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MGT 4550 - Family Business Management
CONFLICT MANAGEMENT
ChapterChapter 4 4
Family Business Management, Concepts and Practice
by A. Bakr Ibrahim & Willard H. Ellis
Instructor: Dr. Irene Duhaime
Dr. Irene M. Duhaime 2
Class Schedule - Week 4Class 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 3
Contents 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
Syndromecontinued ….
Dr. Irene M. Duhaime 4
ContentsContents
…. 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 5
The Traditional Vs. The Behavioral View
Traditional View “..conflict is unhealthy for organizations and
must be avoided” Contemporary or Behavioral View
Functional / Positive innovation, creativity, energy and enhanced
performance Dysfunctional / Negative
must be avoided or managed to minimize damage
Dr. Irene M. Duhaime 6
Causes of Conflict in the Family Business
Figure 4.1 C onflic t in Fam ily F irm sFam ily Business m anagem ent, Ibrahim & E llis
The
BusinessSystem :R esult-oriented C onflic t
TheFam ilySystem :Em otionallybased.
The Overlap Between the Family and Business Systems
Dr. Irene M. Duhaime 7
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 among family members
Favorite Son/daughter syndrome…continued
Dr. Irene M. Duhaime 8
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 9
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 10
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 11
Father-Son/Daughter Rivalry
Value Difference Between Generations Differences in values, vision and management
styles
Leads to increased tension
Dr. Irene M. Duhaime 12
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 13
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 14
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 15
Rivalries Between Offspring:
Mechanisms to Resolve ConflictSuccession planCEO interventionJob descriptionsIntroducing professional managementConfrontation meetingCommunication - weekly supperRestructuring - creating zone of comfort/territories
Dr. Irene M. Duhaime 16
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 17
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 18
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 19
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 20
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 21
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 22
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 23
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 24
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 25
Managing Conflict
Introducing Professional Management Non-family member
Provide objectivity
Encourage professional attitudes in family
members
Dr. Irene M. Duhaime 26
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 27
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 28
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 29
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 30
Cases 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 31
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 32
Question 24
How does a woman deal with patronizing behavior, including a lower salary
Dr. Irene M. Duhaime 33
Question 59
What guidelines can you offer to help siblings or cousins working together?
Dr. Irene M. Duhaime 34
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 35
Question 77
If trouble brews, should you seek outside help?
And from whom?
Dr. Irene M. Duhaime 36
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 37
Question 86
How can you handle theft or substance abuse in a family business?
Dr. Irene M. Duhaime 38
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 39
Class Schedule - Class Schedule - Next WeekNext 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