Building sibling teams preserves a generational link

April 13, 2009
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Some family businesses begin with a group of siblings — West Michigan’s own Irwin Seating Co., for example. For many others, siblings make up the second generation of leadership.

In either case, building strong sibling teams is key to success. A good resource for businesses in either position is: “Making Sibling Teams Work: The Next Generation,” by Craig E. Aronoff, Joseph H. Astrachan, Drew S. Mendoza and John L. Ward.

The short book is designed for siblings who care about the success of their family’s business, whether they are involved as part of an “all in, all owners” team, an “in the business” team, a sibling ownership team, a sibling board team, or a mix thereof.

The authors’ premise is that “a strong, healthy family enhances the possibility for a strong, healthy business, and vice versa.” Their interest in the subject was spurred by a study conducted in the late 1990s that identified a surprising trend: 11 percent of family-owned businesses had co-CEOs and 42 percent were considering moving to co-CEOs in the next generation.   

According to the authors, there are a series of factors that are driving this trend. Key among them: The idea that the eldest son will inherit the business is no longer a valid assumption; many more women are becoming involved in their family’s business; more young people seem to be interested in joining the family business and, with ever-changing technology, their knowledge is becoming more valuable to the family business.  

While explaining this trend might be of interest to some, the key question for family businesses in this situation is: How do we use this information to our advantage? The book is full of helpful concepts, strategies and step-by-step solutions for particular concerns.

Chapter headings highlight important topics, including: The Era of Sibling Partnerships; What Makes the Sibling Generation Different; the Farsighted Founder; In-Laws or Outlaws? Making Siblings’ Spouses Part of the Team; Building a Healthy Team; Creating the Right Environment; Choosing A Leader; Communication Between Team and Parents; Remember, It’s a Family; and Preparing for the Next (Cousin) Generation.

The authors give step-by-step, practical advice on issues including: Goals for Sibling Teams; Ten Tips for Founders; Premarital Agreements Are More Likely to Hold Up in Court When …; Key Decisions Sibling Teams Must Make; How to Bring About Creative Solutions; Sample: a Family Code of Conduct; Pitfalls that Derail a Sibling Team, and more.

For example, in “Ten Tips for Founders” the authors address the Do’s and Don’ts for parents: “1) Assume that your business may evolve into a sibling partnership. Avoid saying to any one of your children, “Someday this business will be all yours.” 2) From the time your children are young, promote the partnership skills of listening, communicating, resolving conflict, and working together. 3) Recognize that what works in the founder’s stage of the business often will not work at the sibling stage. Your children have to re-invent the company. 4) Before they’re needed, put policies and procedures in place that will support the sibling partnership. 5) Introduce the concept of prenuptial agreements early — before the kids have serious boyfriends and girlfriends. 6) Welcome in-laws and educate them about the business. 7) Treat the sibling team as a unit. Don’t try to divide and conquer.  8) Let leadership among the siblings emerge. 9) Practice patience. Don’t always step in when things aren’t going smoothly. And, 10
) Plan your retirement, and implement the plan.”

The process of developing a Family Code of Conduct as a family can set the stage for how family members are expected to treat each other, both inside and outside the business. The following sample provided by the authors is a good start:

  • “We believe in these principles as we share together in the vision we seek:We realize that what is good for the company is good for the family as a whole.

  • We will all follow company rules (i.e., dress, timeliness, expense accounts, etc.)

  • We will cherish our reputation for honesty and integrity.

  • We will do all we can to promote and develop strong family loyalty.

  • We recognize differences will exist. We will discuss them directly and privately.

  • We will always respect the opinions of others. We are committed to resolving our disagreements constructively.

  • We will prepare ourselves for family meetings. We will develop agendas for them.

  • At family meetings, we will encourage all to speak out.

  • We will speak well of each other to all outsiders. We will not argue in public.

  • We will promote each others’ positive strengths among ourselves and with our spouses.

  • We will keep shareholdings within the family and have marriage contracts.

  • We will assume personal responsibility for effective estate planning and openly share our plans with others in the family.

  • We will try to know each other’s personal goals and look for opportunities to support them.

  • We will seek ways to give back to the community.”

A limited number of copies of the book are available on loan from the Family Business Alliance.

Mary Novello is director of Family Business Alliance, a collaboration spearheaded by the Grand Rapids Area Chamber of Commerce and the Family Owned Business Institute of Seidman College of Business, Grand Valley State University, and supported by family-owned businesses and service providers. The Family Business Alliance’s mission is to help family businesses succeed generation to generation. For more information about the FBA, including the April 21 workshop “Haworth: A Story of Succession Success,” visit www.FBAgr.org, or contact Novello at (616) 331-6827.

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