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Resolving Conflicts in a Family Business

Read the article in Small Business Current.

When family members run a business together, the experience often draws them closer, but there are inherent risks as well. Having years of personal history with one’s co-workers can sometimes lead to non-work disputes resurfacing in the workplace.

If left unresolved, these conflicts can sidetrack a business from what it should be focusing on: creating a quality product and/or delivering exceptional service to customers. When disagreements do occur, family members sometimes need to dedicate some time to working through them, as well as any underlying issues, before they cause lasting damage to the business.

As an investment banker, I often work with family businesses and have gotten an front-row look at how unresolved interpersonal squabbles can fester, weakening a business’s potential for growth. I’ve observed that family business disagreements can usually be divided into two groups. One of those is distinguished by regular bickering over day-to-day decision-making, usually spurred by disagreement over who in the organization has the last word.

I encounter family businesses when they’re experiencing a different, deeper type of dysfunction — in which their business has arrived at a major decision point that will have ramifications not just for the family members working there, but for other relatives as well. These are often related to major moments in the lifecycle of a company, like handing over management to a new generation, selling to another party, acquiring another business or landing a new round of funding.

When the personal dynamics inside a family business are already off-kilter, the added stress of these life-changing decisions can cause pent-up emotions to come to the forefront.

But it doesn’t have to be this way. In my experience, the hardest-to-resolve family business disagreements are a product of a decision-making process that hasn’t been designed to give a voice to all the parties involved. When a family member who will be affected by the final outcome doesn’t have the opportunity to have their opinions heard or take part in the process, they can understandably become bewildered and even resentful. When the family members take a step back and analyze the root causes of their conflict, it’s often because a few people tried to take shortcuts around the tough conversations that are sometimes necessary to make big decisions for the group as a whole.

The process that I call “setting the table” for decision-making might seem unnecessary and a waste of time. On the contrary, it’s crucial for reaching a positive outcome. And without it, you’re creating the conditions from which conflict becomes almost inevitable.

  1. Get all the affected parties in the room. A major change to a family business, such as a sale, could bring an influx of income that changes some family members’ financial situation more than others. Those with a larger stake in the business might be able to move to a bigger house, take time off to plan their next venture or even retire. But for family members who haven’t been involved in the business but receive some regular passive income, a sale might mean an end to that. Anyone who’s going to be impacted by the decision, even peripherally, should be in the conversation in some form.
  2. Choose your core decision-making team. While it’s important to give everyone a chance to be heard, decisions are much more easily made by a smaller group. But in picking those key decision-makers, it’s important to make sure that the concerns of all the affected people in the larger group are represented and given a voice. A major decision like a business sale is likely to have multiple components that need to considered individually. So make sure to give each family member the opportunity to be heard on the components that impact them — but not the ones that don’t.
  3. Determine what’s truly valuable about the business. Many family businesses have some monetary value, and a sale of a successful business can potentially result in a big influx of income. But value exists in other forms, too. Sometimes without realizing it, families tie their identity to their business, and when forced to consider a life without it, feel more emotionally tied to it than they might have originally realized. Similarly, a business owner near retirement age might sense that it’s time for a new chapter in their life, but may not have a satisfactory answer to the question of what, exactly, they’d prefer to spend their time doing. In cases like these, the proceeds from a sale may not be as valuable as redefining one’s role in a way that provides more freedom.
  4. Take the time to explain your logic. After making their decision, it’s necessary for the key decision-makers to communicate their reasoning as clearly as possible with the full group. Secrecy or half-explanations will not suffice and can only lead to hard feelings. As an expression of respect for the concerns of their loved ones, as well as a form of accountability, the decision-makers should make the effort to walk their relatives through the factors and concerns that led them to their final choices.

Change is inevitable, particularly for businesses. And when there are multiple potential courses of action, each with its own set of positives and negatives, the decision process can become paralyzing. In these cases, the surest way of avoiding conflict is often through open and honest communication.

So, if your family business is approaching a point of major change, take the time to intentionally “set the table” for good decision-making. In addition to making the process a more positive one, it might lead to a deeper family bond outside of your business as well.

Frank Williamson is the founder of Oaklyn Consulting, a different kind of investment banking firm for small- and medium-sized companies under private ownership. Oaklyn plans and executes its clients’ most complex transactions, including mergers, acquisitions, capital-raising, recapitalizations, and lender and investor relations. Oaklyn supports businesses, investment firms, nonprofits, co-ops and partnerships. By working as consultants, not brokers, Oaklyn helps in situations where traditional investment bankers typically cannot.

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