Tips from a psychologist on minimizing family fallout during business successions
Running a family business can be both wonderful and challenging. But it rarely gets more challenging than during a succession process. As a family business consultant and psychologist, I’ve seen more than my fair share of issues arise during this process. Here’s an example: I was recently asked to provide leadership consulting and coaching to a family-owned business. The current owner/CEO was structuring a succession plan to include his two nephews, who have worked for the business for a long time. The cousins–who are now in their late thirties—had grown up together and were very close. They had even gone to college together and were roommates, and later, were in each other’s weddings. The cousins had always expressed great affection and respect for one another—until the family business got in the way.
Whenever leadership decisions needed to be made regarding the company, the cousins were at odds with each other. Their viewpoints were often diametrically opposed to one another, and their discussions frequently became heated. Both expressed concern over the other’s perspective and behavior. And worst of all, their differences at work were negatively impacting their personal relationships, putting them in a consistent state of extreme conflict. When it came time to begin succession planning, this conflict caused obvious issues.
Why is conflict in a family business often so extreme?
Conflict in a family business can often be more intense and intractable than in a regular business because of the personal and emotional connections between family members. In short, it’s an identity-based conflict that carries far more emotional heft than a “normal” conflict. In a family business, the lines between personal and professional relationships can be blurred, and conflicts that arise within the family can quickly spill over into the business, or vice versa. Family members may have deeply ingrained patterns of behavior and communication that can make it difficult to resolve conflicts in a constructive way. Even in the case I explained above, where the cousins were good friends, it doesn’t mean they acted and thought the same way about everything. In some family businesses, family members may have conflicting values, beliefs, and goals that can create tension and disagreement, even in the absence of a specific issue. These dynamics can lead to resentment, power struggles, and a lack of trust, which can make it challenging to work together effectively.
The Solution
I always recommend that families create family governance rules when dealing with succession planning. And it should be done immediately, just in case something happens to the current leader prior to the succession being fully planned out. These rules are essential, but there’s more to it. In the case of the warring cousins, I took the following steps:
- I worked closely with the cousins to increase and enhance their communication and gave them tools for conflict resolution. It didn’t happen overnight, but eventually things softened up a bit between the two.
- I immediately had the family create (and agree on) a governance structure that included a hierarchy and defined roles and responsibilities. It took some time, but the cousins eventually agreed on roles that ensured one would not have to answer to the other.
- I had the family create a Family Mission Statement. While family governance rules set the framework, there still needs to be a north star to guide the businesses In the end, this structure helps the business as much as the family.
- I successfully encouraged the family to bring in an advisory board—a lawyer, and accountant and a respected financial advisor—to help guide the business when tough questions arise.
- We set up monthly family management meetings to discuss relevant issues and concerns. These regular meetings ensure that issues, be they personal or business, are never left to fester and create resentment.
- And finally, I helped the family create a “parachute” in case either cousin wanted to leave the business via a buy-sell agreement between them.
Conflict is common in family businesses, but with the right intervention and approach, rifts can be mended—and the business can continue to be successful.
