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Four Rules For Conflict Resolution in A Family Business - Family Business Forum - Economic Times
Four Rules For Conflict Resolution in A Family Business - Family Business Forum - Economic Times
Four Rules For Conflict Resolution in A Family Business - Family Business Forum - Economic Times
Sports trainer Greg Anderson, famously remarked “The law of win/win states
- let’s not do it your way or my way; let’s do it the best way”. Strangely
enough, not only do his words ring true in the art of family business
management; they may also just be the perfect advice for navigating the
conflicts that accompany running a family business!
The good news, is that while these complexities are certainly fodder for
conflict between family members, strategizing a robust resolution mechanism
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Four Rules for Conflict Resolution in a Family Business | Family Business Forum | Economic Times 12/6/17, 5)00 PM
A plan tailored to the requirement of the family should provide a unified goal
to the family and should cover assignment of authority to various family
members to execute specific tasks within agreed timelines, a basis for holding
such members accountable, allocation of roles and responsibilities, budgets,
deadlines, a decision-making process and a framework for review. While it is
not required for the decisions of the family to be taken by majority vote or
even unanimously, it is important for the family to clearly identify the
leader(s) and decision maker(s), unanimously. Use of private trust structures,
family arrangements, family constitutions, shareholders agreements, etc. are
some of the increasingly popular tools for codifying family and business
management.
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Four Rules for Conflict Resolution in a Family Business | Family Business Forum | Economic Times 12/6/17, 5)00 PM
For example, two family members who share the same values, may foster
different operational visions for the family business. In such a situation, a
corporate resolution mechanism should not be used to settle a family conflict;
and similarly, personal sentiments should not dominate what otherwise
should be a rationale business decision. An open dialogue to debate the
matter within the family should be facilitated, as well as a separate meeting
with persons having corporate know-how, to unanimously arrive at a
decision.
While the causes of family conflicts may differ, all elements of any conflict
invariably find their root in the basic vulnerabilities of humanity – ego,
needs, emotion, ambition, power, perception and personal values. It therefore
becomes extremely important for all family members to periodically convene
and with the absence of suzerainty, to dispassionately and autonomously
analyse what the current and future requirements of the family and the
business are. Oftentimes, promoters/patriarchs who have founded the family
business, are (rightfully) emotionally attached to what is their brainchild;
sometimes to an extent where they are unable to recognize constructive
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Four Rules for Conflict Resolution in a Family Business | Family Business Forum | Economic Times 12/6/17, 5)00 PM
Some of the biggest family conglomerates in India, like the Ambani family,
the Birla family and the Bajaj family have seen a split or division in their
families after 3 generations, primarily over issues of ownership.
Understandably, whenever news of such division took the public by surprise,
it was the value of the business that took the greatest hit.
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Four Rules for Conflict Resolution in a Family Business | Family Business Forum | Economic Times 12/6/17, 5)00 PM
On the other hand, if division is unavoidable, is all really lost? The hard
reality is that sometimes, despite the best intention and effort of all parties,
even the most close-knit, family-business unit may see an inconceivable end.
Yet, here too, if managed with the right spirit and tools, an end does not have
to mean the end of a family or a business dynasty! It is the mindset of the
parties entering a conflict, that determines the ultimate result. Take for
instance, the Ambani brothers split - an indictment of an unfortunate split
that was nevertheless managed well; with each brother being placated with a
piece of the empire. Today, as a consequence of the split, the brothers have
diversified and grown their individual businesses, and together, they
influence virtually every conceivable industry and sector in India. If a
reconciliation were to ever happen, they would be an unstoppable force!
Takeaway: Whatever the strategy, conflict resolution begins and ends with
open dialogue between family members. It is important to discuss and
establish a mechanism (like using a private trust, shareholders agreement,
etc) that would help avoid conflicts in the family business from the very
beginning. When trying to resolve conflicts, it is even more important to
avoid the ‘blame game’ between family members. The import and use of
mutually elected, unbiased and capable mediator(s), cannot be stressed
enough! All parties should be heard, and no approach should be deemed
taboo. After all, the existence of conflict means that there is undeniably, a
scope for improvement in the cogs of the business, as well as the family. By
negotiating the conflict and reaching mutually satisfying options, the
business and the family, can only walk away from the conflict stronger.
Anuj Sah is Partner and Virja Dange, Associate at Khaitan & Co.
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