Navigating Disputes in Multigenerational Family Enterprises: A Governance Challenge
When family members with different visions and goals are involved in a business, conflicts over governance can arise. These disagreements can be particularly challenging to resolve, as they often involve complex emotional and psychological factors.
Family businesses have been a cornerstone of economies worldwide for centuries.
According to a study by the Family Business Network, over 90% of all businesses are family-owned.
These enterprises contribute significantly to employment and GDP growth.
In the United States alone, family businesses account for nearly 70% of all employers.
They often exhibit unique characteristics, such as long-term planning and strong social ties.
However, they also face distinct challenges, including succession planning and managing relationships between family members.
Understanding the Sources of Conflicts
In many cases, conflicts over governance in family businesses stem from differences in opinion on how the company should be run. This can include disagreements about strategic direction, financial management, or even the role of individual family members within the business. For example, some family members may want to expand the company’s operations, while others may prefer a more conservative approach.
A family member is a person related to another by blood, 'marriage' , or adoption.
According to the U.S. Census Bureau , there are approximately 3.23 people per household in the United States.
The most common family relationships include parents, children, siblings, spouses, and grandparents.
Family members can also be extended relatives such as aunts, uncles, nieces, and nephews.
The Impact of Unresolved Conflicts
When conflicts over governance are left unresolved, they can have serious consequences for the business and its stakeholders. These can include decreased productivity, reduced employee morale, and even financial losses. In extreme cases, unresolved conflicts can lead to the breakdown of relationships within the family and ultimately, the demise of the business.
Family dynamics refer to the complex interactions and relationships within a family unit.
These dynamics can be influenced by factors such as cultural background, socioeconomic status, and individual personalities.
Research suggests that healthy 'effective communication' , emotional support, and conflict resolution skills characterize family dynamics.
In contrast, dysfunctional family dynamics can lead to issues like codependency, enabling, and intergenerational trauma.
Understanding family dynamics is crucial for building strong, resilient relationships within the family unit.
Breaking Down Barriers to Resolution
So, how can family businesses resolve their governance conflicts? The key is to create an environment where open communication and trust can flourish. This may involve setting aside regular meetings outside of formal board sessions, where family members can discuss their concerns and work towards finding common ground.
For instance, in the case of Connor’s heavy-equipment business, setting up regular one-on-one meetings between Connor and Liam, away from the pressure of quarterly meetings, helped to build trust and facilitated a more constructive dialogue. By doing so, they were able to address their differences and find a solution that worked for everyone.
Seeking Expert Guidance
In some cases, family businesses may benefit from seeking external guidance on how to navigate their governance conflicts. This can involve working with experienced advisors or consultants who have expertise in family business dynamics and conflict resolution.
By taking proactive steps to address their governance conflicts, family businesses can build a stronger, more resilient organization that is better equipped to overcome the challenges of the future.
