How many of you have ever considered leaving a job because you couldn’t get the respect you deserved from your colleagues or acknowledgement for your contributions from management?
Perhaps you relocated for a career opportunity and were made assurances about salary and job responsibilities; but the person who hired you was reluctant to follow through with promises that were made. Or possibly you are the senior financial advisor on your team, but are irritated that some of your staff is not “pulling their weight.”
Now change the picture and see your workplace as one where your family members are your supervisors and staff. Imagine that as a consequence of expressing your negative feelings about work that your parents, siblings, cousins, and aunts or uncles might not speak to you or you might feel uncomfortable attending a family function.
These are just a couple of 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. And those numbers are higher in South America and the Middle East.
You may not work with your relatives but many of your clients probably do. Being aware of the personal and financial impact of such unresolved conflict can enhance your understanding of some of the issues your clients in family businesses 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.
Unspoken expectations are a key issue that can derail trust for most family businesses. When working for a relative, some employees assume that time off and working hours should be flexible.
Just as problematic are that formal policies for salaries, raises and promotions are not always enforced. Adult children are often expected to trust that after years of working in the business, their parent will take care of them and provide for them in their estate and succession planning.
However, in many family-owned businesses the issues of succession planning are a taboo subject, and not discussed openly between generations, deteriorating and eroding feelings of trust even more. The ability of family members on a team to have difficult conversations and address conflicts openly with each other distinguishes healthy families and family businesses from unhealthy ones. And those issues will affect non-family members as well.
Family Business Systems
There are three overlapping systems in a family business: the family, the business and the ownership/governance system.
The key to making a family business successful is managing the two distinct systems of family and business, along with the 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. Don’t underestimate the potential for conflict and the negative impact that these differing perspectives can have both on the family and on the business, regardless of whether family members actually work in the business.
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 has an impact on all parts of the system. Therefore, since in a family business the family and business systems are overlapping, any financial or business decisions that you make will not just impact the business, but the family relationships as well.
The Family Dynamic
My biggest area of concern is the inability of family members to resolve complex conflicts effectively, often resulting in emotional decisions that negatively affect the financial stability of the company and may do serious damage to the family relationships.
Most often this is due to lack of opportunity and ability of family members to engage in honest, direct communication with one another. Communication patterns differ from family to family. What is normal for one family is upsetting for another. Unfortunately, family businesses bring their style to work.
Simple conflicts deal with situations occurring right now in the business or with the family. There is no history that precedes the problem and these issues are relatively easy to resolve. Complex problems can start out as simple problems that have been ignored or denied. They also 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 among family members; lack of transparency; compensation issues; entry and promotion (what family members are permitted to work in the business; who and how family can get promoted) and succession planning, specifically, who will run the business when mom or dad retire or die.
Solutions for Managing Family Business Conflicts
The key to successfully resolving a family business dispute 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 also benefit from engaging a family business consultant to provide education on conflict management strategies or facilitate formal communication between family members.
Run Like a Business/Feel Like a Family
The greatest challenge for family businesses is to “professionalize” themselves and act like non-family businesses, while holding onto the best of what makes them special.
One of the concerns for many family businesses is a lack of governance and structure. Unfortunately, family businesses often resist creating formal governance for fear of losing their family feeling. It is possible to maintain a warm family atmosphere, without having a chaotic, unpredictable work environment. Therefore, creating governance protocols are essential. Areas to be considered are: rules for how family members enter the business and how they are trained; the relationship between family and non-family employees; expectations of roles; criteria for decision-making and succession issues.
Taking the initiative by addressing these critical issues can help ensure healthy family relationships and create a balance between families and business.
This article was originally published in On Wall Street.