A generational transition from the founder to offspring generation is a critical point in the life cycle of a family business. Owners believe they have a foolproof succession plan in place having accumulated wealth by single handedly growing the family business, but problems arise when the time comes to pass the torch. This story is the last part of the article I wrote last week involving four siblings that bitterly fought after the founder, their father, had passed away. The conglomerate has vast operations in different countries in Asia.

Race Against Time 

Our first year was quite a challenge. It was a race against time. We were confronted with irrational behavior from all sides so we shifted to one on one engagements with the two warring factions. Session after session we continued to reinforced their sense of duty by educating them regarding their respective shareholder roles and responsibilities and emphasized that family harmony energized with a commitment to continue the founder’s legacy can fuel enterprise growth and preserve their wealth.

After re-introducing the importance of having a family constitution, our team made sure we roped the social document with ownership agreements. We were confident that securing agreed upon shareholder rules and documenting them would define the foundation in building sibling confidence, enthusiasm and effectively restore trust within the family. Moreover, by clarifying their roles, the lines of communication continued to remain open. In the end, our mission was to stop the hostility at all cost.

Building and fostering mutual understanding amongst stakeholders is key to wealth preservation and growth. Every family member must understand that a majority of family businesses have failed as a result of internal factors, rather than external factors. And these internal factors included the failure to set in place owner/manager policies, a plan for succession and managing family conflicts.

Defiance to Trust to Sense of Duty

To the consulting team, our mission was to build trust and openness. After a few more sessions of getting everyone understand our governance mandate, we saw a change in attitude from sordid defiance to a deeper sense of duty in continuing the founder’s legacy. With the sessions gaining traction, the siblings soon realized that only through unity and a shared vision can the family business move forward. They also acknowledged that family unity comes with some sacrifices.  And our role was to inculcate the family member’s fiduciary role of single minded loyalty to the business. This means that family members must be willing to give up some of their own personal freedoms “for the greater good.” In summary, what objectives did we achieved in finally reuniting the family and saving the business from break up?

Objective 1: Strengthened Family Unity with a 100 Year Vision   

• Diffuse the tension
• Educate, Mediate and Pursue Governance
• Institutionalized a Code of Conduct
• Re-introduce the Family Constitution and Shareholders Agreement

Objective 2: Create a Communication Platform

• Activated the family council
  Put family policies and ideas into practice
  Enforced the polices signed by the family members
  Prepare for possible relapse and complacency
  Create a problem solving and conflict resolution platform

Objective 3: Improve the level of Individual Competencies

• Require Education and Training to reinforce raw competencies covering Stewardship, shareholder knowledge, In-law and Next Gen Entry and Exit Rules

For my team at Wong and Bernstein, it was a grueling two years of constantly pounding the true essence of family harmony and the significance of having open and honest communication. Our initiatives and the family members’ willingness to give peace another chance averted what would probably have been a disastrous consequence for the family and the business./WDJ