Resolving family business disputes

Disputes are expected in a family set-up, even the close-knit have disagreements. When you combine founders, sibling rivalry or parent-child conflicts with business disputes, both family and business relationships can suffer a terrible beating.

Ownership disputes between business partners are bad enough and are inevitable. The complex emotional relationships of family members can turn the disputes ugly.

Family-owned businesses represent the majority of enterprises in Kenya and employ around 65 percent of workforce. The nation’s gross domestic product relies heavily on family-owned and run companies; therefore, the health of the family business predicts the status of economic growth.

Even if the business is a model of harmony, it’s a good idea to think about how you’ll deal with disputes should they arise. The more open your family is about handling disputes, the more likely the business will succeed because of disagreements, rather than in spite of them.

Corporations and non-family business have formal barriers to conflict between colleagues. Human capital departments and the natural separation between work and family make it unlikely that a workplace dispute will have serious repercussions on a firm’s future.

On the other hand, the interconnected nature of family businesses means that family drama, workplace issues, and conflicts can more easily become serious problems without special handling.

Many, if not most, family firms lack formal processes to mediate disputes, making it difficult to prevent quarrels from developing into ongoing woes. Given this, how can your business manage its disparities in a way that brings stakeholders closer instead of driving them apart? How can you develop a systematic way of addressing hot-button issues before they hamper company progress? How, in fact, can you transform conflict into a positive force that sparks improvements in your company’s bottom line?

One issue that we have seen arise in many family businesses is that family members may lack a forum for discussing the business. Formal structures like family councils and boards can offer family members a safe, organised way to bring up issues and negotiate conflict.

Formal route

Formal governance can also help to mitigate family and financial hiccups by separating ownership from management. Ultimately, managing family conflicts often comes down to creating better communication skills as a family. While conflict can never be completely avoided, treating it as a normal part of business and developing the skills to handle it can go a long way toward building healthier ties.

One frequent problem in businesses with a first-generation matriarch or patriarch is that family members may lack a safe way to express needs and concerns.

When people don’t feel listened to or appreciated, seemingly small problems can mushroom into major drama.

Airing concerns

To help prevent conflicts, family leaders should actively encourage an environment of airing concerns constructively and giving them the space to disagree.

Founders and other seniors should come prepared to listen without judgment and be willing to fairly consider what is obtaining.

It might be a good idea to have objective professionals like accountants or lawyers attend some of these meetings, depending on what is discussed. Don’t assume that informal meetings can do the job, or that discussions will trickle down to other family members. They won’t, although they will breed miscommunication and mistrust.

Don’t let business bleed into family time. It is challenging to keep from bringing business home, but one way that conflicts turn into family drama is by failing to keep them separate.

Family business leaders must set the example by separating business and family time as much as possible. One way to make this separation possible is by having formal spaces and structured times to discuss business issues. Explicitly making other times no-business zones can help members to relax into their personal roles and get away from work.

Some issues simply cannot be resolved internally. When family members become entrenched and constructive dialogue isn’t possible, an objective expert who is trained to help resolve disputes can help cut through the emotions and focus on issues.

A mediator can also help guide a family through initial conversations all the way to a final resolution. Many family groups can achieve more in a few hours with an outside expert than they have in years by themselves.

Write policy

Create a formal, written policy that governs family participation in the business. Specify a decision-making process, succession rules, salary and equity guidelines, dispute resolution, and other vital points.

Don’t rely entirely on lawyers or other outsiders to set a family policy — the process of creating such a document within the family is as important as the end result. This is not meant to be a legal document, but rather a reflection of the family’s shared ethics and business culture.

Lastly, remember that too little conflict can be just as destructive as too much of it.

Constructive criticism and debate are essential for growth. Don’t manage conflict by avoiding it or pretending that it doesn’t exist. Leaders must be able to treat children like employees and managers during business time to help reduce the risk that family dynamics will damage the enterprise culture. You’re much better off tackling problems head-on and turning conflict to your advantage.