Founder inaction can cause business to fail (2)

In tense situations where the patriarch or matriarch is being pressured by family members to make decisions, there is a very strong likelihood that they will end up suffering in silence and feeling helpless.

With tension escalating and family members demanding for more entitlements, Mr. C., the founder, no longer had the passion to grow the business he started in 1973.

Unless there was real intervention, it was obvious that the family business was on a downward trajectory.

In the course of our assessment, there were instances we hit a brick wall. We discovered that the gap was so wide and the acrimony between siblings so deep.

There was a time in my advisory work when every meeting I attended would always end with a virtual confrontation punctuated with a shouting match that can be heard by employees and visitors on the executive floor. And as if on cue, assistants would immediately disallow visitors from entering the floor. Mr. C. would then just quietly leave the boardroom, disheartened and embarrassed by his children’s actions.

At one point and out of desperation, Mr. C. became emotional and told me how he wished “his business never grew so big so he would never have to contend with his entitled, squabbling and disrespectful children.”

He also lamented the issue of money and power plaguing his adult children. “Why are they fighting for the small pot? If they can just work as a real, united family, there is a much bigger pot to create!”

Mr. C. was used to the hard life. At 12, desperate and hungry, he decided to join the exodus of Chinese laborers, leaving China with only one thing in mind: hope for a better life. As he was about to tear up again, I comforted him that all was not lost. In tense situations where the patriarch or matriarch is being pressured by family members to make decisions, there is a very strong likelihood that they will end up suffering in silence and feeling helpless. Such is the case of Mr. C. He chose not to decide, opted to procrastinate, and remained neutral in the course of our intervention.

This pattern of indecision is not only wrong but destructive. Unfortunately, the “do nothing” option is by far the most popular option. Therefore, it makes sense to consider a third-party intervention as time is critical. An experienced family business advisor, bereft of any emotion, will guide the family members on the appropriate governance mechanism to make critical decisions based on what is best for the family and the enterprise.

After the children swapped accusations of wrongdoing, it was apparent that if my firm, W+B Family Advisory cannot help them, their only recourse was to seek the legal route. It didn’t help that both parties were being goaded by their lawyers to seek court intervention.

In a KPMG report, this case is what they refer to as a classic rags to riches and likely back to rags family.

The report highlights that starting a family business is easy, relatively speaking; sustaining it beyond two or three generations is the hardest part. Indeed, it’s often said that the rags fall on the third generation.

Every family member must recognize that family issues, not business nor external events, will define the very survival of the next generational change in family businesses. After a series of assessments, one-on-one sessions with the family members and a slew of governance interventions replete with drama, a breakthrough happened that averted what would have been the biggest mistake the warring family members would have committed: go to court and scar the family for life.