Resolving conflict with communication: Why talking it out can save a family business
In the midst, as we are, of a major succession event in which trillions of dollars are changing hands between ultra-high-net-worth (UHNW) family members, it has never been more important for every person to feel that they have a voice and, more importantly, feel they are heard.
However, as revealed in The 2023 North America Family Business Report from Brightstar Capital and Campden Wealth, nearly half of respondents (49%) have experienced family conflict, which has often led to a breakdown in communication (according to 41%).
The report, which surveyed more than 100 family businesses from the United States and Canada with an average annual revenue of more than $340 million, reported that the vast majority of respondents (80%) recommend establishing regular communication channels between family members to help them resolve business-related conflicts. However, only 23% of those surveyed admitted they rely on external support when facing family disputes.
“Breakdown in communication is what often leads to family conflict,” says Caroline Kitidis, global head of ultra high net worth at HSBC Global Private Banking. “These familial challenges are very personal. Many times those involved try to manage within the four walls of their own home versus seeking advice from external counsel. Instituting forums and/or channels to do this can lead to establishing a healthy engagement model for the family members.”
“Too often non-family advice to resolve conflict requires a repression of individualism,” says Charles A. Lowenhaupt, UHNW counsellor and author of The Chase Continues, referring to the philosophical and ideological outlook that emphasises the intrinsic worth of the individual. “In fact, conflicts develop when family members feel they cannot self-actualise and are expected to sacrifice individuality to ‘family harmony’.”
Families, especially prominent families of wealth, need to be highly cautious about who they allow into their private sanctum,” says clinical and consulting psychotherapist Dr. Paul Hokemeyer.“While matters of their financial health are sacred, matters of their relational health and the mental health of their family members are even more sensitive and privileged. This is especially true in our media-saturated world where shows like Succession define the public’s view of families of wealth and power through a pejorative and stigmatising lens.
“For these reasons, family members need to be hyper-conscious of what they tell to whom. No family needs to be shamed or embarrassed by their family conflict. Historically, the field of family governance has not had access to licensed and ethically bound professionals, such as family therapists and psychologists who have proven themselves trustworthy and culturally competent to handle their issues with empirically based and artfully delivered clinical interventions. Over the past decade, however, this is slowly changing and a small group of global professionals are emerging to pick up the task.”
Having conversations about how to deal with conflict doesn’t need to wait until conflict arises.
The report, of which 80% of businesses surveyed were established before the 1980s, with 47% founded in the 1950s or earlier, suggests that the success of family businesses will depend on addressing core governance issues. Aside from succession planning, respondents identified formalising a family charter or constitution, expanding professionalisation or hiring non-family members, and creating conflict resolution mechanisms as key priorities.
“Having conversations about how to deal with conflict doesn’t need to wait until conflict arises,” says Russ Haworth, founder of The Family Business Partnership and host of The Family Business Podcast. “In fact, having these conversations prior to conflict being present is a good idea.
“Conflict can often arise as a result of mismanaged or misunderstood expectations. An exercise that I recommend families undertake to help mitigate this is what I refer to as ‘Lifeboat Drills’. These drills effectively simulate what would happen in any number of potential scenarios such as death, disability, divorce, disagreement etc, and ensures the family understands what currently happens to ownership, control and decision making in these scenarios, while also allowing them the time and opportunity to address any unintended consequences prior to the actual scenarios happening.
“Agreeing how you will deal with future disagreements or conflict may not necessarily help you to avoid them but knowing that you have a process in place that everyone feels is fair will provide reassurance that if it does happen, that there is at least a way to help you navigate it.”
“The better place to start is with good communication that pre-empts conflict arising in the first place,” says Russell Prior, regional head of family governance at HSBC Global Private Banking.“All families will have their own, natural ways and methods of communication, whether they be formal or not. So, in the first instance, it’s worth reflecting as to whether these serve the purpose of preventing or managing conflict, should it arise. If they do, then fine. If not, then start the conversation about how conflicts will be dealt with before they arise. Frameworks for building trust and good communication are so important that they always form a large part of any family governance conversation.
I'm quite impressed by the ability of families to self-correct and solve their problems internally.
The report found that family conflict most likely arises from topics related to roles and responsibilities of family members, succession planning, and the patriarch / matriarch unwilling to relinquish control (according to 41%, 27%, and 19% of respondents, respectively). And, when asked about the outcome of their family conflict, four in ten respondents (41%) report a breakdown of communication / continued family infighting. Another 20% observed indecision and stunted business growth. Meanwhile, 41% of respondents were able to avoid such adverse scenarios, and resolve conflicts, through regular family communication, followed by 31% who used the help of external advisors to settle disagreements
“This data is consistent with my experience,” says Dr. Hokemeyer. “They reflect basic tenants of systemic theory which show that while families can be and preferably are self-healing, sometimes they get stuck and need a force from outside the system to help reorient it to a higher level of functioning.
“I'm quite impressed by the ability of 41% of the families who participated in this study to self-correct and solve their problems internally. From a data standpoint, the robust nature of this percentage reflects the consciousnesses of the families who participated in the study in focusing on their inter-relational functioning whilst placing a high value on the importance of resolving conflicts productively.”
“Some families will be closer or more effective communicators than others and be able to solve their own issues, whereas others will benefit greatly from external help,” says Caroline Kitidis. “It is typically families who have thought through these issues, who maintain strong bonds and good governance who find themselves in better positions.”
“Saying we have a ‘breakdown in communication’ is an easy way to try a neutral answer to a hot topic,” says Lowenhaupt. “The follow-up question is often not answered: What is the communication that has broken down and how is it fixed?
“We have found over many years that if there is to be resolution of a conflict, there is a good process to address the conflict, but everyone must realise that often the conflict cannot be resolved. There are indeed families that have generational disputes and thrive on them. Indeed, some wise Indian families point to dispute and separation at each generation as ensuring greater family success. A family must be prepared to conclude that the conflict cannot be resolved before addressing it.”
