Family involvement in most situations can add complexity; this is particularly true with a family business and business transitions.
One of my most memorable classes in my undergraduate years was, “Introduction to Psychology” (aka “PSYC101”). It was a glimpse into trying to understand why people do what they do—often they themselves don’t know. This class has been relevant to almost everything I’ve done in business since that time.
Which leads me to the family business. I tell clients all the time that the problem with a family business is people. People can be complicated. Then, add in family dynamics, brewing and stewing for decades, and there can be a powerful set of complicated dynamics that would satisfy both Shakespeare and Christopher Gaze.
One of the most common aspects that gums up a transition from one generation to the next is a “sense of entitlement.” This is an interesting issue. Where does this come from? It is very prevalent in our society and then it filters into the family business.
In our society, there is a notion that we are “entitled” to particular things from certain people and institutions—the world, or at least parts of it, revolves around us. There is no longer such a great sense of self-reliance, of pride in one’s hard work and accomplishment, of taking initiative. Rather, there is no shame in bleating about what one deserves, that I need to get what’s mine, my fair share and that my expectations need to be met.
It’s reflected in our view towards government. We don’t always work for what we want—we demand it. We expect increasingly more from the government, and it never comes with a price tag. I can demand more services. I want my place at the trough. Rarely does anyone say, I demand more—and I’ll pay more.
Then there is lifestyle. In Western culture, we expect to have a certain amount of vacation, a certain amount of leisure and a certain number of grown-up toys. Why? Well, to paraphrase Descartes, because I exist and I live in the West.
This, of course, may be the root of the decline of Western economies, while various Asian economies have been on a seemingly inexorable rise for decades. I lived in Hong Kong enough years to marvel at a committed work ethic firsthand. In Asia, people don’t have the same sense of entitlement—they have the notion that they need to work to sustain their lifestyle. They haven’t grown up with the trappings of wealth; they will work their way up the economic food chain.
Needless to say, we have a culture of entitlement rooted in the psychology of people. What about the family business? We have well-meaning parents who have a business and who are thinking of passing it on to the next generation. How to “pass” it on? To sell it? To gift it? What about the other siblings? Do you need to work in the business to own some of it? The questions are an opened Pandora’s Box.
In my experience, it is always psychological dynamics that derail a transition strategy, rather than the technical aspects of the transition. This is not always understood. So, a true family succession/transition plan is a process and not an event. It takes a lot of planning and meetings to unpack people’s views and understandings. And a big challenge is entitlement which is embedded in someone’s worldview.
Did the second generation grow up thinking that, “one day all this [the family business] will be mine!” Did they think that because they were the oldest sibling that they were first in line to take over? What about the oldest kid, a daughter, that is married, and now the son in law is the oldest male. Does this matter? Does a son in law count? The father may have said at their wedding that I welcome you into the family and I treat you like my own son. Well, not quite.
Then, there are things implied, but not said. This is dangerous territory. “This is what I heard.” “This is what I thought you meant.” Parents may make an off-hand comment that then becomes embedded in the child’s memory as a reference point. Kids may think birth order is important. It may or may not be.
The problem with a lot of these assumptions is that they are not verbalized but become an internalized compass. So, kids develop their sense of entitlement. I should get a piece of the family business, and maybe a bigger piece than the others. Maybe some kids have invested more of themselves in the family business.
What about the role of meritocracy? Can that upset the pecking order? What if there are a number of siblings, but the youngest turns out to be the most competent? Can junior be at the helm? Remember what happened to Joseph. Check the Bible or Donny Osmond in The Amazing Technicolor Dreamcoat–in either version, it doesn’t end well.
Dealing with family dynamics requires a deft touch and finesse—not decrees or royal fiats. I still come across the occasional situation where the patriarch says I’m not telling anyone about my transition plan—but they’ll find out when I pass away. The most likely outcome is squabbling, legal or otherwise, among the heirs and permanent fracturing of the family.
So, recognize the necessity of dealing with a sense of entitlement. It must be acknowledged and unpacked. There are ways to deal with it. This can take a long time to undo a pattern of thought that has taken a lifetime to develop. It must be done and can be done.
I find that having been through this process many times there are best practices that give the optimal chance for a successful outcome. For a person and family going through something for the first time, they inevitably make mistakes, have false assumptions, say things they can’t get back, and permanently rupture the situation. A family—let alone the business—is too important to sort it out as you go along, for the first time. This is no time to risk your life’s work.