But conflict is amplified even more when it comes to family businesses when you add multi-generational differences and even succession issues to the mix. Not to mention this conflict can go beyond the workplace and also impact relationships outside of the business setting.
While conflict happens, how you manage it can be the difference between a business (and family) that thrives, and one that becomes destabilised.
So do most family businesses have conflict resolution mechanisms in place? And does this actually impact on future plans or aspirations?
Conflict management was a topic in our recent Family Business Survey 2021. This survey was conducted jointly by Grant Thornton and Family Business Australia and Family Business New Zealand.
From our research, we discovered – quite alarmingly – that only 15% of respondents had a formal conflict management mechanism. While this can lead to issues and hurdles in the immediate, it can also impact future plans. This was evidenced by the findings when it came to transition-ready businesses: according to our findings, transition-ready businesses have better governance in place and are 6 times more likely to have a formal conflict resolution mechanism in place.
Sources of conflict in family businesses
A key and typical source of conflict in a family business is balancing the needs of the family versus the needs of the business, especially when first and second generations are part of the business. Areas of tension and conflict can escalate in multigenerational businesses due to differing communication styles and misalignment of future visions, goals and strategies of the business.
Another area of conflict regularly relates to succession-related issues and, according to our research, is the top source of conflict among third generation businesses and onwards.
So how do we limit, and resolve, family business conflict?
A Family Charter
Introducing and implementing a formal governance mechanism such as a Family Charter with ‘rules of engagement’ is one positive way to limit conflict within a family business before it starts.
A Family Charter will help to:
- focus the family on common purposes and shared visions for the business
- promote open and clear lines of communication
- set guiding principles and rules of conduct for dealing with conflict
- set out a process for succession to next gen.
Developing a Family Charter can help to engage both the current and next gen in seeking common values and visions for the business and also aid in a successful transition mechanism when the time comes to pass on the business.
Family Advisory Board
Another often overlooked opportunity to implement conflict resolution mechanisms is the use of a Family Advisory Board. Advisory Boards are often able to better segregate family and business issues which facilitates clearer and more objective thinking around business decisions.
Advisory Boards utilising external advisors with varying skillsets offers the opportunity for ‘outside voices’ who can share independent thoughts and offer balanced views on issues impacting family conflicts, without the weight of emotional baggage that internal family meetings often encounter.
Independent advisors also have the potential to offer expertise that is divergent from the current business owners and can often provide an introduction to a broader network of contacts and resources beyond the family business’s current contacts.
Establishing a ‘rule book’ or a mechanism to help avoid or resolve conflicts in a family business will go a long way to ensuring ongoing harmony amongst wider family members.
Working with clients
Our Family Business team works with family businesses of all sizes – and from all sectors – to implement mechanisms and frameworks to create efficient, sustainable and harmonious structures and workplaces and, ultimately, businesses for generations to come.