One important question for entrepreneurial families is: How can a family avoid a disagreement or 'war'? The answer is not always easy. The solution depends on several factors. These parameters are not only influenced by the family and/or the business, but also by the family members individually.
I remember several situations. In one instance: Three siblings were sitting at a table. They discussed the distribution of shares, they were arguing over why their father did not distribute the shares equally among them.
Another example: Eight cousins – three of them had left the company. The remaining five asked themselves how to avoid further exits without any conflicts. Another situation: a dad who blamed his son, because he was not getting relevant information from the company any more. Or a daughter who worked for the marketing department of the family business complained about her small salary.
And in another family firm, the nephew lost patience when his uncle interrupted him more than ten times during a meeting. Besides that his aunt refused to abstain from her dividend payout preventing a promising expansion into Asia. If all these conflicts are not appropriately addressed they can jeopardize peace in a family and the continuation of the business over generations. I even know some cases in which families completely disintegrated, refusing all contact or resolution attempts after long and protracted conflicts.
If family members have divergent opinions about topics like investments, dividend payouts, family members working in the business, succession or the appointment of external board members, a first step could be trying to convince family members to agree to take into account the opposing opinion. If this fails then pressure is likely to be increased, and alliances are formed with other family members.
If these actions are not successful in reaching an agreement, lawyers are often hired. At this point irreversible consequences might follow; porcelain could break. Unfortunately, the additional expenses generated by lawyer fees must be covered by the families themselves. If conflicts are not resolved they can become a chronic problem; leading to an emotional malaise for all involved.
In the foreground are often emotions of treachery and slight, which can lead to absolute indignation from all the parties involved. The duality of ‘good’ and ‘bad’ dominates relationships. I hear words like “Criminal”, “he is mentally disturbed” or “I cannot stand this anymore.” One source of the conflict is an inability to change perspectives and recognize the other party’s interests.
The two parties are not able to see things from the other person’s perspective anymore. Being able to put oneself in the position of the other family member is an essential ability in trying to find a solution.
During a period of peace it is important for all members of a family business to compose on a set of basic rules designed to help resolve possible conflicts. This means in depth discussions over highly sensitive topics like succession, working in the family business, salaries, investments and dividend payouts. It is important to have a common understanding of vision, values and goals of both the family and the firm.
All these measures support cohesion within the family and allow management to operate effectively with a family that speaks with one voice. A family constitution or a family charter can help document all these rules. If you want to know more about how to develop a family constitution, please contact your local KPMG member firm professionals. If you want to read more about family business governance and family constitutions, please see:
Governance in Family Enterprises – Maximizing Economic and Emotional Success, by Alexander Koeberle-Schmid, Denise Kenyon-Rouvinez and Ernesto J. Poza, Palgrave Macmillan, ISBN 978-1-137-29389-3, entitled to a 20 % discount with the promotional code WORLDPALGRAVE20 if ordered through http://www.palgrave.com.