Managing Family Business Conflicts for the Good of the Company

The potential for conflict is present in any family-owned venture. Internal family dynamics are often complicated, but when you add business and money into the mix, there's plenty of motivation to address and resolve conflicts as soon as they arise. Also, keep in mind that less than one-third of family-owned businesses survive the transition from the first generation of ownership to the second generation.

Here are tips and insights to help you avoid or manage family business conflict in your company:

Hire Wisely

It may be tempting to hire your son-in-law as an accountant because he took a few bookkeeping classes in college, but experts agree that you should avoid this impulse. A relative who's clearly a poor match for an open position may end up costing you more time and money than they are worth, "not to mention exceedingly uncomfortable moments sitting around the table come Thanksgiving." By hiring wisely, the rest of your workforce will appreciate that you focus on merit, not family connections, as the top qualification for hiring new employees.

Make Sure the Hierarchy is Understood by All

Family relationships must take a backseat to an established company hierarchy. If Mary is CEO, other employed family members should understand they can't call on her for special favors or consideration, or quarrel with a request made by her office. The same principle applies to Mary herself; if she appoints her cousin Jeffrey to be director of marketing, she shouldn't be overruling his decisions or strategy without a compelling reason to do so.

Convene Family Meetings as a Preventive Measure

Before conflict arises—and to proactively change conditions to minimize their likelihood—many family businesses convene regular meetings. These are primarily driven by the need to keep all relevant parties informed of ongoing progress on business-related issues and to allow individuals to voice concerns about possible red flags on the horizon. From these meetings, family members will adopt efficient and respectful ways to address minor points of disagreement and/or larger questions of business ownership that pop up when family relationships are involved.

Communication is essential. "You can't simply pass important company news to your family partners at a weekend barbecue or chat about client issues at grandma's birthday party," notes business writer Karin Price Mueller.

When Conflicts Arise, Take a Structured Approach to Resolution

Dealing with a family business conflict isn't all that different with addressing a "normal" business conflict, but some additional delicacy may be required. At a family meeting, adopt some straightforward techniques to help resolve disputes:

• Focus on the specific issue, while avoiding a rehashing of generations-old quarrels within the family. Announce at the outset that everyone will have an opportunity to weigh in.
• When everyone has provided input, take responsibility yourself (or appoint another family member) to clearly summarize each opinion and position, so all feel represented and understood.
• Invite participants to offer solutions to the problem, then among all involved, review and rank those solutions. Depending on the rules set out by the business hierarchy, either make a decision yourself as head of the business or allow the issue to come to a vote, choosing among the best proposed solutions.
• Enforce that solution. Make it clear the problem has been discussed and resolved.

These basic conflict-resolution techniques can work just as effectively in a family-owned business as elsewhere. The key is for everyone to understand that no family squabble is worth putting the entire family-owned business at risk.