Can embracing conflict spur positive change?

By

Carrie Hall

EY Americas Family Business Leader

Trusted advisor to entrepreneurial family businesses looking to create sustainable growth and competitive advantage across generations. Loves travel and wine, particularly at the same time.

4 minute read 10 May 2019
Related topics Growth Family business

Disputes and friction are inevitable in family business, but can actually be quite healthy when managed well.

In our survey of 525 of the world’s largest family businesses, nearly half reported some level of dysfunctional conflict. It’s how they deal with that conflict that makes the difference between success and failure and family happiness and distress.

Reducing unhealthy conflict has benefits for family businesses beyond a tranquil workplace. It’s also a positive for long-term family health and business prosperity. Our research has shown that family cohesion leads to greater business return on equity (ROE), and our research suggests that the same mechanisms that lead to cohesion also reduce family conflict.

In this report, we explore the effects of dysfunctional conflict and explain how to make conflict benefit business and family, rather than disrupt either. We pinpoint the behaviors and traits that family businesses use to help reduce unhealthy conflict, and we suggest actions that business owners and families can take to help manage disputes more effectively, enhance communication and family cohesion and, in the process, help the business and the family thrive.

Healthy vs. unhealthy conflict

For most of us, conflict is, at best, uncomfortable. In a business setting, it can lead to a host of unproductive and often dysfunctional behaviors. Experts in family business say there are three types of conflict:

  • Task: relating to goals and strategies
  • Process: relating to how things should be done
  • Relational: relating to interpersonal relationships

The most unhealthy and potentially harmful of the three is relational conflict, which is characterized by mistrust, anger, frustration, jealousy and other negative feelings.

Within a family business, task conflict and process conflict can have positive results. If there is no relational conflict, task conflict is generally healthy, as resolving it builds commitment and motivation. The result is a sense of inclusion. Similarly, when resolved, process conflict leads to greater coordination and often brings about improved appreciation of one another’s abilities.

The most important component of a family business is the family. Disagreement is inevitable, but if everyone makes an effort to communicate often and really listen, they can avoid potentially explosive outcomes.

Build cohesion, reduce unhealthy conflict

Our data point to the important role cohesion plays in reducing conflict. Fifty-seven percent of low-conflict families had high cohesion, while only 47% of high-conflict families reported high cohesion. On the other end of the spectrum, just 6% of low-conflict families also had low cohesion, while 13% of high-conflict families also had low cohesion.

Our findings show that these activities are important for reducing conflict in the world’s largest family businesses:

1. Engage in frequent communication

Communication is the factor most associated with lower levels of conflict for our survey respondents. Communication works to improve trust, reduce misinterpretations, enable rapid discussion of disagreements as soon as they arise, improve the chances that important information will be conveyed and understood, and strengthen relationships in general.

2. Develop unifying emotional attachments through corporate social responsibility efforts

In the world’s largest family businesses, attitudes toward corporate social responsibility (CSR) activities inversely correlated with the incidence of conflict. In general, the more important CSR is to the family, the less conflict they reported. Finding compelling CSR goals that all family members can get excited about is important for overall family health and is associated with a reduced level of family conflict.

3. Set expectations

If you agree on and set expectations ahead of time, the chances for conflict are greatly reduced. Expectations can cover a range of issues large and small, such as who works in the business, the criteria for employment, how decisions are made, how salaries are set and who is a shareholder. These conversations are often difficult and time-consuming, but they are well worth the effort. It’s harder to agree on difficult issues when in the midst of an emotional conflict, so resolving them before conflict erupts is good practice.

4. Build a sense of purpose and mission

A unified purpose and mission that family members find compelling and personally important serve to build trust, as does a willingness to sacrifice short-term benefits for the long-term health of the family. They see that helping the family succeed enables the achievement of unselfish goals about which they are passionate. This also dovetails with our findings about the connection between commitment to CSR and reduced conflict.

5. Create formal mechanisms for recognizing and resolving conflict

Charge a small subset of family members to identify destructive conflict and urge the parties to seek outside resources to help resolve it. A family council (a group charged with coordinating and in some respects “governing” the family) is ideal for this role. The board of directors, particularly outside directors, can also assist with conflict resolutions and even adjudicate business-related family conflicts.

While unhealthy conflict can prove devastating to a family business, not all conflict is dysfunctional, and there are many ways to calm any brewing storms.

Family businesses shouldn’t hide or shy away from conflict. Instead, they should work hard to reduce and resolve dysfunctional conflict and fully embrace the healthy aspects of conflict and the benefits it can generate.

Summary

In this report, we explore the effects of dysfunctional conflict and explain how to make conflict benefit business and family, rather than disrupt either.

About this article

By

Carrie Hall

EY Americas Family Business Leader

Trusted advisor to entrepreneurial family businesses looking to create sustainable growth and competitive advantage across generations. Loves travel and wine, particularly at the same time.

Related topics Growth Family business