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Unfettered debate and discipline are key to a harmonious business

Re-printed by permission of the publisher from Family Business Magazine.

Fredda Herz-Brown is a managing partner of the
Metropolitan Group

Conflict is a feature of families anyway. Add business to the mixture and the results can be incendiary. A few ground rules and a hearty team spirit can help. Fredda Herz-Brown describes the best way to avoid and resolve differences and maintain healthy dynamics 

All families have conflict and all businesses have conflict. Conflict is built into our lives, and while it tends to be viewed negatively, it can provide opportunities for constructive change. It becomes a problem when it is viewed as bad and to be avoided.

Families do well to develop rules for handling conflicts that arise in the daily work of a business. Some families have developed novel approaches. For example, the Green family has a rule that no one can speak out of turn at family council meetings; the other person must finish their statement before another family member can begin to speak. During one council discussion emotions were running high and family members were constantly interrupting one another. Finally, Seth, the youngest of three sons, suggested that each speaker stand and that another should not be permitted to take the floor until the first speaker sat down. The family adopted the rule. They also agreed to a time limit on each person's comments.

When one family member is angry at another's behaviour, the two should try to resolve the issue and not involve other family members. The Green family provides an example of the risks of relying on others for help in settling the issue. Whenever one of the sons had a problem with a brother, he would discuss it with either his father or mother. Usually, the son would be relieved, but the parent would become upset and the problem would never get resolved.

The Green brothers have learned that when they take issue with another brother's business decision or have a problem with his behavior, they get together with the brother and discuss their feelings directly – leaving the parents out of it. If after several hours they are unable to resolve the problem, they call in an old friend whom they all trust and who has agreed to act as a facilitator.

Another helpful rule for avoiding polarisation is that business disagreements should be dealt with at the office, where they are most likely to be resolved. Participants in the business often bring their problems with siblings or parents in the office home to spouses. Talking over the problems helps them blow off steam. But even if they eventually settle the problem at the office, the spouse may be left with angry, unresolved feelings that aggravate in-law tensions and polarise families.

Two daughters who run their father's clothing firm have worked out another way of promoting consensus on important decisions. From the beginning of their collaboration Jan and Susan Schmidt felt that when one of them expressed a contrary view, it was essential for the other to listen. Susan runs the manufacturing operation, and Jan is in charge of the retail stores, where the firm's products are sold. On one occasion, Jan objected to a line of clothing that Susan was planning to manufacture. Since they could not reach an agreement, they invoked their rule: "A strong vote against something will be listened to."

Susan went back to the drawing board and gave more thought to the line she was planning to manufacture. That gave Jan time to examine her reluctance to go ahead with the line. Both came back to the negotiations in a better frame of mind: Susan had modified the line to meet some of Jan's reservations about it, and Jan was able to articulate her misgivings. Listening to each other's objections and taking time before making a decision had worked well for the two sisters. They decided to go ahead with the line, but on a smaller, trial  scale and with some of Jan's suggested variations.

While rules are helpful for resolving deadlocks, long-term co-operation depends on agreement of fundamentals. I have found that arguments are more likely in family businesses that have not 1) agreed on values, mission, and basic policies, 2) written job descriptions and clarified leadership responsibilities, 3) established regular performance reviews, and 4) set up ­structures so that various constituencies such as minority shareholders and non-participating family members can be heard.

Take the case of a brother-sister team who took over their father's electrical distribution company. Neither Sally nor her brother Brian were clear about the company's focus. During a family retreat, they clarified their values and developed a mission statement based on those values. From this mission, Sally and Brian were able to formulate policies and procedures to guide their work together.

One policy they agreed on was that the company would sell to both distributors and large companies that bought electrical products directly. Now, whenever a question arises about where the company's marketing efforts will be concentrated, Sally and Brian refer back to this original policy decision. For instance, they refused to sell their products to a mid-sized company because its sales fell outside their specifications.

In one real estate firm that I work with, three sibling owners are clear about their roles and responsibilities. Each of the three makes decisions for his or her own division within the mission and strategic plan they have developed for the firm. If one believes that a project may not be consistent with the plan or affects other divisions, the management team will meet and vote on how the issue should be resolved.

For example, Dorie, the sister who heads the commercial real estate division, wanted to bid on construction of a project that involved not only office and store space but a planned residential community as well. Since one of her brothers is in charge of residential construction, she brought up the project at a management meeting. After discussion, the group decided that the project was an important one to bid on; her brother participated in the decision to go ahead.

Families may decide that when there is a deadlock they will defer to the person who has primary responsibility for the activity. A couple named Sally and Jim launched an advertising and printing firm several years ago while Jim was working in a large international firm. Jim, who now works full-time in the couple's venture, is in charge of advertising, while Sally heads the printing operation. While each values the input of the other on projects that cut across the divisional boundaries, when they disagree about a project, the one who originated the work has the final say. On one occasion, for example, the couple disagreed about when and where a client's advertising campaign should be launched. Since marketing was Jim's responsibility, Sally left the final decision to him.
While family members in other firms have clearly defined roles and responsibilities, they have often agreed that major decisions will be made jointly, by consensus. Since the family members in these firms usually work together closely, they are often able to build a consensus long before a management meeting is held and a vote taken.

But what happens when a consensus cannot be reached? In their home health service agency, John and his sister Mary have agreed that in the event of an impasse, if either feels that his or her view has not been heard or understood, they will bring in a third party, their trusted lawyer, to break a tie vote.

When an impasse developed over whether to enlarge their current office or open another at a different location, the lawyer evaluated the data they had gathered and recommended renting space at the new location. Both agreed to go along with the recommendation.

In the companies I've discussed, all of the participants felt the talents and skills of other family members were essential. This mutual respect goes a long way toward building the commitment that is necessary to resolving disputes. Nevertheless, families that work out rules for dealing with deadlocks will have an easier time resolving them when they occur.

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