Warning family businesses: Will sibling rivalry be your kiss of death?

ILLUSTRATION BY RUTH MACAPAGAL

With the vast majority of our clients being family businesses, both globally and in the region, we often find that sibling rivalry is a common phenomenon that keeps a lot of family businesses from ever reaching their full potential. The consequences? Enormous amounts of time and energy are lost in internal quarrels, and a lot of business opportunities are passing by. Profits are not what they could be and challenges are gnawing away at people’s energy.

The difference between silent and open disagreements

Most of these family conflicts are silent; this is why they are so hard to come by and solve. Let me share a few client examples. A family from the Middle East that operates their global empire out of Switzerland was ruled by several patriarchs. The first one laid the foundation for the multibillion-dollar empire. After his death, his oldest son took over the reins, expanded the empire and grew it into one of the world’s most iconic brands. But he ruled with an iron fist and in complete darkness. No other family member was allowed to have any access to what he was doing—the financials, the ins and outs of the business, nothing.

What happened? Did they revolt? No, as long as they all received their money regularly, they kept quiet. They raised some questions on a few occasions when the family got together. But these questions were just as fast shot down as if they had come from Bernie Madoff’s kids—don’t ask, don’t tell.

The finale: the ruler of the empire experienced a sudden death, and the entire business was left in shambles. Nobody knew what to do because he had been operating the entire empire in secrecy and did not keep clear records of what to do and how to do it. A classic mistake.

After his death, the management executives, who were all nonfamily members, were operating outside of anyone’s control and costs were spiraling. Profits were in free fall. That was when we got the call to step in and clean the house.

The monsters under the rug

What would have been the best solution to avoid this fiasco early? Open communication between family members. Bringing potential conflicts out in the open early enough is the best way to avoid future fallouts. And to make sure the business keeps thriving.

But that is delicate, especially in Asia. Conflicts or concerns are usually not brought out in the open at all. Oftentimes, siblings communicate only indirectly with each other, throwing a few hints here and there, but not addressing the real elephants in the room.

Clarity breeds success. In Asia, both the communication between siblings and the one between children and parents is often not clear and open enough to provide the clarity the business needs to function properly.

Even worse, in a lot of times, no hints are dropped at all. Serious topics are simply swept under the rug in the hope they will somehow magically resolve by themselves. I got news for you: They never do! They grow into monsters under that rug. And when you least expect it or when you least have time for it, those monsters storm out from underneath that rug to haunt you—and eat away at your profits!

The two brothers

I will share another example from one of our clients in Asia, a multigenerational family business conglomerate. The whole business suffered because the two main siblings who were actively involved in the business did not cooperate or understand each other well. One of them was made CEO, and the other one headed an important business unit.

There were no clear directions on important strategic decisions because the brothers did not communicate openly and regularly. As a result, a lot of urgent issues in the conglomerate were not addressed. The whole staff suffered from sibling rivalry and a lack of communication between the brothers.

My team and I applied a few practical tools to solve this situation. Remember, however, that these are just examples. To truly resolve conflicts in any business situation, it is important to understand that every family is unique. Every business is unique. And this is why every solution must be unique.

Reality is rarely what you think it is

When the head of the family approached us to professionalize the business and solve the internal family conflicts, we first did an x-ray assessment of the situation, during which we had intensive one-on-one conversations with all of the family members involved. We also talked to key members within the organization, whether these be management committee (mancom) members or others, to get a clear picture of what reality was really like.

Reality is rarely what the head of the family thinks it is. In most family businesses, the actual head of the family is living in a bubble. He or she is kept in the dark about the true nature of the business, and its challenges and opportunities. This means that the most important task that needs to be done first is to eliminate these blind spots.

When my team and I came in, we first established clear rules of communication between the two. And clear swim lanes. They also needed a mindset change. We made them understand that the future of the entire group depended upon them getting their act together; clearly and openly addressing major business challenges and opportunities so the mancom and business units could execute.

Clear swim lanes

After getting an accurate picture of reality, we then proceeded to get the siblings together and first of all, resolve the internal conflicts. I would have to breach client confidentiality to go into more details, but suffice it to say that in this particular case, the two of them had incorrect ideas about each other’s goals and aspirations within the family business.

The CEO thought that the other one wanted his position. This caused a lot of communication gaps and silos between the two. In reality, his brother was perfectly comfortable where he was and had no intention of replacing the CEO. In addition, we had to establish a regular rhythm by which the siblings would connect. In this case, this was a standing weekly huddle between the two, plus clear protocols they had to follow during the huddle.

These would ensure that any open or outstanding challenges but also opportunities would be addressed right away, including the next actions and delegation, so that implementation and ruthless execution could happen right away.

Key takeaways

• Clear communication and ruthless accountability are the oil in your business machine that makes sure everything runs smoothly.
• The root cause behind most family conflicts is that at some point, the family or several of its members lost the ability to communicate openly and clearly about challenges, opportunities, roles and responsibilities.
• Clarity breeds success. In Asia, both the communication between siblings and the one between children and parents is often not clear and open enough to provide the clarity the business needs to function properly.
• Bringing potential conflicts out in the open early enough is the best insurance policy to avoid future fallouts—and to make sure the business keeps thriving. INQ

Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email [email protected].