4 Causes of Conflict in Family Businesses and How to Begin to Resolve It

When conflict is allowed to take root and fester in a family business it can tear the family, and even the business, apart. Relationships can be severely damaged or destroyed. It affects all the employees at the business, as toxicity and negativity spreads, destroying morale and teamwork. Ultimately, left unresolved, the dysfunction of worsening conflict can destroy the business.

Why is it so common to have conflict in family businesses?

All businesses have conflict, of course, but family businesses tend to have even more. With the introduction of family comes the presence of personal relationships. Too often, the lines between professional relationships and personal relationships get blurred and begin to impact the dynamics of the overall business structure, priorities, and management.

Conflict is so much more complicated and elevated in a family business. The dynamics of personal relationships being involved in business can get very confusing, and certainly muddy the waters of conflict resolution. It’s one thing to be angry with your boss at work, but it’s another thing to have to sit at the dinner table or go on a family vacation with that person! Such is the reality of family businesses.

We’re no strangers to family dynamics and the impact they have on conflict in a family business. We summarized the four main causes we see most often, and have made some suggestions as to how to begin to address these challenges in useful, constructive ways:

Impact of Family Dynamics

How we act (or act out) with our sibling or parent or cousin in our personal lives is often not the appropriate way to behave toward one another in a business setting. Unresolved sibling rivalries or family conflicts can fuel larger conflicts when trying to work together. Add spouses in the mix and things can become even more unstable. While it’s very natural to “be yourself” with each other wherever you are, family members need to have different boundaries with one another in the work setting.

Issues that arise include:

  • Rivalry and struggles between generations, siblings/cousins, etc.
  • Favoritism
  • Tensions between spouses, in-laws, etc.
  • Complicated emotional histories in relationships
  • Avoidance, denial and dysfunction

It’s important to define acceptable behaviors and clear guidelines for treating family in the family business environment. We recommend establishing mechanisms for good communications. Hold regular family meetings where people can openly air concerns and discuss issues. A code of conduct will clearly outline what values and behaviors are expected. It can also be very helpful to create a family council that has governance and leadership over the family roles in the business and the conduct expected of those roles.

Unclear Expectations

The key to harmonious working relationships with your family is to make sure that everyone is on the same page regarding the vision, values, and goals of the company. Everyone needs to understand what you are trying to achieve, and have buy-in as to how these goals benefit the company.

Issues that arise include:

  • Misalignment of vision, values and goals
  • Entitlement
  • Who can or can’t work in the family business

Family members need to be held to the same expectations as any other employee. A formalized, written family charter and family participation guidelines will ensure all family members working in the business participate in the creation and implementation of these priorities. When the family is involved in the process, people feel heard and have ownership over the greater business objectives.

Unclear Roles & Responsibilities

Family businesses are often run informally in the beginning, and family members jump in to help in certain roles. Many businesses fail to develop a clear outline of roles and responsibilities from the outset. Then the business grows, and without this clear structure in place, you risk having a company in chaos.

Issues that arise include:

  • No clear hierarchy of roles
  • Conflicting and overlapping roles or responsibilities
  • Poor communication

Formalized job descriptions, performance review system, and human resources authority needs to be established so everyone is clear on roles, and the responsibilities associated with their role. A performance review system will help hold everyone accountable (family and non-family alike), and make it much easier to address performance issues and discuss solutions.

Lack of Guidelines & Policies

In addition to the human resources policies described above, family businesses need good governance to function successfully. Issues such as compensation inconsistencies, different rules for different family members, and conflicting leadership priorities add to underlying conflicts and create new ones. 

Issues that arise include:

  • Compensation
  • Performance issues
  • Accountability
  • Succession planning

A good governance structure includes shareholder meetings, establishing a Board of Directors, holding top management meetings, and forming a family council. A family employment policy helps protect the business as well as the family, and can include entry requirements, expectations, and a family code of conduct.

Establish a Conflict Resolution Strategy

We know conflict will occur in all businesses. Family businesses often fail to develop a clear understanding of conflict in the workplace and attempt to resolve (or ignore) it as they do in the family system. Unfortunately, we know that doesn’t work! If we don’t understand where conflict comes from, and learn to address it constructively, we are doomed to repeat it. Your family business shouldn’t have to pay the price for this avoidance!

When conflict arises, if you have a structured approach to addressing and resolving it, you will feel much more in control and less at the mercy of emotions and reactions. Conflicts in family business are inevitable, but they can be resolved!

Seek the Help of Mediators & Outside Perspective

Some conflicts can’t be resolved by the family members who created them. It is very helpful to bring in outside experts who can help you get to the heart of conflicts, and help mediate the resolution process.

At Quad Group, we know first-hand how conflict can impact a family business. This is part of the understanding we bring to the table, along with an objective view, when we assist with the development of constructive techniques for handling conflict in family businesses. We can provide a forum to facilitate a safe, structured, and proven methods for resolving conflicts through dialogue. We can help see you through to the other, healthier side of functioning as a family business. 

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