Tame Your Family Business Conflict
Sister said this. Brother said that. At home, Mom calls the shots. At work, Dad does. The family dynamic is, by its very nature, often emotionally charged and easily subject to conflict. It’s those close bonds that make us more emotionally vulnerable. Now put that into a rational, supposedly objective business setting, and you’re just asking for trouble. But family businesses don’t have to be centers of family conflict – as long as you have a clear plan and a clear understanding of roles and responsibilities. Here’s how.
Establish a clear chain of command.
Because your roles and relationships within the family may be very different than those you have within the family business, it is critical to formally outline and document each family member’s roles and job responsibilities as well as the overall chain of command and organizational structure. This frees family members from defaulting to the way relationships work in the personal or home setting and lets them interact as coworkers, partners and colleagues in the context of the family business. Even more important, those roles and responsibilities must be assigned and based on each family member’s unique skillset – not merely their status as a family member. In other words, they must be a productive team member for the business to have a place in the business. Otherwise, confusion and conflict can run rampant.
Be proactive with policies and processes.
According to family business expert John L. Ward, many family business conflicts can be avoided altogether by establishing policies and processes before the need for them arises. Having such policies and processes in place right from the start can help family business leaders guide the family in avoiding emotional reactions, manage expectations and promote objectivity.
Keep everyone in the loop.
No one likes being left out. Especially cousin Robert. He is in charge of sales, after all. And even though family business leaders may be tempted to let business developments make their way around to all invested parties by way of family gossip, that is neither effective nor does it help ownership obtain buy-in from all family members. Instead, make sure everyone is fully informed by holding regular staff meetings. This gives your employees, investors and family members an opportunity to share ideas and concerns and puts everyone on the same page. Before each meeting, let everyone know what you will be discussing, and follow up after the meeting with a summary of your discussions, conclusions and action plans.
What each family member earns from the business should be based on each member’s roles, responsibilities or investment in the family business – not on their status within the family. Just because Mom is the family matriarch doesn’t mean she should earn more as the bookkeeper than her daughter who effectually manages the entire operation. Having a formal compensation plan based on industry standards for salary ranges and expected years of experience is key. You may even find that hiring a compensation consultant can be invaluable in helping you to determine what each function is truly worth to your company and to develop a bonus plan based on each employee reaching certain objectives.
Establish job criteria.
As more family members express an interest in joining the family business, it is imperative that you establish job requirements for each of your family organization’s functions. In this way, cousin Susie will understand that she still needs to gain more experience or complete her education because there is a formal guideline outlining the job’s requirements – rather than expect her to be hired just because she’s family. This helps to ensure that your family business consists of a high quality – and truly qualified – team, and it also helps existing family employees feel confident that a new hire truly deserves a place in the organization.
Respect your differences and your shared purpose.
Especially in family businesses, it is important to recognize that each member brings a unique perspective to the organization. Just as each person possesses a different skillset, each person will also have a unique way of approaching problems and creating solutions. Your family business leaders should embrace each member’s differences and accept that it is healthy to disagree, as long as you can come together to resolve issues as they arise. Even more important, each person in your family business should recognize that, despite your differences, you share a common purpose and commitment. Family members who appreciate their common purpose within the business are more apt to work together and compromise with each other to resolve conflict.
Create a succession plan.
Along with a formal chain of command and organizational structure, you also need to put in place a plan for how that chain of command and organizational structure will change in the event the family business owners retire, die or become disabled. The 2010/2011 PWC Family Business Survey indicates that 28% of family business owners predict a change in ownership in just the next five years. However, a recent American Family Business Survey reports that only 30% of family-owned businesses survive the transition from first generation of ownership to the second generation. Having a formal succession plan is key to helping ensure your family business doesn’t suffer the same fate. With the help of an estate planning advisor, you should develop a plan that considers each player’s strengths, leadership skills, investment in the business, and their willingness to take the helm. A contingency plan should also be in place in case the original plan fails. For more on this topic, please see our article, Building a Family Business Legacy with Continuation Planning.
For more tips on how to deal with the challenges inherent in family business, see our article, Rising to the Challenges of Family Business.
Contributing Sources: http://www.entrepreneur.com; John L. Ward, Perpetuating the family business: 50 lessons learned from long-lasting, successful families in business, Palgrave Macmillan, May 7, 2004; 2010/2011 PWC Family Business Survey pwc.com/pcs; American Family Business Survey, MassMutual, 2007.