August 1, 2007
Written by Barbara J. Hill, Esq.
Managing Conflict in a Family Owned Business: Building a Better Business
Family dynamics are often easy to spot in social settings: oldest child as leader, youngest child as peacemaker or any one of a number of other familial roles. At family dinners or holiday gatherings, the intra-family dynamics play out as they have for years and years. However, when these family members are also in business together, the family dynamics can spill over in a more costly fashion. The news reports are full of stories of family businesses that suffer when these family dynamics play out in the family business. Business suffers and family relations are permanently impacted. The Redstone family/Viacom saga, with son suing father, and differences between father and his previously deemed heir-apparent daughter, are reported on almost a daily basis. The Berkowitz family/Legal Sea Foods saga has been reported over the years. Other family businesses face similar challenges, but usually without the media fanfare.
Business administration requires a number of different skills: careful record keeping, cost effective asset management, cash flow management, and good interpersonal relationships. Different jobs in a business require different skill sets: creative development, pragmatic bookkeeping, marketing, budgeting and more. People have differing styles based on personality, strengths, emotional makeup, etc. Sometimes the same qualities that are considered strengths in one area can lead to conflicts in another area.
Imagine a family business. The parents have built a business, while raising and supporting their children, and now, several of the grown children have joined the family business. Isn’t this just what the parents envisioned? Perhaps, but the reality is not as rosy as the dream: One child has a knack for numbers, one child is a visionary, one child is a risk-taker, another is more conservative, and one child always feels left out of important family discussions and feels the same way at the business. One child is creative but disorganized, another child is pragmatic and linear. How do the parents set up a mechanism to ensure that good business decisions and harmonious (or at least tolerant) family relationships ensue?
When business partners are related, the possibilities for unresolved conflict are multiplied. Adult siblings may continue to act out the dynamics of their childhood. Perhaps one child never thought they were appropriately valued. Perhaps one child feels that the parents choose one sibling over another as heir apparent. Issues often arise concerning ways to overrule a family member in the business environment respectfully and appropriately. How do you reach consensus? Not only is the potential cost greater for the business, but the potential impact on the familial relationships is a significant additional concern. It’s difficult to dismiss or layoff a family member. The ramifications of such actions are deep and far reaching.
At the Centre for Mediation & Dispute Resolution, we work with family businesses to ensure that the interpersonal and/or business conflicts are resolved in a manner that permits the business and family ties to flourish. We are committed to providing a safe, neutral environment to evaluate and resolve disputes in a productive manner.
Business mediation is a particularly useful tool to resolve family business disputes. People are committed to working out business differences in a way that permits the family relationships to continue. The commitment to resolve the outstanding issues is the very motive that leads to productive mediation. Everyone wants to find a solution. Whether the conflict originates within the family or within the business setting, the issues often impact the entire business, which inevitably has a negative effect on the bottom line. Further, the issues can cause irreparable damage to the familial relationships, stretching far beyond the confines of the business. When there is a healthy and safe mechanism to resolve those issues, the business is able to move forward with greater productivity.
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