Andrew Godfrey is international director of PRIMA, the family business consulting practice of Grant Thornton. John Tucker is head of UK Family Business Services at Grant Thornton.
The concept of learning is gaining currency among researchers in entrepreneurship and family business. So are disputes in a family business a constructive or a destructive force for change? Andrew Godfrey and John Tucker explain
In the many years that we have been involved in business, both running our own, working in someone else's and advising others on how to run theirs, we never cease to be amazed by the plethora of initiatives, projects and plans undertaken by organisations to bring about change and improve performance. We have seen appraisals, competence models of managing performance, through to empowerment and self-managing teams. We have been involved in outdoor management development through to the more esoteric mind games approach to management. We have seen fire-walking, the use of theatre, painting, poetry and even the army used to motivate and persuade people towards better performance. We have seen team building, team development and team destruction à la The Office. We have seen downsizing, re-engineering, total quality, Investors in People and a myriad of other approaches from vision and mission to corporate culture and the learning organisation. Organisations of all shapes and sizes have embraced the 'change' culture, spending millions chasing the elusive 'answer', looking for the quick fix and hoping the next management fad will bring the long awaited results.
So what is it all about? Why are organisations interested in developing people? Organisations want to achieve the best from their employees in order to boost sales, output and profit. This is not a comfortable habitat for (mostly male) managers charged with ensuring maximum performance. Men do not find this stuff easy – much of it is right brain, intuitive, creative, touchy-feely and scary.
Powerful relationship issues
So what has all this got to do with families in business and more mysteriously, what has it got to do with a Crosby Stills, Nash and Young song written more than 30 years ago? The song says it all: it tells us why life in a family business is so different from life in any other form of business, particularly if you happen to be a member of the owning and/or managing family. The song suggests it's simple, don't ask questions, don't try to understand the relationship, just know that it is based on love. Parents are often intrigued by how closely their children resemble them, physically, emotionally and intellectually. Children are even more horrified to think that they may have anything in common with their parents, until well past their 30th birthday. Parents teach their children and often in the context of the family business children learn most, if not all of their knowledge about the business from their parents.
In the context of a family in business, most of the change, quality, people initiatives will fall at the first or second hurdle if we don't understand and consider the powerful relationship issues encountered when engaging with a family in business. It is within these powerful relationships that many of the conflicts reside, particularly between fathers and sons working together in business.
It is very difficult for a son to emancipate from his father (a critical task in becoming an adult), when they both work together and the son does not have his own universe in which to mature. From a business perspective the son almost always has some independent ideas that differ from the father's, if for no other reason than a generational perspective. Given the essentially emotional nature of family relationships, it would not be surprising if there were confusion about whether a son's actions were a form of rebellion rather than a reasoned disagreement over business issues. Sorting though this requires some understanding of the history of the father/son relationship, as well as the dynamics of the entire family constellation.
Research published by Grant Thornton in Family Values in Family Business showed that "During periods of challenge or change, families and their businesses are supported by their belief in a set of shared values. These are sometimes described as 'lived' values, in contrast to 'espoused' values, which may not always survive the challenge." The report adds: "When a family business goes through change such as generational transition, old habits and vested privileges are frequently challenged. Embedded, or lived, family values that remain intact can, arguably, help to sustain the business during periods of difficult change. The challenge can also expose the distinction between espoused values and lived values. These revelations may create conflict. It is within conflict that values are tested and exposed to critical appraisal."
Take time out to learn
Families need to take time out to learn how to learn from each other. The concept of learning is gaining increasing currency among researchers in entrepreneurship and family business, both as a driver of research agendas and as an emergent, integrative perspective for understanding the dynamic nature of entrepreneurship and family business management. A primary advantage of the learning perspective is that it provides linkages between the complex processes of personal and business development. There is an emergent consensus that there is extremely complex interplay and interdependence between these parallel processes of personal and business development and that these are not adequately explained within the dominant 'personality' and 'process' paradigms within entrepreneurship theory and family business theory.
In these terms, the multi-generational family firm is a special and particularly interesting context in a number of ways. Firstly, the involvement of the founding generation is often protracted and overlaps the involvement of younger family members, enabling a range of possible mentoring roles. Secondly, younger generations growing up in the family business environment enjoy a lengthy period of socialisation, not only into the family and society but also into business and the specific family enterprise. Thirdly, this socialisation process may be undergone within an environment where there are powerful and explicit family expectations about future roles in the business and perhaps eventual management succession; on the other hand, these expectations may operate only at the subtle, tacit level or indeed be non-existent.
Whatever the nature of expectations of involvement in the family firm, it is reasonable to suggest that, compared with the population at large, the formative experiences of children who grow up in family firms may include protracted and extremely complex processes of learning about business and management. It is also reasonable to argue that these experiences set them apart from people from non-business backgrounds in terms of the potential preparation for business careers that their environment provides. It is also the breeding ground for future relationship conflicts that often emerge when parents and children work closely together.
Working with conflict
Conflict is not something anybody enjoys but when it occurs in a family business it can be even more problematic. The dynamics of a family generally mean that saying something critical about another family member can be difficult so within a family business delicate issues can be delayed for fear of offending a family member. Yet conflict resolution is essential if the business is to survive and a degree of objectivity is required to do this. Conflict need not be destructive if its aims are beneficial to the business and ultimately all of its dependents. It is essential therefore in family businesses to distinguish conflicts which are personally based from those which relate to the company. You may ostensibly be in conflict with your brother over a decision he made in the boardroom but is the real reason you are annoyed the new car he gave his wife out of company funds last year? Conflict like this is destructive and needs to be addressed.
The main relationships that cause conflict are parent/son or daughter relationships, sibling rivalry, and relationships between cousins and other relatives. One of the main causes of conflict between a parent and their child is the father or mother wanting the child to enter the business. However most parents are reluctant to give up the reins and want to continue to run the business and ignore their child's desire to take control. The ambitious child may, after years of trying to introduce their own ideas and initiative into the business, decide to leave the business altogether. What the parent must recognise that to encourage their child into the business and then not allow them to take control removes their motivation and interest and may, ultimately, put them off the business completely. The mature decision is to invite the child to participate in the business and then establish a fixed period within which the parent will step aside and allow control to pass to the next generation.
Sibling rivalry is, of course, normal in a family but in a business in can have a corrosive impact. The most obvious example is when more than one child wishes to take control of the family business. A decision by a parent to promote one over the other is difficult and frequently outside help can be used to take the heat out of the situation. A suitable shareholding structure must be put in place to ensure all children involved feel motivated and rewarded for their participation in the family company. You don't want to see your personal relationships and your business destroyed so you must negotiate a contract which provides all siblings with fair rewards and a motive in seeing the business succeed. This can be done using a variety of motivational techniques including share allocation, places on the board and tasks allocated to those most suited.
Running a business with a brother or sister means that your children will be involved in the next generation and, if you have other brothers and sisters, their children may want to become involved also. The problem is you may find you have around four children keen to get involved and a further half dozen cousins. By the following generation you may have 20 family members keen to be involved. All are likely to believe they deserve a job in the family business – and at a senior level. It is vital to ensure that this is resolved. Some shares can be allocated and a general review of who owns the business and where it is going is essential. You cannot assume that a family business can be large enough to support every member of your family. What is vital is to ensure that the children most suited to manage the business are selected against fair and objective criteria. Frequently it is helpful to involve a professional adviser in this decision as it is very difficult for parents to have to choose amongst their children.
Resolving conflict is difficult but to ensure that it is handled smoothly you need to consider the following objectives:
- plan a future together
- address critical issues relating to the family's involvement with the business
- articulate core values for the business
- do not be put off making difficult decisions
- establish continuous processes to resolve conflicts, maintain communication and monitor progress
Only by recognising and acting upon conflicts can you ensure that your family business doesn't collapse into acrimonious disputes.
Consider developing a family charter to address some of the destructive conflicts that threaten not only the stability of the family, but often the sustainability of the business. The process will allow the family to learn together and embark on a journey of exploration culminating in the production of the charter.