In family businesses, which are harder to address--intergenerational issues, or those between siblings?

December 21, 2015

Thomas D. Davidow, Ed.D.

Let us start with the premise that family harmony is not only a desired goal in families, without it, family businesses and family wealth are at risk. Let us add to that premise that in order to maintain family harmony, it is vital to have a clear decision making process.

When it comes to establishing authority and decision making in the family business, without a doubt, the sibling issues are much more difficult to sort out. With intergenerational issues, the subject of authority is unambiguous. The senior generation has authority both in the business and as a parent. The relationship or succession issues can be focused on that one dynamic and how each family member is responding to the transfer of responsibility and authority. The behaviors that move the transfer in a positive direction are clear as are the behaviors that interfere with that transfer.

When siblings of the same generation are in the family business, issues of authority may be determined by birth order, which is not sustainable over time. Or a parent or parents may designate an adult child, which is also not sustainable over time. Sometimes authority is determined through the estate plan and the designation of control stock or by assigning the role of trustee to one sibling. That lopsided institutional authority only exacerbates the underlying issues of sibling rivalry and creates even more family disharmony.

So what to do? At the end of the day, the siblings have to address collectively the issues of decision making and/or authority. This is best done when the parents are alive so they may use their institutional authority to monitor the transition over time while trying to keep things under control. A sudden transfer as a result of death or disability often leads to chaos. In that case, the instructions are the same: The siblings need to sit down collectively to work it through. It will take time and commitment, but it is doable. If the process starts to fall apart, call for help.