How to Manage Conflict in Family Business

family business conflicts

Conflicts are part and parcel of any family business, and they can arise due to a number of factors including sibling rivalries, aging patriarchs and matriarchs, preferential treatment. Learn how to manage conflict in family business – David Harland, Managing Director of FINH

Rodney E. Evans, a professor at the Institute for Enterprise in Family Business, once remarked that “family businesses are fertile fields for conflict.” In an article for the Journal of the Family Firm Institute, Mr. Evans argued that family businesses are most ripe for conflict whenever success affects the company culture. If you’ve been around long enough, many of these conflicts are predictable. Sadly, the same can be said about many common attempts at resolution that simply aren’t effective.

It isn’t difficult to think of conflict-ready elements in a family business: sibling rivalries, aging patriarchs and matriarchs, preferential treatment (or the perception thereof) for family members, spillover from conflict at home into the workplace, etc. Most of these are part and parcel to any family and, if we’re being honest, stem from indelible parts of human nature. There isn’t anything unusual about this kind of conflict — in fact, it would be truly strange if none of these elements existed in a family business.

So you shouldn’t fret if problems periodically pop up in your own family business. After all, it’s perfectly normal. But you want to ensure those problems don’t irrevocably damage the business or the family, which is a real threat thanks to easily avoidable pitfalls that so many family businesses fail to avoid.

Merging family and business systems

Every family has its own unique set of interactions and every business has its own culture, and there’s no reason to believe that these two systems will always (or ever) mesh together perfectly. The average business (particularly in a corporate setting) establishes rules, procedures and hierarchies because they help stabilize performance and foster accountability. All of these elements are formal and explicit; it’s something most workers know they must accept to be part of the system.

Families have systems, too. Yet these systems arise more organic and informal — the boundaries, rules and expectations within a family are natural and often unspoken. Think of the role a big brother plays to his little sister or that of a mother to her daughter. For the most part, family members don’t sign off on these roles and expectations; they just learn to adapt and perform over time.

It’s hard for family members in the business to shift and adapt between these two conflicting realms. The family wants to nurture, develop, and love; the business needs to promote skills, generate profits, and remain rational. Even if you haven’t been a part of a family business, you can probably already guess where the puzzle pieces don’t fit together perfectly.

Problems arise when business principles are applied to the family or when family emotions become part of the business model. There’s not much use in trying to avoid these altogether or, worse yet, just ignore them. In fact, the family and business systems can become even stronger with the right attitude and resolution techniques.

The wrong way to deal with family business conflict

There are two fundamental psychologies at play behind almost every family business conflict: rivalry and ego.

Start with ego: Most founding entrepreneurs are rightly proud of their successful business, and take more or less conscious pride in how the business reflects on them (or visa versa). The founder may effectively treat the business as both a child and an extension of his/herself. When this goes too far, though, every possible conflict or issue becomes an existential threat and is met irrationally and passionately. This reaction is dangerous precisely because it doesn’t promote constructive resolution — only self-preservation.

Rivalry takes many forms in family businesses: sibling vs. sibling, cousin vs. cousin, parent vs. child, family member vs non-family member, etc. It’s not even really a bad thing; normal competition drives success if it’s harnessed in the right way. It’s when rivalries become destructive that problems can escalate.

Ownership can exacerbate family business conflicts by responding in inappropriate ways. Maybe a founding father uses one preferential set of rules and consequences for one son over another, or for his son over non-family employees. Very few perceptions can undermine a business culture as quickly as the notion of unfairness.

It may also be tempting to make family decisions based on business issues (or the other way around). Revenge doesn’t have a place in the office or the home, and conflating punishment between these two arenas is a perfect recipe for bitterness, resentment, and wasted energies. A good general rule of thumb is: sudden, unilateral reactions are least effective when emotions are running high. There’s almost always a better way.

Finding a healthy resolution

Conflict resolution is easy to talk about and difficult to execute. No single procedure is going to work for every business, but there are a few key elements that, if followed, can help ensure that family businesses struggles can be turned into strengths. After all, it’s an old truism that the bone is strongest where the break has mended.

Every conflict involves two or more individuals who have different expectations and understandings. There’s no way to bridge an interpersonal divide without communication, so every family business should foster an environment where effective communication is fostered and appreciated. The method and timing of communication is less important and should probably be tailored to suit the needs of the business and the personalities involved, but the correct answer can never be “nobody talk about it.”

At a fundamental level, almost every conflict in a family business will highlight a weakness in the existing family/business/ownership structure. Take the time to understand what the conflict means — it’s an opportunity to grow stronger.

The healthy resolution won’t always be obvious, so keep focused on the following questions:

What are the underlying expectations and understandings? Why aren’t they the same for everyone involved?

What weakness does the conflict expose and how can the family business grow stronger?

One healthy piece of advice: there’s nothing wrong with turning to outside help and hearing a different perspective. Family councils and family counsels should both be considered. And impartial mediators, such as a trusted family business advisor, can often provide the right outside perspective (especially before lawyers enter the picture).

If you would like to talk to a specialist family business adviser please call us on 3229 7333.