In this issue
Successfully completing a business transfer is often more difficult than building the business itself, whether the company is sold outside the family or ownership is transferred to a new generation of family members. The business leader can either control the transition or be controlled by the situation.
There is often an assumption at family firms that the family tree will always provide the right leadership for the organization. But this doesn’t always hold true. Take, for example, a global manufacturing company—run by the same family for four generations—whose CEO was ready to step down. The next CEO would have to immediately contend with several major business challenges that threatened revenue growth and raised questions about the company’s long-term viability.
Forging a close relationship among siblings during childhood is hard enough, but as siblings become adults, disparities in wealth that may develop can challenge even the strongest relationships. In business-owning families, the potential ramifications are extensive. The dynamic doesn’t just play out in the personal lives of the immediate family; it also can impact the alignment of corporate vision, tolerance for risk and overall decision making, thus affecting all stakeholders.
Understanding sibling wealth disparity
The Biltmore Estate in Asheville, N.C., has been a magnet for millions of people eager to see the legendary property and experience the hospitality first offered in 1895 by George and Edith Vanderbilt. The estate’s 8,000-plus acres in the Blue Ridge Mountains, featuring timeless landscape design by the prolific Frederick Law Olmsted and productive agricultural acreage dedicated to sustainable practices, provide an impressive backdrop for the spectacular Biltmore House.
For many young people, summertime means a break from school, trips to the beach, amusement park rides, barbecues and ice cream cones. For many high school and college students whose families own a business, summer also means long hours spent toiling at entry-level jobs at the family firm, getting to know the enterprise from the ground up.
Family Business Magazine recently circulated a questionnaire in which we asked family business members to share their summer job memories. Their responses indicate that those long, hot days in the trenches were not spent in vain.
Our Family Business team just returned from hosting another successful Transitions Conference in Orlando, where several of the family speakers highlighted the benefits and importance of family councils. These special forums often take years to form, but they are well worth it. Family councils help educate family members about the responsibilities and privileges of ownership as well as the family’s values and legacy.
If one or more of your next-generation family members are in line for consideration as future leaders of your family company, they likely are studying fields relevant to the business roles they aspire to fill: management, marketing, engineering, accounting and the like. But these future leaders also need training beyond subject-matter expertise.
A family in control of a successful, large and growing business will eventually find itself running not just a business but also a family enterprise. The vitality and longevity of a mature family enterprise depend on three equally important key value drivers: the family economic engine, including both business and financial assets; the family itself, its culture and members; and “leakages” that include both cash flow management and estate planning. To thrive for the long run, you must manage your family enterprise as a comprehensive, integrated whole.