Why Family Businesses Need To Find The Right Level of Conflict

From the outside, the Alexander family seemed to have it all.

Henry, the grandfather and family patriarch, had managed to turn a small corner store into a national chain and market leader. Not only did the business provide the next two generations a lifestyle that would have seemed unfathomable when Henry opened his first shop, but the business helped keep the family extraordinarily close. Henry’s sons all lived in close proximity, as did their children, most of whom worked for the company after graduation and spent much of their free time together.

Below the surface, however, another reality existed. The tragic death of one of Henry’s children years before had been devastating to the family. It brought them even closer, but it had also led to a desire to avoid conflict at any cost. Why argue when life is short and precious? But that meant that family members were so afraid of damaging the family relationships that they were extremely reluctant to confront each other–on personal or business issues. Disagreements were quickly papered over to maintain a veneer of harmony. This came at a cost that they did not realize until much later.

For most people, conflict is uncomfortable. That can be especially true in families who’ve watched family conflict tear successful businesses to pieces: Consider the Ambani brothers in India, the founders of Adidas in Germany, the Redstone family in the US, and even the fictional families of the 1980s TV show Dallas or the current HBO show Succession.

What’s less often recognized is that too little conflict in a family business can have an equally destructive impact. When I discuss this with my students at Columbia Business School, where I teach a class on conflict in family businesses, it quickly becomes apparent that the impact of both too much and too little conflict on both the family and their enterprise are almost identical. In both cases, the business can suffer from limited growth, poor decision-making, a loss of competitive advantage, and, in severe cases, the sale or split of the company. Similarly, families tend to break up into factions and suffer poor relationships. The mechanisms are different, but the results are the same.

Conflict is a “Goldilocks problem.” Both ends of the spectrum are ultimately unsustainable–so the best place is in the middle. While Goldilocks may trigger you to think about the fairy tale with the three bears, a better insight comes from our solar system. The earth is in what astronomers refer to as a Goldilocks Zone. Much closer to the sun and it would be too hot to sustain life, much further and it would be too cold. Though the reasons differ, both extremes make life uninhabitable.

Think about conflict as having two faces: external and internal. The external face of too much conflict is what we typically think of: the shouting, the screaming, the outwardly expressed anger.

The internal face of too little conflict is different, it is quiet seething, an iceberg of emotions where the surface is pleasant enough, but the danger lies beneath. Between these two extremes lies a healthy middle, where difficult issues can be raised, addressed, and resolved without doing lasting damage to relationships or shared assets.

The reality is that unless a family’s interests are perfectly aligned, a rare occurrence in my experience, some conflict is inevitable. Therefore, the priority is to manage it, not tolerate or eliminate it. Conflict that is not managed inevitably escalates.

For families on the “too much” side of the spectrum, the challenge is how to reduce the intensity of the external conflict so that constructive conversations can occur. For those families on the “too little” side, they must learn how to disagree in order to release the pressure that builds up from internal conflict. At least in my experience, the “too little” side of the spectrum more common in families, even though it receives less attention from the media. Most families are conditioned not to fight with each other. Ask almost anyone what matters most to them and it is their family, including the ability to spend time together to celebrate holidays, weddings, and so on. This pressure to be the perfect family that never disagrees often ends up sowing the seeds of destruction down the road.

What actually constitutes excessive conflict (vs. constructive disagreement, etc.) depends on personal interpretation and varies by the culture of the family. Some families can more easily tolerate external conflict than others, and the extent to which people will stoically put aside their interests to support the common cause also varies. But here’s a three-part quiz you can use to get the conversation started about whether your family enterprise is in the Goldilocks Zone:

1. Is there general satisfaction with the direction of the family enterprise? You may not be happy about every aspect, but if someone asked you if you were “better together than apart”, you would answer with an unequivocal yes.
2. Are decisions about critical issues being made? You may not address every single point of disagreement, but everyone would agree that there is no “elephant in the room.”
3. Are family relationships good enough to work and celebrate together? You don’t have to be best friends to own significant assets together. Instead, you have to be good business partners, which means you are aligned on the big issues and can enjoy each other’s company, at least most of the time.

Last year, a friend forwarded me a picture he took of a can of Sierra Nevada beer. On the top of it is the line, “FAMILY OWNED, OPERATED & ARGUED OVER.” I have seen many businesses brand themselves around their family ownership, but this was the first I have seen to include conflict in that description. Ken Grossman, Sierra Nevada’s founder, says, “It’s funny, but it’s the truth. We can get together and argue over what’s best for us as a company moving forward, but we all do it in good faith, knowing that everyone wants what’s best overall.”

If you can say something similar about your family enterprise, there’s a good chance you have found the Goldilocks Zone of conflict.

If not, you may find yourself in the same position as the Alexanders. Throughout the years, tempers would begin to flare – not because there was too much disagreement, but because important decisions were avoided rather than dealing with potential disagreement. Eventually, the family decided to sell the company rather than tackle any disagreements that would threaten to disrupt family harmony, such as how to transition the business to the third generation. Unfortunately, the issues that were unaddressed did not go away because the business was sold – historical grievances remained, with new ones emerging from those who opposed the sale. And without the business to keep them together, the family started to drift apart. Five years later, many family members looked back on the sale as a mistake. Both the business and the close relationships were now gone.

No one aims to have conflict within a business – and even worse, within a family. But some conflict is actually healthy. It provides a chance to clear the air of lingering resentments, potential issues, and even find a productive process for disagreeing and still making decisions. Good conflict doesn’t have to destroy a family—managed well, it can make the bonds even stronger.

First Published : 26 December 2018. HBR.org