MGT 4550 - Family Business Management
MGT 4550 Family Business Management CONFLICT MANAGEMENT Chapter 4 Family Business Management, Concepts and Practice by A. Bakr Ibrahim & Willard H. Ellis Instructor: Dr. Irene Duhaime Class Schedule - Week 4 CONFLICT MANAGEMENT IN FAMILY BUSINESS Reading: Chapter 4 Cases: Precista Tools AG (A), p.157 FBM Northern Construction Inc., p.203 FBM Questions 9, 24, 70, 77, 85, 86,90 FBAB PROJECT TOPICS DUE Dr. Irene M. Duhaime 2 Contents The Traditional Vs. The Behavioral View Causes of Conflict in the Family Business Common Sources of Conflict Father-Son/Daughter Rivalry Rivalries Between Brothers: the Favorite Son Syndrome continued …. Dr. Irene M. Duhaime 3 Contents …. continued Conflict Between Other Members of the Family Conflict between Family and Non-family members Managing Conflict Other Conflict Resolution Methods Dr. Irene M. Duhaime 4 The Traditional Vs. The Behavioral View Traditional View “..conflict is unhealthy for organizations and must be avoided” Contemporary Functional / Positive or Behavioral View innovation, creativity, energy and enhanced performance Dysfunctional / Negative must be avoided or managed to minimize damage Dr. Irene M. Duhaime 5 Causes of Conflict in the Family Business The Overlap Between the Family and Business Systems The Business System: Resultoriented Conflict The Family System: Emotionally based. Figure 4.1 Conflict in Family Firms Family Business management, Ibrahim & Ellis Dr. Irene M. Duhaime 6 Causes of Conflict in the Family Business Ambiguity of roles Differences in power and status among family and non-family members Hasty and /or unfair succession process Rivalries Favorite among family members Son/daughter syndrome …continued Dr. Irene M. Duhaime 7 Causes of Conflict in the Family Business .. continued Lack of clear and coherent policies regarding career development, compensation and hiring Lack of code of conduct Lack of proper job descriptions and clear boundaries Dr. Irene M. Duhaime 8 Common Sources of Conflict Father-Son/Daughter Rivalry Rivalries between offspring Conflict between other members of the family Conflict between family and non-family members Dr. Irene M. Duhaime 9 Father-Son/Daughter Rivalry Founder’s Psychological Make-up Strong sense of attachment Reluctance to give up control and power Unwillingness to delegate Son/daughter has a need for independence and grows impatient Conflict leads to strained relationships, rivalry and power struggle Dr. Irene M. Duhaime 10 Father-Son/Daughter Rivalry Value Difference Between Generations Differences in values, vision and management styles Leads to increased tension Dr. Irene M. Duhaime 11 Father-Son/Daughter Rivalry The Path to Self-Validation Drive to equal or outdo father Feeling the he/she cannot measure up to father Offspring should Do his/her own thing and make own choices Understand own feelings and own motivation Understand father’s feelings Prevent father from playing off against other offspring Source: Levinson: “Conflicts that Plague the Family Business”, Harvard Business Review Dr. Irene M. Duhaime 12 Father-Son/Daughter Rivalry Mechanisms to Resolve Conflict Succession plan Third-party intervention Peacemaker Wise man/woman in the family Consultant/lawyer, accountant Dr. Irene M. Duhaime 13 Rivalries Between Offspring: the Favorite Son Syndrome Father playing off offspring against one another An elder Son/daughter not being selected as a successor Ambiguity or uncertainty concerning career path, promotion and compensation An emotional involvement with one of the offspring, as in Favorite Son Syndrome Using age rather than competence as a basis for promoting or compensating family member. Dr. Irene M. Duhaime 14 Rivalries Between Offspring: Mechanisms to Resolve Conflict Succession plan CEO intervention Job descriptions Introducing professional management Confrontation meeting Communication - weekly supper Restructuring - creating zone of comfort/territories Dr. Irene M. Duhaime 15 Conflict Between Other Members of the Family Caused by Lack of, or unfair succession process Value differences between generations Ineffective communication Unclear definition of roles and responsibilities Undefined or poorly defined policies on division of labor, career development and business procedures Dr. Irene M. Duhaime 16 Conflict Between Other Members of the Family Mechanisms to Resolve Conflict Job descriptions CEO intervention Confrontation meeting Code of conduct Communication - weekly supper Dr. Irene M. Duhaime 17 Conflict between Family and Non-family members Initiated by conflict between family members Nepotism Son of the boss (SOB) Syndrome Non-consultation in decision-making The Weekly Family Supper Undefined or poorly defined policies on division of labor, career development and business procedures Dr. Irene M. Duhaime 18 Conflict between Family and Non-family members Mechanisms to Resolve Conflict Clear policies concerning career development Job descriptions Communications Introducing professional management Dr. Irene M. Duhaime 19 Managing Conflict Setting Clear Guidelines Jurisdiction, compensation, career development, code of conduct, objectives, performance assessment criteria Remove ambiguity Set clear expectations Dr. Irene M. Duhaime 20 Managing Conflict Managing confrontation Face-to-face meetings One-on-one meetings with CEO/Founder and employees involved in conflict Group meetings Breaking deadlocks Act early Dr. Irene M. Duhaime 21 Managing Conflict The CEO/Founder as Chief Arbiter Avoid enlisting allies in conflict situations Avoid taking sides in conflict situations Allow expression of feelings Set aside time to resolve dispute and reduce tension Develop appropriate mechanisms for resolving conflict Create a healthy business environment Dr. Irene M. Duhaime 22 Managing Conflict The Peacemaker The Family Wise man/woman A neutral relative Non-family third party (lawyer, accountant, family friend) Helps to reconcile varying points of view Respected by all parties Dr. Irene M. Duhaime 23 Managing Conflict Communication The Weekly Family Supper Relaxed atmosphere Family members freely express feelings Discuss working relationships Share points of view Resolve personal issues Other Weekly Meetings to accommodate non-family members Dr. Irene M. Duhaime 24 Managing Conflict Introducing Professional Management Non-family member Provide objectivity Encourage professional attitudes in family members Dr. Irene M. Duhaime 25 Other Conflict Resolution Methods Expansion of Resources avoid win-lose disagreements Avoidance Non-serious problems, provide a cooling off period Smoothing minimize differences, focus on sharing, provide reassurance; not a long-term solution; serious problems can remain and fester Dr. Irene M. Duhaime 26 Other Conflict Resolution Methods Compromise win-win situations middle ground over extremes parties make concessions may not be the ‘best’ solution Dr. Irene M. Duhaime 27 Other Conflict Resolution Methods Forcing Use of formal or positional authority Issuing of directives Win-lose situation Tendency towards dominance and cohesion Often creates negative feelings Dr. Irene M. Duhaime 28 Other Conflict Resolution Methods Redesigning the Structure of the Family Business Introduce a reporting hierarchy Separation of roles and responsibilities Clear delineation of mandates Definition of jurisdiction and boundaries Reassignment of conflicting parties Dr. Irene M. Duhaime 29 Cases CONFLICT MANAGEMENT IN FAMILY BUSINESSES Cases: Northern Construction Inc., p.203 FBM Questions 9, 24, 70, 77, 85, 86,90 FBAB Dr. Irene M. Duhaime 30 Question 9 Should a rocky relationship with a child, parent, sibling while growing up be a deterrent to entering the business? It it possible to repair these relationship? Dr. Irene M. Duhaime 31 Question 24 How does a woman deal with patronizing behavior, including a lower salary Dr. Irene M. Duhaime 32 Question 59 What guidelines can you offer to help siblings or cousins working together? Dr. Irene M. Duhaime 33 Question 70 Are there some positive benefits to a dispute among family members? What are the best methods of conflict resolution? Dr. Irene M. Duhaime 34 Question 77 If trouble brews, should you seek outside help? And from whom? Dr. Irene M. Duhaime 35 Question 85 Can power struggles between siblings and other family factions create a bad business climate? How can such struggles be defused so they don’t undermine the business? Dr. Irene M. Duhaime 36 Question 86 How can you handle theft or substance abuse in a family business? Dr. Irene M. Duhaime 37 Question 90 What are the different types of company cultures that can exist in a family business and does it matter for family harmony and good business ? What can you do to emphasize more, the culture’s good points and change its negative ones? Dr. Irene M. Duhaime 38 Class Schedule Next Week SUCCESSION - SENIOR GENERATION’S PERSPECTIVE Reading: Chapter 5 Questions 3, 5, 7, 19, 21, 27-31, 33-35, 52, 75, 76, 80 FBAB Case: Baker, Inc. p. 287 FBM Dr. Irene M. Duhaime 39
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