NEWS

Avoiding and managing conflict in a family business

April 6, 2022
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BSc FCA, Audit Partner
East London



Avoiding and managing conflict in a family business



NEWS

Avoiding and managing conflict in a family business

Image


BSc FCA, Audit Partner
East London


Running a multi-generational family business can be hugely rewarding and can often bound family ties much stronger. To build and pass on a family business is often a legacy that business owners want to achieve. However, running a business with family members isn’t always easy. The pressure of meeting business and family needs can be a fine balancing act.

So, how do you run a successful family business and avoid unnecessary conflict and tension?  Here’s our tips on minimising conflict in a family business.

  • Have clearly defined roles

Sometimes a family business has a clear decision maker/leader, possibly the original founder.  But family businesses are often less structured than non-family businesses.  When you start out it can be all hands-on deck and as the business grows, roles can be intertwined. Families also have a foundation of trust and communication that can lead to lack of willingness to give more clarity to roles.

Understanding which family member is responsible for each area of the business is key. Think about the main areas of the business and match these to individual strengths and passions. Areas can include strategy, financial, people, operations, sales & marketing, and customer service. Hopefully a family dynamic allows a leader to naturally develop, but not always and clearly defined roles are vital.

  • Have a clear vision and values

Having clear shared values and a vision for the company ​​can help avoid conflict. If you have clear goals, then private interests that are contrary to the business goals can be easily controlled or stopped from progressing. Having shared values and vision can provide the ‘glue’ that holds the family together on where the business is heading.

  • Family meetings or family councils

Holding regular or periodic family meetings ensures that there is a forum for family and business issues to be discussed. Communication is key to keeping a family business working together successfully.

Often family members are so involved in the day to day of the business and each other’s lives outside of business that it can be impossible to find time to discuss bigger issues or tackle tough topics. Creating a specific and safe place to discuss major business issues and personal grievances can clear the air and enable people to find resolution before they become bigger issues.

  • Write family business policies

It’s often the same areas that cause conflict in family businesses. Whether it’s around pay, compensation or succession. Preparing written family policies before conflicts arise will mean there are specified ways to resolve conflicts — if and when they do occur.

This should be backed up with Articles of Association and a Shareholders’ Agreement which are fit for purpose and regularly revisited to plan for the next stage of the business life.

  • Have an exit plan for family members

If a family member believes the direction in which the company is going isn’t to their satisfaction, then you need to have a clear process where a shareholder family member can reduce involvement or exit the business. It may just be reducing their stake and involvement in the business or a full exit.

  • Employ external directors

Having non-family, non-executive directors on the board of the business can be a very successful way to strengthen a family business and lessen conflict. Having an outside objective view on the performance of the business and skills and strengths of family members can be invaluable.

  • Use external advisors

Much like having non-executive family directors, having trusted external advisors can help to avoid disputes. It may be your accountant or your lawyer but having objective and experienced advisors can help you to avoid and to resolve conflict.

  • Don’t abuse family relationships

Treating family differently to employees can cause conflicts on both sides. If business is busy, then expecting another family to work extra time (before an employee) and expecting family members to drop everything for the business can be an abuse of a family relationship.

Equally, when you begin employing non family members, you must ensure that employees and family members are treated equally. Treating non-family employees differently or handing out special favours to family members can be serious de-motivators and can lead to losing people.

  • Keep business and family time separate

Avoiding a constant business intrusion on family time is critical. Successful family businesses set clear boundaries. It could simply be setting dinner time, weekends, or holidays aside as time without business discussions.

  • Have clear succession plans

When it comes to passing on a family business, the transition can be the time that conflict happens. Aligning the vision of the senior generation and the incoming generation is crucial to a successful transition.

It’s important that the next generation get involved and learn about the business as early as possible to give them experience and develop a sense of ownership and commitment to the family business.

Managing expectations, clear communication and transparency are key to minimise future conflicts.

Conflicts and misunderstandings often exist in family businesses so managing these conflicts is key not just to the survival of the business but to the survival of the family.

The impacts of conflict in a family business can be catastrophic. At their worst, they can lead to the destruction of the family business or create lifetime divisions in personal relationships with other family members.

Here at Barnes Roffe, we support hundreds of family businesses and have seen both the best and worst conflicts occur.  We are there to support our family business clients to both avoid and resolve these conflicts. Contact us to find out how we can help your family business.

We believe we are more than just your average accountancy firm. Our goal at Barnes Roffe is to engage our clients through a proactive relationship, which provides you with the resources and tools you need to enable you to take charge of your finances with confidence.

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PLEASE NOTE: By the very nature of this type of information the details of tax law might have changed since they were published, so contact your Barnes Roffe partner before acting on any matter contained in these documents.