Managing conflict in family enterprises

The book poses a series of questions and suggests that each family's responses to these will determine the effective way forward that would be most compatible with its objectives and family structures

Untangling Conflict: An Introspective Guide for Families in Business

Authors: Janmejaya Sinha, Carol Liao, Ryoji Kimura, & Brittany Montgomery

Publisher: Penguin Random House India

Price: Rs 499

If you are part of a family that is engaged in business and wondering how to ensure that business interests are protected as different members of the family bring out widely diverging ideas, often accompanied by acrimonious family discussions, this book will help you to anchor your thoughts. Put together by some of the most experienced business strategy leaders of the Boston Consulting Group, who have helped many family businesses navigate the compounded complexities of family relations and enterprise imperatives, the comprehensive guide coherently captures the various issues that families must consider in managing potential conflicts.

The need for such a guide is simple. Given the predominance of family businesses, economies and jobs are dependent on their progress. However, the goals of families involved in businesses may be different from professionally-run companies and family developments (for instance, marriages) influence business strategies. If the business fails due to family conflicts, enormous value is lost, along with loss of jobs, brand image and wealth. Thus, introspective diagnostic exercises are offered to prevent and mitigate conflicts.

The key point about this book is that it stays away from offering any single formula that every family business can deploy for smooth flow of business and family matters. Instead, it poses a series of questions through its eight chapters and suggests that each family’s responses to these will determine the effective way forward that would be most compatible with its objectives and family structures.  This is important as even the definition of what constitutes a family business, perceptions regarding these, and cultural and regulatory environments vary across the world. While the book shares insights from different cultural milieus, it is suitable for the Indian context, taking a fictional Indian family as an example of the kind of conflicts that can bedevil business ventures.

A basic understanding of the key family values and objectives is central to business issues. The management gurus put forward certain questions for a family to consider: How would we like to be remembered? What motivates us? What do we prioritise? These are difficult issues to ponder, and it is unlikely that any family composed of several generations and branches would be able to come to a consensus on its motivations for business; however, the process itself can offer some clarity. In particular, the identified objectives, which are mentioned as business-first, family-first and wealth-first, will define the operating models for the business.

The authors segregate potential conflicts into three primary strands. Soft issues are those relating to emotional conflicts that arise due to perceptions on fairness, equality and respect within families. No family can be immune to these, yet such issues impact business decisions deeply and are inadequately factored into business management strategies.

The hard issues refer to the business ownership matters, the rights and benefits enjoyed by family members, and their expectations from the business. Leadership, employment, rewards, and lifestyles can fall in this domain.

The third source of conflicts is the purely business issues where family members do not agree on strategies, priorities, or risk and capital allocation matters. According to the authors, while conflict is unavoidable, what matters is how they are resolved so that family disputes have minimal impact on the business. Useful tables through the book help to distil the various options. For instance, the table on how to define the benefits or rights for a family divides their scope into family, management and ownership for the fictional family and lists these out for each member of the family. Another table gives examples of decisions on ownership with respect to shareholdings, voting, inheritance, and exit from the business. Detailing these out would help the family members to chalk out their preferences and apply them uniformly to all, so that these are not perceived as arbitrary or unfair.

The guidelines in general urge families to listen to each other and resolve conflicts as soon as they arise, either through a trusted family member or through designated intermediaries. Families would do well to set up family assemblies and councils for decision-making. One of the interesting suggestions is that the meetings should include fun activities which help to bond the family.

A chapter further looks at how to manage relationships with other stakeholders in the business such as close advisers, employees, and partners. It points out that over the longer term, trusted employees reap better rewards from family businesses as compared to professionally run businesses.

The fictional Srivastava clan (a community not usually noted for its entrepreneurial tendencies) is mired in various soft, hard and business issues. Given the premise that unique solutions need to be worked out, the book does not suggest any actual way out for the beleaguered family. Working out responses to the “questions for reflection” provided in each chapter section would itself help to articulate some of the issues and resolve them, as the soft, hard and business issues flow from each other.

This volume provides a useful starting point for any family business that wishes to grow, sustain itself or exit amicably. Ultimately, though, dispassionate efforts from an external source are probably the only way to prevent conflicts from escalating.

The reviewer is the author of several books on Indian business history