50 Common Causes of Family Business Conflict ... and how to deal with them – Details, episodes & analysis

50 Common Causes of Family Business Conflict and how to deal with them.  

Family Business Mediation Video No 50.  Cuckoo Consultants.   

By Jon Kenfield. Family Business Mediator. Solutionist.  

• This video is unique amongst the 50 in this series in that it looks to an entirely external conflict generator that can act upon the family - as opposed to the other 49 causes, where the family does its own great job of creating its very own conflict.  

• Cuckoo consultants come into family business environments, usually from a business background, sporting business-based credentials and perspectives.  They create confusion and conflict by promoting perfectly appropriate business advice to the wrong people, in the wrong way.    

• They sound sensible, logical and commercial, but their advice is completely unworkable.   

• The problem lies in their ignorance of the unique requirements of family business - much as a cuckoo has no concern for the eggs it turfs out of a host nest to make space for its own egg.    

• Cuckoos can be existing trusted advisers, keen to protect their clients from outside consultants (the flea wishes to own the dog); consultants from HR or “normal” business backgrounds who believe they have the required experience and skills; advisers who don’t know what they don’t know; or ones who just don’t care.  

Solution  

• Approach all adviser engagements as life or death projects - because they could be, for your family and for your business.       

• Check every proposed adviser’s family business advisory credentials, including training, experience and, most importantly, real testimonials and referees.  

• Don’t rely on accreditation alone.  Real knowledge and experience, and demonstrable skills, are far more important.  

• Meet them, ask questions and judge their answers.  

• Importantly, as with all adviser engagements, assess them for the quality of the questions they ask you.  Any adviser that proposes or recommends doing anything before they have a reasonable understanding of your needs is a salesperson, first and foremost.  In all probability, that’s not the key skill you’re looking for.  

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50 Common Causes of Family Business Conflict and how to deal with them.  

Family Business Mediation Video No 49.  Non - Family Conflict Causes.  

By Jon Kenfield. Solutionist.  

• Can non-family people create conflicts within the family business?  You bet!  

• Family Business are notorious for creating cliques (read your Shakespeare!):  supporters for Mum vs Dad; for siblings against other siblings; for one generation against another; and for getting all family out of the business - so it can be run properly!   

• Motivations may be pure, or not, and may be driven by the best interests of the business, or not.  It depends.    

• Most employees and advisers have their loyalties tested when family businesses reach certain tipping points, and something major has to happen.  Employees, at all levels, are obliged to consider their own, and their families’ situations and futures, while advisers can be conflicted into supporting the person who pays their bills.  Is that now, or longer term?  Who knows?    

Solution  

• To prevent individuals getting behind family members and creating / broadening conflict, the family needs to be able to present a united front about where things are going, and with whom.  This requires a Plan.  

• The Plan needs to reassure everyone that the family’s focus is on the future of the business, not on who may lead the business.   

• The family also needs to make clear to everyone that it doesn’t welcome partisan support for individuals against others.   

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 41: The Next Generation.

• The classic definition of a family business is one that substantially involves at least 2 family members as owners and operators.

• Family businesses tend to take themselves more seriously, the more generations of family they have in their pedigree.

• Almost every family business dates the beginning of recorded history from the commencement of their family business.

• Most families are, or can easily be, motivated by the idea of their business passing through to future generations.

• The prime cause lies in different personalities, education, and socio-economic upbringing.

• It’s nobody’s fault, but it can cause major conflict when the next generation doesn’t display the characteristics the older generation demands.

Solution

• Engage the next generation as early as possible in the ethos and operations of the family’s business - vacation work etc.

• Build next generation teams - investment, philanthropy and environment groups - & teach business fundamentals - meetings, research, problem solving, decision making, leadership & teamwork.

• No cloning - the next generation will stand on your shoulders.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 40. Buying & Selling Interests In The Business

• Conflict occurs when family members feel locked into holding ownership in a family business against their wishes - they would prefer to sell / exit - and there’s no agreed mechanism for doing so.

• Conflicts also occur when family members can’t stitch up acceptable deals for trading their respective interests in the business.

• Conflict arises when some family members regard themselves as owners, and want to act as such, while others see themselves as stewards, and want to act as such.

Solution

• Does the family have a mechanism for buying and selling interests in the family business? Possible? Partly possible? Acceptable?

• If not, and it could happen, develop a formula and process when things are calm. Put it into a shareholder agreement, family constitution etc.

• Is it workable at this point in time Eg: money available, value & valuation formulas etc.

• Hold a Family meeting to discuss individual needs re ownership of the business.

• Negotiate / develop an acceptable basis for a deal (use a mediator if necessary).

• Do the deal, or agree to at a pre-determined time in the future.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 39: Ownership Vs Stewardship

• Ownership entitles business owners to do whatever they like with the business.

• Ownership is here and now / short term, selfish thinking.

• Stewardship requires owners to hold and improve the business for the sake of current and future generations.

• Stewardship has a long term, altruistic focus.

• Conflict arises when some family members regard themselves as owners, and want to act as such, while others see themselves as stewards, and want to act as such.

Solution

• Hold a Family meeting.

• Explain the difference between Owners and Stewards and ask everyone to identify which camp they’re in.

• Develop a long term Family Plan, including intentions for the business, based on above decisions.

• Defuse conflict by recognising the different focus and responding to whichever is chosen for the family.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 38: Sibling Rivalry.

• Often caused by family circumstances and parenting styles, exacerbated by distractions of family business.

• Perceived or actual parental favouritism.

• Differences in temperament and personality.

• Jealousy over parental love.

• Parental modelling of conflict styles - normalising / reinforcing aggression and lack of conflict resolution skills
- parents ignore conflict and teasing.

• Viewing the sibling as a competitor rather than a collaborator.

• Protection of weaker family members - bird with broken wing.

• Preferring and advancing one child over the other in business.

Solution

• Psychometric testing - science of personality differences.

• Establish objective and commercial objectivity in the business - performance, merit and contribution, rather than bloodline.

• Separate business support (performance-based) from family support (personal needs based).

• Have family members supervised and mentored by non-family staff / directors etc.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 37: Lack of Agreed Policies & Procedures

• Business families are even more complicated than ordinary families - because they combine family with business.

• All complex organisms and organisations require clarity and certainty about what is to be done, and how to do it. This avoids the confusion and conflict.

• Family policies give shape and understanding to the family’s past, present and future actions.

• Business policies increase operational efficiency, and help to inject commercial objectivity.

• Lack of policies = lack of discipline > potential for conflict when needs and interests clash.

Solution:

• Take the time to identify areas of conflict, or potential conflict, in the family and/or in the business.

• Use the relevant issues as a focus for discussion about developing a policy for dealing with the issue - family benefits.

• The process of collaboratively developing a policy allows festering issues to be flushed, so they can be dealt with, resolved, and avoided in the future.

• Conflict can often be defused by validation and recognition.

• If compensation is appropriate / required, make it a sensible negotiation.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 36: Personal Financial Security

• Financial security tends to become a more serious issue as people get older and have less capacity to adapt and overcome financial challenges.

• Fear is always a major motivator and financial security, or the lack of it, is an easy thing to get bent out of shape over.

• Ages and stages: as older family members start looking towards retirement, or at least lower income generating capacity, they become more concerned about preserving money and transferring it out of the business into personal savings, or alternative investments.

• Meanwhile, younger family members have much longer time horizons, and more immediate funding needs.

• Owners cannot responsibly hand over the keys of the kingdom until they feel safe and secure.

Solution:

• Recognise and respect that “personal arrangements” can conflict with “business arrangements” when immediate needs clash with longer timeframes.

• Develop and agree a financial plan for outgoing family members that eliminates business liabilities.

• Consider vendor terms purchase arrangements for business interests if there are no other options.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 35: Discipline (lack of).

• Discipline: (a) Internal = self-control and self-regulation; (b) External = system of controls + enforcement measures + consequences for non-compliance.

• Lack of discipline = lack of accountability.

• Extreme situations, threats that threaten the family and the business.

• The concept of discipline is often ignored or dismissed in a mature family context, as family conflict experts, we constantly deal with the results of poor family discipline that’s been transferred into a family business.

• In essence, internal and external discipline are designed to ensure good and appropriate behaviours in relevant environments.

• Personality differences mean that:

o Some family members stick by the rules, while others don’t, conflict.

o Some family members are self-disciplined in the absence of rules, while others are not, conflict.

• When Parents provide unequal / unbalanced support for different children, conflict.

Solution:

• Discuss and agree behavioural expectations and rules, as a family.

• Use an experienced adviser to facilitate the process.

• Transfer outcomes into the business.

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50 Common Causes of Family Business Conflict ... and how to deal with them

Audio No 34: Family Dysfunction.

• Family Dysfunction: A dysfunctional family is a family in which conflict, misbehaviour, and often child neglect or abuse on the part of individual parents, occur continuously and regularly.

• Family dysfunction occurs when the family system is broken. There’s a high chance of conflict developing if the dysfunction is allowed to spill beyond personal disruption into the wider family and/or into the family’s business activities.

• Systems need to be self-organising to ensure survival.

• In families, excuses and accommodations are often made, which unbalance the system because more resources
(financial / emotional etc) are sent in one direction - which causes greater unbalance, conflict and dysfunction.

Solution:

• Identify signs of dysfunction and respond promptly and decisively, in both family and business. The signs are usually products of lengthy states of being - so they won’t be fixed quickly, or through inexpert attention.

• Engage independent / external / expert resources to help.

“We cannot solve great problems at the same level of thinking that created them” - Einstein.

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