FAMILY CONFLICT WHEN THE BUSINESS FACES CRISIS
Updated: Apr 28, 2021
Failure to address unresolved family conflicts will affect performance of the family business.
Likewise, family disputes are exacerbated when the business faces a crisis.
Family business conflict is heightened during times of economic challenge and transition. Typically, when a family company fails, external forces like a weak economy are not the main cause. Estate planning preferences, tax policy, lack of adequate succession alternatives and unresolved family tensions often hasten the firm’s demise.
When anxiety generates a gap between reality and expectation, family relationships are often harmed. Under performance, poor management (of both the family and the business) and inadequate planning lead to fractured relationships, particularly during times of adversity.
Unresolved conflict is more prevalent and interpersonal issues heightened in an unstable financial environment as the reins of control tighten. These situations become more complex as job mobility decreases and people become more dependent on the family business.
Family firms must balance the delicate relationship of their three overlapping systems: family, ownership and business (management). Each exerts influence, has objectives that may reflect different values and compete for resources.
Families who permit individuals to express their views, and whose members have learned to listen to each other, are better able to work through challenges and crises. In these families, relatives’ roles are clear, their contribution visible and the support system ever-present, and therefore changes or transitions are better absorbed.
Among members of families who fail to plan for change, there is more likely to be anxiety, intrafamily tension and conflict between family and non-family constituents. In environments where equilibrium is critical to minimizing conflict (where “Don’t rock the boat” is the motto), demands to change may be subverted, sabotaged or ignored. This is often the case in the troubled family business.
SIX MISSTEPS TO AVOID IN VOLATILE TIMES
There are two major categories of crisis: relationship and motivation. The roots of conflict can be found in the three most common behaviour patterns in each category.
1. Command and control
CEOs who manage like a dictator adopt controlling and condescending management style which create a company culture marked by complaints, lack of motivation or creativity, and carelessness. This leader never bothers to build a team or inspire commitment. As a result, conflict festers and backstabbing ensues. These leaders are often unable to disengage from their business. Succession without conflict is almost impossible under these circumstances. On the bright side, there are proven practices to address these obstacles. The business and the family, with the help of professional advisors, must build a succession plan. Prospective successors should be encouraged to begin their careers elsewhere, both to prove their own capability (to themselves and to the parent) and to develop the independence and self-confidence that can come only from a history of personal successes. The ties that bind must be broken before new, healthy relationships can be built.
2. Narcissism masking inferiority
The narcissist, obsessed with the need to overcome deep-seated feelings of inferiority, must continually prove his superiority to others. As a result, he jeopardizes the business by ultimately belittling and destroying others if they represent a barrier to what he wants. He must try to make others powerless within the systems that affect his span of activity. Conflict is triggered and becomes inflamed when the narcissist loses the loyalty and respect of peers. Associates withdraw, and the fall from power accelerates. The executive experiencing this crisis may manage with a heavy hand, bullying if he can get away with it. An atmosphere of fear grows. Job titles become more important as a means of differentiating stations and are used (or perceived) as threats or rewards. Parents can subtly sabotage their children’s efforts to develop, even into adulthood.
3. Intellectual and emotional paralysis
Many business owners become paralyzed in times of crisis. These owners quickly withdraw and become isolated, cutting themselves off from others in the system. Reality is lost as the crisis grows and resources to resolve the issues become more elusive. The business, already under pressure by creditors, is given less attention. The problems begin to consume the managers almost before the day has started. There appears to be no expertise to reach for at these critical moments. There are not enough funds available to retain capable professionals. The self-confidence of the primary participants deteriorates. Leadership is lost; no energy exists to wrestle with the issues.
4. Loss of desire
A crisis of passion can foster an overwhelming sense of meaninglessness. It can lead highly successful people to engage in extramarital affairs, take foolish business risks and even steal from the companies they have founded or inherited. A crisis of passion is pervasive and, in the extreme, devastating. It reflects an unfulfilled life or lost dreams. Passions are moving targets; they evolve out of experience, frustrations or circumstances. Unresolved, this crisis can destroy much of what a business owner has built. It may be manifested as boredom, a mid-life crisis or a stalled career.
5. Crisis of commitment
While a crisis of passion is very visible, a crisis of commitment is more subtle. It is easily masked and thus often undetected. People without commitment are risk-averse. They avoid responsibility but are always busy. Their commitment may have eroded in the wake of past disappointments, lack of recognition or broken promises. There is always an excuse for incomplete work. At the root of this crisis is the fear of failure. People experiencing a crisis of commitment will not make the effort to identify or air differences and therefore can’t find an acceptable solution to their problems. These conflicts go unresolved.
6. Lost self-confidence
A crisis of confidence also is rooted in the fear of failure. As confidence erodes, the fear grows. Criticism by friends or associates is not tolerable. Those lacking confidence will refuse a challenge. Lack of accomplishments erodes self-esteem. Rather than endure a test, they exhibit self-destructive behaviour. To remain in their comfort zone, they insist on maintaining control, often of a stagnant environment. They resist change because it bears risk and destabilizing. This is a difficult circle to escape.
It is easy to confuse a triggering event with the crisis itself. Running out of cash, a failed product line or lost customers reflect inattention to the operating problems that brought on these scenarios. Similarly, family dysfunction can cause problems within the business as personal conflicts interfere with effective performance.
When times are tough, people often revert to old patterns that exacerbate situations. Unresolved psychological issues, repressed conflicts, ill-defined boundaries between the family and the business, questions of individual development and a less than satisfactory life structure often cause tumultuous periods and debilitating personal inner conflicts. Many of these crises are not permanent psychological disabilities but remain unresolved because the family lacks psychological and problem-solving tools.
Each crisis has its own unique way of consuming a person’s emotional energy and focus, leaving very little time for “life.” Money, intelligence, power and success are no insurance against personal and business crises. Often, they mask the need to address the issues. A healthy, functional family is vital to a successful family business. likewise, an under-performing company can aggravate conflicts and emotions within the family.
It is difficult to differentiate emotional from operational contributions to problems in an under-performing family business. the challenge of separating (not shielding) the family from the company takes enormous skill and leadership. The family system, thriving on love, loyalty and security, must often be violated as the business undergoes the transitions needed to build a stable platform for the future. A third party can assist by creating urgency, decisiveness and focus in the process of redirecting the family and stabilising the business.
A family council facilitated by an independent advisor has proven valuable in helping families deal with issues of risk management, preparation for succession and defining and meeting stakeholder obligations. This council differs for a board of advisors or directors, which generally concerns itself only with the issues of the company.
Conflict is not a negative force. It is a signal that warns of differences that must be addressed. True resolution builds relationships, forward momentum, knowledge and new confidence – i.e. progress by the “combatants.”
Family Legacies www.family-legacies.com is a multidisciplinary family business consulting company. Our consultants are leaders in their respective fields including; Family Business Consulting, Strategic Planning, Financial Planning, Wealth & Risk Management, Corporate Finance, Business Transitions & Exit Planning - Buy, Improve, Grow & Sell Businesses, Commercial & Family Law, Executive Coaching, Leadership Development & Facilitation, providing our clients with a professional and integrated multi-disciplinary service.