, independent business deals generated through company contacts) will be shared among partners?
8. Find ways to enjoy each other’s company away from the business. Your relationship as brothers and sisters remains a priority. What can you do once or twice a year to strengthen your bonds as family, without focusing on the business? Examples include a weekend family camping trip, a family subscription to a local theater company and volunteering at a soup kitchen.
9. Develop clear compensation policies. You probably got the same allowance as kids, but compensation in your business should be based on job performance according to industry standards in your region. When Dad no longer decides who gets paid what, money issues will arise. It helps to have a compensation policy in place before the situation erupts. Even though partners’ salaries differ, bonuses may be based on an equal percentage of company profits.
10. Determine whether you share the same dream. Talking out loud about your hopes and fears can fortify your partnership. If one partner wants to build the company to $200 million in ten years, and another wants to retire at 40, your partnership may falter. How do your dreams intersect? What can you do to support each other’s dreams?
Native Americans made decisions based on the principle of the seventh generation: How will this choice affect our descendants seven generations from now? If you can build a healthy partnership now, your children and grandchildren will thank you, because your business and your family relationships will prosper.