Common Family Business Issues and Conflicts

May 24, 2010 by Frank Goley, Business Consultant

Family Businesses can have their unique set of issues and conflicts. Having policies and systems in place to handle these typical hurdles can make running a family business a lot more effective and profitable.

Family Business Issues

Ø  Family members go straight to the top, head family position, skipping protocol and the organization’s structure.

Ø  Personality clashes and unrestrained emotional reactions among family members can cause inefficient operations and make it a hard environment to recruit talent.

Ø  Lines of authority and adherence to an organizational structure, with responsibilities clearly defined, should be firmly established and separate from the family’s personal authority lines. 

Ø  Due to the nature of a family business, the number of competent family members from whom to choose managers can be limited.  Therefore, it is important for the family business to ensure family members obtain the necessary experience and skills to assume management or find suitable outside-the –family managers.  This issue speaks to the next section in this article, Next Generation Preparations, so we will expand on it subsequent.

Ø  Family businesses must fight the common phenomenon of maintaining the status quo.  Just like any healthy, growing business, company leadership and management should keep up with the times and not be complacent with past successes.  Planning, Market Trending, Training, RE-Training and Continuing Education are incredibly important for a family enterprise, as complacency is a common challenge as the Company matures.

Ø  Family Management Gaps can be a touchy issue as family companies are often run and managed by family members.  However, if a qualified family member is not available for a post, it is important to fill the management position with someone outside the family who has ample experience and history with the Company and the family members.  Bringing in outside Professional Managers can be a mistake as they can alienate suitable non-family employees and lack an established relationship with the family members in the business.  Only hire outside management if no qualified alternatives exist within the Company.

Family Business Conflicts

Family businesses are naturally pre-disposed to conflict so it is very important to establish firm ground rules and roles:

Ø  Define responsibilities and accountability clearly.

Ø  Assign jobs and positions relative to experience, training, skills, capabilities and interests.

§  If jobs and positions aren’t clearly defined and respected, you often have siblings performing similar jobs or have over-lapping responsibilities, causing unhealthy competition and a constant vying for attention toward parents and authority positioned family members.  Additionally, clicks can form within a family company which is counter-productive, causing unnecessary strife and conflict.

§  Family Businesses should work with a Business Consultant to develop, design and implement a fair and firm organizational structure which promotes professionalism and shuns clicks and in-fighting.

Ø  Keep emotions out of the decision making processes in a family business.  Be sure you are fighting the issues, not the emotions or personality conflicts.  Discussing and agreeing to plans prior to major Company changes and events take place fosters a professional environment of respect and cooperation.  Keep the personal family business where it belongs, at home.  Again, an experienced Business Consultant can be very useful in this area to assist in developing business rules, regulations and protocols, along with, decision making structures and processes.  Additionally, it is important to develop structures, policies and rules to guide non-family employees and interactions between family and non-family employees.  Non-family employees often feel alienated and unimportant if these accountability, responsibility and organizational systems, processes and structures aren’t clearly defined and effectively implemented and adopted throughout the Company.

Best Advice

Form a Family Council.  This council should be composed entirely of family members who are key to the future of the business and have significant interest in the business.  The Council should have clear and open communications.  Family members should feel free to share their thoughts, concerns and ideas.  This forum ought to foster understanding and trust among family members, addressing and fixing issues which develop as the business matures and grows.  It is the vehicle to develop and put in motion Company plans; particularly the business’s Long-Term Strategic Plan.The council should provide the Company Strong Strategic Direction, Objectives, Goals, Milestones and Performance Standards. 

The Council can be headed by the Company’s Chairman (if a family member) so the board of Directors has a true understanding of the Company’s long term direction and growth goals.  While the Council takes in consideration all Key family members’ inputs and opinions, it is not’s necessary to have 100% family participation on its Board.  The Family Enterprise’s Board of Directors should contain the top family executives (Chairman and President/ CEO, etc.); however, it should also consist of non-family members to ensure objectivity, different viewpoints and experience levels.  The Council is for family discussions and providing strategic direction to the Board, which in turn, contains a mix of family and non-family alike.

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