Family business: no more conflicts of interest

Family business: no more conflicts of interest

Family dynamics are often bad enough in the home but let them seep through into the office and you know you’re in trouble. When you are working alongside siblings and parents, it’s only natural that there will be some squabbles. However, if these are not controlled, they can have a devastating effect on the growth and success of the business.

Partner, Head of Family Business

KPMG in Germany

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Family dynamics are often bad enough in the home but let them seep through into the office and you know you’re in trouble. When you are working alongside siblings and parents, it’s only natural that there will be some squabbles. However, if these are not controlled, they can have a devastating effect on the growth and success of the business.

Just like families, family-owned businesses need structure.

When businesses start out, they tend to have an informal management practice but this can both inhibit the business’s growth and profitability and impede conflict resolution.  Not only that, family conflict impinges on non-family employees. The latter employees will often think that the only real growth potential involves family members – in other words, there is the perception that nepotism rules, which takes away any motivation for non-family employees to advance their careers. On the flip side, family members may feel that they are under constant pressure to set an example, or that they have been unfairly marginalised simply because they are family.

This all makes it imperative for family businesses to follow a formal management structure, one that has standard policies and practices.

Conflicts between family members

Conflicts between family members tend to revolvearound three issues:

  • Family issues
  • Business issues
  • Ownership issues

Should any of the above turn the workplace into a daily battleground, you should seek the services of a family counsellor. This outside mediator will quickly comprehend the family dynamics and will act as a negotiator, coming up with practical resolutions.

These resolutions are not cookie-cut, they are unique to the business at hand as each family business, just like the family unit, is unique. That said, certain common rules may still apply. Follow these and you can stave off the next family business conflict.

  • Only put members of your family on the payroll if they are, in fact, making a postive contribution to the business. Ensure that every family member has a clear idea of his or her role and responsibilities, and hold them accountable. Family (and employees) cannot meet your expectations if they don’t know what they are. Make sure the following is done:
    • Each person has a title
    • Job function
    • Compensation
    • Performance review
  • When it comes to awarding contracts, make sure they are awarded on merit, not because the individual is part of the family. Otherwise you lay yourself open to problems, both concerning the family member and non-family employees.
  • Never show family members special treatment. Favouritism towards family members will demotivate non-family employees. Non-family employees should feel that they have the same opportunities of advancing their careers as members of the family bloodline.
  • Don’t reward or punish a family business member purely on the basis of family histroy. Make sure everything is democratic when dealing with both family members and non-family employees. Praise when it is deserved, no matter who the person is, and discipline where necessary, irrespective of family status.
  • Be honest and open with ALL employees.  Be transparent about having family members and/or relatives working for you. If you don’t, your secret will be discovered soon enough and you will appear deceitful. Ensure that non-family members are as aware of what is going on in the business as family members. It is essential that you communicate well with all members of your company, irrespective of whether or not they are related to you. Always have an open-door policy and two-way communication. Something to consider is to get family (and also non-family) members to attend industry workshops and conferences that enable people to work together and communicate well.
  • Separate family from business. Don’t give family members special benefits that you wouldn’t also give other directors or members of staff. Don’t write off family vacations as business expenses. Don’t give family members access to the company car unless you offer the same to non-family employees. In short, be fair and accountable.
  • Boundaries are important in any relationship. Make sure you establish these early on in your business. Agree and keep to a system. The worst offenders are often spouses who run a business together. If this is your situation, you may want to drive to work in separate cars and then agree on a cut-off time when you do not discuss business, allowing yourself quality family time in the evenings, over weekends and when on holiday. You have to nurture your relationship outside of work otherwise you will have a fractured relationship at work. Don’t infringe on personal time (including your own) after work.
  • If you have family issues within the business, call in a mediator.

It is possible that, even if you have the same values, you may not all share the same vision. For instance, should you keep the business privately owned or take it public? Do you wish to expand, franchise or go after a different target market? One of the best ways to resolve these issues is to call in a family counsellor. There may be several counsellors in a family council. These counsellors can be owners or co-owners of the business but not company employees. This council meets regularly to strategically plan the future of the business. You should evaluate this council every couple of years. You may even want to open the council’s membership to other family members and a younger generation of family members.

The council only addresses concerns relative to the business. It decides if a fund needs to be created to make family loans or to compensate family members who have taken an income cut in order to keep their business afloat. It may well create plans:

  • Individual plans for the professional goals of each family member
  • Plans that determine the overall goals of the family and what resources are required for the achievement of these.
  • Business plans – long-term strategy, management control, etc.

In conclusion, if you run a family business you need to do so in a way that is transparent, fair and that boosts the morale of all members of the business. It’s vitally important to have a functioning governing structure. Family businesses have a strong desire to retain full ownership which sometimes can hamper them from capitalising on opportunities. Make sure this isn’t the case with you.

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