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MEDIATION

MANAGING AND PREVENTING FAMILY BUSINESS DISPUTES

Rather than confront conflict, family members tend to avoid it, or avoid each other, until something snaps. When it does, fallouts can be serious. But if you need help dealing with family business disputes, there is an effective alternative to litigation and one that usually gets disputes settled swiftly. Family business mediation is becoming a more readily acceptable approach to dispute resolution.

 

Family business mediation is an incremental process. It takes time for the mediator to help the different sides see things somewhat differently than they currently do and start to facilitate agreements. It can also take time for the family members to really trust the mediator and buy into the idea that the mediator is working in everyone’s best interests.

The key element of effective family business mediation is that it produces results that are acceptable to all involved. Thus, when conflicts are resolved, they tend not to lead to other disagreements and acts of sabotage. It is critical that the family recognize and want to address the conflicts, understand that they will likely have limited if any success on their own, and choose a highly qualified family business mediator to work with them.

A family business mediator is an unbiased outsider whose job is to work with members of a family business to come up with an all-around mutually acceptable resolution that alleviates the conflict. Mediation is a highly interactive process that is geared to help the various sides better communicate and think through the possibilities so they can arrive at a viable solution.

WHY IS IT PARTICULARLY SUITED TO RESOLVING FAMILY BUSINESS ISSUES?

While family businesses face the same challenges as other businesses when it comes to dealing with conflict, there’s a quintessential difference. In a business dispute, a relationship may be at stake. In a family business, it will always be. So, even straightforward commercial issues can be complicated by how people feel, or exacerbated by past altercations, unresolved misunderstandings, or by issues to do with the family, possibly triggered by events going back years.

That means that there is invariably an additional layer of complication to deal with too – and while litigation can be a sensible way to settling purely commercial issues, the courts aren’t good at dealing with relationships. Often, in a family business dispute, both the problems and the people need sorting.

 

The first thing a mediator usually does is engage with everyone – separately, preferably – so that, no matter how bruised they are by what they’ve been through, they trust the mediator enough to let him or her help them. Then, having earned their trust, the mediator works through the issues with the family members, acting as both bridge and buffer, and drives the process through to resolution.

HOW DOES IT DIFFER FROM LITIGATION?

Mediation is a dispute resolution methodology that is often fast and cost-effective compared with other approaches such as litigation. Moreover, the outcomes tend to be supported by the different sides in the conflict—in part because mediation is designed to empower the people involved to come up with ideas and action steps. With mediation, the parties themselves come to an agreement - versus, say, arbitration or legal proceedings, where someone else makes a decision and imposes it on the participants.

COST-EFFECTIVE:

Typically, the cost is a fraction of what litigation would involve. Day rates can be agreed upon in advance, so there are no hidden surprises either.

 

SPEED:

Arranging to mediate is easy and disputes, which may have festered for years, usually settle on the day.

 

FLEXIBLE:

A mediator can help parties resolve all sorts of issues, not simply legal or commercial ones.

 

CONFIDENTIAL & RISK FREE:

Discussions and settlement terms stay confidential. If you don’t want to settle, no one can force you. This eliminates any danger of being saddled with an unwelcome legal ruling.

 

INFORMAL:

The mediation can be designed around the family and be as flexible and informal as you want. Discussions can, for instance, be spread over a couple of sessions to give people time to reflect on what they have heard and how they now feel.

CONSIDER BRINGING IN A MEDIATOR WHEN:

  • People have different ideas about how the business should be run, or who should run it.

  • People are worried about how a change may affect them, e.g., plans about the future of the business, succession, or due to a death or divorce.

  • People have competing needs or interests, especially financial ones.

  • A rift becomes personal. Especially where it is between founder/owner and family members, or competitive siblings, or over the treatment of family and non-family members.

  • Inter-generational issues need addressing. The younger may want control sooner than the older generation is prepared to relinquish it. Or vice-versa.

  • Serious conversations need to be had and you are worried about them going off-kilter.   

FOR A FAMILY BUSINESS, INTERVENING EARLY CAN BE PARTICULARLY IMPORTANT

Mediation can be very effective when issues start flaring up. A mediator can clear the air, stop conversations descending into the usual family arguments, and knock heads together. So that family members can settle issues safely, without destroying themselves, the family, or the business. if you intervene early enough, you also have a much better chance of repairing a relationship and getting it back on track. 

ESSENTIAL TRAIT FOR FAMILY BUSINESS MEDIATORS

Often, lawyers and accountants provide family business mediation services—as do family business consultants. Obviously, expertise in matters relating to family businesses is an essential trait for family business mediators. Family business mediators also should understand family dynamics and how they impact business decisions. Specific industry knowledge can prove helpful too, although it tends to be less important than the other two factors.

OTHER TRAITS TO LOOK FOR IN A MEDIATOR INCLUDE:

  • Ability to put people at ease and have them share openly

  • Adeptness at empathetically responding

  • Impartiality

  • Ability to creatively explore possible solutions and to brainstorm

  • Open-mindedness

  • Patience

  • Ability to explain complex issues to create a better understanding

  • Ability to deal with intense emotions

 

An adept family business mediator will help the different sides clarify their positions and identify numerous possible avenues for resolving the conflict. This is often accomplished through joint meetings where everyone is present as well as private caucuses where the mediator is talking with only one side at a time. The family business mediator goes back and forth between the parties, bringing each side ideas, possible solutions, requirements, and even the other side’s viewpoints.