It's All in the Family

We all know it: A strength can also be a weakness. And family business is no different. The intense personalities and strong wills that make a family business successful are also the roots of family conflicts.

Too many of these conflicts end up growing out of control and wind up in litigation, causing major rifts in the family as well as in the business. They usually cause major strain on family relationships through one party buying out another or by family members continuing to work with each other in an atmosphere of tension. Either way there is emotional attachment and residual pain.

As an advisor and facilitator for small business owners through my TAB franchise, I am amazed by the comments I hear things like: “My sister wants to keep our company small and is fighting a controlled growth,” or “Dad won’t let go of the control,” or “My brother and I are paid the same and he doesn’t carry his weight.”

All of these things – and others – hold the potential for family conflict that can grow out of control.

Family members usually have different levels of involvement and will rarely agree on what those levels are, or how to set fair compensation for different levels of involvement. Are the perks reasonable? What about the children of the non-active family member? Should the business be required to give them good jobs as well? Can it afford to? These conflicts get much worse if a divorce takes place.

There are different ways to manage conflict before it begins by understanding the options and having an agreement on how things should be handled in those situations.

·  One way to avoid lawsuits is to agree to binding arbitration. This means that you let a third party decide who is right after the party hears arguments and sees evidence from both sides.

·  Another alternative dispute resolution approach is the so-called “rent-a-judge” method. Family members hire a judge who gives a binding or, depending upon the wishes of the parties, a non-binding opinion.

·  Some family disputes are being solved by using a confidential-non-binding process in which the attorneys representing the family members give condensed arguments to an expert advisor. This process—called a mini-trial—lets family members look at the strengths and weaknesses of both sides and facilitates a settlement through the exchange of information.

·  Of course, the best solution is always to try to avoid disputes of this scale altogether by structuring the ownership and responsibilities in a family business to suit the abilities and personalities of the family members involved.

The sad reality is that disputes are inevitable. When they do occur, the key is to acknowledge and address them right away, usually through an objective third party. The sooner you can act on a problem in your family-run business, the better your chances of avoiding the knockdown drag-out family feuds that cause the downfall of many businesses and family disruption that can drag on and affect dinners and reunions for years.