Family-owned businesses can be both rewarding and a source of pride. However, managing conflicts and maintaining harmony among family members can be challenging.
Differing opinions on business operations can lead to misunderstandings and potentially cause long-term damage to both family relationships and the business. The key is to balance family love and support with the focus on business growth and a harmonious work environment.
In this article, we will discuss common conflicts in family-owned businesses and provide strategies for better communication to resolve these disputes.
After years of advising family-owned businesses, we have identified common causes of conflict. They include:
- Lack of Communication – Most conflicts arise from unmet needs, unresolved arguments, and the absence of discussions on important issues, rather than poor business performance. Family members often avoid confronting poor behavior to spare feelings, causing issues to build up. Avoiding difficult conversations can lead to misunderstandings, resentment, and unresolved problems.
- Lack of Trust – Trust issues among family members can hinder effective decision-making. Personal issues such as jealousy, competition, and favoritism can lead to conflict. Doubts about each other’s capabilities and judgment can result in power struggles, ultimately affecting business harmony and success.
- Lack of Clarity on Roles and Responsibilities – Family members may see themselves as equals, but business roles often differ in authority, leading to misunderstandings and conflicts. Additionally, differing expectations about roles and responsibilities can cause confusion, frustration, and disagreements.
- Lack of Shared Vision and Goals – When family members fail to communicate effectively, they may have different expectations, ideas, values, goals and vision for the business, especially during transitions. This can lead to disagreements during planning and decision-making processes.
- Lack of Governance and Accountability – Without clear governance structures and accountability, family-owned businesses often face decision-making and operational challenges. The absence of formal business plans, regular meetings, and defined processes can result in inconsistent practices and a lack of strategic direction.
- Lack of Succession Planning – Without a clear succession plan, leadership transitions in family-owned businesses can lead to uncertainty and instability. This often results in power struggles, trust issues, sibling rivalries, and operational disruptions.
When facing conflict, consider John Maxwell’s advice: “Learn to be flexible. Check your own attitudes. Keep conflict in perspective. Don’t overreact. Love people more than your opinions. Focus on the relationship over and above the issue.”
Every conflict in a family business presents an opportunity to strengthen both relationships and the business itself. Implementing effective conflict resolution strategies is essential for maintaining peace and harmony. Here are some strategies to consider:
- Establish Regular Meetings with Open Communication – Effective communication is crucial in family businesses. Scheduling regular weekly or monthly meetings to discuss business matters can help maintain clarity and focus. While disagreements among family members are normal, the key is how they are resolved. Encouraging open and honest communication, where everyone feels comfortable sharing their thoughts and concerns, is essential. It’s important to listen as well as talk, and never undermine another family member in front of others. These meetings can build trust and understanding, addressing issues early before they can escalate.
- Establish Clear Roles and Responsibilities – To ensure a smooth operation in a family business, it’s essential to separate family roles from business roles. Clearly define each family member’s roles and responsibilities to reduce disputes, interference, and power struggles. This clarity in roles sets expectations and minimizes overlaps and conflicts. While roles should be clearly defined, they can also be flexible and adaptable to changing situations.
- Establish Inclusive Decision-Making – Involve all key stakeholders in the decision-making process. This approach ensures that everyone feels valued and heard, which significantly reduces the chances of conflict. It creates a sense of ownership and collaboration among all members, leading to more harmonious and effective decision-making.
- Establish a Clear Succession Plan – Creating a succession plan is essential for a smooth leadership transition. This plan should include a transition timeline and outline the gradual transfer of responsibilities. Additionally, it should clearly define the roles and responsibilities of successors in their new leadership roles.
- Work with Professional Advisors – Your CPA and attorney can offer unbiased perspectives and assist in resolving conflicts. Invite them to regular meetings to help establish a structure, clear processes and provide valuable insights.
Conflict in family businesses is inevitable, but with the right strategies, it’s possible to transform conflicts into opportunities for collaboration. By making sure everyone feels heard and understood, you can create a harmonious and successful family business that can thrive for generations to come.
Ursula Scroggs, CPA, is managing director at DKSS CPAs + Advisors, with offices in Troy and St. Clair Shores, Michigan. Jean Stenger, CPA, is director of operations for DKSS.
