AS THE family business grows and transitions from the founding stage to sibling partnership stage, family and business issues will naturally become more difficult and fragmented.
When ownership is passed on to the children by way of inheritance, the entire ecosystem becomes more complex, especially when there is no transition or when the senior generation unexpectedly exits. Similarly, as time changes, the family business cycle and personal relationships become complicated and, worse, the wealth structure is compromised. Such was the difficult case assigned to me a few years ago.
It was in the first quarter of 2017 when I flew to the US to initiate damage control between four warring siblings that bitterly fought after the founder, their father, had passed away. The conglomerate was a multi-billion-dollar family enterprise with major presence in different countries in Asia.
The marching order then was to diffuse the tension among the siblings who clashed months before. Because of the conflict, the business units became paralyzed. It was also reported that a handful of key non-family executives were contemplating on leaving the company, fearing a major tug-of-war among the new owners.
This case involved two younger siblings aged 44 and 45 pitted against two older siblings aged 51 and 53. Lawyers representing the children shared to me that they were bracing for a “Battle Royale” where the mandate was to take over control of the various assets spread in different locations.
Thankfully, with the intercession of the matriarch, the siblings accepted the invitation to meet. One sibling even attempted to tag along an in-law who was a lawyer, but was prevailed upon to drop the idea. Other siblings insisted on bringing their legal counsels and we likewise had to put our foot down. I felt an unwelcoming silence as they all entered the room. Neither parties were talking but when the mother started to share their wonderful moments together and turned emotional, we sensed that the children were receptive, albeit reluctantly, to explore reconciliation.
In the six sessions that followed, we witnessed several incidents of insults hurled from all sides. One even remarked sarcastically, “We will forget but never forgive.” There was hostility everywhere, with some sessions spent blaming one another for failed business decisions resulting in huge losses, and another session pointing to the meddling in-laws.
Almost all of them were exasperated and started to complain why it was taking so long to complete the constitution. And in several cases, I had to explain the rationale: “that the journey is often more important than the results.”
There were also a few instances that my team egged me to pre-terminate our engagement, as the discussions were heading nowhere. But when it was the turn of the siblings to share their personal dreams and craft a mission statement addressed to the future generations, I knew we were slowly regenerating enthusiasm and commitment.
As the session progressed and tackled the family’s aspirations, shared values and the vision for the business, and the plan on how to achieve them, the governance team started to notice a gradual transformation of openness and understanding. We then set out to prepare the “rules of engagement.”
Overall, time was of the essence, and we knew that the answer to the conflict was the creation of a family constitution that will record the family’s heritage, culture, hopes and ambitions. At its core, the constitution we envisioned included a mission statement for the family and their clearly stated hopes and aspirations for the current and future generations. It also included the rules that will govern family members in the business.
To be continued...