The Conflicts in the Family Business, originated by the conflicts between the own members of the business family, are a powerful agent of tension.
In this article signed by our collaborator Ana Diaz Montañes, Family Business consultant specializing in Family Councils, we delve a little deeper into this special and common theme.
Theme to which we already proposed some solutions in a previous publication: Family Business Protocol.
The Conflicts in the Family Business. Background.
In the VII Annual European Barometer of Family Business elaborated by KPMG (2018), to the question, what are the three main concerns that your family business currently faces? A 42% indicate the decline in profitability, 38% the war for talent and 35% political instability.
So recently and in this line, have expressed it in the two major EF events that have been held in Spain. Last October in Murcia, at the XXII Congreso Nacional de la Empresa Familiar, with specific proposals on an in-depth reform of the education system and the demand for political stability. And, this November in Madrid, along the same lines, at the European Family Business Summit, during the annual meeting of European family businesses.
Despite of the fact that political instability is currently one of the main concerns, family conflicts and not the uncertainties of the markets are the main cause of the disappearance of companies and the rupture of family sagas.
We have examples of family businesses and business families that have overcome oil crises, inflation and interest rates of 15%, real estate crises, financial crises and even wars. Families that have been able for decades to transcend the company beyond the context in which they moved.
In the book “Characteristics of Successful Family Businesses,” IESE Business School points out as success factors, excellence, work, initiative, simplicity and austerity and, in my humble opinion, I would like to add patience, communication and good humor.
In relation to family conflicts, I point out two of the most sensitive moments in the life of any family business:
- the generational replacement of power and ownership
- and the incorporation of new generations into the business organization.
In fact, business leaders are clear about it. In the 2017 Barometer prepared by KPMG, the question “What factors do you consider key to success?
- 95% say they have good corporate governance structures and processes,
93% maintain control of the business in the family
and 93% point to communication between generations.
The Conflicts in the Family Business. Anticipation.
From the business dimension, the leaders understand the needs of the company, for it they plan, quantify, innovate, order, elaborate business strategies to 5 or 10 years and assign budgets and resources to carry them out.
But in family businesses, they cannot be separated from their family aspect. And yet, family management planning is not always explicit. The resources that we so clearly see as necessary for business continuity, it is difficult for us to apply them as a philosophy, in family management.
Each family business is as unique as each family is. And the contexts in which they develop are different. But to move on from this, there are a series of cross-cutting issues to all family businesses that have been proven as generators of conflict.
Themes that intertwine the lives of my parents, my children, my uncles, my siblings and my brothers-in-law with business life and organization.
- Have dividends become an essential money to live my brothers, my cousins…? But this year we need to advance in the digitalization of the company.
- I can’t wait to retire, I could continue to supervise, but will my children be able to continue without me or will they throw away everything that has been achieved so far? What if I sell the company and leave them a patrimony?
- Do I split the shares equally? But my eldest son is the one with the most effort and dedication. Equality or equity?
- The salary of each of my children is different according to the number of grandchildren. They are my grandchildren and they have the same right to live at the same level! I work more and I have more responsibility than my brother and we earn the same, it is not fair!
- Which comes first, the family or the company. My son, my cousin, my brother-in-law, doesn’t find a job, of course, with the crisis it’s complicated. Let’s help him, What enters the company to work?
- My company and the market have grown and changed a lot, why not incorporate an external professional to manage it? Will my children know how to face the new challenges? Do they want to and can they? In truth, we need non-family managers to continue being market leaders.
- A part of my cousins want to sell their shares, they say that total, they receive nothing, they do not contribute anything. They also live outside Spain and think that we earn a salary and they receive nothing. What do we do, do we buy their shares? At what price? Do we all sell? What if we sell, then what do we do with the money and no work? If my father and my uncles saw it, they would get a tremendous displeasure. Do we incorporate new shareholders to continue growing or do we do it with debt? We are committed to this project.
A good example
A few weeks ago, in the Comillas Family Business Open Classroom sponsored by Arrabe Integra, the president of Calidad Pascual, D. Tomas Pascual, said “love fills what order encompasses” (Bert Hellinger). In short, it gets to the essence of the issue I’m discussing in this article. We were fortunate to hear the story of his company and his family told by two of its protagonists Tomás and his sister Sonia. And even better, they explained to us how they are organized as a family and how the long process is being, (more than 20 years), helped by external advisors, to get to where they are right now, with the 1st to 2nd generation business relay successfully completed and already preparing the relay to the 3rd generation of cousins.
Conflicts in Family Business. Conclusions
If I had to draw a lesson from this case of success, I would dare to say, anticipation. The best medicine is to anticipate emotional wounds that are difficult to heal. This does not mean avoiding problems, but anticipating these situations that will come at one time or another. Anticipate with flexible instruments that accompany the growth and development of the family and the company, incorporating new spaces where effective intergenerational communication can take place. These instruments can be the institutionalization of a Family Council and clear and explicit rules of the game that anticipate and regulate the relationship of the family with the company (the so-called Family Protocol).
Faced with different contexts but sustained by the same family values, adapt the success models of the founders, which does not mean repeating them! Anticipate so that the personal expectations of people who are already in the company, and the personal expectations of new incorporations, move in the same direction.
In short, to anticipate the creation of a communication space where the family is managed in its relationship with the company, being almost indispensable to have the help of an external team.
And it is almost Christmas time, and my grandparents, my parents, my uncles, my brothers, my brothers-in-law and cousins will all get together for dinner. Every Christmas with the traditional family menu and in a natural way, we will toast to the new projects of the company for the New Year.
In Arrabe Integra we are experts in the management of the Family Business. We have many clients who are, therefore, and if it is your case and you need help, do not hesitate to contact us.