How to deal with family conflict in the business

Recognise that differences of opinion are not necessarily a bad thing.

Family conflict is a perennial problem for family businesses and a key reason why many do not survive from one generation to the next, writes David Foster, managing director of RBS Coutts (Cayman) Limited. 

Squabbling siblings, problems between the generations, succession planning, nepotism, remuneration and perks for family members working in the company: there are many different sources of conflict in the family business.

A certain amount of conflict is natural. Where you have more than one person involved in a decision, differences of opinions are inevitable, and indeed can often be a positive influence. A healthy dialogue is often necessary before families come up with their best work: it leads to a sort of creative sparring through challenge and discussion.

It is rare that family businesses don’t face some form of conflict at some point in their lifespan so families need to think about how they are going to deal with conflict even if it hasn’t reared its head. If there are different family perspectives that aren’t discussed and catered for, problems can arise when it comes to major decisions, such as launching a new brand or recruiting senior people to the business from outside the family.

Poor communication is at the root of a lot of family conflict: if a family doesn’t get its communication right the chances are that sooner or later they will end up in conflict. Good communication is particularly important when it comes to third or fourth-generation family businesses, with cousins who are less likely to know each other well, have grown up in different households with different values and tend to be more geographically dispersed.

A key part of the family communication process is being able to acknowledge and address family issues and create and maintain forums to deal with them. It isn’t always easy, but the more families can create a safe environment, which promotes openness and honesty, the more prepared they will be to deal with whatever issues arise.

What family businesses can do:

  • Recognise that differences of opinion are not necessarily a bad thing; how they are dealt with is more important.
  • Communication protocols can help establish ground rules so that the family knows what they can expect in terms of communication and vice versa.
  • Families should strive to reach decisions by consensus as far as possible and consistently to speak with ‘one voice’.
  • Training and education can help prepare family members to act as stewards of the business.
  • Differences should be addressed proactively where possible. It is better for families to ask in advance how they would deal with potential conflict, even if they are not currently experiencing it.
  • Family Constitutions, Shareholder Agreements and other similar agreements, either legal or moral, can help manage expectations and create clarity.