Kennesaw, GA—Disagreements and conflict are inevitable in both families and family businesses. Rare is the family that doesn’t have at least one relative everybody wants to avoid—Uncle Joe’s politics, Aunt Mary’s criticisms, cousin Louie’s obnoxious jokes, or sister Annie the drama queen—but when friction and disputes arise in a family business there’s a lot more at stake than a congenial Thanksgiving dinner.
A new survey and report from EY Family Business Services in conjunction with the Cox Family Enterprise Center at Kennesaw State University in Georgia explores conflict in a family business. Some conflict is not only healthy, it’s important: if a next-generation family member comes into the family business with no new ideas, the business isn’t going to evolve and risks losing its competitiveness. But other conflict is detrimental, especially when it makes an uncomfortable working environment for nonfamily employees or impacts the business’s reputation.
In EY/Cox’s survey of family business owners, nearly half reported some dysfunction. But it was how they managed the dysfunction that determined the success and health of both the business and the family, says the report. Reducing unhealthy conflict and increasing family cohesion benefits the long-term prosperity of the business as well as the wellbeing of the family.
“The most important component of a family business is the family. Disagreement is inevitable, but if everyone makes an effort to communicate often and to really listen, they can keep bonds strong and avoid potentially explosive outcomes,” says EY Americas family business leader Carrie Hall in the report.
The report identifies three key types of family business conflict: task, process, and relational. Task conflict refers to disputes over what should be done; i.e. goals and strategies of the business. Process conflict is a dispute over how things should be done. Both are generally healthy if there are no other underlying issues, say the authors.
The third kind of conflict, relational, is the most troubling and the one with the biggest potential for harm to the business, says the report. Strong negative feelings (such as mistrust, anger, or jealousy) can manifest themselves in equally negative behavior, such as screaming, bullying, playing the victim, passive-aggressive acts, and more. These issues not only change family members’ attitudes toward one another, eroding the trust and unity needed to face any tough times in the business, but they also can lead to more devastating actions like intra-family lawsuits.
Family conflict rarely stays at home, says the report. And when it inevitably spills over into the business, employees may feel caught in the middle, unable to avoid taking sides, or uncomfortable witnessing frequent arguments and shouting matches. This can lead to reduced motivation and commitment from nonfamily employees, as well as increased turnover.
Unresolved relational conflict can not only magnify small disagreements at work, but the report warns that if the dysfunction becomes fodder for gossip outside the office, the brand reputation of the business can suffer, impacting its ability to obtain credit or serve customers. It also makes the business less likely to attract top talent.
But not all conflict is bad, emphasize the authors. The key is keeping emotions out of conversations and decisions. Families that have learned how to do that can benefit from conflict because it can stimulate needed change, spur creativity, encourage the use of outside experts to bring in fresh ideas, and ultimately build family cohesion as family members share the experience of resolving problems for the benefit of all.
Here are five steps the report’s authors recommend for resolving conflict healthily and minimizing the kind of conflict that turns unhealthy:
1. Frequent communication. Participants in the EY/Cox survey typically have regular family or shareholder meetings to discuss business issues (90% of respondents) and/or regular meetings to discuss family issues (70% of respondents).
2. Develop unifying emotional attachment through corporate social responsibility efforts. The study shows that finding compelling CSR goals for all family members to get excited about serving the greater good can promote a feeling of unity and reduce conflict.
3. Set expectations. Conversations around such sensitive topics as criteria for working in the business, salary, ownership, and decision-making can be tough, but it’s well worth the time to establish them in advance than when a difficult situation arises and emotions are running high.
4. Build a sense of purpose and mission. Like CSR, a unified purpose and mission that family members find compelling and personally important serves to both build trust and motivate members to sacrifice short-term benefits for long-term health of the family.
5. Create formal mechanisms for recognizing and resolving conflict. Sometimes just giving a person or group responsibility for a goal goes a long way toward achieving it, says the report. For example, creating a family council charged with identifying destructive conflict and creating an outside board of directors to help settle critical issues of conflict.
Top image: intheblack.com