3 Ways to Prevent Conflict From Destroying Your Family Business

It’s a dreaded word that wreaks havoc among family-owned businesses. No one sets out to engage in it when building a business, yet it’s an inevitable part of every family-owned business.

That dreaded word is conflict.

Conflict is not bad, as long as we understand how to use it to improve our business and ourselves. Conflict, can, however, be destructive to family-owned businesses when allowed to foster resentments and cross over relational boundaries.

According to the Family Firm Institute, 20% of family businesses report weekly conflict, another 20% report monthly conflict, and 42% report conflict 2-4 times per year.

According to Harvard Review, some 70% of family-businesses fail or are sold before the second generations has a chance to take over the business.  Conflict results from poor management decisions, emotional immaturity and being unprepared to handle complex business decisions.

Before we look at three ways to use conflict to gain positive outcomes for the business, let’s define conflict.

Conflict is not the same as a simple disagreement. Many of us disagree or don't see eye-to-eye with others, yet we find ways to get on the same page, because our values and the end result are much more important than the difference in opinions.

Disagreements happen all the time and are simply defined as lack of consensus.

Conflict, on the other hand, goes much deeper than a simple disagreement. Conflict happens when two people reach a point where their positions are mutually exclusive, or a point when two points of view come to a place of a prolonged struggle.

In order to prevent conflict from destroying your family business, you first need to identity the root cause of the conflict. Once the cause has been determined, use the following three principles to prevent conflict from undermining your business:


Say NO to Nepotism

Hiring, paying and promoting family members because they are family rather than on their merit, will inevitably cause conflict. In a business where family and non-family employees work together, engaging in nepotism will not only discourage non-family employees but eventually drive your bottom line down. So how to avoid conflict caused by nepotism? Make it very clear to your family members that all hiring, firing and promotion decisions will be made based on merit. Explain to them why this principle is critical to the wellbeing of the company, and help them understand how destructive nepotism can be to both the business and the relationships. By making avoiding nepotism a guiding principle you’ll minimize the potential for emotionally charged conflict to occur. Reach out to a trusted and experienced third party to help you with personnel issues.


Say NO to Greed

Long-term financial health should be a priority of every family business. Conflict will arise when business objectives clash with financial needs or wants of the family, especially when no boundaries have been set to protect the business from foolish financial decisions.

As Family Business Center puts it so well: “Successful Family businesses leaders focus on the next generation, not the next quarter. They tend to embrace strategies that put customers and employees first and emphasize social responsibility.”

Set ethical standards so high around the finances of your family business, that there won’t be room for abuse. Make sure that controls are in place to help prevent financially driven conflict.


Set Clear Conflict-Resolution Guidelines

A wise proverb says that there is wisdom in multitude of counselors.

Since conflict is an inevitable part of life, and will rear its ugly head in virtually every family owned business, having clear, written guidelines for conflict resolution becomes very important.

Guidelines could include principles like:


  • Deal with conflict quickly, do not let it fester.

  • Listen to the opposing party without interrupting and with an open mind.

  • Go directly to the individual you are at conflict with. Do not permit gossip or character assassination.

  • Designate few individuals to serve as unrelated, uninvolved and objective go to parties for counsel and wisdom. Give them full permission to speak truth to your life.

  • Do not be easily offended

  • Put other’s interest above your own

  • Focus in serving others rather than being served

Data shows that only 30% of family-owned businesses survive into the 2nd generation. Only 12% survive into the 3rd generation, and only 3% make it into the 4th generation. Conflict, when allowed to go unchecked, has the potential to destroy even best business.

Conflict does not have to be bad. When manage appropriately, it can actually help a family-business grow and mature.  Don't allow your business to become yet another unfavorable statistic. Resolve early on to not allow conflict to destroy your family-business. Reach out to trusted experts to help you manage conflict. Very often honest, unbiased feedback and evaluation will help you not only overcome conflict, but use it for something good.