Conflict is a natural part of human relationships, whether in a family or business setting. Conflict is neither positive nor negative; if handled correctly it leads to new thinking, better planning and decision – and a stronger sense of trust and commitment.” – Carlock and Ward, 2010.
While the successful continuation of your business into the next generation is an amazing feat, with it can come issues due to differing views about the future of the business from one generation to the next.
A struggle for family owned businesses is not wanting to harm a personal relationship while airing a business conflict – but in avoiding the conflict, the issues underlying the conflict and tension persist, fostering distrust between the family members. There are also health and performance related consequences such as increased stress levels and an inevitable breakdown in communication amongst key decision-makers, making it difficult for the business to adapt and change to current economic and industry changes.
It’s tempting to mix business and personal and simply hash out company conflicts, opinions and strategy at any family gathering, but this can be more destructive than helpful. When a family business has a formal Family Council, family members are then able to air their grievances in the right arena and have their opinion heard for what it is – and not just be shot down at the family picnic because they are the youngster in the group.
A Family Council also allows the family members involved in the business to clarify their expectations of each other. This can include issues surrounding the equitable treatment of family members, the dividend policy of the company – weighing up the family’s needs against the capital requirements of the business itself – the future outlook of the business, as well as the potential opportunities for family involvement.
The Family Constitution is a fundamentally important document to any family business which outlines the family’s values and states the rules the family members have agreed upon for how they can participate in and be recognised by the family business.
Such a document will in itself stop many an issue before it can brew, as many questions that can be left unanswered in a family business – for fear of hurting a loved one’s feelings – will be addressed before it can even become a problem.
As the family business grows and is passed on to a second generation, the need for a formal structure increases. Taking measures such as establishing a Family Council and creating a formal Family Constitution document can assist family businesses in effectively managing their number one concern of ensuring that the company is always working towards a shared vision and goals.