Interpersonal Relationships in the Family Business: The Recipe for Success or Failure

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Davis Wright Tremaine LLP

Families are all about loyalty, mutual support, and unconditional love, right? That's certainly the ideal that many families try to achieve, even if they operate a business together. With that said, the interpersonal dynamics in a family business can be complex and may present extreme communication and leadership challenges.

Relationships among family members may come with high levels of emotions, dependency, disappointments, and resentments—the types of factors that can lead to intrinsic tensions. Furthermore, the comfort level that family members feel between each other may have the perverse effect of causing them to openly act in a less than civil manner.

How family members relate to each other publicly and privately can impact employee morale and confidence in the family as leaders, both positively and negatively. It is therefore important to manage intra-family conflict in order to maintain family relationships and allow the family business to grow and build a culture that resonates with employees.

Four Types of Interpersonal Conflicts

Before learning how to manage intra-family conflict, it is important to recognize the four different kinds of interpersonal conflicts.

The first and most common type of interpersonal conflict is a minor disagreement that arises out of nothing more than differing points of view. The good news is that minor disagreements can be sorted out through effective communication and compromise and—when managed properly—may actually lead to better outcomes than when a singular point of view is taken into consideration.

The second type of interpersonal conflict is a serious dispute, which often swells from minor disagreements over differing objectives or the failure to resolve such issues in a timely manner. At this juncture, parties have escalated and prolonged the level of disagreement among themselves to the point where they disrespect each other and act defensively. Family business leaders should take decisive action to effectively resolve these issues before the situation further deteriorates.

The third type of interpersonal conflict is a destabilizing conflict. At this point, emotions dominate and anger is expressed in an aggressive manner—sometimes publicly—that results in a loss of constructive goals. Outside intervention should be considered in managing destabilizing conflicts, lest they metastasize into the fourth type of interpersonal conflicts.

The fourth type of interpersonal conflict is warfare, where there is intense hostility among parties who prioritize hurting one another over working towards furthering the family business enterprise, much less resolving the conflict itself. Warfare often results in personal and legal attacks with the goal—stated or unstated—of damaging the other side to the detriment of the family business. Relationships can be permanently damaged, and the culture of the family business can be degraded and perhaps even destroyed.

These conflicts can result in hurt feelings, damaged relationships, verbal assaults, health issues, isolation, and unreasonable expectations for future generations of family business leaders. From the financial perspective, they can also cause underperformance, business failure, or vulnerability to the point where a sale of the business under unfavorable conditions becomes a reality.

Addressing Interpersonal Conflicts

The key solution for addressing conflicts is timely and effective communication among the participants. Communication, particularly if it is guided by qualified and experienced professionals, allows people to be open with one another and discuss solutions for any interpersonal or business issues.

The goal of such mediation is to build trust among all members of the family business, but this can only be achieved if one makes a conscious effort in analyzing why and how people are interacting the way they are. It can be very difficult for family members to communicate with one another because of their history, and it is therefore critical for the conversation to be focused on what family members need from each other and how actions of other people have affected them.

It is also important to separate business issues from family issues, as a lack of a well-defined separation between the two increases the potential for conflict among family members. Simply recognizing that work should remain at work can go a long way in maintaining solid relationships among family members. This balance can result in a more sustainable family business.

Simply put, family businesses come with family drama and it is up to the business leaders to create an environment of trust and respect that fosters productivity and strong relationships. Effective and facilitated communication allows people to recognize how their actions impact both the business and their family, thus increasing the probability of survival and success in the long run.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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