Succession Part 3: Distinguish Between Your Business and the Business of Your Family.
While families and businesses have important similarities – clearly defined power hierarchies; varied, often conflicting perspectives; and a shared sense of purpose – they also have clear differences: level of formality, methods of decision-making, and longevity. When first generation wealth creators lead both their family-run businesses and their families, it can be confusing to know where the boundaries are between the two. The truth is that the injection of a large sum of money into family dynamics provides stress that brings out the best – and worst – in each personality. As Robert and Adrian write:
“Even the savviest wealth creators can get tripped by up by the complex interpersonal dynamics that come with managing significant wealth – what we call “the business of your family.”
Caution: Spoiler for Season 3 Finale ahead…
Distinguishing Between the Business of the Family and the Family Business
Even multi-billionaire media mogul Logan Roy is not immune to these dynamics. Throughout the series, Logan has been searching for a strategic acquisition to keep Waystar relevant in a media landscape dominated by streaming platforms. He meets with Lukas Mattson, the CEO of GoJo, a company with a popular content streaming platform, to discuss buying it. Mattson correctly identifies that Logan needs him a lot more than he needs Logan; he sees his company as a “rocketship” and Waystar as a “lead balloon.” Mattson explains that he’s not interested in an acquisition. He wants a merger in which he would become CEO. Logan has dangled the CEO position in front of his children throughout the series as an incentive for supporting his actions. If Mattson assumes the role, not a single one of the children is guaranteed any position in the company, much less the CEO role. So, when Logan decides to pursue the merger in secret, Shiv, Roman, and Kendall spring into action to stop him. Due to their parents’ divorce agreement, they comprise a supermajority in the holding company and can override any decision to change company leadership. Unfortunately, Logan learns about their plan to confront him before they’re able to meet with him. He amends the agreement with his ex-wife to remove their veto power.
When they arrive, they learn the merger is done and their bid to prevent the acquisition is over.
In this case, the interests of the family and the interests of the business are at odds. While it is best for Waystar to merge with GoJo to gain a competitive edge in the media landscape, ceding control of a company in which they control huge shares, and from which they derive their livelihoods, to an outsider, is a move that rightfully scares the Roy children. Because there is no structure in place to protect family interests, Logan has the power to make decisions that affect them without consulting them. This creates anger, sadness, confusion, and resentment.
Avoiding this Pitfall
Wealth creators may attempt to manage their families using the same tactics that led to successful outcomes for them in business. However, most would be well served to take a step back, look across their complete professional and personal landscape, and fine-tune their approach to each.
How can wealth creators lead their families and their businesses while protecting the unique interests of each? The secret is knowing which business tactics are transferable to a family and which are not.
- Create a Family Council. Company boards serve the interests of the shareholders in a company. They are a balance to the actions of the leadership. Family councils can serve the same purpose, advocating for the interests of the family in a family-held organization like a company or foundation. Had the Roys established a family council, they would have discussed the merger and created a position statement for the family, which would have been part of the considerations for the merger decision.
- Set the Tone with Your Behavior. As a leader in your family, know that your behavior sets the tone for the way the family interacts with each other for years to come – consider the way the Roy children act above. With a father actively trying to outmaneuver them, it is not surprising that they unite in opposition to him. Their family communicates in dramatic power plays instead of direct conversation.
- Treat Family Dinners like Board Meetings. Save the business discussions for the family council meetings and allow the rest of family time together to be spent building relationships.
- Be Afraid to Speak Up. Have you ever been asked a question in a group setting and gone along with the crowd, just to keep the peace? Maybe you’re on a road trip and your wife suggests you get fast food from a certain restaurant for dinner. You’re not a huge fan of the place, but you ask the kids if that’s what they want, and they say yes. So you pick up the food and, after everyone is done eating, learn that no one actually wanted to eat there in the first place. You all agreed because you thought it was what everyone else wanted, even though it’s not what anyone wanted. Now imagine this on a larger scale – maybe your family company is interviewing candidates for the CEO spot, and everyone seems to like one person, but you have your reservations. It’s important to make your voice heard to protect the interests of the family.
Many wealth creators struggle to distinguish the tools needed to effectively run a business with the tools needed to effectively run a family. Though Logan Roy is used to making unilateral decisions as CEO of Waystar Royco, he fails to consider the desires of his children when merging with GoJo. This is a grave mistake because of how their family relationships will suffer. Had The Roys taken steps to separate Waystar Royco from their family interests, possibly by establishing a family council or modeling more reasoned, methodical behavior, they could have strengthened their family relationships instead of pushing them to the brink.
Season 4 is scheduled to premiere in Fall 2022. While I anticipate the writers want to keep the drama high, I encourage anyone navigating the realities of generational wealth to you visit: https://www.firstgenerationalwealth.com, where you can learn more about the steps you can take to ensure enduring wealth and a long-lasting legacy.
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