Family Ties

The ability to work through conflict is critical to a family business's success and longevity.

Photography by Ed Honowitz/ Getty Images

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Scott Baskin, co-owner of apparel retailer Al Baskin Co., admits that when it comes to his family’s 78-year-old business, personal relationships and business concerns always intertwine. “You can never divorce the two, because the underlying issue of your role within the family is constant,” says Baskin, who owns the retail business with his younger brothers, Michael and Steven.

He and his brothers have helped mitigate conflicts that arise when family dynamics encroach on business decisions by clearly defining each sibling’s day-to-day role within their company — the parent of the eight-store Mark Shale chain. Scott handles the merchandising and finances, Steven takes care of the stores and catalogue business, and Michael runs human resources. “That allows us to focus our efforts,” says Baskin. “It doesn’t eliminate disagreements, but it does ease them. And when disagreements come up, we just talk them through with a clear knowledge of what our individual responsibilities are.”

There’s no avoiding it. Conflict is a fact of life in family businesses. According to a Family Firm Institute survey, some 82% of family-run operations reported conflict on a regular basis, with 42% characterizing their conflicts as “moderate” and 14% citing their conflicts as “difficult.”

“The biggest issue revolves around managing ‘What’s best for me as an individual?’ as opposed to ‘What’s best for we as a family?’” says Andrew Keyt, executive director of Loyola University Chicago’s Family Business Center. “When you walk into a family meeting with a what’s-best-for-me attitude, it’s impossible to understand other family members’ positions and you end up with a discussion that’s tainted with too much emotion.”

The problem, Keyt says, is that most family firms have no systems in place to handle conflict. Instead, they have an unspoken family rule to avoid or minimize any conflict. Indeed, 20% of those who responded to the Family Firm Institute survey said their families avoid any discussion of workplace
conflict altogether. “There’s an underlying fear that disagreement on the business front will expose all the family’s frailties on the personal front,” Keyt says.

Conflict as a Growth Opportunity
Rather than view conflict as a threat, a family business can use it as a catalyst for building a better future for the company. “Successful family businesses know they must have open communication about difficult issues, that they must talk about matters that in many families would be kept secret, and that such communication requires trust and a willingness to be vulnerable,” says John Ward, clinical professor of family enterprise at Northwestern University’s Kellogg School of Management.

However, before resolving any conflict in a family business, it’s important to understand its source. “If the conflict emerges from being a child in that family rather than being an adult business partner, that has to be addressed,” says Carol Ryan, president of CJR Consulting in Chicago.

No matter the root of the problem, it’s important for a family business to have a shared vision, which typically comes in the form of a mission statement that spells out why the business was founded and helps keep the family, managers and employees focused on the company’s purpose. While the mission statement should broadly sum up what the business aims to achieve and how it wants to be viewed in its industry, the statement also should connect the business with the family’s values. In fact, some family businesses supplement their mission statements with a family values statement that describes in detail how the family plans to interact with the business world and community, as well as with each other. In a sense, the values statement is a formal declaration of commitment to the business and to the family.

“One of the keys to the enduring success of a family business is commitment — commitment to the family’s purpose, commitment to planning for the future of the family, commitment to the valuable work that takes place in family meetings and commitment to the business and its continuity within the family,” Ward says.

A long-range strategic plan — one that answers the question, “Where are we going as a business?” — is also important to a family business, as it is to any business enterprise. That plan should tackle more specific issues, such as expansion of product lines, geographic expansion, human resource and technological objectives, expected changes in industry conditions, potential competitive challenges and acquisition possibilities. Family members, managers and the board of directors should take part in developing this plan.

“Successful business families recognize the possibility that conflict will arise over some of the issues under discussion and that disagreement can put the family at risk, but they also recognize that there is a risk to the family in not doing multi-dimensional planning,” Ward says.

Many companies hold off-site meetings, but the need for retreats is far greater in family-run businesses, where family dynamics play a significant role in the well-being of the business. “Retreats give everyone a chance to spend time together and bond, enjoy each other’s company and do something fun,” says Andrew Keyt, executive director of Loyola University Chicago’s Family Business Center. “They take the pressure off.” Retreats serve a number of functions. They can be forums for open, honest communication among all family members, offering time to discuss family issues — both business and personal — and cement family loyalty, values and continuity. Experts see retreats as particularly important during periods of change in a business, such as management transition, new family members entering the firm, rapid growth or acquisitions. “They can be particularly helpful in easing family members’ concerns and stopping behind-the-scenes whispering if the business is having problems or is in a period of flux,” says Carol Ryan, president of CJR Consulting in Chicago. A retreat should always have an agenda beforehand, outlining what needs to be discussed or decided and who will lead the discussions. Often a facilitator is brought in to monitor events and customize the family business sessions around family concerns. Those sessions should take place in the mornings, leaving afternoons for leisure time. Children and grandchildren generally should be invited, as well as in-laws, who need to feel a part of the family to ease any tension or potential conflicts. Nonfamily employees or managers should be excluded, however, since the retreat is not the time or place to discuss management or the detailed operations of a business. A retreat should always be held in an informal setting and should last at least a full weekend, giving participants time to work and play. Family members should never pay nor should attendance be required. “If planned well, a retreat often turns into an eagerly anticipated annual family tradition,” says Ryan.

One widely used method to resolve common conflicts goes by the acronym DESC — Describe, Express, Specify and Consequences — and holds family members directly responsible for their behavior within the business. When a family member consistently is involved in negative behavior within the business setting — coming in late to work or leaving early, for example — the family head of the business meets with the guilty party and describes the person’s actions or behaviors objectively, quantifying the concerns, avoiding judgment and expressing simply the consequences of the behavior on the business and family. Desired behaviors are specified, and positive consequences are presented, emphasizing opportunities or benefits that will occur when the behavior is changed.

“DESC is particularly effective in family business settings,” says Keyt. “It keeps the conflict between two family members, rather than making it a bigger issue within the family or business, and the person on the hot seat is treated with respect.”

Gathering the Clan
To bolster communication on a larger scale within a company, many family businesses create a family council, which brings together all family shareholders, often from multiple generations, to exchange information and ideas, gather feedback and resolve conflicts. The size of the council, of course, depends on the size of the family. If a family business is small, the council can meet in an office or conference room on a regular basis.

However, when family businesses grow to include larger numbers of family shareholders, representatives from different branches of the family typically are elected. A leader is chosen, usually a family member with the skills to run a meeting. Sometimes an impartial outside consultant is brought in to handle the task. “Generally the more family members are involved in the council, the more formal the meeting has to be,” says Keyt. “A written agenda is important, as well. It limits the freedom to which someone can raise hell about some company issue or policy.”

Whatever the size of the business, the family council should meet at least once a year and address a variety of topics, from short-term business strategy to tax or estate planning issues.

But no matter the agenda, the importance of the family council cannot be underestimated. All family members hear the same information at the same time, which helps to dispel rumors and allay fears. As a result, communication improves, providing data and extending goodwill to each family member who has a stake in the business.

“Lack of formal communication among family members is one of the biggest problems in family firms,” says Keyt. “A family council is an organized way for family members to debate issues and learn about the family and business.”

Seeking Outside Help
In some cases, it’s necessary to go outside the family to deal with significant issues. Often an advisory board, a group that acts like a board of directors but without legal authority, is brought together periodically to craft solutions to difficult problems. Its members, who are appointed informally, can range from tax experts to psychologists. Family members also may choose to sign on with an individual consultant or a facilitator. Facilitators function like conductors at family meetings, giving everyone a chance to speak. Consultants, on the other hand, provide active guidance based on training and experience and try to motivate family members to accept their advice.

Above all, if the family decides to consult with an outside source, they should do so before a crisis occurs. Sometimes a company will hire a consultant simply to take the pulse of the business, assess the relationships among family members and gauge family support of business strategies.

Any advisor selected should be knowledgeable in both family and business dynamics. Sometimes
an advisor works in tandem with colleagues for an interdisciplinary approach. “I’ve had highly conflicted families that work with both a business consultant and a family therapist,” says Ryan. “No matter what issue a family business is working on, it’s always about learning to communicate. And that takes on added importance in a family-run business that counts on continuity from one generation to the next.

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