5 Best Practices for Managing Conflicts in Family Businesses

"5 Best Practice Strategies for Managing Conflict in Your Family Business" article banner from Ferguson Alliance

“5 Best Practice Strategies for Managing Conflict in Your Family Business” | Ferguson Alliance

As family business advisors, the Ferguson Alliance team is often called on when a family business is experiencing disruption, challenge, or conflict.

Over the years, we’ve learned that family members often have a tough time seeing what’s pretty clear to us as outsiders: challenges like low levels of trust, misalignment of goals, or blurred lines between business and family relationships. Conflicts within a family business are never just about business. They usually involve personal relationships and emotions, making them more complex to deal with.

These can easily lead to shareholder and leadership dysfunction, putting a family business in real danger. However, we’ve also found that if you stay vigilant in guarding against this kind of dysfunction, and instead, seek to work through conflict in a healthy way, your choices can benefit your family business for generations to come.

Root Causes of Conflict in Family Businesses

Most family business conflict seems to stem from similar root causes: lack of clear communication, no alignment on a central theme or goals, differences in vision for the family and the business, and, as a result, different expectations around business performance.

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When these differences aren’t addressed, moving forward can become nearly impossible. So, to manage these challenges, you need to take a step back and look for where the disconnect is coming from.

1. Face Issues Head-on

Facing conflict is hard. Most people tend to avoid conflict because it feels uncomfortable. But the sooner you take action when you recognize conflict, the more likely you are to solve it before it becomes a danger to your business or your relationships. If, for example, you know your family and business leaders are misaligned on vision and expectations for the business, it’s essential to pull the group together and discuss.

As a practical first step, it’s important for family members to come together and make the key decision about the nature of their business. Are you a “family-first business” or a “business-first family”? Clarity on this front will inform many of your other choices moving forward.

2. Settle on a Common Vision

Once you’ve reached clarity on who you are as a business and as a family, it’s time to move forward with other practical discussions.

  • What is your long-term vision for your family business and your definition of future success?
  • What is your business’ overall purpose, or its “why”?
  • What do you, collectively as a group of shareholders, want to strategically achieve over the next five years?

It’s good practice to convene in person, when possible, to work out these plans. Doing so allows you to gain clear alignment. That alignment then breeds trust not only among family members but also with other business leaders and your employees.

3. Insist on Sound Governance

The hard-won trust and alignment you’ve developed can erode over time unless you put strong governance processes in place to protect them. This could include bringing in an external advisory board to offer counsel and increase accountability among family members and leadership. Such an advisory board can offer an external perspective and increase accountability, making sure that both management and family stakeholders are held to the same standards.

Sound governance can also mean developing a regular schedule for family meetings and clearly defining family members’ roles and responsibilities.

 

For additional information and the last two steps in managing family business conflicts, please read the original article found on the Ferguson Alliance website.

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