Preventing conflict in family-owned businesses

Conflict in family-owned businesses is a common and often complex issue that can have significant consequences for the business, as well as the family members involved. 

After advising family-owned businesses for many years, we have identified a set of common drivers of conflict in family-owned businesses:  

1. Lack of clear roles and responsibilities 
2. Lack of planning (leadership succession and/or ownership transition) 
3. Differing values, goals and family vision 
4. Differences in work ethic 
5. Power struggles  
6. Treating family members differently than employees 
7. Lack of family governance structure 
8. Jealousy and favoritism 
9. Lack of approach to address family conflict   
10. Greed  

To be proactive and prevent family business conflict from diminishing the value of the business and the strength of the family relationship, we recommend a few key preventive measures: 

Develop a family business vision, values statement and strategy: First and most critical, is building family unity around a collective vision for both the business and the family’s future. Get everybody on the same page by developing a long-term vision and set of values for the business that can be shared with future generations as a sort of North Star for the family. 

Establish clear roles and responsibilities: It's important that everyone in the business understands their role and responsibilities, and that these are clearly defined and communicated. This can help to prevent misunderstandings and conflicting expectations. 

Define governance policies and procedures: Incorporating governance policies is crucial, particularly those to expressly address family shareholder, family employment and family and leadership decision-making responsibilities and parameters. Not only do these policies need to be developed and documented, but they must also be implemented and periodically reviewed for continued relevance and suitability as a family grows and a business changes. 

Create an approach to facilitate open communication: Maintaining open communication channels and a professional and respectful atmosphere when challenges do arise is essential. Open communication and mutual respect for one another can be more challenging in family settings where underlying rivalries or bias may be prevalent. Nepotism and feelings of unearned privilege often breed resentment and other negative feelings, particularly across multiple generations. Encouraging open communication before conflict has a chance to fester can help parties to sort out intentions and redirect issues before the conflict spirals. Implementing a family council or a process to discuss family issues will be a key preventative measure. 

Prepare the next generation: In order to minimize the sense of entitlement from younger generations, many families encourage the next generation to gain work experience outside of the family business. That approach arms the next generation with experience outside of the business as well as job-related credibility and prevents the appearance of nepotism or awarding a job to an unqualified family member. In many successful family businesses, the next generation does not have an automatic birthright to run the business although they may have a birthright to eventually own the business. 

Separate family from business: Families that own businesses must understand that at any given moment they may be wearing different hats and must be cognizant of that fact. At times they may be wearing one of the following hats: 

1. Family-business owner 
2. Family-business employee 
3. Family member only 

These three distinct roles require different thought processes, come with different sets of responsibilities, and require situational awareness of whom you are interacting with and in what role.   

As the old story goes, one family business patriarch, wearing his “CEO hat,” told his son that he was fired. Immediately afterwards, he put on his “Dad hat” and said, “Son, I’ve heard you’ve just been fired. How can I help?” 

Have regular family meetings: Scheduling regular family meetings is a great way to stay informed, resolve issues and maintain open lines of communication. 

Seek outside help when needed: If conflict within the family is particularly difficult to resolve, it may be helpful to seek the assistance of a family business advisor, mediator or professional therapist. 

There are many reasons for family business conflict. Those reasons include greed, favoritism, lack of shared vision, values and plan, the absence of proper governance and open communication. Using our suggestions above will help to eliminate unwanted family business conflict and ensure the success of your business for generations to come. 

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