Controlling Conflict in a Family Business

Internecine battles in closely held firms need not lead to deadly civil wars.

October 27 2010 by Morey Stettner


When Nita Werner took a full-time job at her parents’ business in 1994, she knew her accounting skills would fill a gap. Combined with her father’s sales and purchasing background and her mother’s assembly expertise, Werner figured she could help form a formidable triumvirate.

Within a few years, however, the trio’s clashing styles and different perspectives stymied business growth. They realized that the status quo wasn’t tenable.

“There was some serious yelling going on among the three of us,” recalls Werner, president and chief financial officer of Ornelas Enterprises, a contract electronic manufacturer in Hillsboro, Ore. “It created a culture where our employees thought they could do that, too.”

By 1998, Werner and her parents decided they needed to relate to each other better. So they hired a consultant to lead a series of communication-skills seminars.

After six months of sessions, the family developed tools to interact more effectively. Their employees also participated in some workshops, so they gained skills as well.

“We learned that the person who yells the loudest isn’t the winner,” Werner says. “We learned to listen and respect each other’s views.”

Arguing and sniping occurs in many families. But when the combatants run a business, ill will can spiral out of control and jeopardize everything they’ve built.

Like Werner and her parents, enlightened families recognize the problem and address it. If allowed to fester, conflicts can alienate employees, confound investors and scare off customers.

Passing the Torch

Families that exhibit certain behaviors such as openness, patience and a willingness to accept differences in opinion usually work through conflicts productively. But that’s harder to do amid jealousies or other psychological baggage.

“Most family businesses cannot transition successfully from generation to generation,” says Scott Friedman, a partner at Lippes Mathias Wexler Friedman, a law firm in Buffalo, N.Y. “Often, it’s not because the business isn’t good. It’s because the relationships aren’t good.”

The next generation sometimes enters the family business for the wrong reasons. They may assume “it’s easy, it’s lucrative or it’s expected,” says Friedman, co-author of How to Run a Family Business.

As a result, they tend to approach the business with a sense of entitlement and lack clarity about their role. Rather than raise concerns with tact, they rush to disagree and lambaste anyone who gets in their way.

Two strategies enable family businesses to avoid rancor. First, there’s the gift of choice: The older generation lets children pursue their passion and career interests. That’s better than pressuring next-of-kin to become presumptive scions of the business.

Second, companies that preserve core values create a non-negotiable set of beliefs that govern how people treat each other. A board or directors—or an outside consultant—can help enforce the values and work with individuals who violate or disregard them.

At Harbor Industries, three generations of leaders have passed along core values that emphasize operating with integrity, serving customers and solving problems. Making the values come alive for both family and non-family employees has helped minimize conflict, says Tim Parker, president of the Grand Haven, Mich.-based maker of retail displays and fixtures.

Parker was Harbor’s vice president of operations before becoming president in 2008. To create a smooth transition, he and his father retained a professional facilitator years earlier to lead quarterly family meetings “to lay out succession carefully so that there would be no conflict,” Parker says.

Respected outsiders such as Harbor’s corporate counsel and three independent board members play a vital role in guiding the business and serving as a sounding board when family issues arise. Parker adds that he and his father “make sure to address family-related issues internally without affecting our other [300] employees.”

Big Families, Big Problems

To prevent conflicts from erupting in family businesses, parents need to venture outside their comfort zone. That means raising potentially uncomfortable issues with their kids.

“Sometimes, the fear of damaging relationships is too strong so families resist having the conversation they need to have,” says Debbie Bing, principal at the Center for Applied Research in Cambridge, Mass. She cites an example of a family business where the parents never discussed their children’s aspirations and future roles.

“If all the kids wanted to push Dad aside and become president—or if any of them said they wanted to leave the business—it would sound disloyal,” Bing says.

When large families run businesses, they’re especially prone to internecine feuds. Enlisting the whole clan to craft a set of unifying principles can forestall conflict.

At United Supermarkets, a 50-store grocery chain based in Lubbock, Tex., two brothers serve as co-presidents and the board is comprised entirely of family members. About five years ago, a consultant helped the family compose a visioning document that addressed many sensitive issues.

“As a family, we answered questions such as ‘Do we believe that one branch of the family should have a controlling interest?’ and “Do we believe that family members have an automatic right to work in the business?’,” says Matt Bumstead, United’s co-president. “Now if we begin to disagree over a subject, we refer back to what we said as a family in our written vision statement.”

Before Promoting the Next Generation, Ask Five Questions

Leaders of family businesses need to ask five questions before promoting their children into senior roles, says Stuart Morley, principal of BRS.JUMP, a Toronto-based consulting firm:

  1. Are you doing it for the right reasons? Build a solid business case for promoting your son or daughter—and be certain that your child will operate in the company’s best interests. If your motive is to treat everyone in the family equally or silence a nagging, overambitious kid, that’s a red flag.
  2. Do you have the right candidate? Consider whether your child’s personality will complement your firm’s culture.
  3. Is it the right time? “Often, a founder hangs on too long and let’s the business deteriorate,” Morley says. “Don’t wait too long to do the transition.”
  4. Do you have support from your customers/suppliers/bankers etc.? Confirm that your key constituencies like your child and approve of his or her promotion.
  5. Are you doing it the right way? Create an orderly promotional process with incremental steps so that your kid gets constructive feedback along the way.

Recruit Trusted Outsiders

At Patten Seed Co. in Lakeland Ga., the founder’s grandson is CEO and his great grandchildren also work in the business. But the firm’s longtime president is an outsider.

“I’ve been here almost 40 years,” says Ben Copeland, the president. “I’m working with the third generation now.”

Early in his career, Copeland reported to the founder’s son, W.A. Roquemore. Copeland learned from his mentor to “mind the store,” to pay attention to every aspect of the business to ensure it delivered quality products to satisfied customers.

“Roquemore was a brilliant entrepreneur and a strong leader,” Copeland recalls. “He trained me along with his son [the current CEO]. We came up through the same tutelage.”

Copeland brings the best of both worlds to Patten Seed: As an outsider, he can make more objective strategic decisions. But he’s also steeped in the family’s values and work ethic.

As a result, Copeland has earned the family’s trust. He admits that he doesn’t “always agree with the CEO on everything, but we work through it well.”

Links and Resources

Websites

1) Family Business Institute provides consulting, white papers and other research on its website (www.familybusinessinstitute.com). It also offers a “Performance Roundtable Program” in which CEOs of family businesses in noncompeting industries meet twice a year to discuss business challenges and review best practices.

2) Kenneth Kaye, author and family business consultant, lists his favorite films and novels that relate to family business dynamics (http://kaye.com/resources/favorites).

3) The United States Association for Small Business and Entrepreneurship, a membership organization, provides articles and information on family business (http://usasbe.org/interestgroups/familybusiness).

4) Family Firm Institute, a membership organization, has gathered instructive resources such as case studies of family businesses from Harvard Business School and other global business schools (www.ffi.org).

5) ReGeneration Partners provides a three-minute video on its website, “Is a Family Business Consultant Right for Your Family Business?” (www.regeneration-partners.com/about_video.shtml).

6) Fambiz.com offers a free monthly collection of news briefs on family business topics (www.fambiz.com/news.cfm).

Books

1) The Family Business Conflict Resolution Handbook by Barbara Spector (Family Business Publishing, 2003) is a 208-page book from the editor-in-chief of Family Business magazine.

2) Keep the Family Baggage Out of the Family Business by Quentin Fleming (Fireside, 2000) is a 336-page book that identifies the “seven deadly sins” that can sink a family business—and how to avoid them.

3) Family, Inc. by Larry & Laura Colin (Career Press, 2008) is a 256-page book co-written by a 37-year veteran of a 92-year-old family business. The focus is on practical tips to manage siblings, spouses, children and parents.

Morey Stettner is the editor of Managing People at Work and the author of five business books, including Skills for New Managers (McGraw-Hill). Based in Portsmouth, N.H., he coaches executives on their communication skills.