Brotherly love: Be careful when passing the business on to siblings

Family Business

Shortly after the death of their parents, Roger and Clint inherited their family business. Both had worked in the business since they were teenagers, but there was no doubt then who the boss was – dad.

Their parents wanted to pass along a legacy to their two sons and each boy knew his part of the business well. The transition couldn’t have gone smoother until a few months in, when problems began to develop. Both sons were named co-presidents, and while their cooperation worked well when the parents were around, their yin and yang disappeared when their names appeared on the checks.

Like children of divorced parents often do, the staff would play one brother off the other. If they didn’t get the answer they were looking for from Roger, they went to Clint. Tension between the two brothers rose until they came to loggerheads. On one occasion, staff had to separate the two as loggerheads turned to fisticuffs. Clint, fed up, took his share of the business in cash and left.

When Roger died some years later, Clint did not attend the funeral. What had started out as brotherly love ended in anger. While a family was torn asunder, so too, potentially, was a business and all the lives therein. So, did mom and dad make a mistake in passing along the business legacy? Perhaps, but not necessarily.

Family businesses are a unique and complex entity. Transitions need to be prepared for years, if not decades, in advance. The boundary lines need to be clear and drawn to not only take advantage of the skillsets of all involved, but also to protect all involved. In every organization, someone needs to be the boss. Be it the head of the household or the head of a corporation, cooperation and collaboration only go so far. So, should one brother have been chosen over another? While the answer is maybe – and that is a really tough decision for parents – the answer could also be no.

Often, the best decision is to take the brothers out of the mix and turn the keys to the family empire over to an interested and trusted third party. The brothers maintain the ownership, but the president is not a family member. A third alternative is to set clear benchmarks that each brother must ascend to within his area of work. This sets up a competitive situation which some owners may wish to avoid, but it does typically create a clear winner. What should be avoided at all costs is to defer to birth order: the oldest gets the job. This may or may not be the right person and further, even if it is, the outside perspective will be that the first one out of the womb wins the prize.

Only in special, almost blessed situations can a co-presidency work. It’s better to split the company than to rely on brotherly love to be in the best interest of the company.

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Dr. Borst is the retired Dean of Business at Concordia University. He started up five businesses under and is COO of the Family Business Legacy Institute. He can be heard every Saturday morning as Dr. Dave at 6:20am on WTMJ radio with the FBLI show- "All Business". Dr. Borst is an entrepreneur, author, speaker, and blogger of a variety of topics from religion to politics or any of the topics you are not supposed to discuss.

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