An exploration of family conflict on the firm

In the article Conflicts in Family Firms: The Good and the Bad, authors D’Lisa McKee, Timothy M. Madden, Franz W. Kellermanns and Kimberly A. Eddleston make the point that while managing the multitude of family relationships makes conflict particularly pervasive in family firms, not all types of conflict are inherently detrimental. Published in The SAGE Handbook of Family Business, 2014, the authors’ fundamental argument is that it’s simply not accurate to say that mitigating any and all types of conflict is in the best interest of a firm. Since conflict can at times improve family firms’ performance, they go on to explain the three general types of conflict and how they can manifest themselves in desirable or undesirable ways, based on the type of conflict, its frequency and its intensity.

                  After an overview of the three types of conflict (relationship conflict, cognitive conflict and process conflict), the authors address mechanisms for coping and then go on to discuss common outcomes as a result of coping with conflict. Noting that empirical research in this particular area of family business is still in its infancy, the authors must refer to general management research on interpersonal conflict in order to illustrate several points.

They outline a few conclusions which might be relevant for advisors dealing with conflict in family firms, such as “process conflict should enhance the performance of family businesses but its limitations suggest that low to moderate levels of process conflict would be most beneficial to family firm performance.”

                  The article outlines the five main strategies for managing conflict, including avoiding; contending; compromising; collaborating; and using third-party intervention, and also addresses some family firm conflict antecedents, moderators and outcomes.

Perhaps the most useful section in the article outlines a few concrete, overall recommendations for practitioners, summarized as follows:

·       conflict needs to be viewed as part of the overall governance of the organization

·       governance contracts among family members should include conflict-related clauses to heighten the awareness of the involved family members and family branches

·       any immediate and open negative conflict should be addressed within 48 hours of the occurrence

·       a board or regular shareholder meeting with conflict-related authority can be beneficial

·       practice shows that it is beneficial to elect a ‘go to’ person on a yearly basis who is in charge of addressing critical issues among family members and serves as a first regulating authority

·       the establishment of ‘family days,’ meetings scheduled at regular intervals, can be a useful tool in regulating conflict

·       governance mechanisms need to anticipate future changes in the family structure so that they can address the complexity of the family, its future structures and have provisions to deal with those changes (sometimes called anticipatory governance)

·       conflict that has been brewing for years or is of ‘murky’ origin may benefit from the use of an independent third party

               Ultimately, despite the little empirical research on the subject, we know that conflict and tensions can impact interpersonal relationships, firm performance, household performance and socio-emotional wealth. While this article is interesting and somewhat informative about family conflict, it may be fairly redundant for professional advisors who are already fairly educated or experienced in this area, and may provide new information only to those who have little or no knowledge of the three types of conflict or the strategies to manage them.

                  

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The Role of the Advisor in Succession

Noting that until now, despite the wealth of literature on succession, we have had a limited and narrow understanding of how successors develop and establish their leadership skills within the complex web of a family firm, and that leadership development and the construction of a leadership profile is a complex process, authors Salvato and Corbetta have taken a close look at how advisors affect the process through which successors develop their own leadership profile.

                  In the 2013 article, Transitional Leadership of Advisors as a Facilitator of Successor’s Leadership Construction from Family Business Review, the authors find that advisors offer a significant contribution to the development of a successor’s leadership by taking on a transitional leadership role which includes shared leadership involving the incumbent leader, the successor, and the advisor.

                  This role:

1.     Supports the successor in his or her individual internalization of leadership skills

2.     Provides relational recognition to the successors’ leadership

3.     Facilitates the collective endorsement of the successor’s leadership by members of the controlling family and by nonfamily employees.

The study follows four cases in which the role of the advisor and his/her relationship to the

successor and other family members is closely examined, and determines the ways in which the advisor supports, affirms, questions, and evolves throughout the process of a successor’s leadership transition, and subsequently how the advisor takes on a role of “temporary shared leadership,” a new concept in family enterprise research.

The article includes several insights into the unique nature of the advisor’s relationship in a family firm and both the defined and undefined ways in which the advisor role can play a part in generational succession and the process of leadership development. The details of the study are interesting and highly relevant for advisors who work closely with family firms, particularly during times of transition.

For those interested in finding out more details about the methods used to measure and track the advisors’ involvement in these succession transitions, the article can be found at:

http://fbr.sagepub.com/content/26/3/235, from the Family Business Review September 2013 vol. 26 no. 3, pages 235-255.

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How and Why Family Values Matter in Family Businesses

It is unusual to come across articles focused solely on values in family businesses, and as a result, the ones that are published usually make an effort to contribute to increasing awareness and discussion about the important role of values in family enterprise.

Values are indeed essential in a family business, and more crucial than one would think given the little information known or written about them. The article Values in Family Business by Ritch L. Sorenson, published in the SAGE Handbook of Family Business, 2014, provides an overview of values-related research in the organizational behavior discipline. While parts of Sorenson’s summarization of research is not directly related to family firms, the latter part of the article addresses how values are established in a family and subsequently in a business, and provides illustrations and depictions of the otherwise invisible characteristics of family firms which are defined as ‘values’ and ‘culture.’

 Notable points from the article illustrate that in order for individuals to work together, they must communicate in a manner that helps them develop common values and culture; and that the fundamental organizing element of social capital is communication, which is a conduit for sharing information. The article uses an example of a real-life couple’s forms of communication which demonstrates how they began to form a social foundation for their family (p. 470), noting that communication patterns created in the home become rituals, and rituals instill and reinforce values in children.

    He includes an excellent description of how values differentiate family firms from non-family firms:

[W]hat makes a family business unique is that the pattern of ownership, governance, management, and succession materially influences the firm’s goals, strategies, structure and the manner in which each is formulated, designed and implemented. In other words, we study family businesses because researchers believe that the family component shapes the business in a way that the family members of executives in non-family firms do not and cannot. (Chua et al., 1999:22) The author describes several ways that family values may become incorporated into the family business in Figure 23.1, Social Processes that Develop Similar Values and Culture in Family and Business, on page 472.

A few other key points include:

• On how values play a role in succession: “values are the social bedrock for next generation socialization”
• Invisible influences on values: “Symbols, rituals and heroes reveal values and culture in the family and the family business. They can be purposefully designed to call attention to desired values”
• How values play a role in governance: “[v]alues are incorporated into collaborative documents such as vision, mission, goals, policies, practices, and the like, often compiled as a constitution or charter”
• Uniting the family and the business: “[f]ormal collaborative processes within families and between families and businesses promote common values that unite the family and the business”
• And on the crucial importance of values: “Family and business are so fundamentally different they naturally pull apart over time … There must be common ground that is stronger than the forces that pull family and business apart. Many families in search of this third dimension turn to shared values. Values are often the only glue strong enough.” (Aronoff and Ward, 2007:17)

 While Sorenson’s most relevant points have been outlined here, this is by no means an exhaustive summary of the article. Anyone wishing to delve deeper into the nuances around values in family firms or wishing to strengthen their awareness around the power of values at play in family enterprise is strongly encouraged to read this article.

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