Five Common Causes of Family Business Feuding and How to Avoid ThemJune 28, 2013
Family Feud the game is fun to watch. Family feud in the family business is like watching a train wreck. It’s hard to put a good spin on the word “feud.” It implies more than just a disagreement, but rather a longstanding and deeply-rooted standoff. It would be unrealistic to expect all family members to agree on all actions of the family business or of each other, but it is within reason to learn how to keep family disputes to a minimum and avoid planting some of those landmines in the first place.
Following are five typical causes of a family business feud, and some suggestions to avoid them or mitigate any fallout:
- Having no succession plan. The importance of the succession plan simply cannot be understated. If you avoid putting one in place, the chances of there being a power struggle or other type of disagreement after you “leave” the business increases. Not only will there be the question of who takes over the business, but there are other potential decisions that will be required (e.g., handling estate tax issues, the direction the business will go in, and responding to clients who want to understand the transition plan in place).
- Not making your succession plan known. If you do make a succession plan, but fail to reveal its contents to anyone in the family business, similar rivalry issues could occur. One child, for instance, could have assumed they would be the next leader if they had been the one to spend most of their life working for the business. Say the other child is named as the new leader instead but no one, including the appointed leader, thought this would happen. Resentments and unfulfilled expectations will emerge in the most difficult transition time for the family business. Although you may not make everyone happy with your succession decisions, giving the head’s-up, responding to questions, and taking the time to adjust to the decisions could prevent the worst of it.
- Showing open favoritism. Beyond just naming one child over another in the succession plan, there are many ways to ruffle feathers in the family nest at any time in the family business. For example, an owner assumes the first born child in the family would be the natural leader and therefore is the one sent to business school, given the plum management position, and showered with compliments and approval. Maybe the third born child actually has more interest in the business and puts more work in, and feels he/she should be recognized equally. Even if the decision to favor the first born is valid, it is quite natural that a rift between the siblings may damage both the family and the business. Maybe there is a way to find a good fit for the third born if he/she is not right for the promotion, and to still show respect and approval to them as well. Chances are your actions are seen by ALL employees in the company and they will begin to follow that lead giving the non-favored child no chance of succeeding in the future running of the business.
- Treating family differently from non-family members in the business. Similar to the favoritism within the family, making the family business all about rewards for family employees and not for non-family employees is a strategy that could be a serious detriment to your business. If your non-family team members feel as if they’re being treated unfairly, they could perform poorly or leave and possibly speak resentfully against your business to vendors, clients and others. You will have a hard time attracting outside talent to the family business if others think they won’t be treated fairly. Work with one set of rules that applies to everyone equally.
- Poor communication. Really the primary cause of most of the other items listed here is lack of or poor communication. This is a feud catalyst. With no procedures or guidelines for all to follow, no baseline of expectations set for employment, and no understanding of the company’s mission and goals, there will be differing opinions among all employees and management, and jockeying by some to say their way is the “right” way. By having a consistent and fair hiring process, written procedures or protocols, regularly scheduled operations meetings and family meetings to address the business, a cohesive team can be built. The chance of resentment and conflict are decreased by making clear in advance, the expectations of what your team members are “signing up for” by working for the family business.
We know that the passion of family business owners can strengthen their companies and their families. We can channel that energy positively by helping with succession plans, estate plans, governance and other family business needs.
Contact me at firstname.lastname@example.org or 732.747.0500 with questions or to receive a complimentary consultation with our family business advisors.