Managing conflict in family businesses

According to Family Business Australia, family businesses currently represent around 70% of all businesses in Australia and the estimated wealth of the sector is $4.3 trillion.  

Clearly, family business is big business in Australia.

Owning a family business provides rich opportunities to build relationships within that family – but there are also plenty of opportunities for conflict and failure.  You don’t have to look far to find a family that’s been torn apart by a poor business decision, or to find someone dealing with relational stress due to working with a family member.

Conflicts in family businesses often differ from those in non-family businesses, and family-related issues sometimes dominate day-to-day interactions, which can jeopardise the future of the business and the family itself.

Some families try to be informal and good natured in their business planning, but this often leads to problems. Avoiding family conflicts entirely may not be possible, but in our experience, establishing clear directives and guidelines early on goes a long way in protecting families from serious conflict and financial distress.

Here are three tips to help avoid and deal with conflict in family-owned businesses:

1. Create clear guidelines and choose roles based on skill, not family

Set clear boundaries up front. For instance, make it clear who can join the family business, what qualifications they need, what the remuneration plans will be, what career paths are available, and what your succession and exit plans look like. For the good of the company, you need the right talent in the right positions. Hiring and promotions should be based on merit, not family.

It’s also a good idea to have clear conflict resolution, governance and management structures in place for almost everything. These policies are important for any business, but they’re even more crucial in an environment where there are more ties, emotions and sensitivities involved. The likelihood of conflict is much higher when there’s more personal involvement, so it’s key to have these policies in place.

2. Establish regular family meetings

It’s natural for family members who work together to blend their personal and business lives, but this can bring too much of the family dynamic into running the company. This is often unintentional, but feelings of resentment from family squabbles can creep into and potentially impact business decisions.
To help avoid conflicts like these, family meetings should be held regularly, and it’s a good idea to include all members of the family – whether they’re involved in running the business or not. Try to separate discussions around business from those for family, and if necessary, choose a set location. For instance, the office boardroom may be fine for business planning, but might be designated as off limits for family discussions.

3. Get professional help when and where you need it

As noted above, it’s critical for people in a family business to take on roles based on skill and merit – so just because Cousin Paul took an accounting course once doesn’t mean he has the skills to tackle the business finances full time.

Don’t be afraid to examine and discuss areas where you may need advice from experts outside the family to help make your business a success. Getting the right help and assistance – from lawyers to business succession planning professionals – can mean the difference between failure and developing a business that thrives for generations to come.

If your family business needs help in the areas of accounting, business advice or financial planning, contact the experts at Accru.

About the Author
Rhys Bithell
With a double degree in Corporate Finance and Accounting, Rhys’ love of numbers has been apparent for a long time. He understands the importance clients place on their money and helps them make the most of what they have.
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