Managing Conflict in a Family Business

A skilled mentor can sometimes identify family friction as an impediment to business development.  Family businesses have the potential to be a hotbed of discontent, says Carol Ann Casey of CA Compliance Limited, specialists in corporate grievance investigations and mediation.  She has this advice on strategies to avoid tension in the first place, rather than having to deal with the consequences of conflict.

Conflict is normal within families.  People grow up trying to differentiate themselves, and are encouraged to be independent and responsible for themselves.  But if ‘being independent’ goes too far, self-absorbed behaviours and controlling relationships can lead to conflict when working in a family business.

Family tensions, maybe from competing opinions, needs, approaches or interests, can spill into the workplace, and business disagreements may then affect harmony at home.

Issues can arise due to not having agreed and shared family values, goals and objectives, and from inter-family friction, favouritism, nepotism or rivalry.

Essentially, family members must continually work at relationships to be successful.  Trust is why families chose to work with each other.  And, it is a choice.  Trust, however, cannot be based on assumptions.  Mistrust can come from many sources, such as not treating all family members as adults in the business, focusing on differences rather than commonalities, or seeking self-goals over family-goals, such as who holds the top job.

Open communication and dialogue help surmount perceived or actual conflicting views.  Dealing with issues is essential, however, rather than pushing them away, assuming they are too volatile to discuss.

Trust allows positive change that correlates to growth.  It creates efficiency and effectiveness on the family business journey, with the need for fewer professional advisors.  It also builds loyalty, not only with the family owners, but with employees and other stakeholders.

Any attack means either defence or withdrawal, and both of these destroy trust.  But, tackling issues in a productive way allows people to move forward positively.

Family conflict or attack behaviour demonstrates poor leadership to younger family members; the future leaders of the business.  Modelling good behaviour in the business is essential among older and younger family.

Tools and Systems

To thrive, and pass on a successful business to the next generation, the family must develop tools and systems for managing conflict and internal challenges.   It is not about avoiding conflict, but managing it.

  • It is vital to listen, to ensure matters are spoken about within a business.

The best leaders listen well and actively.  They reiterate what is said and think carefully about other people’s perspective.  It is important not to be self-righteous but, instead, to focus on what ‘we think’ is the right decision, or idea, for the business, thereby reaching cooperation, collaboration, or maybe compromise.

  • Talk about the problems, not the people.

Do not label the person with the problem.  Involve all the family, as every perspective is valuable.  Avoid accusatory language, and take responsibility for your own role in any conflict.

  • Get robust contractual shareholder and employee agreements in place.

Having family business policies helps define the boundary between family and business.  These include employment regulation policies and a shareholder dispute resolution policy and procedure.  From a governance perspective, it is important to align with the business constitution.

  • Draft a code of conduct on how the family members work together.

A code can be drafted, agreed, and signed by each person, setting the tone from the top, like a charter on how ‘we will’ work together, professionally and practically.  This will expressly state expected behaviours, the commitments of each family member, and investment in relationships among family members.  Also, importantly, that each will speak with ‘one voice’ to non-family directors, staff and the public.

  • Consider soft skills training

Family members should regularly attend externally-led soft skill training sessions together, covering topics like self-awareness, communications, conflict resolution, and understanding and working through family dynamics.

  • Use independent mediators

Complexities and conflicts can easily arise inter-generationally and inter-family within a family-owned business.  Electing someone, perhaps a ‘family elder’ who is not employed in the business, and is trusted by all, can help bridge a communication gap or mediate competing strategies or disputes.  Depending on the circumstances, however, it might be more appropriate to engage an external party.

Independent non-executive directors can bring objectivity and perspective on strategy, policy, supervision and accountability, and may help mediate disputes, depending on the issue.

Conflict is a fact of life and, when used constructively, forces us to challenge our assumptions and automatic behaviours.  Family members, who are owner-managers, need to pause, listen to those not directly running day-to-day operations, and reflect.

Good family leaders listen more, encourage opinions, cooperate and collaborate, which is much more likely to lead to an agreed position, even if it is a compromise.

And, family owners and leaders are never too important to be nice to people, including their family directors and shareholders.  By respecting, trusting and collaborating, plus espousing shared values, the possibility of conflict can usually be mitigated.

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