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Sibships – How does the sibling relationship affect a family business?

There is no relationship in life longer than that of siblings.  And, like today’s families, sibships come in all shapes and sizes. The classic nuclear family has diminished in the past decades, due to divorce, remarriage and parenting out of wedlock. So now we have more half-sibs, step-sibs and sibs by adoption. In addition, second and third marriages have created large gaps in sibling ages.

We have studied what it is about siblings that shapes their relationships–genetics, gender, environment, birth order, parenting, family lifestyles, etc. It is safe to say that there is no clear answer. Identical twins separated at birth who find each other later in life can seem as though they were never divided. And siblings who grew up in the same home with the same parents can be as different as dogs and cats.

Even in biblical times, sibling relationships were portrayed as difficult and troubling. The stories of Joseph, and Cain and Abel come to mind. On the other hand, siblings can be lifelong friends and soulmates who cherish and love each other.

How does the fact that siblings share common parents in some form affect a family business?

Entry
So much of the future depends on the past; consequently, entry into the family business is critical. The norm for family businesses is to employ the next generation in preference to non-family for two reasons: trust and common economic gain. There may, or may not, be a component of future ownership, but that assumption prevails.

As a sibling group enters the business, they begin to seek their fit.  Sometimes this stage is strategically planned, but typically not. More often it’s done on an “as needed” basis, where skills and abilities become secondary to the needs of the business. Most families do not develop any kind of Entry Policy, and therefore, entry for the siblings can be very diverse. Often timing (graduation) and needs of the business trump good business practices.

Entitlement
Being a family member in a family business comes with expectations and one assumption is entitlements. Entitlements prevail and the perception is that the entitlements–whatever they are–will be doled out equally to the siblings in the business and, to some extent, those not active in the business. Truth is that there is no equal. A dollar today isn’t a dollar tomorrow nor are perks, job roles, titles or compensation equal among siblings. Even if things are presumed to be equal by parents, they aren’t seen that way by recipients. I recall parents gifting a piano to one son to support the musicality of the household because an older brother had filled his boat’s gas tank for the summer on the company credit card. The parents were trying to make things equal to extinguish a conflict. While dollars may have been equal, it didn’t work for either brother and fueled the struggle, resulting in one of the brothers exiting the business under very adverse terms.

Our helping professionals tell us that sibling rivalry begins with the birth of a second child. At that point, love, affection, time and assets need to be shared. The concept that these things should be shared equally might be the first brush with entitlement. The fair versus equal struggle starts and never ends. When a family owns a business, these struggles get intensified.

Management
Next generationers wind up in management positions unless they are totally unqualified (and sometimes even then). When siblings join the management team, it doesn’t happen simultaneously, so the first in gets the heads up. Who gets what position, who reports to whom, and how compensation is determined become new battlegrounds for sibling rivalry. Age and seniority can be used as trump cards over education and skill. Family dynamics become part of the decision-making process, where an individual’s position and role in the family can become part of the criteria used for management roles. The term “first among equals” has developed to describe one form of sibship, however it really only highlights the issue, rather than diluting the conflict.

Years of family dynamics are superimposed on the sibling team. I recall two fortyish brothers getting in a heated argument at a board meeting and one recalling their paper route, then fast-forwarding those skirmishes as being the same as the current conflict. It would be wise for sibling teams to remain in the present and see each other as adult peers, rather than perpetuate the family hierarchy and history.

Conclusion–on the flip side
Despite a potential mine field including IEDs, siblings can make great management teams. The strong side of sibling management is that they have long-standing relationships and probably know each other very well. Knowing what to expect of each other, both good and bad, can provide a solid, united, cohesive front to the outside world. Sibling teams normally have common values and goals that simplify the decision-making process. Siblings can make decisions with eye contact, or during a family dinner, and execute those decisions with lightning speed, and that’s something that Wall Street claims is one of the strengths of family firms. Here are some suggestions to make sibling management teams effective:

1. Develop an Entry Policy that includes a requirement for outside work experience.
2. Discuss fair versus equal at family meetings.
3. Design a family employment policy that includes compensation and promotions.
4. Encourage open communication between the siblings about what that relationship means in a business context.
5.    Establish a Code of Conduct.
6. Determine a governance process that outlines how, and by whom, decisions are made.

Richard Segal is the family business contributor for Corp! magazine. He is the founder of the Family Business Council and its affiliated study group and operates a consulting firm specializing in issues related to enterprises with a family connection. He can be reached at [email protected]

Richard Segal

Rick Segal is the principal at Segal Consulting. He holds an Advanced Certificate in Family Business Advising with a Fellows status from the Family Firm Institute. Rick is the founder of the Family Business Council and its affiliated study group. Reach Rick at [email protected] or by visiting www.segalconsulting.biz

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