Have you ever considered leaving a job because you couldn’t get acknowledgement for your contributions from the boss or the respect you deserved from your coworkers? Or perhaps you relocated and were made assurances about salary and job responsibilities, but the owner was reluctant to follow through with promises that were made. Can you imagine that as a result of leaving that job your parents, siblings, cousins, aunts and uncles might not speak to you or you might feel uncomfortable attending a family function?
These are just a few examples of some of the potential dynamics that individuals working in a family business must face. Two out of five businesses in North America and Western Europe have two generations working in them. It’s higher in South America and the Middle East. So while the challenges facing family business may not directly affect you, being aware of the personal and financial impact of such unresolved conflict can enhance your understanding of some of the issues your clients or colleagues may be facing.
The research tells us that the most significant single concept that underlies all the competitive advantages and distinctions of a family business is trust. It is often a core value in a family business. When it exists within a family business it becomes priceless currency. When it doesn’t, it is not only one of the most divisive elements in any relationship, but it can be devastating to a family business.
Depending on the size of the company, there may be no formal human resources policies for salaries, raises, or promotions. Adult children are often expected to “trust” that after years of working in the business, their parents will “take care” of them and provide for them in their estate and succession planning. Yet in many family-owned businesses, the issue of succession planning is a taboo subject not discussed openly between generations, which deteriorates and erodes feelings of trust even more.
Understanding family business systems
There are three overlapping systems in a family business:
The key to making a family business successful is managing these two distinct systems of family and business, along with the third overlapping system of ownership/governance.
Balancing family interests and business interests often requires a compromise between family and business perspectives. These differences in perspectives — not necessarily differences in personality — are the source of most conflicts in family businesses. You cannot underestimate the potential for conflict and the negative impact these differing perspectives can have both in the family and in the business, regardless of whether family members actually work for the company.
When making important family and business decisions, it is essential that you consider the theory of “wholeness.” This concept suggests that a change in any part of a system (family or business) has an impact on all parts of the system. Therefore, because in a family business the family and business systems overlap, any financial or business decisions you make will not just impact the business, but the family relationships as well.
As a family business consultant, my biggest area of concern is the inability of family members (children, parents, siblings, cousins, aunts/uncles) to resolve complex conflicts effectively, which often results in emotional decisions that negatively impact the financial stability of the company.
They can also create serious damage in the family relationships. Most often this is due to a lack of opportunity and ability of family members to engage in honest, direct communication with one another.
Complex problems often have roots in the family history and dynamics. Some issues that can create this type of conflict are:
- difficulty for family members to respect boundaries;
- a sense of entitlement and power struggles amongst family members;
- lack of transparency;
- compensation issues;
- entry and promotion — what family members are permitted to work in the business, and how are they promoted;
- succession planning — who will run the business when mom or dad retire or die, and who gets to own business and who doesn’t?
Solutions for managing conflicts
The key to successfully resolving a family business conflict is to separate the person from the problem. Understanding the position of others and insisting that negotiations be based on objective criteria such as standards of fairness, best practices in the industry, efficiency, and observable behavior is essential to maintaining a professional atmosphere. You might benefit from engaging a family business consultant to provide education on conflict management strategies or facilitate opportunities for formal communication between family members.
Yet, family businesses often resist developing formal structure or governance policies for fear of losing their “family feeling.” However, it is possible to maintain a warm, friendly atmosphere, without having a chaotic, unpredictable work environment. Proactively creating protocols for critical areas such as expectations of roles, responsibilities, and ownership can help ensure healthy family relationships and create a balance between families and business.