3 Problems To Solve With Family Business Mediation
Many people think of mediation instead of court when looking to resolve personal or family disputes and business disagreements. It is faster, more affordable, and less contentious as a problem-solving tool than a lawsuit will ever be. Mediation is also the best solution for family business disputes that muddy the waters between personal and business problems.
People may think litigation (lawsuits) over family business disputes might keep “personal” concerns out of things. In reality, the antagonistic, winner-loser nature of suing each other just heightens the emotional, personal, and financial cost of the disputes. All businesses have conflicts, but when the people on opposing ends of disagreements must sustain family relationships beyond the work environment, the variety and intensity of disputes increases substantially. You take it to work, you take it home, you take it networking, and to social events, political venues, church, temple, or synagogue… You simply cannot get away.
We all know the tired, old phrase: “Hey, It’s nothing personal; it’s just business!” Malarkey! In a family business, all disputes are personal — always. When every area of your life, business, and possibly, your legacy is affected, it is undoubtedly personal. Because of that, family business disputes often are the most difficult to resolve. Mediation is the better option to resolve issues and protect relationships.
Mediation is attractive to disputants, lawyers, and certainly, judges, due to crowded court dockets, time, and costs. It offers a way to avoid confrontation (which, face it, nobody likes) and assures everyone’s voice is heard. Since the mediator takes no sides, she keeps everyone focused on mutual interests as the parties communicate through her to sort their intermingled business, ownership, and family issues.
What is truly great about family business mediation is its applicability to any disagreement, whether the problem is personnel, operations, direction, growth, succession, or closure. Let’s look at three of the family business disputes that mediated can save…
1. Succession Planning
The majority of family business owners fail to properly plan for succession, if, in fact, they plan at all. Many founders of a family business just assume it will pass to their heirs or that one or more heirs will “step up” to run it. Succession planning takes time and consideration that is hard to come by when most of those hours and creative juices are required to operate the business. It is easy to put off planning to ensure a business transfers effectively to the person or team that can properly continue to build it. The most pressing conflicts in business succession are:
● Ownership / Partnership methods and strategies
● Family employee expectations (shares, positions, authority, etc.)
● Owner / Leader exit plans
● Incapacity of the leader
● Preparation of the next generation
The Family Business Institute showed that 50%+ of family business leaders will retire in the next decade. Less than 20% of them have selected successors. The research showed that only 30% of family-owned businesses survive into the 2nd generation, and just 12% get to the 3rd. That is why it is so important to plan for succession, if the mission is for the business to survive into future generations.
Mediation can help. With a skilled, impartial mediator, business owners and respective family members can avoid confrontation so they can constructively identify shared goals for the business. While the mediator keeps the focus on those mutual interests, the family can understand each parties’ expectations and determine a plan for succession. Then everyone knows the proper form of ownership, smart exit plans, what to do if a key person becomes incapacitated, and how or if the next generation will be prepared to take the reins.
2. Grudges and Other Old Baggage
No matter how people are related (through DNA, adoption or marriage), all family members show up to work with different views, involvements, and personalities. That creates extra sensitivity among family members. It brings special challenges that do not exist with unrelated business colleagues, making it particularly challenging to keep everyone collegial at work.
● What about those family members whose perspective is that they are entitled to privilege in the business? What happens when their expectations and the expectations of non-family employees are, or are not met?
● What about when older siblings think they should inherit leadership due to seniority, but it is the younger ones who have the ability and interest in the business?
● How about the next generations who believe taking over the business is expected of them and they don’t want it, or even resent the expected responsibility?
● When a divorced or second spouse is involved in inherited roles, what happens to the trust relationships among the family?
Family business arguments often lead to disaster, especially when feuds and alienation occur. Family schisms regularly poison the business from the inside and that not only triggers counterproductive management but also reduces profits. Long-lasting and unresolved grudges just increase problems and become worse once awareness spreads outside the business.
A collaborative approach like mediation is proven to help resolve such conflicts. Moreover, it can save relationships, improve them, or at least provide a model for working through future challenges. When the neutral mediator has the skill to help family members work through troubles and avoid confronting each other, those relatives rarely feel unheard or badly treated. The fact that mediation is private and confidential helps assure that the family and its business’s “dirty laundry” is not aired in public.
3. High Turnover among Non-Family Employees
An often overlooked factor is that family-owned business troubles affect non-family employees too. Whether problems are truly favoritism or not, they can seem to be to those employees who are not related. It is a delicate balance, bringing up next generations to know and be capable of handling the business without pushing away or showing a bias against non-family employees. According to sources like the Small Business Administration (SBA), retaining non-family employees is one of the main difficulties for family-owned businesses with a culture where:
● Hiring practices give jobs to family members just because they are family
● Promotions go to family members, even though they may not be qualified or have not “paid their dues” like other ambitious employees were required to do
● Perks and benefits are given to family members when they have not earned them as other employees did, such as health insurance, vacation, networking opportunities, educational prospects, mentoring/access to leadership…
● Certain family traditions look like favoritism, such as that new car or summer abroad for graduation, or the extra cash that seems like unearned bonuses.
● Unwillingness exists to take an “outsider’s” perspective to keep business ideas and practices from becoming stale or dated.
Problems related to nepotism ultimately affect the company’s bottom line. Before that happens, bringing favoritism and other employee conflicts to mediation can generate tremendous solutions. It matters less whether the founder / business owner thinks there is preferential treatment than when the perception among non-family employees is that it exists. It can be hard to examine, but a neutral, skilled mediator has no “skin in the game” so can help get everyone’s concerns on the table. That keeps both family and non-family employees focused on the solution and leads to healthier working relationships and bottom lines.
With a skilled mediator, you can avoid unnecessary confrontation, stay focused on mutual interests, and build private, creative solutions to these three of your company’s most pressing challenges, and more.
You can join the discussion about mediating your business or family disputes, whether management, customer, partnership, divorce, guardianship, estates and trusts, or elder care. Submit your issue to our Asked & Answered blog, Follow us, or Comment below.
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