By Prof. Enrique Soriano
We often hear similar stories where parents would make their children feel guilty with statements like, “I sacrificed my life to give you a better future,” or “I worked day and night for all of you,” or “My dream is for the family to be united when I’m gone.” No doubt those expressions are sincere and all are coming from the heart but parents/owners must acknowledge that they have to walk their talk and communicate early on their plans. They can only do so much in gearing their children to appreciate and embrace the values of working in the business, but in the end, the children should be given the freedom to pursue what they truly desire, even if it means not working in the family business.
As part of my firm W+B Family Advisory’s governance engagement protocol, I would usually start with a one-on-one session with family members to allow me to understand their internal dynamics better. Just last year, in one of my interventions, an adult child expressed a deep sense of exasperation over his father’s way of handling the business, “Every time we have lunch together, and I am not exaggerating, our parents, especially dad, would remind all of us that this business that our grandfather started should be for keeps, that we should only trust family members. Yet, despite our capacity limitations, he keeps on expanding like he is just in his fifties! He is 73 with all sorts of medical issues. How can we grow when we can’t even hire good non-family talent? Sadly, his ideas are unreal and very old school. And every time I argue that some of us may not want to be part of the business, he would scold us and walk away! We respect him, but I believe he is plain selfish. He does not care about our dreams and aspirations.”
PWC’s Nasser adds, “Understanding and managing these dynamics become extremely important as everyone within the family will have their own strong points of view. The individual views will differ based on personalities but also based on where the individual family member is positioned within the three-circle model (Tagiuri and Davies 1982) and highlights the overlapping nature of the family, business and ownership systems.”
In the family circle, you will see family members who may be active or passive shareholders. Family executives are involved in the business in the second circle, but they usually vary in their family connections and ownership. The third circle consists of owners, some active, others retired, and the rest may not have worked in the business at all. With an eclectic mix of stakeholders with varying interests, you can expect this concept of “families” to become a three-edged sword resulting in a major communication tussle. When there is no deliberate effort to create a governance structure to manage these overlapping circles, relationships among family members can be chaotic.
For context, when you are working in the business, you are neck deep with all kinds of challenges related to growing the business; but when you are not part of the business, your focus is solely on what you will earn through an end-year dividend. The non-working family member exhibits a certain feeling that his voice does not matter. In most cases, he or she would always feel deprived of any information related to the business. This differing perspective naturally creates deep-seated division leading to some form of emotional conflict. For many family members, their opposition can be covert at first (gossip and non-cooperation), but when these issues are not addressed and managed well, it spirals to negative behavior like anger and constant arguments. The more a conflict progresses, the stronger the effect and the more difficult it is to get out of.
When you fuse these business-related conflicts with traumatic childhood experiences, the hostility spills over to real overt conflicts such as threats, intimidation, and even sabotage. The drama does not end there. When ownership is handed over to these adult children, their thirst to get even will manifest through defiance, retaliation, and in rare cases, violence.