Every family business faces conflict at one point or another. Some must deal with the issue of conflict more often than others. But no matter how cohesive the family business looks on the outside, there is undoubtedly at least a small measure of conflict brewing on the inside. If your family business is constantly in the midst of a conflict, either small or large, it’s time to implement effective family business conflict management resolution techniques. Learning how to anticipate when a conflict might arise, developing clear guidelines for dealing with a conflict, and adopting effective conflict management techniques may be the only way to ensure your family business ultimately succeeds and prospers.
If families can anticipate these sorts of issues, and create clear guidelines for dealing with them that everyone supports, they increase the odds of avoiding the pain of conflict and poor decisions. That is what a family constitution strives to do. It functions as a kind of insurance policy against future problems. By creating binding agreements on governance, it sets up the playing field for orderly succession, provides clear criteria for decisions, and establishes mechanisms to help resolve conflicts and disagreements before they have ruinous effects.
“We the people…to form a more perfect union” Family Business Magazine, Summer 1998
A family business that is willing to dedicate the time and effort necessary to develop a Family Business Constitution, which helps govern the operation of the family business, often fares much better than a family business that has no ground rules. A family constitution is a mechanism that sets up the playing field. It helps resolve conflicts before they get out of hand.
A Family Constitution Can Address Several Issues Including:
- Who will have control of the family business in the future?
- Rules for separating the family business from regular family life.
- How are family members who are not involved in running the family business to be compensated?
- Who in the family is responsible for specific job responsibilities?
Ultimately, a Family Constitution is meant to be a binding agreement that holds power. When a conflict arises, family members can reference the Family Constitution for guidance on how the conflict should be resolved.
According to an article published by the Harvard Business Review, Avoid the Traps that Can Destroy Family Businesses. To survive over the long haul, family firms need to adopt formal policies about whom to employ, whom to promote, and how to balance family and business interests.
If you want your family business to succeed, flourish, and have the capacity to provide financial benefits to your family members for many years to come, it’s important to understand from the beginning that the owners of a successful family business must accept that there will be challenges along the way. The most important factor in regard to family business challenges is having the skills to handle conflict and being dedicated to creating solutions that will help move the business forward.
- Alignment: In order to prevent conflict, all family members involved in the business must be in agreement on important issues.
- Vision: Family members should agree on the vision of the business. This is often best accomplished by creating a written vision statement.
- Shareholder Agreement: A binding legal agreement is typically an excellent tool to help stave off conflict within a family business.
There are several other key factors that help eliminate the possibility that family business conflict will arise, including: creating an action plan, adopting a Family Constitution (as stated above), adopting an employment policy that states the terms and conditions of employment, and putting all past conflicts to rest.
Cambridge Consulting Services has extensive experience assisting family businesses in the development of Family Business Conflict Management strategies. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Cambridge Consulting Services has assisted more than 230 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.