Sources of conflict: Tension triggers from generation to generation

We have previously covered differences in culture, values and social norms across family generations, as well mechanisms and frameworks that can help manage and minimise conflict. But what are the sources of conflict, and does this change from generation to generation?

Conflict was a theme surveyed and discussed in our 2021 Family Business Survey, conducted jointly by Grant Thornton, Family Business Australia and Family Business New Zealand. The research identifies several key areas of conflict that consistently appeared across family businesses in different industries, financial situations, and maturities, but also shows that sources of tension and conflict vary markedly with the generation of the business.

Where conflict occurs from generation to generation – a snapshot

• Between first and second generation: Balancing the needs of the family versus the needs of the business.
• Second and third generation businesses: Differences in communication styles and methods with each other and the first generation.
• Third generation businesses and onwards: Succession-related issues.
• Multigenerational businesses: Certain areas of tension and conflict become more pronounced in multigenerational businesses, such as communication style and aligning the future vision, goals and strategy of the business. The more generations a business transitions through, the less significant issues like survival, financial stress, and managing growth become.
• First generation businesses v start-up businesses: Tensions between the two types of businesses align: survival, financial stress, setting strategy, and balancing work and family life.
• Low importance issues across all generations: Interpersonal issues like sibling rivalry are of low importance regardless of the incumbent generation.

The difference in conflict sources across generations underscores how the family and its business evolve and mature together. Whilst founding generations experience the most difficulty in protecting and growing their business during its most vulnerable period, once the business is established, tensions concerning communication (and hence cooperation) between family members and transition planning become more apparent.

Understanding conflict triggers and pain points – and how they evolve across successive generations – are instrumental in not only gaining insight into key weaknesses, but also present opportunities to resolve differing opinions and views across the family.

Making conflict constructive

In our previous articles, we discussed the importance of ensuring that conflict does not divide the business, and the potential opportunities arising from a respectful and open-minded discussion amongst stakeholders. Unfortunately, looking at the Family Business Survey shows that in the eyes of successive generations these discussions aren’t happening, and perhaps are even exacerbating other areas of conflict.

Thankfully, a number of solutions exist to help generations understand and work with each other to ensure that conflict is used to strengthen the family and the business.

• Family Charter

A non-legally binding document, created in consultation with all family members that affirms common values, practices and culture across all generations to build consensus and clarity.

• Family Advisory Board

A leadership board responsible for stewardship of the family business. While it is important to have a good representation of the family on the board of directors, this can sometimes lead to inefficiencies or conflict if directors take on too many roles. A good family advisory board will ensure that business decisions are made according to family values and objectives, reduce opportunities for disagreements, and contribute to business continuity.

• Family Business Council

A recurring or one-off event designed to facilitate discussions amongst family members, resolve existing or potential conflicts, and align individual perceptions of the business’s vision and position.

It is worth noting that across all generations, the contribution of family members and sibling rivalry are considered amongst the least concerning for businesses in Australia & New Zealand. This shows that family members genuinely value the effort, ambitions and value that everyone brings to the table. Resolving the issues outlined can form the next step in ensuring the efficiency and continuity of the business.

Grant Thornton’s Family Business Advisory team are the trusted partners of large and mid-size family businesses across Australia. We firmly believe in the potential within family members and work proactively with our clients to manage conflict and facilitate respectful and value-adding discussions. With extensive experience acting as independent and objective advisors across the entire spectrum of family business operations, our team is ideally placed to assist businesses reach their fullest potential.