Sustaining Trust and Navigating Conflict in Your Family Business
You’ve worked so hard to make your family business a success, but eroding trust and simmering conflict threaten to derail the progress you’ve made. Is that a sign that your family business won’t make it to the next generation?
Not necessarily. In fact, most conflict in family business is natural, rational, and predictable. After all, family businesses have to navigate a whole host of challenges that most other businesses don’t – the power, status, money, legacies, and relationships at stake are enormous. The decisions that family businesses face are of significant consequences to many stakeholders. But even though it may be predictable and rational, conflict in a family business is also manageable.
In our work at BanyanGlobal Family Business Advisors, we have seen the same patterns again and again. What may start off as a seemingly insignificant difference of opinion can quickly intensify into a full-fledged conflict. In fact, there is a pattern of escalation in what we call the ‘’conflict spiral’’ – with 7 distinct stages. The final and most dire stage is when lawsuits are filed. No one wants to end up there because only lawyers win then. Ironically, completely rational actions on everybody’s part – becoming frustrated by differences of opinion, wanting to enforce an existing agreement, turning to a lawyer for help, and so on – can send business families down that devastating spiral.
Identifying and knowing how to respond to brewing conflict can make the difference between navigating through a difficult situation or letting it derail you. The first step? We advise family members to familiarize themselves with the conflict spiral. Being able to self-diagnose a situation helps individuals see the potential consequences more objectively. It also provides a common language that can foster dialogue and slow the downward spiral.
How do you accomplish this when the emotional stakes are high? We advise our clients to create processes and structures that enable the right groups to have the right discussions about their interests, so that decisions about family compensation, portfolio strategy, and family vacations aren’t all done over Sunday brunch. Clarifying what decisions are made by owners, by the board, by the management, and by the family can act as a shock absorber, enabling everyone to take a deep breath and seek ways to reestablish the trust necessary to work together.
Once you understand that conflict in family business is natural, you can begin to employ strategies and processes for navigating it. That way, you are far more likely to avoid the scorched-earth conflicts that can undermine all that you and your family have worked so hard to build.
Marion and Nick spoke about managing conflict in their seminar, Building Trust in the Family Owner Group: Clarifying Roles and Aligning on Goals, at the 2017 FOX Fall Forum. FOX members can access the presention.
Dr. Marion McCollom Hampton is a co-founder and Senior Partner at BanyanGlobal. She has been active in the family business field for 25 years, and has been named a Fellow in the Family Firm Institute. She is co-author of a foundational work in the family business field, Generation to Generation: Life Cycles of the Family Business (with Kelin Gersick, John Davis, and Ivan Lansberg, Harvard Business School Press, 1997).
Marion’s family business advisory practice focuses on helping families address relationship and governance issues to achieve business continuity from generation to generation. She has served clients and run educational programs for families in business in Latin America, Europe, and the Middle East, as well as in the United States.
Marion was on the Organizational Behavior faculty of Boston University’s School of Management from 1986 to 1997. She has published a number of articles on the structure and dynamics of family-owned business, in addition to cases, scholarly articles on organizational culture, and two books dealing with organizational issues. She has also taught in university executive leadership programs at Dartmouth’s Tuck School and the Wharton School, as well as in private corporate programs for Carrier, General Electric, Caterpillar, Grant Thornton LLP, and JP Morgan Chase Private Bank.
She received an AB magna cum laude from Harvard University, an MPPM (masters of management) from the Yale School of Management, and a Ph.D. in organizational behavior, with Distinction, from Yale University.
Nick Di Loreto is a Principal at BanyanGlobal. He has counseled client families in North America, Asia, Europe, and the Middle East, working with them on an array of tasks including reviewing portfolio strategies, developing organizational capabilities, and planning for generational transitions. His expertise spans a broad range of industries including telecommunications, finance, energy, education, health services, and logistics. He also plays an active role in the financial management and planning efforts of the firm.
Nick was first exposed to family business in high school when he worked in his family’s medical technology business. This was his first experience of reporting, professionally, to his father, and he came to appreciate first-hand the tensions, the complexity, and the deep sense of accomplishment that can result from achieving business success with close family members.
He went to college at Bucknell and immediately afterwards went to work at Accenture, where he helped launch products, manage client partner relationships, and conduct business development. After four years at Accenture, Nick attended the Yale School of Management, where he earned his MBA with Distinction, concentrating on finance and strategy. During that time, he also worked as an energy sector credit analyst for Standard and Poor’s.