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Managing conflict in a family-owned business

Family-owned businesses can be rewarding, but they also come with their own unique set of challenges. One common issue is conflict, which can arise due to a variety of factors. As we presented in a previous article in this series, “Drivers of conflict in family-owned businesses,” conflict in a family business has many root causes. They include but are not limited to: 

  • Lack of clear roles and responsibilities 
  • Lack of planning (leadership succession and/or ownership transition) 
  • Differing values, goals and family vision 
  • Differences in work ethic 
  • Power struggles  
  • Treating family members differently than employees 
  • Lack of family governance structure 
  • Jealousy and favoritism 
  • Lack of approach to address family conflict:   
  • Greed  

If not properly addressed, conflict can lead to tension, misunderstandings, and even the breakdown of relationships within the family and the business. 

When it comes to family businesses, consider the words of author, Max Lucado … “Conflict is inevitable, but combat is optional.” 

What is important – to maintain a sense of “family” and ensure that the business continues to grow and prosper – is how the family deals with that inevitable conflict. 

When conflicts occur in a family-owned business, it's important to address them promptly and effectively. Here are a few steps families can take to resolve conflicts: 

Stay calm and composed: It's easy to get emotional when conflict arises, but it's important to stay calm and composed. This will help you think clearly and come up with a solution more effectively. 

Utilize a structured approach to managing conflict: We have observed that the most successful family-owned businesses tend to resolve conflict before it becomes disruptive. Many of these businesses utilize a formal process and standardized approach to mitigate the conflict.  Depending on the size and complexity of the family and family business, some families create family councils as a vehicle to address family conflict. Those councils implement formal dispute or conflict resolution processes. 

Identify the root cause: To find a solution to a conflict, you first need to understand what's causing it. Try to identify the root cause of the conflict and focus on addressing that rather than just the symptoms. 

Communicate openly and honestly: As with prevention, open communication is key to resolving conflicts. Encourage everyone involved to express their thoughts and feelings and listen actively to what others have to say. 

Seek outside help: If you're having trouble resolving a conflict on your own, consider seeking the help of a family business advisor. These professionals can help facilitate discussions and find mutually beneficial solutions. 

Families without a structured approach often feel the need to hire outside, objective advisors to lead them through a conflict resolution process. Although the process described below might feel like common sense, many families cannot navigate the process without the help of outside advisors because they are too close to the situation.

Our conflict management approach 

Our family business strategists often get requests to help family-owned businesses address conflict among family members. To that end, we use the structured approach presented below: 

Introduce a neutral un-biased approach: Present the involvement of an outsider as unbiased without a “horse in the race.”  Make sure both sides of the conflict understand that the outside advisor is not representing either side but the “good of the family.” 

Conduct fact-finding: The advisor should meet with all parties independently to understand root causes of the conflict, the point of view of both sides and the entire fact base. The advisor should attempt to understand each sides’ desires and definition of a successful outcome. The advisor should strive to understand the emotional issues as well as the factual issues. 

Compile, organize and review findings: The third step is to analyze and organize all of the information gathered. The results can then be shared with the participants in a factual and objective way. Points of conflict and additional disagreements should be noted. Additionally, points of agreement or compromise should be noted. 

Rank conflict points: The issues on the table should be ranked by each side in the following categories - 1. Must haves, 2. Nice to haves or 3. Not important. Once issues are ranked, seek agreement from each side through compromise, “horse trading,” or modifying demands. Start with the most insignificant or easiest problem first. Disagreements cannot be negotiated until the facts and feelings are understood by everyone. 

Memorialize agreements: The next step is to bring the sides to a formal agreement and memorialize the agreement. Start by reviewing the changes agreed to and confirm that compromises are still acceptable. Commitment to the agreement can be confirmed through formal or informal contracts, a new policy, or a handshake. 

Communicate the agreement: The last step is to communicate the agreement to those parties inside the family or the family business that need to be aware of the outcome. Sometimes a formal communication is required, other times a verbal announcement at a family meeting or dinner might be appropriate. 

Lastly, any conflict management approach will unfortunately not mean much in the long run if the family members that have been embroiled in conflict cannot forgive each other for the conflict and disagreements that have taken place in the past. We have observed this situation many times. Long-time grudges, disagreements and slights create lingering bitterness and resentment. Conflict management processes in family-owned businesses must not only address the obvious conflict and presenting issue but must also address the issue of forgiveness within the family. Remember family businesses may not last forever but families will!

If your family business is struggling with family conflict, contact our team today.

Gary A. Plaster
Principal, MBA
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