Family Business Tensions as They Affect Business Viability

Sharon M. Danes, ProfessorUniversity of Minnesota

Department of Family Social Science

Why study tension and its impact on family business?

• Tolerance of conflict can foster a social climate that allows individuals to express and test themselves as well as establish

their identities (Busby, 1977).

• Too much or destructive conflict can detract from providing and communicating clear goals for a family business (Kaye, 1991).

• Family businesses can benefit from constructive conflict but there is a threshold at which conflict is no longer beneficial (Ward, 1987).

What literature indicates

• Family and business goals differ among family businesses• Family businesses can be lost through destructive levels of

tension between family and business goals

• A strong business calls for open communication about goals and a desire to resolve misunderstandings

Family Businesses Conflict: Distinct from other conflict contexts

• Family members are often fighting about deeper issues than it appears on the surface

• Reasons for sustaining conflict are often stronger than desire to solve it

• Issues are circular or systemic, not linear with a cause and effect

• Conflict follows a dynamic pattern

Content of Family Business Conflicts

• Justice Conflict

• Work-Family Conflict

• Role Conflict

• Identity Conflict

• Succession Conflict

Sample• Nationally representative sample of family

businesses

• Subset of businesses with data from business and household managers

• Primarily male business managers and female household managers

Initial Findings on Tensions & Goal Achievement

• Overall, household manager had higher levels of tension than business managers

• Highest level of tension by both managers was unfair workloads, followed by resource competition between family & business

• Household managers also indicated greater level of success in achieving most important goal identified

Predicting Business Tensions & Achievement of Goals

• When family health (APGAR) is good, tensions are low for both managers

• The higher the total level of tension, the less success in achieving business goals

Household Manager’s Work Decision Status

No YesNo 38% 20% 58%

Yes 6% 37% 43%44% 57%

Decision Maker in

the Business?

Work in the Business?

Table 2. Household's Manager's Work Decision Status

Household Manager’s Work Decision Status Tension Sources

• For those who have decision-making responsibility in the business, they have higher tension levels in:

– lack of role clarity– confusion over authority– issues over unequal ownership

Work Decision Status Impacts Tension Levels

• Those who are decision makers in the business, but do not work in the business, are more likely to have higher tension levels than those who do not work in either arena

• Potential for “crazy-making” ?

• For this group, tensions are higher:– competition for resources– confusion over authority

And interestingly enough...

• The business manager who reports having a spouse (household manager) who shares in the decision making - reports the same higher levels of tension in:

– lack of role clarity– confusion over authority

Farm Family Businesses Differ from Service and Sales Businesses

Lack of role clarity

Confusion over authority

Unequal ownership

Competition for resources between family and business

A Mutual Gains NegotiatingA Mutual Gains NegotiatingApproach toApproach to

Mutual Gains Mutual Gains

Negotiating:Negotiating:

an attempt to get people to synthesize aims rather than

enter into win-lose competitiveness

Mutual Gains NegotiatingMutual Gains Negotiating

Competitive• Win as much as

possible through negotiation/demand/ claiming

Mutual gains• Provide a process for

parties to reach creative mutual gains agreements

Mutual Gains NegotiatingMutual Gains NegotiatingCompetitive

• Win as much as possible through negotiation/

demand/claiming• Competitive, suspicious,

closed• Win – Lose

Mutual gains• Provide a process for

parties to reach creative mutual gains agreements

• Cooperative, trusting, open• Win - Win

Mutual Gains NegotiatingMutual Gains NegotiatingCompetitive

Each party:

• Defines their positions • Establishes bottom line

demands

• Negotiates with other parties

• changes demands, surrenders, threatens

• Agrees or withdraws

Mutual gains

Each party:• Seeks to identify interests of

all parties• Defines their common goals• Identifies problems and

constraints• Generates a range of

alternatives• Works toward agreements

acceptable to all parties

• Focus on INTERESTS Not Focus on INTERESTS Not PositionsPositions

• Separate the People Issues from Separate the People Issues from the Contextual Issuesthe Contextual Issues

• Invent Options for Mutual GainInvent Options for Mutual Gain

• Insist on Using Objective CriteriaInsist on Using Objective Criteria

Jones’Jones’ Vacation Role Play

Jones’Jones’ Vacation--Position

Joan

• Two Weeks at the Beach

Bill

• Two Weeks in the mountains

Jones’Jones’ Vacation-- INTERESTSINTERESTS

Joan

• Need a rest• Need time with Bill• Swimming/Sunbathing• Sandy beach, salt

water smell and ocean beach dining

Bill

• Need a break• Time with Joan• Fishing and hiking• Mountains - tradition

and views

Focus on INTERESTSINTERESTS--Not Positions

• Work to understand other parties interests -- listen and be empathetic.

• Discuss your own interests openly and candidly.

• Commit to meeting other parties interests.

• Must change the way you act!

Mutual Gains NegotiatingMutual Gains Negotiating

Competitive• Power: The key to

resolution of traditional negotiations.

Mutual gains• Empathy: The key

to mutual gains negotiations.