Why do conflicts occur in family businesses and what can be done to resolve them? Grant Gordon attempts to find some answers
When families argue over business, headlines are made. Take the Ambani brothers in India (pictured), who have developed a bitter feud since the death of their father, Reliance Group founder Dhirubhai Ambani. Or the Pritzker dynasty, which has been fraught with conflict as certain family members wanted to exit, unhappy with the level of remuneration of those working in the business. Positioning between Rupert Murdoch's scions has always made gripping reading as the world waits to see who will next run the mogul's media empire. Not only can the bad blood that can come of these disputes rock the family to its core. In some cases, it can move markets. In my latest book, Family Wars (co-authored by Nigel Nicholson of the London Business School) we put the spotlight on cases of classic conflict in family business and look at how to deal with the tensions.
The saga of warring families is as old as the story of Cain and Abel in the Scriptures. You can't entirely insulate siblings from conflict. When brothers are set in competition, the risk of a fight emerging is always there. Successful families encourage dialogue and communication to plan for the future based on a shared vision and charting a route that builds trust in the family. The Ambani brothers were left to fight over the spoils after their father's death. Without the influence of the patriarch it can become a zero sum game where one sibling's gain is another's loss. With Reliance Group it came down to investment bankers to adjudicate over the carve-up of the family dynasty.
When the generations battle it out, not only is family trust eroded but it can also have a negative impact on the performance of the business. In the case of the Bata Shoe dynasty, a struggle for supremacy undermined the ability of the business to make much needed changes. Thomas Bata Sr and his wife Sonja made a formidable couple who commanded respect, but the decision to hire their son Tom Jr as CEO backfired when the parents and their son found that their vision was not aligned. For example, Tom Jr believed that a stock market listing could offer advantages to the business, whereas Sonja clung to the view that the company should remain the world's leading privately-owned manufacturer of shoes.
The lack of clarity among the owners over strategic direction took its toll at the company in terms of retention of senior management. Only following a complete overhaul of the governance structure were the Batas able to regain grip on the destiny of their organisation. The destruction of family relationships can reach great proportions when a cult of personality overshadows the business. This is the House of Hubris where power goes to the leader's head. The second-generation family business entrepreneur Sumner Redstone encapsulates the archetypal leader with an iron grip; edging aside foes along the road to success at both CBS and Viacom, while allowing a serious family rift to develop. Overweening pride and confidence can isolate the leader from the ordinary mortals that surround them. This is the stuff that patriarchs are often made of – where character traits such as narcissism and anti-social behaviour can creep to the fore.
When the decision-making process is compromised there comes the risk of unity dissipating and a family schism emerging. The issues that can divide include remuneration, ability to exit on fair terms, entitlement to ownership and even the feeling of emotional attachment to the family business.