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Conflict in the family in business arises from a variety of underlying concerns, and often requires approaches to prevention and resolution which go beyond conventional dispute resolution techniques.

Introduction

Managing conflict in a family business can be extremely challenging. Often, conventional dispute resolution techniques which seem logical and correct, have unexpected outcomes when applied to such conflicts. Indeed, they may even make matters worse. The importance of considering the ongoing relationships among stakeholders throughout the conflict management process cannot be overstated. The reasons and forces underlying the conflict must be well understood by the advisor so that he/she may be able to apply the appropriate conflict management approach in the proper sequence.

Nature of Conflict In a Family Business

Conflict in a family owned and managed business is systemic in nature and is often not merely about individual, easily identifiable disputes. Moreover, the potential for conflict is inherent in family businesses due to the overlapping roles and systems involved – each with its own set of priorities, goals and resources. It is crucial in any approach to managing conflict in family business, therefore, that the advisor fully understand the complex business, family and ownership system that he or she is addressing.

Family business conflict is also often more severe than conflict in non-family businesses. This is due to the fact that for stakeholders in a family business, it is not simply a ‘job’ or ‘shares’ or ‘money’. Management roles and ownership often strike to the heart of the stakeholder’s identity and needs. At the other end of the spectrum, stakeholders may perceive their role or ownership in the business as the ultimate safety net and without it, their future in terms of job and career is jeopardized. In either extreme, roles and ownership in a family business may not be as negotiable as they might otherwise be in a non-family enterprise.

Reasons Underlying Conflict in a Family Business

Conflict in a family business includes disputes over economic interests, power and control, as well as issues concerning the relationships among stakeholders. Some families may be close and able to reach compromise, while others may not feel that their family is as much of an interconnected economic and social entity. They may not be able to reach compromise easily.

Approaches to Family Business Conflict

Economic issues, and related issues of power and control, can often be addressed by conventional dispute resolution approaches. Direct negotiation and mediation are effective methods to achieve a mutually agreeable solution within defined parameters. Arbitration and litigation can also be used to force an outcome on the stakeholders – typically to the advantage of one over the other. Such use of a forced outcome can often exacerbate conflict. The relatively new practice of collaborative law may provide a useful and manageable compromise between litigation and mediation, as each stakeholder would have an advocate, but one which is precluded from serving if the conflict escalates to outright litigation.

Emotion laden issues, such as personality clashes, differences in values, and family history, however, do not respond to negotiation or litigation. More importantly, they cannot be ignored in a family business where the ongoing relationships matter. Attending to these relationship issues first is crucial because improved relationships, and relationship skills, may enable more effective negotiation and discourage brutal litigation.

In addition, evaluating the structure, policies and procedures regarding the business and ownership systems may reveal the need for structural improvements which can be made to these family business systems such that conflict can be better managed.


Team Approach

Managing conflict in a family business often benefits from the use of a collaborative team which can understand and address all systemic issues. From conflicting business goals (e.g. compensation, title, authority, mission) to addressing old grudges and clashing values and personalities, different sources of conflict require different approaches and, often, different professionals. Business consultants, mediators, psychologists, trust, estate and contract attorneys, accountants, coaches and even litigators, may all be part of a team needed to successfully manage conflict in a family business. The timing of each intervention must be well planned and its impact on the important continuing family relationships needs to be well considered.

References

Baumoel, D. (2009, July). Thomson / West Pub., Edited by Roth, Wulff, Cooper, The Alternative Dispute Resolution Practice Guide, Chapter 42 - Managing Family Business Conflict: A Collaborative Approach.

Tagiuri, R., Davis, J.A., Bivalent Attributes of the Family Firm, Harvard Business School (Working Paper). (1982, 1996).

Baumoel, D., Four System Model of Family Business, Family Firm Institute Conference Proceedings (2005)

Bowen, M., Family Therapy in Clinical Practice, Jason Aronson (1994)


Abraham Maslow, Toward a Psychology of Being, John Wiley & Sons (1968, 1999)

Gerson, McGoldrick & Shellenberger, Genograms:Assessment and Intervention, WW Norton & Company, Inc. (1985)

Raven & French, Bases of Social Power (Studies in Social Power), University of Michigan Press (1959)

Further reading and external links


Article contributors

Douglas Baumoel, Founder/President of Continuity Family Business Consulting.


Family Functioning Conflict in the family