Escaping a Family Feud

We regularly see the tragic unfolding of these seven stages of conflict in business families. We have observed great anguish and frustration. Families fractured. Careers and businesses ruined. But that doesn’t have to be your fate. We have also witnessed a difficult, but possible, path out of the conflict spiral – a few important steps that can get the business family on the right path again.

Create alignment for change

As a general rule, conflicts do not end until interests change. By that, we mean that the combatants need to come to the conclusion that their common interest in finding a solution outweighs the competing interests they were fighting over. Usually this kind of change happens through some level of suffering, whether that’s financial, emotional, or both. If family members feel enough pain, then they become willing to see their interests in a new light. When those interests have shifted, it allows warring factions to come to the table and find compromises that didn’t exist before. At some point, whatever people are fighting about becomes less important than ending the conflict.

If you find yourself in this situation, look for opportunities to align on common interests. That doesn’t mean you all-of-a-sudden put aside everything that had brought you to this point. You don’t have to agree on much other than, as one family we worked with said, “the status quo is not an option.” Often there is some residual family bond that can be accessed. Families can tap into a visceral, almost biological, reservoir of family connection, usually one that is focused on preserving family ties into the future. As one family member put it: “Let’s work out our differences so that we don’t poison the next generation.”

Put all options on the table

With alignment on the need to change, the next step is to identify a path forward. We believe it’s vital to put every option on the table. Resolutions that may have been unthinkable before may be the only way out now, since the alternative is a return to the suffering of being stuck in a family feud.

Start by trying to surface all of the available options. They will generally fall into these main categories:

• Sell the family business to an outsider
• Have one part of the family buy out the other owners
• Divide up the company – or its assets – among the owners
• Construct a “grand bargain” that keeps the family together as owners, but under a new agreement

The first three of these paths represent an attempt to solve the underlying conflict by changing the family’s relationship as owners of the business. Tragically, there are times when families just can’t turn their pain to their advantage. They can’t go back and find a commonality of interests; they can’t forgive the mistakes of the past. The pain is too profound. Then it’s time to sell the business and to save whatever remains of the family relationships.

The last path keeps the ownership group intact but changes the nature of their relationship to the business. We call it a “grand bargain” because it usually involves addressing multiple issues at the same time, with each side getting what matters most to them and compromising in other areas. It will often involve changes across all five of the core rights of owners.

As an example, we worked with one family that found themselves in a deadlock due to a number of disagreements about the future of the business. After working their way down the conflict spiral, the company’s performance stagnated, while their formerly close family relationships suffered. After realizing that they all wanted to stay as owners despite what they had been through, they agreed on a grand bargain that included:

• Moving from a partnership to a distributed type of family business. This meant that family members who didn’t work in the business could now be owners.
• Building out Owner, Board, and Family Rooms to replace the Loft they had been working in. This distributed decision power into groups better suited to make good decisions
• Creating a new purpose to replace the lapsed one. They shifted their Owner Strategy from one focused on liquidity to one that prioritized growth.
• Communicating to the next generation about the business so they could make informed decisions about whether they wanted to be part of the company as employees, board members, or owners, which substantially increased the engagement of the next generation.
• Agreeing on an estate plan that would ultimately equalize ownership across the branches. This resolved a decade long feud between two branches.

Each grand bargain that we have helped construct looks different, depending on the needs of the family at that moment. If you are trying to construct a grand bargain in your family, avoid the temptation to look for a “silver bullet” to solve all problems. Major conflicts are almost always caused by a complex constellation of factors, don’t expect a single solution.

Rebuild trust over time

In the midst of a family feud, some family members will refuse to come to the negotiating table because they don’t feel as though they can trust those who would be sitting on the other side. The lack of trust is entirely reasonable. Since trust is about being vulnerable, as the conflict worsens and people feel less safe, they should be expected to have a much more difficult time trusting each other.

The issue is when trust becomes a precondition for making progress. That is unrealistic. Greater levels of trust are likely to be the consequence of resolving conflict, not the cause. A feeling of trust is a reflection of the behaviors of the other person, which means it can be reconstructed over time. In fact, you should take concrete actions to build trust by demonstrating competence, openness, concern, and reliability to each other. That is why it is critical to focus on the process of working towards a resolution before you start negotiating on content. That includes defining guidelines for how you will treat each. By doing so, the level of trust will start to increase, little by little. In turn, that will not only open up other options, but it will raise the likelihood that you can ease strained family relationships.

Get outside help

Managing the process of exiting a family feud on your own is an incredibly difficult task. When trust is low, you are likely to need an honest broker who can bridge the communication back and forth, as well as facilitate what are likely to be tense conversations. It also helps to have someone who can bring ideas for how to resolve the situation.

The outside help may come from inside your inner circle, from a trusted advisor, relative, clergy member, or a mutual friend. If you don’t have someone who can serve in that role, a number of experts can help, such as mediators, therapists, and family business advisors. “There are some systems where relationships (e.g. brother-brother) are so toxic, often for historical reasons, that trivial comments produce explosive reactions and draw attention away from a decision and onto the two individuals,” observes Harvard Business School’s David Ager. “To avoid paralyzing the system, the only way to move forward on any significant decision is through the use of a trusted, neutral, third party whose responsibility is to manage the conversation between the family members, often by reframing and interpretation, with the goal to avoid misattribution in every statement uttered by the other family member.”

*Adapted from the Harvard Business Review Family Business Handbook by Josh Baron and Rob Lachenauer. Pages 229-232.