There have been many theories as to the complex nature of how conflicts begin and whether disputes can lead to change and create progress, but what is unequivocal is the predictable nature of conflict and its long-lasting consequences. In the family business, and consequently the family office world, disagreements are commonplace, yet families are poorly tooled to resolve such conflicts, let alone understand why they exist in the first place.
Families are a group of people bound together by love, lineage, law and often a little luck. They frequently disagree with each other and carry a certain amount of ‘baggage’, the origins of which have been laid down by previous generations. They also tend to have affection for spouses, parents, siblings, cousins, aunts and uncles, grandparents and grandchildren. When families are engaged in running a business, these positive and negative aspects of family interconnectedness are exposed and tensions can emerge.
One of the challenges for family businesses is to channel the bonds of family in a positive way to gain a competitive advantage. Anyone running a business knows how challenging it can be and accepts there will be differences within the workforce at all levels. However, when the conflict is between members of a family, the emotional impact is heightened and any negative outcome can be potentially destructive to the whole family, including unborn future generations. We must accept that conflict is a fact of family business life, but we can learn to harness its creativity rather than allowing its negative potential to dominate.
The nature of family conflict has a different dynamic to non-family conflict. Family members have more invested in the ongoing relationship and the result may be a stronger reaction to conflict. When they disagree, they may sever contact and eventually decide they are too emotionally far away to work towards any kind of reconciliation. Once the dust has settled and time has passed, they may seek a closer relationship, only to realise they are too close and vulnerable to further hurt and disappointment. As a result, relationships can often exhibit circular patterns.
The Family Firm Institute states that 20% of family businesses report weekly conflict, another 20% report monthly conflict and 42% report conflict three to four times per year, although not all disagreements rise to the level of seemingly intractable conflict. When two or more individuals must act upon or implement their needs, values or interests, and they perceive others as blocking or opposing them, conflict arises. Too often, families sweep potential conflict under the rug. Rather than respectfully addressing problems that could cause strife, they are ignored and allowed to fester until some combination of events makes them impossible to overlook. By then, the conflict may be so intense and deep-rooted, or the business may be in such a delicate and precarious position, that resolution becomes far more difficult.
The ultimate price to pay for families can be financial ruin, hatred of other family members and, with it, misery, depression and a great deal of suffering. When it comes to conflicts of interest in family businesses, matters are more difficult to resolve because there are three levels of interest at play: family, business and ownership.
Rather than mask or deny inevitable conflict, resolution brings deeply held differences to the surface and creates a comfortable space and set of skills to move forward successfully while enhancing the relationships involved.
**Avoiding conflict**
It is optimal to avoid negative conflict if at all possible and there are steps that can be taken to minimise damaging conflict situations.
**1. Know yourself**
When dealing with conflict, family members should pay close attention to their own state of mind and emotions. We all respond differently to conflict and our responses are not generally logical. If we understand what triggers our own conflict response, we can take control of how we choose to behave.
Conflict is rarely logical or factual but stems from a perceived threat. This threat may be physical, emotional, psychological or financial. When we feel angry or threatened by a challenging conversation or situation, we may experience what is termed an ‘amygdala hijack’, where emotions take precedence over logic. When this happens, a number of physical changes take place: the emotional part of the brain, the amygdala, overrides the thinking part of the brain, the neocortex, in response to a perceived threat. This compromises the ability to reason and think logically. Working memory becomes less efficient and blood pressure, adrenaline and hormone levels rise. It can take up to three to four hours for this state to clear.
People respond differently to this flood of hormones. Generally, we prepare ourselves to deal with the perceived threat by either running away or standing our ground and fighting. This ‘fight or flight’ response has evolved over many thousands of years.
A stressed person may be prone to impulsive thinking and behaviour they later regret. It is important to understand your own response to conflict. Ask yourself:
Do I enjoy it?
Do I provoke it?
Do I fear it?
Do I go numb in the face of it?
Do I run from it?
Do I ignore it?
Do I tolerate it?
Then consider how this will affect your response to the situation you are in, and remember it is highly likely the person you are in dispute with will have a very different response.
**2. Listening**
The key skill in both avoiding and resolving conflict is listening. Always give the other person the opportunity to explain. Sometimes we learn very important things by giving others the space to talk. We often assume we know how to listen, but this is not always the case, and some training in active listening can help reduce conflict.
When we listen actively, we are not just listening for facts but for the impact those facts have had on the individual’s experience and therefore their understanding of the conflict. Conflicts are not about facts; they are about perceptions. People often move into conflict when they feel their values are being threatened. In family businesses and family offices, it is often assumed values are shared, and it can feel unsettling to discover this is not the case.
When listening, we must be aware of the values, beliefs and behaviours underpinning the individual’s perception of the conflict. To feel heard, a person needs feedback from the listener. This may be non-verbal (nods, body language, eye contact) or verbal (reflecting key words, paraphrasing content and summarising themes, concerns, values and emotions). The listener must first hear, acknowledge and accept what is being said, rather than challenge it. Once someone has truly been heard, they are more open to challenge and genuine progress becomes possible.
**3. Communication**
Open and honest communication can help avoid many misunderstandings that lead to conflict. A widely used method for resolving common conflict builds on good communication and is known by the acronym DESC: Describe, Express, Specify and Consequences.
Consider a common scenario. A family business member consistently arrives late to meetings. Other family members are annoyed, teamwork is deteriorating and important decisions are delayed. As the leader, you are expected to address it.
**Describe**
In a private meeting, listen respectfully to how the individual perceives the situation and then describe your own perception of their actions. Quantify concerns and avoid judgemental language or absolute terms such as “You always” or “You never”. Instead say: “You were 30 minutes late to yesterday’s meeting. That was the fifth time this year.”
**Express**
Express concern about the consequences for the business and family, and how others perceive the behaviour. Avoid exaggeration. For example: “The problem with you arriving late is that it reduces the time we have for important decisions and signals to others that meetings are not important to you.”
**Specify**
Be clear about what is needed. Specify the behaviour required to resolve the problem: “We need your input, so it is vital you are here on time when we call a family board meeting.”
**Consequences**
Explain the positive consequences of changed behaviour: “When you arrive on time, meetings will be more productive, morale will improve and we benefit from your experience. If lateness continues, others may feel meetings are unimportant.”
**Common conflicts**
Those working in conflict resolution often see recurring themes in family businesses:
- A child with no interest in the family business who wants a different career
- Siblings where one assumes leadership and the other is persistently critical
- Jealousy over who is perceived to benefit most from the business
- Clashes between established methods of the older generation and new ideas from the next
- Differing views on the role and parity of women in the business
These conflicts are often caused by misunderstandings of motives and values underlying individual behaviour.
**External intervention**
Even the healthiest families can become stuck in disputes, and even the most capable family members can be caught in the middle. An external consultant or mediator may be needed.
Families are often reluctant to ‘wash their dirty linen in public’, but confidential expert intervention at an early stage can prevent public and sometimes vindictive court cases that frequently result in total family breakdown.
Many family business conflicts benefit from mediation. Today, mediation is regarded as a form of alternative dispute resolution in which a neutral third party helps those in dispute work towards their own settlement. It is usually quick, often completed in a single day, and far cheaper than legal alternatives. Unlike court proceedings, mediation is confidential, with limited exceptions involving abuse or criminal activity.
Mediation aims for outcomes that are ‘good enough’, where all parties feel they have benefited and learned something, rather than one party winning and the other losing.
The mediation process typically begins with all parties together to outline ground rules and explain the process, followed by opening statements. Parties then move to separate rooms and the mediator meets with each party confidentially throughout the day. When common ground emerges, parties are brought together and a written agreement is drafted, signed and witnessed.
However, mediation is more than process. Its core work lies in understanding what matters to the parties and what will enable them to move forward.
Family businesses are increasingly recognising the danger conflict poses to individuals, relationships and business success. As a result, they are turning to mediation as a constructive way forward.
Overall, mediation has an approximate 85% success rate. It is cost-effective and, for family businesses, confidentiality is a major advantage over court proceedings.
