Hardly a day goes by without a headline about a “family business feud” in the pages of national newspapers or in blasts from various media sources. It’s hard not to get drawn into the real-life soap operas involving battles pitting fathers against sons, mothers against daughters and cousins in all-out brawls. Sales of major family businesses are often precipitated by such feuds, as are transitions prompted by “irreconcilable differences” among family members. It would all be so enjoyable if it were merely fiction for entertainment rather than real people’s lives and livelihoods at stake. In keeping with the theme of “Building Bridges” within families and between families and advisors, here are some observations on these feuds.
What You See is Not What You Get
Rarely is a family business feud about the business. Yes, there are often disagreements about business issues, including strategic decisions, operational priorities and how capital should be deployed. However, these kinds of issues are usually sorted out in the offices of the business itself. It might seem redundant, but worth mentioning—family business feuds are more often about family issues than business issues. The seeds of conflict that arise today were probably planted decades, if not generations, ago. Parenting approaches, such as early favoritism of one child over another, or gender issues that alienate groups of family members, often manifest in the battles that hit the papers. Of course, all families have conflict. Families with jointly owned assets such as businesses, charitable foundations and multi-generational trusts, have the opportunity (and misfortune) of playing out those battles with tangible and intangible assets that serve as ammunition and weapons.
Ownership Issues are Often at the Core
Given the fact that most of us interact with businesses all day long on an operational level, we are accustomed to thinking that business is primarily about management. Thus, it’s not surprising that the way we often process family business issues is from the business, or rather, management level. A non-family CEO is tossed out and replaced with the heir of the founder. The founder decides to split the business, and two business lines are created. In reality, these are all about who owns the business. Sometimes the conflict arises because a family member inherits shares of a business, but has no other connection to it. At a distance, it may seem like that family member may disagree with business practices that seem to decrease the value of her shares. But a closer look could reveal that the inheritor might just want something to show for an inheritance from a dear family member. Illiquid shares of a family business don’t give that warm and fuzzy feeling that a family heirloom might, or even the sense of freedom that cash in a bank account provides. Family members who jointly inherit a business are often challenged with a steep learning curve that requires strategic business thinking combined with emotional intelligence.
Prevention is Simpler, and Harder, Than You Think
Starting a new business can be extraordinarily challenging – survival is at stake for at least the first year or few. Making decisions about further direction of an ongoing concern can also be daunting. When it comes to family feuds, research and anecdotal observations of those in the field indicate that while the underlying issues might be extremely complex (if they weren’t, then we wouldn’t have scintillating literature going back to ancient times. Remember Oedipus?). However, there are some practices that families can set in place early on to reduce those risks. These include: engaged, healthy parenting; inter-generational dialogue; and transparent communication. These can be promoted by establishing safe places for exchange among family members. Family meetings facilitated by outside experts are a start–after all, don’t we all behave a bit better when there’s a non-family member in the room? By learning how to communicate and resolve minor conflicts, the family can get practice resolving manageable issues before the big ones arise. Family members should even consider whether it makes sense to split up the business in a way that assuages family divisions. Selling the business altogether with equitable distribution of the proceeds might provide an opportunity for the family to stay together while the business might not. These are just some of the “simple” techniques that families can institute, after careful deliberation. This kind of work is hard, but in a different way from running a business. By avoiding it, though, the family is more likely to keep their personal business out of the headlines.
