Family Business Conflict

Family Business Disputes and Conflicts

If ordinary businesses function in three dimensions: Culture, Operations and Finances, family businesses are both blessed and cursed with a fourth dimension .... Emotion. 

Emotion can generate endless streams of passion, energy and conflict and, like nuclear fission, the way these profound energy sources are used determines whether they are immensely constructive … or catastrophically destructive.

Accordingly, family business disputes are never simple.  Every one operates on at least 3 levels - Business, Family/Relationships and Personal (not always in that order).

These disputes mix generations and genders, cultures and ethics, brothers and sisters, spouses and relatives, tradition and technology and the influence of the hidden "powers behind the thrones".

Causes of Family Business Conflict

Some of the most common causes of conflict are:

• Poor communications between family members, plus historically low levels of trust and a general absence of willing collaboration.
• Lack of information about the financial situation and future prospects for the business and for family members working in, and/or depending on, the business.
• Unclear or unshared vision and goals for the business and the family. Family members working in, or relying on the business, have no idea what the future may bring for the business, for the family or for themselves.
• Inter and intra-generational conflict arising over the perceived need to make major changes and/or to modernise, professionalise or restructure the business.
• Fear.  If the business has been the owner’s life, then will leaving, or even slowing down, be their death?  What is there for them beyond the business?
• Fear.  Dad can’t imagine being at home with Mum / Mum can’t imagine being at home with Dad!
• Fear.  Owner(s) cannot bring themselves to pass over ownership of the business, even though they transferred responsibility for managing it years previously.  ie: Don’t hand over the reins unless you’re ready to get off the horse!
• Lack of a workable, or any, Succession Plan.
• Lack of objectivity and realism in the owner(s) of the business as regards its future prospects and/or current value.
• Unclear roles and responsibilities for family members.
• Unclear or unknown expectations amongst family members.
• Entrenched, unresolved relationship problems between family members.
• Inability to separate business issues from family issues.
• Inability to separate business needs from family needs.
• Inability to mobilise the family to support the business and vice versa.
• Lack of circuit breaker processes or people to help resolve conflicts between family members.

No simple process can hope to resolve these types of conflict and a sell out and walk away, or scorched earth approach can only make things worse.   We often see situations where, year after year a family has faced adversity, made sacrifices and placed enormous personal and financial demands on family members to help build and run the business - without ever stopping to recognise or deal with the problems brewing in its own nest.

Eventually, the problem becomes intolerable to one or more family members.   Often, the catalyst for (re)action is a major change or crisis (emotional, financial, operational, medical etc).

When the flare goes up we provide a crisis response team with multi-skilled expertise in dispute resolution and problem solving, mixed with practical business, financial and legal competencies.

Elements of Family Business Conflict

Every family business conflict is unique, but most share some common features:

• Belonging and alienation — there is always a family history of effort and sacrifice, inclusion and exclusion.  Depending on the characters of the individuals involved, we spend varying amounts of time getting their stories out of the family members –essentially talking about the family and the business and each person’s place in both.  We use this primarily to obtain background information and to create feelings of trust, validation and engagement in the coming process.  Individual family members derive comfort from our listening process, which usually works for them as a form of narrative therapy - talking out issues and concerns that nobody has listened to in the past.
• Generational tensions — these run up and down and sideways, mainly between parents and children and between siblings.  It can be very hard to reconcile different work ethics, lifestyle expectations, cultural and educational conditioning and economic environments across generations.  Add some inter-generational competition to the mix (eg: between father and son) and you get an even more explosive combination!
• Emotional anguish — guilt flows freely when family relations rupture. Meanwhile staff become factionalised, disoriented and de-motivated through a sense of uncertainty about the future and there's often a general loss of respect for the business owners who don't seem capable of getting their collective acts together.
• Leadership expectations — owners of the business, who are also usually leaders and heads of their family units, feel compelled to make wise decisions that do the right thing by business and family. Emotional and other personal factors can complicate decision-making and create enormous pressures.  Sometimes, even the wisdom of Solomon wouldn’t be enough to sort out the family's problems!
• Commercial confusion — all conflicts are distracting.  Family Business conflicts create a major diversion from the business of doing business. With continuing conflict in the family trading partners, financiers, staff and other stakeholders become nervous and eventually lose confidence in both the business and the family.  There’s only one way for the family and the business to go from there – and it’s not up!
• Competitor danger — the sharks circle while the business bleeds. Conflict can dramatically reduce the viability and value of a business. Suddenly the financial security and the proud legacy the family may have struggled to build over generations are at serious risk.

With such complex scenarios solutions are never going to be easy.  They have to be worked on, but the goals — restoring family harmony and securing future business success — must surely be the most important objectives on the family’s radar screen?

Providing a legacy of peace and prosperity is one of the greatest blessings a family business proprietor can leave to his or her children.  It is the difference between passing on a treasure or casting the family into a prison.

It’s no coincidence that creating an atmosphere of peace, candour and prosperity within any business has become a major driver of modern best practice in business.

Family Business Dispute Solutions

When family businesses recognise that they cannot resolve their problems by themselves they engage us to work with them to find solutions.

We guide key family and non-family personnel through a series of confidential, individual and joint meetings.   Our first task is to identify and separate the significant issues into 3 distinct categories:

• Business
• Family/Relationships
• Personal

Then, the dispute resolution process begins:

The Family Business Dispute Resolution Process

1. Gather information about the people, the family and the business.  
2. Identify the issues that are causing problems.
3. Identify general and specific interests and needs, both recognised (apparent) and unrecognised (hidden).
4. Analyse and evaluate this objective information and the subjective impressions obtained during the information gathering process.
5. Develop and agree a long term vision, a conflict workout plan and a timetable with the family.
6. Counsel, coach and prepare individuals and groups for meetings and negotiations.  Involve lawyers, tax accountants, financial advisers, coaches, therapists and other support professionals, if and when required.
7. Conduct and manage one, some or many mediation (negotiation and problem solving) meetings.
8. Focus on solving the business problems first, then turn to significant family, relationship and personal issues.  If individuals have serious personal problems we may involve other, external professionals (eg: psychologists and counsellors) to work with these individuals in a parallel process so they can participate constructively in the main problem workout process.
9. Work with family members to develop comprehensive options and alternatives to resolve all problems.
10. Help family members to visualise themselves living with the consequences of the most attractive options.  Evaluate other options as alternatives.
11. Draw acceptable options together to form workable solutions (often involving far-reaching, long-term changes).
12. Generate a written Family Agreement, in plain English.   This is a flexible, possibly legally binding document, designed to record and commit the family to the decisions they have made to resolve their conflict and to implement a go-forward plan.
    
    Any agreed outcome is a good outcome for our purposes.  Provided the Agreement is legally valid, it only needs to be measured against the family’s, and the businesses’, specific needs and interests.   In these cases, external and objective measures of "fairness" are virtually irrelevant.
13. Oversee the implementation and subsequent performance of the family’s undertakings per the Agreement.
    
    We have found this last activity to be an essential, ongoing role that is rarely required with non-family business agreements.  Unfortunately, it is not unusual for a family to go through all the pain of developing an Agreement, only to then ignore it and return to their original dynamics, unless someone independent stiffens their resolve and holds them all accountable.

Benefits of Family Business Dispute Resolution

Quite simply, if you take yourself, your family and your family business seriously there is no more effective dispute resolution service available anywhere than the service we offer – period! 

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