The Key Issues that Can Help Family Businesses Gain Control of Sibling Rivalries

The Key Issues that Can
Help Family Businesses Gain Control
of Sibling Rivalries

by Thomas Davidow and Richard Narva

Old soldiers, General Douglas MacArthur once remarked, “don’t die, they just fade away.”

Not so sibling rivalries. They have been around since the beginning of mankind–related most memorably in the biblical narratives of Cain and Abel and that of Joseph, his brothers, and the coat of many colors. And they can create nearly as much havoc in today’s family businesses as they did in the biblical tales. Some family businesses have been literally torn apart by the intensity of feelings created when one sibling feels neglected or rejected, and proceeds to walk out on the family business or go to court in search of vengeance or justice.

Family businesses can never realistically expect to completely rid themselves of problems created by sibling rivalries. The best that family businesses can hope to accomplish is to minimize the conflicts.

Coping Approaches

Broadly speaking, principals of family businesses can take either of two approaches to cope with sibling rivalries: an arbitrary approach and a managed approach. By examining each of the approaches, we can offer insights and suggestions for how owners of family businesses can most effectively move through the minefield of sibling rivalries.

The Arbitrary Approach

The most common technique used in a number of countries through the ages to deal with sibling issues has been to mandate passing family wealth and power to the oldest son. American cultural doctrines of merit and equality do not allow for legally instituting the rule of primogeniture, but that doesn’t mean the approach isn’t applied within individual family companies.

In many family businesses, the founding generation developed implicit agreements under which the older sibling would prevail in situations where several siblings worked in the business. One famous example of this style is the Bingham newspaper family of Louisville, whose demise has been widely reported in the media.

Such an arbitrary approach may work for a while when siblings are young and the doctrine of “might makes right” enables the older sibling, through dint of physical size and intellectual development, to dominate. But the transfer of this doctrine to the family business is fraught with danger.

The siblings in a family business may collude to continue the system, out of habit and a “wish” to keep the family together. But it almost never works over the long term. Sooner or later, when the siblings grow up, the younger siblings discover that they don’t want to play along with the masquerade as mature adults. In our consulting practice, we have worked with a number of older generation family members who are very fearful that their children will experience the same heartache, loss, and pain with their siblings as these older individuals experienced with their own brothers and sisters.

The Managed Approach

Siblings who learn to manage their rivalry issues often become much closer and trusting as a result. They can then use the closeness of their relationships as an important business and personal asset. As a result, the family and the business can each benefit from a shared value system and efficient decision making.

How can brothers and sisters in a family business learn to manage their relationships? By defusing the two most important issues around which sibling rivalries revolve: succession and compensation.

In many family businesses, the issue of succession–selection of the person or persons who will be in charge after the parent or founder is gone–exacerbates long-standing sibling tensions. Too often, this issue is never discussed, either because it seems impossible to resolve or, at a minimum, requires difficult and painful decision-making.

Similarly, the matter of compensation often ignites simmering tensions between siblings. Among those who work for the firm, there is the matter of whether there should be equal pay for equal work, even when the contributions of the individuals involved are unequal. Disputes can also arise between those who own stock and manage the firm and those who own stock and have no management role.

Defusing Tensions

The most effective way to defuse these issues is for each member of the family to agree upon and participate in a sustained family dialogue. It may be necessary to use experts to facilitate the dialogue in the beginning, or at points along the way. During this dialogue, the actual process of communication is extremely important.

At the same time, actual family business issues can be discussed. for example, the family should examine and deal with the issues of future leadership and compensation. Getting these issues out in the open, in a constructive dialogue, can go a long way toward easing sibling rivalry issues.

Thomas Davidow and Richard Narva are founding partners of Genus Resources, a Needham, Massachusetts consulting firm that specializes in family business issues.