Family Businesses – how to prevent making a drama out of a conflict

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Anyone who has ever watched a soap opera will know that family or business issues are the root cause of most conflicts. Many a juicy storyline has relied on one or the other. Art imitates life and, inevitably, disagreements arise in households and boardrooms across the world. But what can be done to prevent making a drama out of a conflict when the two scenarios combine?

The emotional investment in building a family business and the blurring of different relationships within them means that conflict can prove more disruptive than in a ‘conventional’ structure. A breakdown in communication can have serious implications for organisational cohesion and productivity.

Good succession planning plays an integral role in ensuring harmony. Planning well ahead of any handover of responsibility and involving all the relevant parties is advisable so that everyone concerned is consulted and can openly raise any issues or views they may have. Taking an inclusive approach can help to explain the rationale behind decisions that are made, prevent misunderstandings, and provide certainty.

This process can be backed up by putting in place systems and structures to ensure fairness and consistency. At this point, seeking external advice will help in bringing a dispassionate and objective viewpoint to the situation. Points to cover may include line management, access to training and mentoring, and finance.

One source of conflict within a family business can be competing priorities and objectives. Drawing up a family charter is one way of dealing with this collectively. Priorities can change, so it’s important to regularly review any charter to prevent dissatisfaction from arising among stakeholders.

Prevention is better than cure but, if conflict still flares after taking these measures, what dispute resolution options are available?

It may be possible for the parties concerned to resolve the issue through dialogue, perhaps involving some form of independent mediation. Any agreed outcome should be documented, either informally or as part of a shareholders’ agreement. Another relatively straightforward solution would be to look at reallocating responsibilities within the organisation.

If the conflict is more deep-rooted or on a wider scale, bringing in non-executive directors and managers from outside the family to introduce more neutrality can be effective if the organisation is big enough to absorb them.

More sweeping changes could involve moves such as buyouts of disaffected shareholders who no longer wish to be involved in the business, demergers or even selling the business entirely. Each of these will have significant repercussions and so should only be undertaken having sought detailed, independent and professional advice.