A family business is a business owned and run by members of a family. The majority of ownership or control lies within a single family. This unique entity combines the traditional business system along with the family system and may include combinations such as husbands and wives, parents and children, extended families and multiple generations.
Successful family businesses are advantageous and of great benefit to the family members involved, communities, local and global economies. They have the capabilities for positive impact on the economy of a country, create jobs, provide employment opportunities and generate wealth and security for families.
As an important economic force, they can influence the socioeconomic development of a country, increase the Gross Domestic Product GDP and provide a better quality of life for the citizens. Family firms can serve as a source of economic growth and advancement for developing economies.
Family business success is premised majorly on the business structure and effective conflict resolution. Many family-owned enterprises fail to survive beyond the first generation due to being run like casual businesses without formal processes and management structure characterized by lack of a business plan, structured governance, standard policies, defined strategic plans, goals, succession planning and a dispute resolution clause.
Stability, effectiveness and continuity are achievable when family businesses employ time-tested family business building activities including family business consultants, Board of Directors, Advisory Boards, family council and meeting.
Through these management strategies, the family and business systems are strengthened to effectively manage complex family business problems, deescalate conflicts, prevent disputes and create a strong business and healthy family dynamics.
Family businesses are prone to conflict. Conflict is the bane of family businesses because of their uniqueness. Conflict is the major thing that can get in the way of their success. Early intervention is therefore crucial to their survival and success.
Unresolved ownership, business and family issues can drastically affect their performances. Business disputes over money, management and ownership can impact both family and business relationships adversely. Family problems which can be physical, emotional or financial may affect how they speak about themselves, how to share information and may prevent family shareholders from speaking with one voice to non-family directors, staff and the public.
Family-owned enterprises pose unique set of challenges such as succession issues, in-law problems, conflicts over who may or may not be employed, conflicts due to different ownership philosophies and management practices, tensions involving spouses, conflict over compensation, problems among siblings or sibling rivalries. Destructive conflicts not only affect family members but can result in high turnover of non-family members and negatively impact business operations and productivity.
When emotions are high and strong, outside professionals can be of great assistance. Family business owners can seek the help of a mediator, an independent third party to help resolve issues constructively and avoid recourse to arbitration and litigation that can do permanent damage to the family. The mediator helps create an environment that facilitates respectful and rational discussion and negotiation.
Mediation deals with disputes in a positive, holistic manner and helps preserve important relationships. It reduces hostility and establishes effective communication. It assists the parties to understand each other’s needs and concerns, develop and communicate new ideas. They identify the root of their conflict, jointly explore options for settlement and are equipped to resolve future conflicts.
They resolve issues made more complex because of an overlap of family issues and business issues, improving communication and understanding among family members in their roles of shareholders, board members, working partners, advisors and employees.