Facing conflict through family councils

Carlos Arbesu _Family Business

One of the moments of truth to test the usefulness of family councils is its capacity to address family conflicts or crisis. Although there is plenty of experience about family councils in positive environments, little is known about its performance in negative or critical scenarios.

As Alexandre Koeberle-Schmid points out in his recent book “Governance in family enterprises. Maximizing economic and emotional success”, it is a paradox to observe that family councils “work best when they are less needed”, that is to say, when there are not family conflicts to address. Difficulties are not only about the complexity of addressing family conflicts, but rather about managing the divisions among family council members which create great obstacles for the proceedings of the council itself.

From this point of view, we can distinguish positive and negative aspects of the performance of family councils, when it comes to confronting family conflicts or crisis:

a. Negative aspects: for example when family council members suffer crisis in their private lives (divorces or marriage crisis, quarrels among brothers and sisters, individual crisis etc). In all those cases it is really difficult for the family council to function well and smoothly, and many times family councils end up suspending the meetings or delaying them until problems are resolved or conflicts are overcome. These crisis or conflicts can take years so the functioning of the family council itself could be seriously affected.

b. Positive aspects: the mere existence of regular family council meetings generate dynamics of “collaborative dialogue”, and this dialogue strengthens the capacity of family members to overcome any conflict situations that may arise. It is in this scenario where the “preventive” function of the family council takes place. Acting this way, family councils prevent future conflicts not only anticipating the specific problems that may arise but creating and promoting the capacities of the family council itself and their members as a team to acomplish their conflict management functions perfectly well.

The three most important causes of conflict in family businesses are: (1) work and dedications of family members in the business (2) power and participation in decision making processes and (3) remuneration. Family councils can ordinarily overcome conflicts through communication, information, active listening to involved family members, and finally giving and opinion or taking family council positions relating to the conflict.

Nevertheless, family councils are not legal bodies and thus, they need the collaboration of those other legal governance bodies in the business –as shareholder assemblies or boards of directors- to implement legally binding decisions and policies that solve or regulate potential áreas of conflict.

Finally, family councils can legitimately decide the exclusion of a member from the family, that is to say, from the family associations or agreements, but these cases are very rare and so sad for families.

Some useful keypoints for the family council to overcome conflicts or crisis could be the following:

• Work on anticipating and preventing causes of conflict.
• Active listening to those family members who are not involved in the business
• Set rules of governance and policies regarding the topics that could lead to conflict
• Ask for help and/or mediation from independent board members and counselors taking a neutral point of view
• Communication and collaboration between the chair of the board and the chair of the family council
• Establish clear rules and, if neccessary adequate bodies for conflict and dispute resolution, even arbitration.

It is important for the stability of the family council that it does not get involved in the conflict resolution decision, delegating or leaving it to an ad hoc committee or to an arbitration or mediation body. Thus, the family council can give opinions or suggestions trying to persuade family members to solve the conflict and reach agreements, without generating distress in the family council itself or risking its authority.

As always, I would be really thankful if you let me know your opinions, critiques and suggestions about this post. Ideas must be shared, discussed and improved. Also, I would be thankful if you cooperate on the diffusion of this post in the networks (Twitter, Linkedin, Facebook…) to allow more people to get access to it and discuss it.

Thank you very much and have a happy day!

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