50 Common Causes of Family Business Conflict ... and how to deal with them

50 Common Causes of Family Business Conflict ... and how to deal with them

50 Common Causes of Family Business Conflict ... and how to deal with them

Expectations & Entitlements.  

By Jon Kenfield. Solutionist.  

• Family membership may create unjustified and unsupportable expectations of rewards or benefits from the business - cars, phones, credit cards for personal expenses etc. These are sometimes caused by parental generosity that becomes unsupportable on an economic basis.  

• Family employment raises obvious Performance & Remuneration issues.  

• Popular myth that family members must put in 120% effort by employees. Rarely achieved, except in founding generation.  

• Sense of entitlement is a common problem:  o Protected species.  o Rewards / high pay for family name - not for effort, contribution, or ability.  o Job security without objective accountability, resentment amongst hard working family members and staff.  

• Parental promises are often taken into the business, without disclosure. Usually creates clash with other staff, managers and supervisors, and HR policy in general.  

• Parental obligations taken into the business create problems between parents when rose-tinted expectations are deflated by work realities.  

• Solution: establish objective employment, performance measurement and reward criteria in the business (HR task) and ensure its congruence with family rules.  

• Satisfy family expectations that are not proper business considerations out of family funds, transferred out of the business. There you can apply whatever family criteria seem good to you, without reference to commercial commonsense.  

• Make objective employment criteria a family requirement in a Family Policy or Family Constitution document - then it isn’t personal, when the issue comes up. 

Ensure that the policy is congruent with business HR policies and procedures.  

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Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Employing Family Members.   

By Jon Kenfield. Solutionist.  

• Family business = private business, legal & practical ability to do whatever.  

• Prime reason for many family businesses’ existence is to provide employment for family members, (especially those with sub-par employment prospects, in the eyes of their parents).  

• More complicated in 2nd and subsequent generations, because there are more stakeholders, coming from multiple households  exponentially more complex family dynamics.  

• If family members fit in = OK, provided they aren’t resented by staff (loss of expectation of career path etc).  

• If family member doesn’t fit in - work ethic, personality, attitude towards staff etc, major issues. Good staff leave; loyal and bad staff stay. Loyalty is usually personal to the leader, not to the family.  

• Junior roles are usually OK. Senior roles need to be on merit, or everybody’s future is at risk, and staff push back is almost inevitable.  

• Solution: establish objective employment criteria in the business (HR policy task).  

• Create formal performance management system, with:  

o Detailed job descriptions.  

o KPIs.  

o Objective competency requirements.  

• Make objective employment criteria a family requirement in an agreed Family Policy or Family Constitution document. Then it isn’t personal, when the issue arises, and business and family procedures support each other. 

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Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Modernising & Professionalising the Business.  

By Jon Kenfield. Solutionist.  

• Clash between old and new, conservative and progressive, positive and negative, proactive and reactive.  

• Usually an inter-generational, age-based issue.  

• Incumbents are invested in past and present; successors are looking to the future.  

• Aged owners may be fossilised - they either resist change, or can’t physically make changes.  

• Common for upcoming generation to invest too much in IT to marginalise owners / parents. When it goes wrong / over-budget - creates conflict and concerns re judgement of potential successors.  

• Also common for parents to indulge next gen by allowing them to enter into contracts that stamp their authority on the business - enthusiasm and poor judgement can make this go horribly wrong - and threaten the business as a consequence.   

• Solution:   

Take a gentle approach. Negotiate acceptance of change through inclusive planning (on-boarding) and help with visualising next life stage.   

• Create new, appropriate and attractive role for elders as Sponsors of change, using family members and interests to create extra leverage.  

• Move human blockers into non-operational governance roles so they can’t interfere with change project.  

• Empower staff to make changes - reduce dependency on current leaders and create experienced support team around ascending generation. 

I'm interested in your comments below.  

Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

By Jon Kenfield. Solutionist  

• Classic cause of conflict - competing financial needs and interests.  Family needs money to live on; business needs money to ensure sustainable trading.  

• Family money is for personal use, which may be necessities, luxuries, or anything in between.  Time frames are personal and subjective.  

• Business money is to maintain competitiveness and generate profits. Time frames are commercial and objective.  

• Assuming money is a scarce resource, getting the balance right is always challenging.  Solution:    

• Clarify personal and business needs and expectations (long term perspectives make it easier to suffer short term pain).   

• Develop financial plans so everyone knows what is likely to happen and what their role is in making it happen.    

I'm interested in your comments below.  

Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Confusing Roles: Owners, Leaders, Managers & Employees. The Dotted Line!  

By Jon kenfield. Solutionist.  

• Conflict flows from confusion and attacks.  

• A fundamental source of confusion is lack of role clarity.  

• Another revolves around unjustified change. That’s not  the same as unwarranted change - unjustified means “not explained, therefore not accepted or supported”.  

• According to business best practice, leaders, managers and employees all have clearly definable roles in a business. Clarity provides Certainty & Confidence.  

• Owners should be placed off to the side in any Org Chart. They have no definable role in the business, and their interests can clash with business imperatives.  

• Owner interventions also confuse everybody in the chain of command.  

Solution:  

Create an Org Chart with a dotted line separating strategic & governance roles from operational responsibilities.  

• Leaders (directors) should stay and operate above the dotted line (governance).  

• Everybody else operates below the line (doing the doing).  

• Leaders can go below if they have a specific operational roles.  

• Develop detailed job descriptions and appropriate KPIs so everybody knows what’s expected of them and how their performance will be measured.  • Establish discipline in the business structure - above and below the dotted line. And have an isolation box for owners to stay inside!  

• All business employees need to perform. When owners try to re-write that rule (perhaps in support of a non-performing family member) business systems and discipline suffer.  

I'm interested in your comments below.  

Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Ages & Stages - Conflicting Financial Needs.  

By Jon Kenfield. Solutionist.  

• Major cause of conflict - generated by different needs during different ages & stages, compounded by life’s usual complexities.  

• When young - home & mortgage / family / school fees / collecting “toys” + prospect of many more years in the business.  

• Willingness to invest in risk - less to lose and more to gain.  

• When old - fewer operating expenses, but long period of not working and not earning is now an immediate concern.  

• Less return on investment in business and greater need for personal financial security - more focus on self, and less on current & future business.  

• Fear that family members (usually not those working in the family business) will be left having to support aging and ailing parents.  

• Solution: individual & collective financial plans that address everybody’s (especially parents’ ) needs as well as possible, & reassure the whole family that things are under control.  

I'm interested in your comments below.  

Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Differences:  Needs, Wants & Interests | Perspectives &  Behaviours | Respect & Rewards.  

By Jon Kenfield. Solutionist.  

• Arguments and conflicts come from lack of:  Shared Visions, Plans, Goals & Commitments.  

• Shared Visions Goals, Strategies & Plans are aspirational focal points that start with built consensus & are sustained by continuing effort & performance.  

• Lack of … leaves people to invent their own expectations, realities, & stories - encouraging leaders to create their own paths, while followers get confused.   

• Solution: take time & make effort to build, adopt & implement shared plans.    Engage family members and key staff in the process.  

Use it to:  

o Encourage regular communication, meetings & problem solving.  Increase communication & negotiation skills.  

o Increase respect as everybody has clearer expectations and assigned roles.  

o Build trust through observable reliability & performance.  o Focus on larger goals whenever confusion, demotivation or conflict arise.        

o Share & increase personal and group resilience.     

 I'm interested in your comments below.  

Thank You.

50 Common Causes of Family Business Conflict ... and how to deal with them

Parents as Bosses: Nature vs Nurture vs Independence.  

By Jon Kenfield. Solutionist.  

• Nature vs nurture goes back to the Greeks: innate qualities vs learned / conditioned behaviours and abilities.  

During the growing up years, Nature and Nurture interact within the Family System to shape individual personalities and core family dynamics. The results can cause serious conflict when they move into a business system, where consequences are magnified.  

• Family Business = Double Whammy:  o Parents at home vs Boss(es) at work and,  o Siblings at home vs professional colleagues at work.  

• Many sibling conflicts arise through parental over-protection (nurture) of one weak / needy sibling over another who is more independent & resilient:  o Excessive and overly-prolonged support tends to increase dependency on parents for life skills and financial sustenance, as well as work competencies.  o Independent children may resent dependent children who are treated equally by parents and bosses, despite unequal efforts, commitment and contribution. (Unequal abilities are usually ignored).  

• Entirely appropriate Parenting styles may not translate well into business operations:  

o Nurture vs Competition can create conflict when (unconditional) family love, emanating openly from one part of the family (ie: Mum) crashes against the business’s need for performance from a boss (often Dad).  

o It throws mother against father, and siblings against each other.  

• Modern business is more inclusive and collaborative - playground lessons?  

• Resilience is a product of teaching & requiring independence - owning issues and challenges; choosing how to deal with them; accepting responsibility for handling your own stuff, without running off to Mummy for a fix, and a cuddle.  

• Solution: create and require adult independence & resilience in business. Obtain coaching support if this conflicts with the family’s normal model.  

I'm interested in your comments below.