Top sources of conflict in Family Business

Conflict is inevitable in Family Business as it is an amalgamation of Family and non-family members who are likely to have disagreements on Family / Business related issues. Enlisted are the various sources that could give rise to conflict in the Family Business scenario. It is feasible to identify appropriate measures once the source of conflict is identified.

The top sources of conflict are

  • Direction of the business: Lack of common vision and goal for the family business can trigger conflict among Family Members.
  • Decision Making: Lack of clarity about / in the Decision Making process or the decision-making authority can be a potential cause for conflict.
  • Roles & Responsibilities: Lack of clarity regarding the roles and responsibilities of members, lack of understanding of their roles by Family Members, role overlaps, or poorly drafted performance expectation could snowball into conflict.
  • Compensation/Benefits: If they are perceived to be unjust or inequitable, solid ground for conflict is generated. If the compensation is perceived as unjust or inequitable, it lays the ground for frequent sources of conflict.
  • Ownership: Family Ownership of Business can be a major source of conflict if actual ownership is at stake and terms of transfer to the next generation is not clearly documented.
  • Monetary benefits to non-employee shareholders: Inequitable distribution of dividends to shareholders can be a major source of conflict.
  • Personality Differences: Family businesses that fail to acknowledge and accommodate differences in the personalities of individuals involved are more prone to conflict.
  • In-Laws: In-laws and spouses may have different perspectives and interests. Unless their terms of engagement with the business is clarified this could be another source of conflict.
  • Accountability: Family members must be held accountable for fulfilling their responsibilities.  If resentment grows into a confrontation it must be handled with discipline.
  • Succession: If a leader has not been jointly voted as a successor, it is likely to be source of conflict during the leadership transition stage as there may be many aspirants for the position.
  • Sibling Rivalries: If sibling rivalry persists even after the children's entry into the family business domain this can lead to bitterness among the members.
  • Entry / Exit Rules: Clear rules on entry / exit of family members into and out of family business
    can reduce conflicts.
  • Communication: Unclear, partial and infrequent communication can be a source of conflict as it could lead to misunderstanding among family members.
  • Estate Plans: Lack of clarity on estate plans formulated by senior generation raises anxiety among other members. The absence of clarity on inheritance could lead to conflicts.
  • Finances: Money matters often becomes a source of conflict among family members. Can it be coupled with compensation and benefits?

It is very important for family businesses to identify the potential sources of conflict and proactively work to ensure that adequate measures are adopted so that those conflicts do not arise at the
first place.

 

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