by Joel Freimuth, President of Blue Pearl Consulting Firm
For anyone running a family business, conflict is nearly unavoidable. According to the Family Firm Institute, 20% of family businesses report weekly conflict, another 20% report monthly conflict, and 42% report conflict three to four times per year. While conflict can be defined in many ways (divorce, death, accusations, etc), family businesses are hit the hardest and necessitate the most proactivity.
Businesses can turn for the better or worse at the drop of a hat. Because of this suddenness that all business owners are at the very least, subconsciously aware of; there is a critical need to prepare for both scenarios in those occasions where operations are running smoothly. This ideal holds true for succession planning as well. Many headaches can be avoided altogether with some forward thinking.
There is no doubt that varying levels of conflict will occur through the course of running a family business. However, having a game plan before conflict arrives and not trying to figure it out in the heat of the moment will go a long way in coming to a clean resolution.
Here are some of the issues that can threaten the prosperity of a company and how to best avoid and subsequently resolve them.
Goal Oriented Operating Agreement.
Important to any partnership but crucial for a family business where minor issues can create stronger emotions; an operating agreement enables decisions to be made prior to the potential conflict. By formulating a plan of attack while everyone is on the same page, the risk of heated arguments occurring in the moment is averted. Gear this toward the goals of the company so that it maintains congruence with the vision that all parties have for business operations.
All decisions at the time of its inception may not be etched in stone, but it is important that any alterations to the manual only take place when the business is running smoothly. This idea of planning for the worst when things are going well is the backbone to the operating agreement which will create a fallback for the family management to return to, if a consensus cannot be reached.
Identify Major Conflict vs. Minor Disagreement.
Conflict can rear its ugly head in many different forms. By identifying the severity of each problem that pops up, one will be well equipped to handle every particular issue properly. Through the operating agreement and common discourse, simple disputes over what to charge a customer will be handled far differently than accusations of a family member skimming money off the top.
While the prior example may seem obvious, identifying and creating barriers between these differences will give the business much more solid ground to stand on while solving conflict. This is another step in creating a more unified front when everything is going well to avoid disaster when it comes knocking.
What is Your Vision?
The vision for the company always needs to remain at the forefront of every business. Family businesses tend to have more dissent in this area than most because generational goals can vary immensely. The leaders of the company whether they be father/son, brother/sister, etc. must communicate clearly with each other where priorities lie.
As all industries are constantly evolving, these aspirations may change over the course of time. Anytime either party feels the need for a change of direction, a dialogue should commence before any actions are taken. It is best to drive this discussion when heads are cooler and hopes are higher rather than waiting for a severe conflict to prepare for it.
Joel Freimuth is the President of Blue Pearl Consulting Firm, founded in 2011. Freimuth has years of experience and expertise in management consulting, financial analytics, business development and strategic planning. Blue Pearl is located in Chicago, IL, and specializes in creating, implementing and maintaining strategies to assist its clients in reaching their stated goals.