Professor Enrique M. Soriano, author of “Sibling Rivalry in Family Business”, is a World Bank/IFC Governance Consultant, Educator, Columnist and Family Business Coach who helps family members come to an agreement even when their values do not align.
Growing up, Soriano saw the effects of sibling rivalry first-hand. His maternal grandfather’s remarriage brought dissonance to their previously harmonious family dynamic. Soriano’s mother couldn’t cope with her new siblings, and there was a falling out. Feeling like an outsider in her new, blended family, she withdrew.
For more than three decades, this schism persisted. Finally, the half-siblings took the initiative to mend things, stating in their wills that much of their family’s wealth was rightfully Soriano’s mother’s.
Sibling rivalry became a theme in Soriano’s professional life as well. In the corporate world, Soriano saw dysfunction in the family-owned businesses he came into contact with: their problems manifesting shameless board room disputes, their unhealthy rivalries writ large in front of company executives.
To mitigate the potential fallout of such conflict in the family business, Soriano was compelled to explore the phenomenon of sibling rivalry in depth. Recently, Tharawat Magazine had the opportunity to sit down with Professor Soriano and discuss his work.
“This creates a meritocracy where children wonder if their parents will still love them if they don’t work as hard as expected.”
What causes sibling rivalry in family businesses?
Unconditional love plays a significant part. Love for family members should not translate to universal acceptance in the business – objectivity is required.
Let me give you an example: parents tell their children that when they graduate, they need them to help with the family business. Their children have no practical experience in the corporate world, nor any idea of what it’s like to be an executive. The children are told that if they watch their father or mother run the company and work hard, they will inherit it. Invariably, the children become lost; theoretical knowledge, no matter how comprehensive, is not enough. Parents often replay this scenario with multiple children, telling each of them that they will inherit the business.
The dynamic changes when parents make business demands of their offspring. Often, for the older generations, hard work alone reigns supreme. This creates a meritocracy where children wonder if their parents will still love them if they don’t work as hard as expected. Sometimes, parents are not interested in their children’s ideas pertaining to the business – just hard work.
This situation forces children to go to their mother or father and express their frustration about not being appreciated or loved by the other parent. That parent agrees to intervene, coddling bad behaviour and reinforcing entitlement.
Then, one day, the children are made shareholders and given ownership of the company. They still have no idea about what is involved. Soon after, the children have children of their own, and the cycle of mistakes continues. There are no clear rules, no defined roles and no real responsibilities. The situation is exacerbated when there are two, three, four or five siblings.
As a coach, how do you de-intensify potentially catastrophic family conflicts?
I advise that families on the verge of conflict do not get lawyers involved for at least a year, not until the tension has an opportunity to diffuse. The second step is education, reassuring family members that there is hope and a path forward.
All family members should get involved in the process. In my practice, I address the group and diffuse the disagreement over six separate sessions. Afterwards, I speak individually to the siblings, allaying their worries and making sure they have what they need to move forward.
In resolving family conflict, what would you would like to see families doing more of?
I would like to see a greater emphasis placed on work plans when family business members are trying to develop their relationships. I always have a schedule. When I buy into a potential conflict, I create a work plan for those critical first six months, over which time I establish the circumstances behind the conflict and take full control of the proceedings. When emotions are high, a work plan is necessary to keep a perspective.
The work plan’s initial step involves establishing how the business conflict is a by-product of conflict in the family. I begin with family governance. Often, founders are at fault, but I don’t lay any blame because they likely weren’t schooled in family governance. Survival is usually the main objective for founders.
“We try to build ownership governance into the family business, not just ownership.”
What do solution scenarios generally look like for families experiencing this kind of conflict?
Upon completion of the work plan, families can enter into business governance proceedings in a mindset of peace. From there, we focus on operational best practices. Roles are established, and so-called board alignment leads to the next phase.
From here, we can move forward ambitiously. This could even mean a public listing. Sometimes, I work with siblings on the details of an IPO.
Other times, there is more relational work to be done. We also focus on stewardship, establishing when parents will unequivocally step down so that their children can start seeing themselves in leadership positions and prepare adequately.
We try to build ownership governance into the family business, not just ownership. Often, we encourage family members to sign legal documents; a family charter is empty without an executable ownership governance document or shareholders’ agreement.
The first step is always the most important, however: siblings in conflict must know that there is a solution and that it’s worth finding. Families that are able to re-establish their equilibrium enjoy greater opportunities to grow their wealth.