Managing Conflict in the Family Business

Understanding Challenges at the Intersection of Family and Business

K. Rhodes, D. Lansky

• Publisher: Palgrave Macmillan
• Year: 2013
• ISBN:
  9781137321305
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Family Business Conflict Archetypes, Frames, Roles, and Tactics are discussed in this bookwith a view toward educating readers to the common conflict cycles that family businesses encounter. More specifically thebook will address twelve conflicts that are common in family owned businesses, howto spot them and how to resolve them.

Chapter 1

Managing Conflict: The Balance of Family and Business

The family unit is—and always has been throughout the world—the core operational group of society. It is also the primary vehicle for carrying on a business as a way to support that family unit. Today, in addition to owning and managing shared businesses, many successful families also collaborate in managing family offices, overseeing philanthropic endeavors through established family foundations or sharing control of other public and private enterprises. While all of these forms of family collaboration face similar challenges, the unique qualities of a family at the center of these structures add complexity to effectively balancing these challenges with the tensions and problems that come with being a family in business together.

Many conflicts in family businesses or enterprising families are predictable, but they are not necessarily inevitable. By focusing on helping family members and other interested parties associated with a family-owned enterprise to recognize those predictable conflicts, you can more accurately determine which of those conflicts might be headed off, brought to resolution, or managed over the long haul. The relevant management strategies can be implemented with the goal of simultaneously upholding the family and the business.

Exhibit 1.1 sums up the reasons why working together in a family business is challenging.

The bottom line is that some of the most challenging conflicts in family businesses often are not only complex but the result of long-term processes and developments rather than one-time events. For example, two brothers haven’t spoken for years because of an old disagreement, an adult child has cut herself off from family gatherings because of a previous quarrel, divorce brings pain to family relationships, etc. But unaddressed conflicts in a family can eventually erode relationships between family members to the point where conflict-ridden interactions with each other become accepted and family members consider them “normal.” Although this otherwise relatively harmless dynamic can be found in most families, the added stress and responsibilities of interacting in the context of a business can make the conflict worse over time so that it can potentially become quite destructive.

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EXHIBIT 1.1 Four Reasons Why Working Together in a Family Business Is Challenging

1. Being engaged with each other in a family enterprise adds an entirely different level of complexity.

2. Family members may be uncomfortable with conflict and develop habits of coping with tensions that keep conflicts from surfacing.

3. Family members exhibit a reflex reaction to a problem that can blow the problem out of proportion.

4. The dilemmas arising when families live and work together add a layer of potential tensions that must be managed on a daily basis.

In addition, many siblings and cousins working together in family businesses likely experience an intimacy paradox. This means that those siblings or cousins know each other so well that they are also skilled at knowing how to best interact with each other in ways that avoid conflict; unfortunately, this skill gets in the way when they need to have deeper conversations that might be uncomfortable to them. They know how to enjoy each other’s company, but they also tacitly know what they shouldn’t discuss or allude to because of its potential to create conflict. Many people develop these communication patterns and unspoken “don’t go there” agreements when they are very young. The intimacy paradox arises when those old patterns of relating to each other begin to prevent family members who are working together in a family business from recognizing and discussing conflicts that affect the business and family relationships.

When business conflict is properly addressed, owners or managers tackle smaller challenges, managing them effectively in real time. But when events are not well managed or are accepted as normal or just ignored, they can become chronic, accumulate over time, and develop into crisis points. In family businesses with long or multigenerational histories and strong emotional ties, recognizing and managing conflict may be more challenging for family members than for non-family employees.

Yet, managing conflict is a challenge in any business setting and when approached correctly, some conflicts can actually be beneficial because they can push business leaders to see a situation differently or come to a deeper understanding of people and circumstances that inform their decisions. Knowing how to manage conflict and then leverage it into an advantage is not always easy, however, and this is particularly true in families—and perhaps particularly in families who are also in business together or engage in other collaborative enterprises, such as a family office or a family foundation. That’s because the dynamics that can produce conflict in a family combine with the challenges of owning and operating a business, introducing emotional and historical dynamics that may complicate solutions and opportunities. These conflicts can be more accurately described as dilemmas—situations in which tensions chronically exist and few clear answers are readily available without unwanted consequences for the family or the business. Learning to recognize and live with apparent dilemmas, polarities, and paradoxes is the key to successfully managing conflicts in the family enterprise.

According to experts, conflict is “a process that begins when an individual or group perceives differences and opposition between itself and another individual or group about interests and resources, beliefs, values, or practices that matter to them.”¹ Although that definition is accurate, it is insufficient to describe the dilemmas and tensions that are common to families jointly involved in businesses and enterprises. In these contexts, every instance of conflict is further complicated by the multiple roles and relationships of family members. The CEO of a family enterprise may be the son of its founder, and he may also be dad to several children and granddad to several grandchildren. He is likely the husband of a spouse who helped him build the business and raise those children. He may be a brother to a vice president in the company or even a copresident with a sibling. In addition to being uncle to his siblings’ children, he may also be their boss if they work in the family enterprise. Other dynamics may also be at work:

multiple family members may be working in the enterprise to make it successful and to provide for their individual families

other family members not active in the business may be owners or shareholders

the “permanency” of the relationships between family members

the role of in-laws and the relationships created across the family

Clearly, families working together in a business or enterprise also have to juggle the relationship between that enterprise and the family as a whole. This is true of family businesses on a global scale and across cultures, whether family members are engaged in the enterprise as owners or managers or both.

Every family business faces some conflict at one time or another and regarding many different situations. Whenever people work together, there are bound to be different opinions and ideas on how to get things done. Different opinions don’t necessarily lead to conflict, but when different opinions combine with emotion, intransigence, criticism, or contempt, that’s when conflict per se emerges.

Nevertheless, just because a family faces conflict doesn’t mean it can’t function well, because all conflicts can be managed, even though they may not be quickly or easily resolved. That’s an important distinction, because business families don’t actually approach conflicts in the same ways other organizations do. If you’re working in a family business, it’s likely you already recognize that your conflicts are something of a balancing act and that learning to work through conflicts may be more important than just trying to resolve them or get rid of them.

In addition, many families may not realize there’s a significant problem in the business until it affects family relationships. Some families say they were motivated to seek help in managing conflicts because they recognized they were becoming less inclined to spend time with each other as a family away from the office. Some families in business may actually be closer than families that don’t work together: families in business often vacation together, go on cruises or to the beach, the mountains, or a lake property; they go skiing, scuba diving, fishing, or just relax together as a large, extended family. When those vacations or long weekends are no longer fun for some or all family members, and they find themselves thinking “I just don’t want to be around him [or her] any more than I have to,” that’s when the family realizes its relationships are starting to fray. And most families in business together don’t want that to happen to their family or to their business.

THE THREE DOMAINS OF FAMILY BUSINESS

Figure 1.1 illustrates three general domains of family-owned businesses and the interaction between these domains. Each domain represents a “hat” a family member or other stakeholder might be wearing at any given time and the potential dilemmas or paradoxes that could be encountered in each role. One person might be dad and also CEO and a majority shareholder at different times; his son or daughter might be COO and a minority shareholder. These different constituencies and their interacting relationships result in interest groups, which might naturally be in conflict or competition because of differing agendas and priorities.

For example, how can you be boss and brother (or sister) at the same time? How can a brother and sister, with all the typical experiences of growing up together, put aside those sibling relationships and now focus on their business relationships, which may be those of CEO and COO? Or how do you balance the wish of family owners to have greater dividends when family business managers want to reinvest in the company? These overlapping roles and relationships create natural dilemmas that are accepted as part of a business-owning family’s day-to-day life. But they also present opportunities for tensions and conflicts to emerge.

Figure 1.1 The Three Domains of Family Business.

Source: R. Tagiuri and J.A. Davis (1982) reprinted in F...

Table of contents

• License
• Cover
• Title Page
• Copyright Page
• Contents
• List of Exhibits
• Introduction: A Primer to Managing Conflict in Family Business
• 1: Managing Conflict: The Balance of Family and Business
• 2: Common Dilemmas That Can Lead to Conflict
• 3: Guidelines for Dealing with Dilemmas That Lead to Conflict
• 4: Create a Legacy for Future Generations
• Additional References
• About the Authors
• Index