There’s no such thing as a family business without conflict. If you Google “family business feud,” in less than a second, you’ll get roughly 1.2 million hits. And that of course is the tiniest fraction, which doesn’t include the number of family business disputes that do not show up in the Google search engines.
At their worst, a quarrel in the family business can become a threat to everything the family business holds dear, including relationships, wealth, and position in the community. Seventy percent of family-owned businesses won’t make it to the next generation, and the biggest reason for this sad fact is family quarrels.
Since every family is going to have conflict, the fundamental question is how do you deal with these quarrels so that they don’t cause lasting damage?
Develop a Covenant Culture
An answer that has worked for many family businesses is to create a covenant culture. Do it long before it’s needed.
In a family business, this means that family members make a covenant with each other that while they have a right to air their disagreements, when a decision is made they come together. They agree ahead of time to close ranks and move on.
Part of a covenant culture is everyone gets to be heard. Participants agree to listen to all sides and to value a robust discussion.
Another essential element — arguably the most important — is a commitment that issues will be resolved within the group. The reason for this is that in cases where members of a family business go to the media or get into litigation to resolve a conflict, they are likely to unleash an uncontrollable chain of events that predictably will endanger the entire family enterprise.
By the time a family business member exposes a conflict to the press or initiates litigation, there’s usually no turning back. The chances of reconciliation are so slim that many family business professionals will not take on as a client a family business that has reached this stage. Chances are that this family business is on its way to joining the 70 percent of family-run businesses that don’t make it to the next generation. What’s all important is preventing conflicts from reaching this stage.
Ways to Resolve Conflict
Since conflicts are inevitable, what can members of a family business do to support having a culture that commits to keeping quarrels within the family?
The business family needs to consciously work on developing a culture for resolving conflict. Culture is “How we do things,” and if the important work of developing a strong, supportive culture is left to chance, members of the family business may never learn key attitudes that they’ll need to keep disputes from escalating. Without ways to keep conflicts from escalating, a covenant culture is not possible.
Developing a positive family business-friendly culture requires time working together, discussion, and above all, role modeling. To prevent disputes from getting out of hand, practice these six attitudes and techniques:
1. Take a moral stand that it’s wrong to move disagreements outside the family. The experience of many thousands of family businesses shows that once a family starts down the road of a public dispute or litigation, the usual end result is the demise of the family business. Positions harden, reason goes out the window, and it’s a rarity for members of any family business to change course. The usual end point is either severe weakening of the business or its complete destruction. Members of family businesses need to know that it is morally wrong to be the cause of this.
2. Let family members know that this isn’t just about their wishes. Because any public acrimony in a family business so often leads to the company’s failing, it threatens the well-being of innocent bystanders, including the company’s employees, stockholders, lenders, and even the tax base of the community. Members of family businesses need to know they have a responsibility to large numbers of people beyond themselves.
3. Emphasize the concept of “family first.” Family businesses are unlike regular families because in the tug of war between individualism and being a member of the group, there needs to be a different balance. Members of a family business have a different level of responsibility because their actions influence all the stakeholders involved with the business.
4. Put relationships ahead of ego. Members of family businesses need to know that there are times when they have a choice between getting their way and having a familial relationship. Being a member of a family business at times means sacrifice, and for the business to continue, this can mean giving up the gratification of getting his or her way. In return, they’ll get something of vastly greater importance: the chance for the family legacy to continue and thrive.
5. Compromise is key. Members of a family business need to learn to listen to each other and avoid the temptation to “stand on principle.” In the context of a family business, standing on principle is a synonym for “being stubborn.” It means, “I’m not going to listen to you.” It also tends to shut down discussion because virtue signaling, or outward expressions of intent or principle, can shut down the give and take that’s essential for compromise.
6. Be careful of what is said in anger. Angry words can be self-fulfilling. A person may say something in momentary anger, such as disparaging someone’s competence or expressing preference for a sibling, but the person hearing what was said may remember those words for a lifetime. Garbage can come out of Pandora’s Box that can’t be stuffed back in again.
The Health as a Whole
If a conflict is done right, the family and all of its benefits will endure. Done wrong, the family business blows up. By considering and practicing these six attitudes and techniques, you can quell any family business conflict before it jeopardizes the health of the company as a whole.
About the Author:
Mitzi Perdue is a celebrated speaker, businesswoman, and author of How to Make Your Family Business Last. A cum laude graduate from Harvard University and holder of an MPA from George Washington University, Perdue draws from her direct experiences in two long-lasting family enterprises to assist businesses in preparing for lifelong success. She is a past president of the 35,000-member American Agri-Women, a former syndicated columnist for Scripps Howard, and the founder of CERES Farms. For more information, contact: Mitzi Perdue, www.MitziPerdue.com