Tales of business empires crumbling under the weight of family feuds are all too familiar. This stark reality underscores the significance of conflict as a pressing concern for business families. Recognizing and addressing conflict is crucial for these families to safeguard against its devastating consequences and ensure the long-term sustainability of their business legacy. Family business research identifies five broad types of conflicts:
Conflict of interest
Conflict of roles
Conflict of goals
Conflict over processes
Conflict in relationships
Conflict of Interest
Conflict of interest is a universal challenge that families in business face. This type of conflict arises naturally due to the diverse interests and priorities of family members within the business. The family business system comprises seven key areas, and family members often occupy multiple roles, leading to conflicting interests.
For instance:
Family owners who don’t work in the business prioritize dividend distribution.
Family managers focus on retained earnings to ensure business success.
Non-owner, non-manager family members may seek employment, potentially conflicting with business needs.
These differing priorities inevitably lead to conflicts. Human nature aggravates the issue, as individuals tend to feel entitled to more – whether it’s larger shares, leadership positions, or employment opportunities. To achieve sustainability, families in business must acknowledge and manage these conflicts effectively through:
Open communication
Robust governance
By addressing conflict of interest proactively, family businesses can mitigate potential disputes, ensure a united front, and drive long-term success.
Conflict of Roles:
Role conflict is a common challenge in family businesses, arising from the overlap of family and business roles. This conflict often affects family members who wear multiple hats, such as cousins, siblings, or parents and children working together.
The issue lies in the blurred lines between family and business roles. Family members may struggle to distinguish between their relationships as relatives and colleagues, managers, or subordinates. This confusion can lead to identity issues, tensions, and conflicts.
For instance, a family member may respond to a relative rather than their manager during a business discussion, causing confusion and conflict.
To mitigate role conflict, it’s essential to establish clear boundaries between family and business domains. By defining and maintaining these boundaries, family businesses can reduce tensions, promote healthy relationships, and ensure the success of the business.
Conflict of Goals:
Goal conflict occurs when family members disagree on the objectives and direction of the business. These disagreements often stem from diverse backgrounds, education, training, and experiences within the family.
A common example of goal conflict arises when family members have differing views on the company’s future. For instance, younger generations, such as the third generation, may prioritize investment over operations, while older generations may prefer to maintain the status quo. This conflict can manifest in questions like: Should we continue as an operating family business? Or should we transition to wealth management and become an investing family?
Addressing goal conflict requires open communication, active listening, and a willingness to find common ground. By doing so, family businesses can align their objectives, ensure a unified vision, and drive long-term success.
Conflict over Processes:
Process conflict arises when family members disagree on the methods and procedures to achieve a shared goal. These disagreements often revolve around:
Responsibilities and roles
Resource allocation
Financing
Operational processes
In family businesses, process conflicts can be particularly prevalent due to the numerous processes involved. For instance, family members may hold differing views on HR processes, leading to conflicting values and approaches to managing employees. When left unaddressed or managed reactively, process conflicts can have negative consequences, such as:
Disruptions to business operations
Decreased employee morale
Inefficient use of resources
To mitigate process conflicts, family businesses should prioritize:
Open communication
Active listening
Collaborative problem-solving
Establishing clear policies and procedures
By addressing process conflicts constructively, family businesses can ensure alignment, efficiency, and a positive work environment.
Conflict in Relationships:
Relationship conflict is the most complex and challenging type of conflict in family businesses. It’s rooted in emotions, rather than rational issues, making it difficult to address and resolve. This type of conflict can arise from past experiences, interactions, and dynamics within the family, such as:
Competition for attention and approval
Perceived unfair treatment
Unconscious emotional wounds
These underlying emotions can fuel negative feelings like anger, envy, and jealousy, which can then manifest as conflicts over goals, processes, roles, or assets. However, the real issue lies in the relationship conflict itself, not the surface-level disagreement.
As scholars note, “family members rarely fight about what they say they are fighting about.” In reality, conflicts over business issues are often a symptom of deeper relationship conflicts. The complexity of relationship conflict lies in its ability to:
Underlie and spark other types of conflicts
Charge conflicts with negative emotions, making resolution challenging
Be hidden, making it difficult to identify and address
To resolve relationship conflicts, family businesses must:
Acknowledge the emotional root cause of the conflict
Address the underlying issues, rather than just the surface-level disagreement
Foster open communication, empathy, and understanding
By recognizing the hidden danger of relationship conflict, family businesses can take the first step towards resolving these complex issues and building stronger, healthier relationships.
