What is in this article?:
Family business consultants provide advice on how to solve the toughest family business problems.
Three common problems in estate planning discussed below.
Family businesses enjoy many advantages: a shared joy of success, a common pride in tradition, stability and loyalty. Even so, there’s a flip side to the coin. Sibling rivalries, parent-child conflicts and charges of nepotism by non-family staff can interfere with any family enterprise.
Let’s discuss how to solve three common problems.
The leadership battle
• Problem: The time has come to select a leader from the next generation. Several sons and daughters want to take charge. How do you avoid creating hurt feelings among the siblings?
• Solution: “The transition to a new leader can be extremely difficult in a family business,” says Stacey A. Lundgren, a former family business owner who is now a consultant in Howell, MI (www.staceylundgren.com). “The decision needs to be based on job performance and the duties each sibling has taken on over the years.”
While that’s easy to say, the waters can be muddied by emotions as decision time approaches. “Be aware that this transition will affect the personal lives of the siblings forever, so they will be experiencing a lot of fear,” Lundgren says. “There may also be feelings of greed if siblings are concerned with how many shares of the business each will have. And this can lead to feelings of resentment.”
Interpersonal histories can also play a role at decision time. “So much depends on the dynamics that developed among the siblings when they were growing up,” Lundgren says. “Bear in mind that even with grown children it is normal to compete for the parents’ love and approval. When one sibling is chosen to lead, the other siblings can feel that person is loved more or is being selected for being smarter or more capable. That can create resentments”
Given the broad mix of emotions, it takes a tremendous amount of maturity by the parents to avoid arguments and hard feelings. They must avoid being influenced by past family events that have nothing to do with the business.
She suggests these steps:
Hold a meeting to discuss the transition. “Emphasize that you’re holding a business meeting, not a social one, and remain as neutral and as businesslike as possible,” Lundgren says.
Begin by stating the meeting’s purpose and emphasize that the transition decision must be based on business criteria. Note the importance of leaving personalities out of the decision.
Then review the past jobs held by each sibling. “A review of duties can suggest a decision that is professional rather than personal,” Lun-dgren says. “Who was doing the work that naturally produces a leader?”
Follow up by getting each sibling’s thoughts on the best candidate. “Remind them that the business will belong to all of them, so they all have vested interests in its success,” Lundgren says.
Don’t make the transition decision at the meeting, unless everyone is in agreement. “State that dad and mom will make the final choice and schedule a second meeting to announce the decision.
“Start the second meeting by obtaining feedback from the siblings,” she suggests. “You might say something like this: ‘I’ve come to a conclusion; that’s my job as the owner. But it would be interesting to see if it’s apparent to you what decision I have come to.’ Why? This shows respect for the kids. And it might be gratifying for the parents to see if the children agree with their decision.”
Bonus tip: Stay involved with the business for a couple of years, Lundgren suggests. You can play a valuable mediator role.