Founder Inaction Can Cause the Business to Fail (Last Part)
Phase 2: Restoring Communication Channels
The team focused its efforts in salvaging whatever lines of communication channels available and in doing so gradually, introduced the buy-in of the warring siblings through the different phases:
- Founder History (How he started)
- Founder Shared values (hard work, humility, honesty)
- Founder Aspirations (family harmony, legacy, stewardship)
- Founder Transition to Next Generation leaders (direction of the business)
- Family and Business Structure (What structures must be instituted to maintain family harmony)
- Family Transition (How will the family Prepare for the Future)
With these values resonating, we then proceeded to a plan of action geared towards a unifying and shared vision and mission statement.The direction of the business was a major strain and through the formulation of a strategic plan, we effectively diffused the tension.
Even with my years of family business coaching, this process was arguably tougher than expected as the growing pains were quite palpable.
For Gen 1 and 2 family members, the big switch from the first generation “entrepreneurial” style to a professional and consensus based model had to happen so it was necessary to institutionalize the rules without fear or favor.
Phase 3: Governance is Mandatory to Survive
After a series of sessions coupled with one on one assessments, we finally made them agree to sign family agreements outlining family member roles and responsibilities (active and non-active) in the family and business. We then created a detailed code of conduct covering conflict of interest, entry and exit rules, and family member KPI’s.
For shareholders, we made it very clear that those elected to the board must have the competence, interest and commitment and that the conduct of the shareholders must be aligned with what the founder desired.
Phase 4: Ownership Alignments
After a series of exhaustive ownership sessions, we preempted what could have been a scandalously damaging effect to the family and the business. We finally made all shareholders sign ownership agreements.
These difficult intervention was worth it! It not just averted a long and litigious court proceeding and, as their HR head puts it, “our office saved the jobs of close to five thousand employees, 1,200 project based workers and a few thousand indirect recipients from suppliers to the families that rely on their breadwinners.”
We felt we won the lottery when warring siblings started to communicate and some members reaching out and trying to play catch up on the many years lost due to the conflict.
As I write this article, it is still a work in progress, as the next challenge is to continue the momentum by forming a Family Council and doing oversight work. Beyond governance, the business can now move toward growth mode.
There are many founders in the mold of Mr. C. I would often hear Gen 2 members explaining to me their inability to talk to their fathers about succession issues. It is still an extremely sensitive topic. It is a cultural factor.
Finally, founders (particularly the traditional Chinese) are reluctant to disclose their wealth and the history of the conflict to a local advisor so when Mr. C met me, he only asked three questions:
- My nationality
- My experience; and
- My motivation in helping mediate and mentor
I told him that my grandfather from my mother’s side used to own many businesses. And for many years, was recognized as the second largest taxpayer in his city. But in one fell swoop, the business collapsed because of sibling rivalry.
Mr. C understood completely.