Continuing our examination of the seven complexities facing those planning for a business transition, this article delves into the third consideration — the problem of unresolved conflict. Unresolved conflict refers to our tendency to ignore difficult issues and allow them to escalate.
There's no doubt we live in a world of constant change. Good management of this change is what drives our success. As conflict naturally occurs when the status quo is no longer acceptable, it follows that the existence of conflict is a direct result of change.
As the chain below illustrates, the linkages work both ways. Effective management of the aforementioned conflict can also bring about a change that will enable greater success. This is an important consideration when planning for the continuity of your business as the ownership and leadership changes hands.
So why then does so much conflict remain unresolved? For the most part, we fear conflict. We tend to filter our comments or avoid engaging in debates because we don't want to become vulnerable or hurt someone else's feelings. While we are afraid of destroying relationships that are important to us, ultimately that is what often happens when we ignore the issue and leave it to fester. Much like that nagging toothache, we imagine that if we don't think about it, the conflict will eventually go away. Instead it often grows into an extremely painful abscess which can subsequently burst and poison the system.
No doubt you have read many articles in the newspapers about prominent family businesses dealing with the negative impact of unresolved conflict. The end result is often a lawsuit that only serves to further disconnect the family — as was the situation with the McCains of McCain Foods and the Shoens of U-haul fame.
There isn't a company or organization around today that doesn't feel the pressure of change and the uncertainty that a business transition will bring. Conflict typically arises out of situations involving:
- Differing visions for the direction of the business
- Conflicting principles and values
- Failure to let go of the ways things were done in the past
- Reluctance by the senior generation to pass on authority
- Power struggles between incoming and outgoing generations
- Sibling rivalry or jealousy among next generation co-preneurs
- Clash of personalities or differing work styles
Research also shows that conflict in family businesses magnifies with each generation. The longer the conflict festers, the harder it is to resolve.
“I just don't want family fights,” bemoans Sophie. “I don't want the fights we had with Jim and Beth.”
Penmaenship Tool and Die is a perfect example. Some twenty years ago, Thom Penmaen added a trucking arm to the business. He needed someone to run the new division so he instinctively turned to family and created a partnership with Jim, his sister's husband.
Unfortunately the relationship didn't work. Thom removed Jim from the management of Thomson Shipping but to this day, Jim still owns 25% of the shares. The issue has never been resolved. Both Thom and Jim refuse to negotiate. They are both stuck in their respective positions.
Not surprisingly, what began as a business issue has spilled over into the family causing a rift that couldn't possibly get any wider. Their wives, Sophie and Beth, were once good friends but now don't speak. Thom and Sophie's adult children haven't had contact with their Uncle Jim and Aunt Beth for many years and the third generation doesn't even know Jim and Beth exist. Until this issue is resolved, a plan for transitioning to the next generation cannot move forward.
With the continuity of a family enterprise so dependent upon a “we focus” and healthy relationships within the family unit, it is vital that we find ways to address roadblocks rather than leave conflict to fester.
Our next article will explore some of the following strategies for addressing conflict ranging from the simple to the very complicated:
- Recognize your fear of conflict
- Create positive conflict
- Develop prevention strategies
- Adopt an issue resolution process
- Engage a third party to help facilitate the process
In the meantime, for information on this or the other six complexities to address when planning for the transition of your business, contact your BDO advisor or our Business Transition Services team at 1.800.598.6400.