Managing Conflict Within the Family Business

Author: Josh Huseman, Vice President, Business Owner Advisory Services

With half of U.S. gross domestic product attributed to family-run businesses, it’s easy to see why the Conway Center for Family Business considers family-owned entities America’s economic engine. According to the U.S. Census Bureau, family businesses account for approximately 90% of all U.S. businesses and contribute to half the country’s employment.

Family businesses are the fabric that build our local communities and they provide a real impact to local economies. Within the context of the families that run these companies, owning a business together provides meaningful and rich opportunities to build relationships but it also opens the door for relational conflict. You don’t have to look far to find a family that was torn apart by a business or financial decision, or to find someone who has experienced relational stress because of working with a family member.

In our experience, we have found that families can mitigate the typical conflicts that show up within the family business with intentional planning and well-thought-out procedures. This can run counter to some families’ general desire to be informal and good natured in their planning but making a few clear decisions can go a long way in protecting the family from conflict. Here are some of the most important factors for a family business to consider when avoiding conflict.

Where Family Business Conflict Begins

There are several contributors to conflict within family businesses, and one is a tendency to bring too much of the family into the running of the company. Sometimes this is unintentional, as leftover feelings from old family issues prompt attitudes that can impact business decisions.

An inability to separate family roles from business roles is another reason that conflicts arise. The big brother who tends to take the lead, for example, may have an accepted place within the family but an individual who portrays the same role within the business context could easily cause conflict within the company structure.

At other times, conflicts arise from a lack of boundaries. It’s natural for family members who work together to blend their personal and business lives until little distinction remains. This can accidentally begin to bring the business into the center of the family, which creates opportunities for conflict for those who work in the business, as well as the family members outside the business.

In this setting, it’s all too common for familial business associates to expect the unconditional love and acceptance of the family to spill into the company environment. When disagreements then arise over the individual actions of another, conflict may ensue.

Perspectives on risk offer another area where conflicts may emerge. A parent may invest countless hours into growing a thriving business operation, but as he or she nears retirement, the individual is less interested in taking the same higher-level risks that may be required to grow the business. This can be a frustration to children who stand to inherit the company and see the need for measured but higher risk practices.

Managing Conflicts in the Family Busines

Entirely avoiding family conflicts within the business setting may not be possible but by setting clear expectations and communication structures, instances of conflict can be mitigated or better managed. It’s important to start by creating boundaries around family and business communications. Here are three specific ideas to help you manage potential areas of conflict:

• Family Meetings: Family meetings should be a regular habit, and it’s best to include all members of the family – whether or not they are part of the business. Strive to separate discussions around business from those that pertain to the family. If it helps, define when and where each type of discussion may take place. The office boardroom may be an excellent location for business planning but may not be the proper venue to discuss issues pertaining to family matters.
• Establish Policies: To reduce the incidence of conflict within the business environment, set some clear boundaries up front. Decide who can join the family business at the outset and what qualifications they must have. Include items such as compensation, career path, ownership and exit. We also suggest considering a family employment policy to memorialize the intent well before specific family members may consider joining the company.
• Don’t Force It: It is important to realize the need for flexibility. Not every decision lasts forever, so companies should re-evaluate the purpose of the family business at least once a generation. Consider how previous plans now fit the structure and leadership style of the company. Make changes where necessary to ensure your business has a solid plan for operating.

As you set business parameters and lay out clear plans for operating, you’ll find that instances of tension are reduced and when conflicts do arise, they are more easily managed by pointing to your established plan of operation.

About the Author

Josh is the Vice President of Business Owner Advisory Services. Josh is motivated by a strong desire to see business owners impact the world through their core values and entrepreneurial spirit. He is particularly intrigued by the unique opportunities and challenges that come with family-owned businesses, and he works hard to help them realize their full potential.