Family Conflict in Exit Planning

Exit planning is a process that must be handled carefully in order to insure the best outcome for the business owner. When exit planning involves a transfer from one family member to another, there can be additional layers of complexity. This is especially true if any sort of family conflict is present either in the business operation or the family itself.

Every Business Has Conflicts

Creating a perfect business environment is impossible. No matter how capable or wonderful the people the companies hires, there will always be at least minor personal disagreements or squabbles about work issues or how the company is run. We are all human, we all have our own ideas and experiences, and sometimes goals or personalities clash. It’s easier to manage unrelated employees than it is family members, though, because family members have relationships outside of the company too.

Family members’ relationships are more complex because of the history they have with each other and the emotions involved. The fact that they know each other better doesn’t always translate into more harmonious work relationships. Often, it’s the exact opposite. People are more likely to repress or ignore the negative feelings they have toward their parents, children, or siblings. That doesn’t mean they don’t eventually come out. If those unresolved feelings emerge within the work setting, they can cause real trouble for the company.

For example, a business owner may have conflicting feelings about relinquishing control of his business even before a sale because he defines himself by his position and it gives him power and status. His son may interpret his hesitation as a lack of confidence in his abilities. And this may or may not be true. It can be hard for a parent to see their children as fully mature adults and give them a larger role in the company or more responsibility. If they try to discuss their issues at work, it’s likely that past personal issues may crop up in the conversation and sidetrack any progress they could make on the matter at hand. 

Another problem is manipulation. Family members know each other’s vulnerabilities and which buttons to push to get a reaction. If a conflict within the company gets too heated, they can manipulate their family members’ insecurities and “fight dirty.” When there are disagreements and both parties have anger and emotional ammunition, the situation can become ugly fast. This is especially true when money is involved.

Escalating Family Conflict 

There are four stages of family conflict, ranging from minor, solvable issues to out and out war. The first stage involves simple disagreements. The family members involved see things differently, but they are not angry at each other and can still work together towards common goals and for the benefit of the business. 

The second stage of conflict results when disagreements go unsolved and hard feelings arise. At this point the larger problem becomes not the work issue but the unwillingness of the two parties to solve it. It’s at this point that people begin to blame each other and become defensive. These issues can still be solved with better communication, but this should happen sooner rather than later, before the respect between family members is lost and damage to the family as a whole occurs. 

The third stage is when opposition becomes entrenched. Family members find new things to dislike about each other and manufacture new conflicts, often bringing others into the dispute and creating sides. Once factions within the company form and accusations and wagon circling happen, it’s much harder to resolve what originally may have been a minor problem – even with outside help. That’s because people have invested themselves in the conflict and identify themselves as a member of one side or the other. This type of conflict is so harmful that it destabilizes the company itself. 

Finally, there is open warfare. At this point the attacks between parties or groups are not limited to snide remarks or passive aggressive behavior. Family members work to humiliate each other or take away power or money because taking revenge or getting even is now a higher priority than the business itself. At this stage of conflict, both the business and the family are likely to disintegrate, and the best the company can hope for is dividing financial assets before they become worthless. The relationships themselves are beyond saving. 

There is a real risk that conflict between family members in a family business can not only complicate or prevent a transition but actually damage or even bring the business to bankruptcy. If the conflict is not mitigated early enough, working to create better communication between family members even with an outside party involved may not be enough.

If your family business is experiencing trouble or the company culture is suddenly going sour, you should question whether there are unseen and unresolved family conflicts in play. If that is the case, the sooner you bring in professional management, the better.  Do not allow hostile feelings and unhealthy patterns of communication and interaction to fester. They will hurt both the company and the family too. The right intermediary can help the family communicate better and work towards a resolution and a healthier understanding of the family conflict.

VINCENT MASTROVITO

vincent@prometispartners.com
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503