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Managing Conflicts In A Family Business


wealthymattersFor most people, conflict is uncomfortable. That can be especially true in families who’ve watched family conflict tear successful businesses to pieces:.What’s less often recognized is that too little conflict in a family business can have an equally destructive impact. The impact of both too much and too little conflict on both the family and their enterprise are almost identical. In both cases, the business can suffer from limited growth, poor decision-making, a loss of competitive advantage, and, in severe cases, the sale or split of the company. Similarly, families tend to break up into factions and suffer poor relationships. The mechanisms are different, but the results are the same.

Conflict is a “Goldilocks problem.”In the sense the earth is in what astronomers refer to as a Goldilocks Zone.Much closer to the sun and it would be too hot to sustain life, much further and it would be too cold to sustain life. Though the reasons differ, both extremes make life uninhabitable. Both ends of the spectrum are ultimately unsustainable–so the best place is in the middle.

Conflict has two faces: external and internal. The external face of too much conflict is what we typically think of: the shouting, the screaming, the outwardly expressed anger. The internal face of too little conflict is different, it is quiet seething, an iceberg of emotions where the surface is pleasant enough, but the danger lies beneath. Between these two extremes lies a healthy middle, where difficult issues can be raised, addressed, and resolved without doing lasting damage to relationships or shared assets.

The reality is that unless a family’s interests are perfectly aligned, a rare occurrence, some conflict is inevitable. Therefore, the priority is to manage it, not tolerate or eliminate it. Conflict that is not managed invariably escalates.For families on the “too much” side of the spectrum, the challenge is how to reduce the intensity of the external conflict so that constructive conversations can occur. For those families on the “too little” side, they must learn how to disagree in order to release the pressure that builds up from internal conflict.

What actually constitutes excessive conflict (vs. constructive disagreement, etc.) depends on personal interpretation and varies by the culture of the family. Some families can more easily tolerate external conflict than others, and the extent to which people will stoically put aside their interests to support the common cause also varies. But here’s a three-part quiz you can use to get the conversation started about whether your family enterprise is in the Goldilocks Zone:

  1. Is there general satisfaction with the direction of the family enterprise? You may not be happy about every aspect, but if someone asked you if you were “better together than apart”, you would answer with an unequivocal yes.
  2. Are decisions about critical issues being made? You may not address every single point of disagreement, but everyone would agree that there is no “elephant in the room.”
  3. Are family relationships good enough to work and celebrate together? You don’t have to be best friends to own significant assets together. Instead, you have to be good business partners, which means you are aligned on the big issues and can enjoy each other’s company, at least most of the time.As Ken Grossman, Sierra Nevada’s founder, says, “It’s funny, but it’s the truth. We can get together and argue over what’s best for us as a company moving forward, but we all do it in good faith, knowing that everyone wants what’s best overall.”

If not, throughout the years, tempers would begin to flare – not because there was too much disagreement, but because important decisions were avoided rather than dealing with potential disagreement. Eventually, the family might have to sell the company rather than tackle any disagreements that would threaten to disrupt family harmony, such as how to transition the business to the third generation. Unfortunately, the issues that are unaddressed might not go away because the business is sold and historical grievances joined by new ones emerging from those who might oppose the sale. And without the business to keep them together, the family might started to drift apart.

No one aims to have conflict within a business – and even worse, within a family. But some conflict is actually healthy. It provides a chance to clear the air of lingering resentments, potential issues, and even find a productive process for disagreeing and still making decisions. Good conflict doesn’t have to destroy a family—managed well, it can make the bonds even stronger.

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About Keerthika Singaravel
Engineer,Investor,Businessperson

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