Conflict and communication in the family business

By Joseph H. Astrachan, Kristi S. McMillan

I also came upon a few sites that discuss various methods of reducing or resolving conflict <!–[if gte mso 9]> Normal 0 21 false false false DE X-NONE X-NONE MicrosoftInternetExplorer4 <![endif]–><!–[if gte mso 9]> <![endif]–>

http://www.businessweek.com/smallbiz/content/nov2006/sb20061129_919406.htm

but the thing is that they all speak of what we have discussed in previous weeks such as;

• Hold regular family meetings to discuss business issues and settle disagreements.
• Create a formal, written policy that governs family participation in the business.
• Performance evaluations

Apparently these three points, which were discussed in earlier points are key to reducing conflict within a family firm, however, I feel that although these are major points to discuss, these points would only come up upon succession. I understand the importance of seperating emotions and business, however I still feel that a family business should remain just that and not resort to these solutions without attempting others first.

I will post the links to these sites, but I also found a very interesting case study on family conflicts on this link;

http://www.mediate.com/articles/noll20.cfm

The links to the websites regarding resolution of family problems

http://www.allbusiness.com/specialty-businesses/family-owned-businesses/1190-1.html

http://businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073792653

Complementing what Shaan has written about a “written policy” that governs family participation in the business, here is a link to an article that describes what should be stated on these Family Written Policies or also called Family Business Constitutions:

http://www.businessweek.com/magazine/content/08_64/s0804030877251.htm

The article is called

A Giude for Family Businesses, by Ernesto Poza . It claims that every Family business needs a constitution which is a document that spells out the company´s vision and offers guidelines that can prevent disastrous conflicts.

Now I’m reading “Management and organisational behaviour” by Laurie J. Mullins. And there is an interesting chapter about role relationships in the group and role conflicts.

The definition of role conflict is the following: conflict that arises from inadequate or inappropraite role definition and results in a person behaving in a way which may not be consistent with their expected pattern of behaviour.

I think that this type of conflict should be very wide-spread in family business. In fact, family members often have a tendency to replace business behaviour patterns by family ones. It difficult to separate two roles - role of business participator and role of family member (we also could see it doing our Roger Levy Family case Roundtable). And the reason for this, in my opinion, is not clearly defined roles.

The proper solution of this problem, as I think, is clear definition of the roles written in the official document and well-defined structure of the firm. So, it correspondes to the Shaan’s second point describing methods of reducing or resolving conflict.

From your group’s skit on conflict, which was very good, the thing that struck me most was that all the family members were fighting about their connection or ‘piece of the pie’, not necessarily for financial gains, but decision-making power and respect. This connects to a journal i found, called “Feuding Families: When Conflict Does a Family Firm Good” by Franz W. Kellermanns and Kimberly A. Eddleston. I think you might have used this in your skits. The author explains that altruism (doing selfless acts for the sake of the FB) has positive effects on the performance of family firms. However, “In an individualistic family altruism is not necessarily reciprocal. Therefore the likelihood that family members take advantage of another family members’ altruism, especially the founder’s altruism toward other family members, increases (Schulze, Lubatkin, & Dino, 2002a; Schulze et al., 2002b).”  I think this was very apparent in your skit!

To connect this to Galina’s point above, if the father had spent more time to clearly define the roles of each active family member, they could all practice altruism in a positive way as opposed to being “individualistic”.

You can check out this journal here: http://findarticles.com/p/articles/mi_hb6648/is_3_28/ai_n29076556/?tag=content;col1

Chocolates and FB Conflict

Read this series below on a great saga of Family Business Conflict that is resulting in the demise of an empire. Enjoy, ed

Jay Pritzker, Who Built Chain Of Hyatt Hotels, Is Dead at 76

Knives Drawn for a $15 Billion Family Pie

Records Expose Schism in Chicago Family

Hyatt clan share out $1.3bn to end row

Lewis Hamilton severs Formula One ties with father Anthony

http://www.slideshare.net/ppatelmacbook/resolving-conflict-in-fam-bus

Hughes, C., 2007. Resolving conflict in the family business. LP/Gas, [Online] 67 (67/14-14), Available at: http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=25171093&site=ehost-live (Business Source Complete) [Accessed 1March 2010]

Levinson, H., 1971. Conflicts that plague family businesses, [Online] 49 (2/90-98), Available at: http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3866887&site=ehost-live (Business Source Complete) [Accessed 1 March 2010]

Noll Douglas, 2004. Resolving Family Business Conflicts. [Online] Available at: http://www.mediate.com/articles/noll20.cfm. [Accessed 1 March 2010].

Script For Our Skit

Guys, by the way, a specialized magazine for family business is available at this link http://www.familybusinessmagazine.com/. it’s really cool, because it has huge amount of info concerned conflicts as well, but also almost all our topics. Check it!!!

Resolving conflicts in Family Business

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Conflict http://www.extension.iastate.edu/agdm/wholefarm/html/c4-74.html

is a natural phenomenon in any family business. It can shatter a family into pieces.

Family and business conflicts arise due to difference in opinions between the different family members. In a family, there is more of emotional values, protective bonding and they do not willingly accept changes.  For a Family Business to succeed, change is inevitable.

Conflicts cannot be predicted. A simple conversation between two people can lead to misunderstandings and arguments. The argument can have nothing to do with the topic being discussed, at all. Conflicts in families that are also in  business together are higher then normal families because issues such as money is often based on business.

The family and business conflicts need to be handled differently. When you mix the issues over matters, such as leadership and money, then both relationships suffer a lot.

It is very important to find out the base of any conflict and the way you handle it.

Families that involve themselves in handling the conflict <!–[if gte mso 9]> Normal 0 21 false false false DE X-NONE X-NONE MicrosoftInternetExplorer4 <![endif]–><!–[if gte mso 9]> <![endif]–>

http://findarticles.com/p/articles/mi_m1154/is_n11_v83/ai_17405464/

are more likely to succeed in their businesses. Families should build up a family plan which describes how you are going to be in family without your business influence. Businesses should deal with leadership and management plans.

Some of the ways to tackle family business conflicts are:

1.Frequent family meetings to be held to discuss business related issues and settling disagreements.

2.Active involvement in the meetings, have patience, and listen to what the other person has to say.  Remember, we are born with 2 ears and 1 mouth for a reason.

3.Brainstorming:  Gather the solutions to the problem, accepting the ideas and opinions of each individual.

4.Find the solution that has the highest potential.

Unresolved conflicts are harmful and put both the  family and business at risk.

Families and businesses that managing conflict effectively have higher chances to survive and achieve their goals

(http://www.familybusinessbattleground.com/2009/11/resolving-conflicts-in-family-business/)

Another type of conflict which hasn’t beend addressed in this blog is the compensation family members expect to receive. Paul Karofsky in his article “Equal vs. Fair in Family Businesses” explains that when similar compensation rates are fixed for all family members these often thend to create conflict when family members compare their contributions.

So he, Karofsky,  recommends a formula that seems increasingly acceptable, especially to younger generation family members, “is a base salary at fair market value, plus a bonus based on performance quality, plus or minus a yearend “adjustment” because of ownership. (Curiously, family members are actually paid less, on average, than their non-family equivalents because so many opt to reinvest some of that compensation back into the business.)” Taken from

http://www.businessweek.com/smallbiz/content/jan2005/sb20050126_0194.htm

Hey Guys!!

I found an interesting article (i know everyone says that, but this might be true!)

Here are some key points you can extract from it…. have fun!
Managing Human Resources in Family Firms: The Problem of Institutional Overlap

http://www.lgassoc.com/library/articles/108-humresourcesfamily.pdf

Institution Overlap problems which may lead to Conflicts within family businesses:

• Problems of Selection–> relatives feel entitled, threatens effectiveness and survival

• Problems of Compensation and Equity–> implicit affective principles instead of specific value of the work. Compensation ambiguous, a hybrid of family and business criteria. Nepotism may lead to: incompetent employees retained and competent employees let go.

• Problems of appraisal–> difficulties in evaluating performance of close relatives, stressful for founder!

• Problems in Training and Development–> conflict in training, give mebers what they want to do, not necessarily lessons for the business. Investments made for offspring’s development.

Entrepreneurship and Family Business:

Many family business researcher has been interested on entrepreneurship within the family business focusing on succession plans.

Gibb Dyer Jr and Wendy Handler has focused on that fact that family members need to consider many aspects like successions in order to make the business future in a better way.

The reason for such interest for succession plan can be attributed to the fact that succession is indeed a very troublesome problem for entrepreneurs, and there are numerous, high-profile cases such as the Ford and DuPont families where the succession problem deeply affected the business and the family. Moreover, because of the difficulty in resolving the succession dilemma, founders have been more willing to ask for outside help in the form of either research or consulting on the succession question. Thus, entry into the world of family business has often occurred as the entrepreneur contemplates retirement.

http://aede.osu.edu/resources/docs/pdf/D3E57989-B26F-4D12-B7054694F29BA82C.pdf

This graph below shows the differnt steps that needs to be considered by the family:

http://pfp.aicpa.org/NR/rdonlyres/597501EE-4B56-464F-8E14-DDF25083B5E1/0/FFFamilyBusinessSuccessionPlanning.pdf

All families contend with conflict, at least once in a while. Here is such an example of a family business owner from California and his views.

Dipping into the talent poolRyder Steimle
California Pools & Spas, West Covina, Calif.

Ryder Steimle, 39, never worked directly with his father, Doug, at the family’s company, California Pools & Spas in West Covina, Calif. Doug, now 63, took a leave from the CEO’s post in 1999 to join a three-year church mission to Argentina.

“That gave me an opportunity to grow without being overshadowed by his personality,” says Ryder, who was a vice president at the time. In his father’s absence, he worked closely with his uncle, David Morrill, the company president, who’s also now in his 60s.

“I think we would have gone different ways, had my father not left,” Ryder speculates. “It would have been difficult for our two personalities to blend for a long enough period of time for us to make the transition.”

After Doug returned from his mission in 2003, Ryder was named CEO of the company, which now employs 60 people. “When he got back, he realized the company was a different place, and it was probably best for me for him not to come back,” Ryder says. “It would be difficult for me to learn the things I needed to know to take control.”

At times, however, Doug found it tempting to jump back into the pool business, especially while Ryder was trying to help his three brothers find their niche in the company. “Of course there was tension,” Ryder admits. “It was very difficult to have his older son making decisions on behalf of his other kids.”

For instance, brother Quinton, 37, learned he’s not interested in management. He found he excels in sales, and today he works directly with homeowners. “But settling into that seat has taken time, to discover what makes him tick and for us to coach him through,” explains Ryder.

Vanz, 34, initially worked in sales. He worked hard and was conscientious but didn’t really shine in that position, according to Ryder. When an opportunity opened a few years ago for an assistant manager at the company’s warehouse, Master Supply, he was able to grow into a management position there and now oversees that division. “It has been a perfect fit for him, and he has excelled,” says Ryder. While Doug agreed that Vanz should be given that opportunity, Ryder notes that he and his father disagreed about how it would happen.

“I think my father wanted to ramrod him into there, and I wanted it to happen a little slower,” Ryder says. “I remember being uncomfortable with someone on the outside—my father&151;who wasn’t involved in the day-to-day business, sort of making those kinds of decisions.” He says he told his father, “‘There are things you’re not seeing that I’m seeing. There are other players this will impact. We need to be sensitive to all that.’ And we got on the same page together.” It is working well now, Ryder says. (His youngest brother, Myles, 30, is the manager of sales and marketing.)

Ryder understands why many parents want their children to have equal positions in their family’s business. “They love them equally,” he acknowledges. “But you cannot have equality when you’re passing the business to the kids. You have to have leaders and followers—a clear chain of command that everyone understands, respects and is willing to live by. When you start breaking that chain of command, that’s when things get screwed up.”

(Pearl J.A, Dealing with Dissent, 2010).