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It’s no surprise that family business conflict is common among family-owned businesses. Or that it most often stems from family dynamics. The question is how to handle it.
There are plenty of business consultants who can step in to help companies manage family relationships in a business setting. The desired outcome is family cohesion and a successful family business.
In some cases, that can only happen when you bring in non-family members to run the business in the interest of promoting family harmony.
But, before we dive into that, let’s look at the biggest conflicts in family businesses.
They include:
- Lack of clarity on roles and responsibilities: When family members are not clear on their roles and responsibilities, it can lead to confusion, frustration, and conflict. For example, if one family member is tasked with business decision-making but another family member constantly interferes, this can create a lot of tension.
- Differing expectations: This is common when companies are in transition – when there’s a new product, a new market, or a new competitor. One family member may want to maintain the status quo, while another family member may want to shake things up to meet the new challenges.
- Personal issues: Jealousy, competition, perceptions of favoritism, and power struggles all can lead to family business conflict. This happens, for example, if family members perceive that the senior generation is playing favorites among the members of the second generation.
- Succession planning: Determining who will take over the business when the current business owners retire or step down can be a very difficult and emotional process. It often leads to conflict and sibling rivalries.
- Lack of communication: Communication is key to any successful relationship, but it’s especially important in family firms. When family members don’t communicate effectively, it can lead to misunderstandings, resentment, and conflict.
Family Business Conflict Management
Bob Murray and Alicia Fortinberry, organizational management consultants and authors of several books, including their latest, The Human Science of Strategy: What works and what doesn’t (Ark Group, 2020), say that relationships are, by far, the most important aspect of all of human life. That includes family-run businesses.
“The very intense relationships in the family sometimes actually get in the way of decisions that might be the best for the organization at certain stages,” Fortinberry says.
The struggle can be particularly intense when the business leader or founder is ready to exit or sell the company.
“A private equity firm says, ‘We’ll give you X million for the company’ and one part of the family says ‘Oh Whoopee! Let’s do it.’ But the other part of the family says ‘No, no, no, we’re a growing concern. Let’s stay, and besides we don’t have anything else to do.’”
When that happens, Murray and Fortinberry try to get the family members to search for areas of agreement and ask deeper questions to get them outside their traditional ways of looking at the business. They call it the CATS issues — certainty, autonomy, trust, and status.
For example, they will ask family members to explore questions such as: What is it that gives me importance? What is it that gives me psychological safety? What gives me a sense of certainty? What gives me a sense of autonomy?
“Quite often, there will be a solution that you find from this process which they haven’t thought of,” Murray says.
“The thing to remember is that you’re not in business for business,” he says. “Human beings don’t give a damn about outcomes. They don’t give a damn about targets. They’re there to relate. They’re there for the tribe, not the business.”
Family Business Success
Building family business success requires understanding the steps toward healthy conflict resolution. Those include:
- Talk about it: Family owners need to be able to communicate openly and honestly with each other about both family issues and business issues. And they need to be able to share their feelings and concerns while respecting everyone’s point of view.
- Set ground rules. It’s helpful to set some ground rules for the family meetings, such as agreeing to listen to each other without interrupting, agreeing to disagree respectfully, and agreeing to take a break if the conversation starts to get heated.
- Seek professional help: If the family conflict is severe or ongoing, it may be helpful to seek professional help from a mediator or counselor. A professional can help family members communicate more effectively and resolve their differences in a constructive way. Or, if the conflict is related to the growth of the business or a planned exit from the family enterprise, the answer may be to bring in non-family members as professional management.
When the Answer is Hiring a Non-Family Member
The transition from family ownership to a more corporate structure isn’t easy.
Murray and Fortinberry have dealt with companies in which there are family members who believe business success relies on bringing in outside leadership while others want to remain in control with seats on the board of directors.
“And we’re saying, ‘No, wait a minute. You can’t. It just doesn’t work that way.’ They simply don’t have the talents and the skills that are needed to run a business at that level,” Murray says. “Therefore, you either have to be trained to do so, or you have to hire in from outside.’“
This is certainly not a new idea. Harry Levinson wrote about it in “Conflicts That Plague Family Businesses” for the Harvard Business Review back in 1971. While the column is dated thanks to its focus on fathers and their sons, men and their brothers (note the missing daughters and sisters), the basic family business conflict remains:
“In U.S. business, the most successful executives are often men who have built their own companies. Ironically, their very success frequently brings to them, and members of their families, personal problems of an intensity rarely encountered by professional managers.
“The fundamental psychological conflict in family businesses is rivalry, compounded by feelings of guilt when more than one family member is involved.”
The only real solution is to move toward professional management, he says.
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When you’re ready to make that transition, a rock star interim executive might be the best first step. Nearly two-thirds of our highly skilled interim executives have run a family business. Contact InterimExecs for a confidential consultation about your plans for the future and what the company you have built needs to smoothly transition to new leadership. InterimExecs RED Team of top executives work with owners to develop and execute a strategic plan for exiting your business. That means providing operational expertise to increase the value of your business and putting structure in place so you can successfully change roles or transition out.
Read Our Full Series:
Part 1: Choosing the Exit Strategy that is Right for You
Part 2: The Critical Importance of Business Succession Planning
Part 3: Identifying the Right Successor
Part 4: Family Business Transition to the Next Generation