Family conflict is a perennial problem for family businesses and a key reason why many do not survive from one generation to the next. Yet few family businesses in the UK believe it’s important to have procedures in place to deal with family conflict should it arise.
Squabbling siblings, problems between the generations, succession planning, nepotism, remuneration and perks for family members working in the company: there are many different sources of conflict in the family business. Despite its prevalence, it is surprising how few families have put in place measures to resolve conflict, should it occur.
A certain amount of conflict is natural. Where you have more than one person involved in a decision, differences of opinions are inevitable, and indeed can often be a positive influence. A healthy dialogue is often necessary before families come up with their best work: it leads to a sort of creative sparring through challenge and discussion. Creative conflict can ensure that different points of view are aired and approached by family members in a healthy manner.
Yet many families in the UK are clearly uncomfortable with the need to address these differences, and their instinct is to ignore it. Indeed, some family businesses can be prone to sweep issues under the carpet and hope they’ll go away. And companies that don’t experience family conflict can feel ‘its not a problem for us, why do we have to do anything about it’, but this isn’t an ideal attitude. It is important that the family continually forecasts and plans for problems that might arise tomorrow. Proactively considering how to manage potential differences of opinion and disagreements will pay dividends. Ignored problems can build up and become much more difficult to address if not nipped in the bud at an early stage.
It is rare that family businesses don’t face some form of conflict at some point in their lifespan so families need to think about how they are going to deal with conflict even if it hasn’t reared its head. If there are different family perspectives which aren’t discussed and catered for, problems can arise when it comes to major decisions, such as launching a new brand or recruiting senior people to the business from outside the family.
Businesses that are able to listen to and respect all the different views within the family have a real advantage. Many of our clients have cited having everyone on board emotionally as key when making really important family business decisions. Letting every family member express their own view in their own way means everyone on board feels accounted for and valued.
Poor communication is at the root of a lot of family conflict: if a family doesn’t get its communication right the chances are that sooner or later they will end up in conflict. Good communication is particularly important when it comes to third or fourth-generation family businesses, with cousins who are less likely to know each other well, have grown up in different households with different values and tend to be more geographically dispersed.
Communication is an area that can fall by the wayside in family businesses and it is vital that family shareholders are not taken for granted. Family businesses need to communicate with their shareholders, make sure they have enough knowledge, information and understanding and feel included.
A key part of this family communication process is being able to acknowledge and address family issues and create forums to deal with them. It’s important for families to make space and time to have these discussions, be it at the family council or family assembly or in family meetings. It isn’t always easy, but the more families can create a safe environment, which promotes openness and honesty, the more prepared they will be to deal with whatever issues arise.
There is one other aspect that can help conflict - success. It’s much easier for the family to cause arguments if the business is doing badly but it is harder for shareholders to feel disenfranchised if they are part of successfully building the business.
What family businesses can do:
• Recognise that differences of opinion are not necessarily a bad thing; how they are dealt with is more important.
• Communication protocols can help establish ground rules so that the family knows what they can expect in terms of communication and vice versa.
• Families should strive to reach decisions by consensus as far as possible and consistently aim for a win-win situation. The aim should be to create a cohesive family able to speak with ‘one voice’.
• Training and education can help prepare family members to act as stewards of the business.
• Differences should be addressed proactively where possible. It is better for families to ask in advance how they would deal with potential conflict, even if they are not currently experiencing it.
• Family Constitutions, Shareholder Agreements and other similar agreements, either legal or moral, can remove potential for conflict by defining rights and responsibilities, managing expectations and creating clarity.
Juliette Johnson is the Head of Family Business at Coutts. For more information visit www.coutts.com
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