Fighting the Family Feuds

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By Bernard Kliska, Ph.D. and Christopher Eckrich, Ph.D.
Family 1: Ben and his wife, Lisa, bought their orthotics business from Bens father three
years ago. At first, the excitement of working together overshadowed any disagreements.
After a few months, Lisa began to realize that Ben was great with the manufacturing process,
but he frequently avoided the paperwork necessary to process orders. As the office manager,
she began to take it personally when Ben didnt respond to her requests to document his
work.
In turn, Ben began to feel that Lisa did not respect how hard he worked to get product out the
door. He wished she would stop nagging, take care of the details, and let him do his work.
Tensions at home mounted, and they stopped going out on their weekly dates.
Family 2: Roger and Allen were in the process of taking over the business from their parents,
who insisted that they each own 50 percent of the stock and get paid the same. But Roger and
Allen were not equal in either ability or passion.
Roger had always been the one who developed new business, maintained relationships with
key customers, and oversaw the office. In the past, Allen has demonstrated a poor work ethic
and a reluctance to take responsibility for the business.
Roger is worried that once his parents are gone, the business will suffer. The equal pay
despite obvious differences in commitment is making him bitter. Perhaps he should just strike
out on his own and let the cards fall as they may for his aging parents and his unfocused
brother.
What Causes the Feuds
Family members who work together in a business know that when it goes well, being
together is wonderful. But when unhealthy family conflict creeps into the family business
and there are always family challenges in a family businessfailure to resolve the conflict
can lead to tense days, sleepless nights, stressful holidays, and financial losses.
In our experiences with family-owned businesses, we see some common conflicts, including:

Tensions over money.

Struggles for control between generations (a father and his children) or within
generations (two siblings).

Feelings of unfairness when those in the business gain greater perceived or real
rewards than those not working in the business.

Fears of future stability when succession issues are not being openly addressed and
resolved.

While the conflicts may be the same, each family will resolve them in a unique way
depending on the family dynamics and individual personalities, as well as business culture
and processes.
When Family and Business Overlap
Families and businesses have different cultures. Most families consciously make decisions
based upon emotions. They seek stability, have unconditional love and acceptance for each
other, are private, desire harmony and know they are tied together as a unit for generations.
Family is always family.
Businesses operate in an entirely different world. Those who operate businesses must be open
to constant change, make a profit, demand performance from employees, create a successful
employee culture, enforce lines of authority, and recognize that relationships are formal and
may end when the relationship no longer makes business sense.
A critical task facing families who work together is to understand which one of these systems
they are working in. Normally, those entering a business understand that they need to learn a
new culture and rules for performance. But in a family business, family members often
experience confusion as family expectations overlap with business expectations.
In a discussion, was that comment made as a sister speaking to a brother, or as a superior
speaking to a direct report? The confusion is normal, but potentially threatening to the family
and the business.
Here are some of the specific challenges that emerge when these two worlds collide:

Business owners may promote relatives or children on the basis of family

consideration (emotion) rather than on merit. An owner may be faced with keeping a
child on the payroll to avoid breaking up a relationship in the family, though such
nepotism can inhibit the companys ability to retain or develop non-family employees
and managers.

Family business leaders may have an open-door policy that invites all relatives to
work in the business. This may seem like an act of love. But what happens when there

are more family employees than the company needs or can support, leading to a
shrinking piece of the financial pie for each family member?

A founders children may be compensated according to their personal needs rather

than their job performance. Non-family employees equate this system with an
allowance from mommy and daddy, and it often drives competent non-family
managers to seek employment elsewhere.

The family value of treating children equally may result in equal rewards to children
regardless of their commitment, ability, or contribution to the business success. This
socialistic practice can be seen in some of the staunchest capitalistic family
enterprises.

Childhood sibling rivalry can continue through the years. It can become full-blown
warfare in a business setting, leaving other employees distracted from the business
goals.

Parent owners often pursue equality in their estate plans, but do not invest in training
the sibling or cousin group on how to be a team. Sometimes they dont even
communicate the plan. (After all, were your parentsjust trust us!) This results in
an ineffective ownership group taking over the business.

Preventing the Feuds

If those are the problems, what are the solutions? If a family works on establishing clear
policies in the following six areas, the family business (and the family itself) is much more
likely to succeed. Here are six aspects to nail down:
1. Family entry and exit. Establish a participation policy, specifying who can work in the
business, what qualifications are necessary for positions, and clarifying that it is okay
for a family member to leave the business.
2. Salaries, promotions, and positions. Establish a compensation policy identifying the
basis for pay, perks, promotions, as well as the consequences of non-performance.
3. Equality and merit. Clarify the hierarchy in the business. Clearly articulate a basis for
gaining a voice and management responsibility. Everyone in the family has wisdom
and should be heard, but this must be balanced by the business need to have decisions
made.

4. Sibling relationships. Create a sibling code of conduct, which is a jointly crafted

policy on commitment, values, expectations and communication.
5. Communication process. Hold regular business meetings, and commit to spending
family time away from the business where communication does not focus on the
business. Ensure that key areas of potential dissension have been discussed, such as
terms for transferring stock (buy/sell or shareholder agreement). Create a conflict
resolution policy to ensure communication through tough issues.
6. Leadership of business and family. Create policies and processes that ensure
successors must earn the right to be the business leader. At the same time, reinforce
that senior leaders must also prepare to let go.
Establishing the PoFighting the Family Feuds
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Establishing the Policies

The problem is, many business owners are so busy with day-to-day operations that they
do not feel they can take the time to work on broader issues like the ones listed above.
Unfortunately, many have found out that failure to respect the intricacies of family
business can result in enormous blocks of time spent later trying to recover from
matters that could have been prevented with a few days of work hammering out the
differences between family and business.
Those who do woFighting the Family Feuds

Establishing the Policies

The problem is, many business owners are so busy with day-to-day operations that they
do not feel they can take the time to work on broader issues like the ones listed above.
Unfortunately, many have found out that failure to respect the intricacies of family

business can result in enormous blocks of time spent later trying to recover from
matters that could have been prevented with a few days of work hammering out the
differences between family and business.

Those who do work through these issues often hold a few half-day sessions to explore
the owners beliefs and expectations, and craft them into strong policies that guide later
decision-making. In our work, we have found that meeting over time is more effective
than just trying to quickly put something on paper. The most effective family ownership
groups weve seen evaluate how well they are functioning together, lay out goals for the
coming year, and then assign individual family members who will take responsibility for
making sure that these tasks are completed well and on time.

Families in business will always have challenges, but truly effective family businesses
are defined by people who take responsibility for thinking through the normal rough
spots and making plans to deal with them. The rewards include watching the family
business succeed throughout several generationsrk through these issues often hold a few
half-day sessions to explore the owners beliefs and expectations, and craft them into
strong policies that guide later decision-making. In our work, we have found that
meeting over time is more effective than just trying to quickly put something on paper.
The most effective family ownership groups weve seen evaluate how well they are
functioning together, lay out goals for the coming year, and then assign individual family
members who will take responsibility for making sure that these tasks are completed
well and on time.
Families in business will always have challenges, but truly effective family businesses
are defined by people who take responsibility for thinking through the normal rough
spots and making plans to deal with them. The rewards include watching the family
business succeed throughout several generations
licies
The problem is, many business owners are so busy with day-to-day operations that they do
not feel they can take the time to work on broader issues like the ones listed above.
Unfortunately, many have found out that failure to respect the intricacies of family business
can result in enormous blocks of time spent later trying to recover from matters that could

have been prevented with a few days of work hammering out the differences between
family and business.
Those who do work through these issues often hold a few half-day sessions to explore the
owners beliefs and expectations, and craft them into strong policies that guide later decisionmaking. In our work, we have found that meeting over time is more effective than just trying
to quickly put something on paper. The most effective family ownership groups weve seen
evaluate how well they are functioning together, lay out goals for the coming year, and then
assign individual family members who will take responsibility for making sure that these
tasks are completed well and on time.
Families in business will always have challenges, but truly effective family businesses are
defined by people who take responsibility for thinking through the normal rough spots and
making plans to deal with them. The rewards include watching the family business succeed
throughout several generations