Conflicts can occur in even the closest-knit families. Add a business to the mix and the potential for family fighting escalates, as financial and professional disagreements involving the company can bump up against existing personal tensions among family members.
One result, of course, is that family battles can get out of control and hurt or even destroy the family business if they’re not dealt with effectively.
If you are part of a business with family members, it’s crucial to be able to address and overcome inevitable conflicts. That doesn’t mean you have to achieve unending, perfect harmony among those involved. Instead, the aim is to effectively manage the disputes so that there is no serious adverse impact on either family relationships or the operations of the business.
Here’s a look at how to tackle that goal.
Four levels of family business conflict
We see four levels of conflict that occur within family businesses (see Exhibit 2).
- Minor disagreements. This is the most common and least severe type of conflict. Although they occur frequently, minor disagreements are unlikely to significantly disrupt the operations of the business. These disagreements are a product of differing opinions and perspectives but not extensive disparities. Most of the time, minor disagreements can be worked through by the people involved (although sometimes the help of other family members is needed). Outside assistance in resolving the problem is usually not necessary.
- Major disagreements. These occur when family members are at odds with each other and getting to some sort of resolution is not at all easy. Feelings of being disrespected coupled with aggressiveness and defensiveness are par for the course in major disagreements. These conflicts can be resolved, but often time is an enemy. The longer the arguments prevail, the more likely they will become more severe and dangerous to the functioning of the business.
- Serious conflicts. These are usually a product of not attending to pressing concerns and major disagreements. When lesser problems fester and grow, they can become serious conflicts that may be hard to wind down. Very often, a family facing serious conflicts will divide into factions and the business will suffer. Emotions usually will run high, and personal attacks on the motives and integrity of family members will be common. This often causes painful emotional wounds that can be very difficult to heal.
- Warfare. Without intense interventions, serious conflicts can turn into warfare that destabilizes the business and causes deep, permanent scars in the family. Lawsuits and sabotage (sometimes subtle, sometimes not) can devastate the business. The positions of the family members become so entrenched that any form of reconciliation can become virtually impossible. Family relationships are badly damaged, and the business suffers greatly.
Note: These four levels usually develop in sequence. There is almost always a progression starting with minor disagreements that work their way up to warfare—unless something is done to avert disaster.
Dealing with family business conflicts
Unfortunately, we find that relatively few family businesses have formal processes to handle conflicts. Instead, resolution is done informally in the context of the family. Where a family member is autocratic, all conflicts are resolved by dictate. This works well until the autocrat is no longer in charge. Unless another family member takes on that same role, emerging conflicts can quickly escalate to warfare.
Still, there are ways to deal with family business conflicts (see Exhibit 3).
- Formal governance structures can be very useful in mitigating conflicts. Family councils, family advisory boards and well-run off-site family meetings can all help de-escalate conflicts. These structures are predominantly outside the business itself, providing a way for the family to share their perspectives and grievances and get feedback.
- Fostering communication among family members can be highly effective in avoiding and minimizing conflicts. As many significant conflicts start with smaller misunderstanding and differing points of view, being able to openly talk about them and find areas of commonality can stop them from becoming more problematic.
- Family business mediation is often the best way to help families address major disagreements and serious conflicts. When conflicts get past the point of minor disagreements, it can be valuable to turn to family business mediators to help work through the issues and ensure the problems do not turn into warfare. Note that when the warfare level is reached, family business mediators tend to be of very limited value. At that point the family is, simply put, “too far gone” for mediation to be effective.
Because of the important role mediation can play when the situation is veering toward disastrous, we’ll take a closer look at family business mediation.
A closer look at family business mediation
Given that many family businesses are the drivers of economic prosperity for the families, family business mediation is becoming a more readily acceptable approach to conflict resolution. It is usually highly cost-effective—much more so than litigation, for instance.
The key element of effective family business mediation is that it produces results that are acceptable to all involved. Thus, when conflicts are resolved, they tend not to lead to other disagreements and acts of sabotage. It is critical that the family recognize and want to address the conflicts, understand that they will likely have limited if any success on their own, and choose a highly qualified family business mediator to work with them.
So where to start? A family business mediator is an unbiased outsider whose job is to work with members of a family business to come up with an all-around mutually acceptable resolution that alleviates the conflict. Mediation is a highly interactive process that is geared to help the various sides better communicate and think through the possibilities so they can arrive at a viable solution.
Mediation as a dispute resolution methodology is often fast and cost-effective compared with other approaches such as litigation. Moreover, the outcomes tend to be supported by the different sides in the conflict—in part because mediation is designed to empower the people involved to come up with ideas and action steps. With mediation, the parties themselves come to an agreement—versus, say, arbitration or legal proceedings, where someone else makes a decision and imposes it on the participants.
Often, lawyers and accountants provide family business mediation services—as do family business consultants. Obviously, expertise in matters relating to family businesses is an essential trait for family business mediators. Family business mediators also should understand family dynamics and how they impact business decisions. Specific industry knowledge can prove helpful too, although it tends to be less important than the other two factors.
Other traits to look for in a mediator include:
- Ability to put people at ease and have them share openly
- Adeptness at empathetically responding
- Ability to creatively explore possible solutions and to brainstorm
- Ability to explain complex issues to create better understanding
- Ability to deal with intense emotions
An adept family business mediator will help the different sides clarify their positions and identify numerous possible avenues for resolving the conflict. This is often accomplished through joint meetings where everyone is present as well as private caucuses where the mediator is talking with only one side at a time. The family business mediator goes back and forth between the parties, bringing each side ideas, possible solutions, requirements and even the other side’s viewpoints.
Family business mediation is an incremental process. It takes time for the mediator to help the different sides see things somewhat differently than they currently do and start to facilitate agreements. It can also take time for the family members to really trust the mediator and buy into the idea that the mediator is working in everyone’s best interests.
If you are part of a family business, you will almost certainly have fights and squabbles with members of your family from time to time. The key is to take steps to address those problems in ways that prevent disagreements from blowing up into full-fledged warfare that can potentially take down the business.
One step may (or may not) be to enlist a mediator. But regardless of your approach, committing the time and energy to resolving disputes can potentially help set your business up for a stronger future.
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