Preparation is key to successful changeovers at family companies. Early on, the next generation should know about expectations and teamwork
Chances are good that a long-lived family business will eventually be led by a sibling team. But despite sharing common values, siblings face real obstacles when cast in the top leadership spot. Sure, perceptions of parental favoritism and longstanding rivalries can make cooperation difficult. But the biggest challenge? Almost all second-generation sibling teams must somehow adapt a decision-making process dominated by a single autocratic leader into one that works for two people. The key is preparation.
So how do you prepare sibling teams capable of this challenge? When your children are young, define your expectations in written form and formalize procedures that all employees, family and nonfamily, are expected to follow. If you wait until your kids are ready to assume leadership roles to do this, it may engender conflict rather than prevent it. Do it before they enter the business, and all involved will know what's expected and have a chance to grow into their roles.
Documents you'll need include a buy-sell shareholder agreement, an employment policy, compensation guidelines, and job descriptions to help all understand who will be hired, under what circumstances, how they'll be paid, and what their responsibilities will be (see BusinessWeek.com, 5/31/07, "The Fair and Friendly Family Business").
As children grow, they should be introduced to the business so they can get to know employees, hear stories about the business's positive and negative aspects, and learn why you started and continue to run the business. Older children should be invited to take summer jobs.
Before joining the company full time, siblings should be required to obtain the necessary education and training to execute their responsibilities. This may include college or technical schools, and should include a period of time working at an outside company where the family name carries no significance before they join the family company.
Team Concept from the Start
When siblings have joined the company but aren't yet in the top leadership jobs, encourage them to work as a team by pairing them in jobs that require cooperation. Avoid putting them on tracks that have them following each other in the same job, or you risk encouraging unhealthy competition. When siblings are sent out for training or seminars, have them attend together when possible. It will encourage a sense of togetherness they can use to represent the family firm to outsiders.
You should also set up regular family meetings and organize a board of directors that includes outsiders. Prepare a process for breaking tie votes in the event the siblings can't agree on some future decision. Consider having an outsider or one of the siblings take a rotating role as the tiebreaker. Once the siblings are in leadership roles, you as a parent should not act as a tiebreaker—it should be their responsibility.
The job of preparing siblings for sharing leadership of a family company is a challenging one. With luck, it will pay during and after their successful run, when the next generation will be ready to take the reins.