The Inevitable Creep of Inequality

Inequality in families happens as a slow-motion change to the business family. Children enter the world all “created equal,” and most parents strive to provide equal opportunities. Siblings start out under the same roof and share many experiences. But as their lives unfold, they make thousands of decisions that lead to individual success, or not. Strong cultural influences, such as gender bias, amplify inequalities regardless of individual capabilities and choices. Luck also plays a major role in either opening up opportunities and success or closing them down. By their fifties, siblings will often recognize that the summation of all the choices and experience creates pronounced differences in siblings’ capabilities, accomplishments, beliefs, wealth, and happiness. Some siblings will inevitably become more successful and influential in the family than others.

This disparity crops up not only in siblings but also in family branches. Some branches fall behind the others in wealth, power, and accomplishments. Those who are feeling inferior are often the first to sell to their cousins or to outsiders. One third-generation business family we worked with had two primary branches. One branch had the voting control over the company, amassed 90 percent of the family’s wealth, and held all the family executive roles in the business. The other was labeled the “bad branch.” The two branches will never be equal in power, wealth, or position.

Sociologists explain that humans tend to focus less on absolute differences between groups and more on relative differences within a group. In most business families, the “all created equal” thinking creates back pressure against the disparity. You will hear from family members comments like “You can’t expect our son to work for his brother!” Or “Don’t my children deserve a chance to work in our company?” Or “It’s not fair that she got company stock and I didn’t!”

Family branches have often made different choices through several lifetimes. Such outcomes are hard to unwind, to equalize. And would it be fair to equalize?

Often, fair is not equal. And eventually, equal is no longer fair.

Although some multigenerational business families try to equalize wealth, such policies can be harmful in the long run. For more guidance on how to navigate perceived inequality in your family, see this Q&A with Judy Lin Walsh.

Ellen Weber Libby, author of The Favorite Child, advises that families learn to be comfortable with some inequality developing over generations because it’s inevitable. So how do you get comfortable?

Here are five ways to navigate this path well:

1. Focus on purpose.

As a family, working on defining and refining your purpose will help all of you keep your eyes on your collective objectives and what you are individually willing to sacrifice for the greater good. When families spend considerable time talking about inequality, that’s a sign that they lack a clear and compelling purpose as a business family. Renew your conversation about why you own this business together. Such discussions can bring you all to higher common ground.

2. Define your family culture.

Families can choose and build their culture over time. Some families focus on meritocracy—you benefit more from the business by working in it, for example. Others have a more “socialist” culture, in which taking care of the extended business family is an important shared goal. Either version (and many in between) is okay as long as you have built trust and communication among the family members so that everyone understands the culture. Feelings of inequality are often a symptom of an ambiguous family culture.

3. Have a forum or another process for dispute resolution in the Family Room.

By having an appropriate family forum for handling disputes, you can help prevent conflicts from escalating. In many cases, you just need a forum that encourages civility, that is, the ability to be in the same room and make decisions together without the conflict disrupting the business or the entire family. The ability to sit down in the same room and make objective decisions together, despite the inevitable disagreements, helps family members avoid the pitfalls of emotionally charged arguments that breed and spread when the involved parties don’t communicate.

4. If you’re one of the haves, make sure you are sensitive to the have nots.

Some inequality is inevitable, but that doesn’t mean the family members who end up in positions of power should lord it over those who aren’t so fortunate. Make sure your family culture prizes the family—and not just the finances. Those in a more comfortable financial position should be sensitive to those who aren’t. When planning extended family activities, such as a family reunion or holiday gathering, make choices that everyone can afford. Don’t plan to stay in four-star hotels if only some family members can afford it.

5. Find common ground through gratitude.

Even if you are a have-not in your family, you’re still likely to be better off than the average person in the world, Libby says. Keep your sense of inequality in perspective. Much research confirms that those who express gratitude for what they have and for what others do for them are far better off emotionally. Take time to express gratitude in your family.

*Adapted from the Harvard Business Review Family Business Handbook by Josh Baron and Rob Lachenauer. Pages 154-156.