Commentary

Wealth shall not pass three generations

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First of two parts

“Can’t live with ’em, can’t shoot ’em.” This is a humorous cliché used to refer to a spouse in a difficult marriage. It is also often said when describing the feelings of working alongside your siblings in a family business.

Sibling relationship is the longest relationship of life. Our siblings enter our lives—without our choice—long before our spouses, and usually they outlive our parents.

The book of Genesis provides a virtual running commentary on sibling rivalry and poor succession planning. Cain and Abel are rivals because Cain is jealous of Abel’s favored status in the eyes of God. Consequently, Cain murders Abel. Jacob and Esau are rivals because Jacob is the favorite of their father, Isaac. With the help of his mother, Jacob steals Isaac’s blessing (the equivalent of 51 percent of voting shares in those days). Joseph and his 11 brothers are at odds because Joseph is their father Jacob’s favorite. A lucky sibling, Joseph narrowly escapes the murderous plots of his older brothers and later becomes their “boss.”

On the other hand, Hansel and Gretel is a story of siblings who survive by using their wits and sticking together. Sadly, their enemy is their parents—the evil second wife who covets scarce resources and wants to get rid of the children, and the spineless father, who goes along with a murderous plot to abandon his son and daughter in the wilderness. Hansel, presumably the eldest male child, is clearly the leader, as they naively devise plans to find their way home by dropping bread crumbs along their path. Gretel, the younger sister, is actually the more aggressive one, who courageously saves Hansel’s life by pushing the wicked witch into the oven to her death. Incredibly, the happy ending to this fairy tale includes a joyful reunion with their twice widowed father, whom the children continue to love in spite of his rejection and abuse of them, and they return home together to carry on their family wood-cutting business.

 

Third generation

Sibling rivalry is one of the major reasons why more than 85 percent of family businesses fail during the third generation.

Families expand geometrically. The founder and his/her spouse start the company in the garage, and eventually raise a family in which two brothers, reared in the same household, with the same values, the same work ethic, grow up and eventually take over the business. They work together successfully as partners, respecting each other’s strengths, building niches suited to individual talents, fighting through their differences, and dividing turf as well as bonuses, as they learned to do back in their boyhood bedroom.

Between them, after a while, they have one divorce and seven children, raised in three different households, with different ethnic and religious influences, different choices in education and parenting styles. In the third generation, five of the seven cousins (all into their 20s at about the same time) assume that there will be a white collar job for them in the family business. Unless clear, fair policies were developed in advance, including requirements for getting a job in the company, much less being promoted, rivalry among sibs and cousins can lead to intense conflict over limited spots at the top.

As in childhood, only one person gets to sit in the front seat. If these conflicts remain unresolved, even in the midst of success in the marketplace, another third generation business will face decline, or an unwelcome sale to “outsiders.”

Anointing the first-born son is no way to run a family business.

Many family businesses continue to transfer power and controlling assets by primogeniture. A succession plan should, ideally, include an objective assessment of all the siblings, depending on their present competencies, their observed performance and their willingness to develop the necessary skills for leadership. The choice of successor also is affected by the stage of development of the business: Do you need a super-responsible, conservative, firstborn to steer through turbulent times? Or will the business benefit, during times of rapid technical and social change, from a more adaptive, innovative laterborn?

Developing a succession plan involves assessing leadership abilities and providing opportunities for growth for all your sons and daughters, so that the best prepared and best motivated candidate is chosen for CEO, or warehouse manager, or VP for marketing, without relying only on gender or birth order.

Emotional rivalry

The rivalry between siblings actively involved in a family-owned business takes two different forms: Emotional and strategic. To find solutions to resolve conflicts among brothers and sisters in family businesses, one must first determine if the rivalry is emotional or strategic, or some combination of both.

The Biblical story of the prodigal son is an example of the emotional rivalry between siblings. Who will receive the blessing from the parent? Who is the favorite? Who received the most attention? And who needs that attention now? For many family members, the unavailability of the entrepreneurial parent who worked incessantly at the business and was emotionally absent from his or her children in their developmental years undermines the basic foundation for establishing individual self-esteem in the children. (To be continued)

 

(Prof. Soriano is chair of the marketing cluster of Ateneo Graduate School of Business. He is also a family business book author and coach. For comments, e-mail at sorianoasia@gmail.com)

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  • Alfie Anido

    As the adage goes, the 1st generation builds it, the 2nd generation expands it, then the 3rd generation loses it.

  • inq_kw

    is this principle also applicable to fake NGO’s (i.e. fake NGO’s will also not last 3 generations)?

  • WeAry_Bat

    It is an old Chinese proverb about families and wealth.

  • WAUNAKEE

    Don Vito Corleone’s methodologies are the best lessons in preserving family wealth throughout. Determining at early stage the children’s leadership potential in elation to his/her temperament is foremost!

  • mamamiamia

    “Wealth shall not pass three generations”, why not mga hija! If you are privileged right now and you have very very good lawyer/s . Just before you go! Lay Down the Rules so your “stupid”, “rebellious”, “tamad” ,”sugarol”, “waldas” ,”mabisyo”, “walang silbi” at “walang kuwentang ” heirs will NOT make blunders or mockery or “kakahiyaan” to your family name, your legacy at mga pinag hirapan mo! Take a note of that mga hija!

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