Sibling rivalries can often be a major roadblock for any family business. It has often been the case that a family business gradually built over years or even decades can end up falling apart due to a sibling rivalry lying within that ends up destroying the business from the inside out.
Let’s take a look at why sibling rivalries can ruin a family business’s succession planning as well as what business owners can do to prevent such harmful effects from taking place.
One of the most notable harms that sibling rivalries can cause for a family business is the creation of a business identity crisis. When multiple siblings are vying for the same position of leadership, they will usually have their own respective agendas; when they clash, this conflict may end up tearing the business asunder.
Examples of such clashing agendas can be seen when one sibling intends to run the business with a more holistic approach to grow the business while another prefers a more capitalistic method which emphasizes shareholder returns and monetary value of the business.
According to the three-circle model shown on this page, issues can arise when the business identity and approach of more than one sibling happen to be in conflict and thus misaligned. For example, one who prefers a more holistic, family-oriented method might be more willing to work with other family members in the business on the honor system while another who opts for a more money-minded approach similar to what most non-family owners would select would likely vehemently oppose doing so. It’s conflicts such as these which set the stage for larger rifts to emerge and potentially wreck the business.
What often ends up taking place is a power struggle between the siblings involved as they push to have their own agendas pushed through and used to shape the business in their own image. If left unchecked, this power struggle can eventually end up splitting the business into multiple factions and in the most extreme cases, potentially even lead to one or more factions outright splintering off, separating from the main family business, and operating as a rival business.
This therefore brings up the question – what can a family business do to mitigate the harmful effects that sibling rivalries might have? To that end, probably the most important step to be taken is the establishment of important family business governance mechanisms that serve to resolve conflicts such as an advisory board, a family council, and/or a shareholders’ agreement. Each of these conflict-resolving frameworks as well as the terms and conditions of their operation ought to be clearly stated within the family constitution so as to avoid any ambiguity and thus potentially exacerbate conflict.
The current leadership of the family business also has a role to play in stemming the impact of sibling rivalries. Some of the actions they should take in this area include enforcing the provisions in the family constitution relevant to the conflict at hand, treating every key person related to the business equitably and justly at all times, imposing clear and unambiguous leadership and ownership frameworks, and consistently upholding the company’s fundamental governance policies. While none of these actions guarantee that sibling rivalries won’t derail the business, they do make it much more difficult for such to be the case.
It may even be helpful to hire one or more independent non-executive directors. Since these directors are not from within the family, they would thus be able to have a more objective viewpoint with regard to sibling rivalries and other family conflicts. They would thus be able to provide unbiased feedback which in turn would serve to elevate the business’s standard of governance and avoid any potential difficulties which sibling rivalries might have otherwise brought up.
Whether your family business is currently fraught with the fallout of a sibling rivalry or whether you’re trying to make sure one doesn’t crop up to begin with, Evoque Advisory has exactly what any family business needs regardless of the unique conditions it’s experiencing. Whether it’s about conflict resolution, business governance, or anything else – our solutions will help you take your business to the next level.
Please contact us at enquiry@evoqueadvisory.com to request a consultation or address any other relevant matter.
