Family, business, identity and influence in the family business

In this piece, I focus on the overlapping challenge of family and firm, and identity and influence. Family businesses can be seen as interacting subsystems with differing, perhaps opposing logics. This view enables us to see and understand the tensions in managing family businesses as the interests of the family and the business vie for priority. Such tensions can become apparent at the strategic level through issues like diversification, attitudes to risk, investing, research commitment and in structures, such as incentive and compensation schemes.

It can get complex. One can add management to family and firm dynamics. Such a view allows us to see the context in which reasoning, dialogue and decision making occurs. It allows us to identify the underlying issues in any discussion. A son may criticize a mother’s business decision, which the mother perceives as inappropriate behaviour of a subordinate. More open son-mother communication may be accepted within the family sphere, yet the son wishes to demonstrate his aptitude as a worthy successor owner and manager hence the criticism of his mother’s business decision. Contextual signs explaining actions like this can sometimes be missing in family business dialogue. Consequently, context can be misunderstood by family members especially if one of them is wearing multiple hats. Being clear about the context of a discussion is important for well-functioning family dialogue in a family firm.

Debate is healthy and constructive. It develops solutions beyond those offered by individuals for the advance of the business. However, conflict goes beyond considering the qualities of an argument or course of action. Strong family relationships can cater for debate. More brittle relationships may result in conflict as the dialogue reflects underlying disagreements and personality clashes.

To keep discussions within the realm of debate and to reduce the corrosive effect on brittle relationships, it helps to consider if the discussion is about the past, present or future. For the past, determine what happened and how it continues to influence the present. For the present, determine what is happening and what is core to the issue. For the future, address what paths the issue could take and what would be the best path. Use discussion of the past only where it enlightens discussion of the present and future. Keep the discussion on the issue and not the person.

When in discussion, give each participant the same time to talk. Attain self-knowledge – if the reader can – of any tendency the reader has to dominate or to waffle; often less is more if well expressed. Listen: fewer people have this skill than one might think. Remember that simply hearing is not listening. Actively listen to understand and empathize. Perhaps the reader can rephrase the content of the other person’s dialogue in their own words then ask if they have correctly understood the issue. Take a break if emotions run high in discussion. This gives people the opportunity to reflect on issues, regain composure and recommence. Try to discuss specific, tangible points to resolve issues. Speaking generally is likely to result in wide ranging and circular discussions. Focus on the issue and not personalities to avoid the discussion being personal. See issues from the perspective of other participants. Expressing such empathy often reduces criticism, contempt and defensiveness. Take responsibility for issues where necessary. This give respect for the views of others. Taken together, these techniques of constructive communication reduce the chances of discussion being reduced to one or more of criticism, defensiveness, contempt or stonewalling.

Good governance cannot substitute for constructive communication. The latter is necessary even in the architecture of the former. When working within good governance and using constructive communication, you may still face the sparks of conflict in discussions. Do not rush into it if you become aware of it. Avoid taking personal offence or denigrate others; this keeps the argument on the issue and does not spread it to people. In any solution to the issue, ensure there is a gain for the other party as a rational and emotional incentive to resolve the issue. Think about the consequences of what you say or do. Consider any positive motives the other person may have and appreciate them. If the issue escalates, perhaps get a person to mediate who you think has the sensitivity for the role. When looking for a solution, consider several and be open to modification of one or more of them as a solution acceptable to all parties concerned.

Should we be needed, my colleagues and I are readily available for consultation on disputes and legal matters more generally. We are familiar and experienced with the full range of dispute resolution from negotiation, mediation, neutral evaluation, expert determination through to arbitration and litigation. Often it is the timely application of the earlier of these methods that results in amicable resolutions with limited cost, effort and suffering.

For more information please contact Henry Clarke using henry.clarke@nexa.law