Family Business Tensions as They Affect Business Viability Sharon M. Danes, Professor University 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 Table 2. Household's Manager's Work Decision Status Work in the Business? Decision No Yes Maker in No 38% 20% 58% the Business? Yes 6% 37% 43% 44% 57% 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 Negotiating Approach to Mutual Gains Negotiating: an attempt to get people to synthesize aims rather than enter into win-lose competitiveness Mutual Gains Negotiating Competitive Mutual gains • Win as much as • Provide a process for possible through parties to reach negotiation/demand/ creative mutual gains claiming agreements Mutual Gains Negotiating Competitive Mutual gains • Win as much as possible • Provide a process for through negotiation/ parties to reach creative demand/claiming mutual gains agreements • Competitive, suspicious, • Cooperative, trusting, open closed • Win - Win • Win – Lose Mutual Gains Negotiating Competitive Mutual gains Each party: Each party: • Defines their positions • Seeks to identify interests of all parties • Establishes bottom line demands • Defines their common • Negotiates with other goals parties • Identifies problems and constraints • changes demands, surrenders, threatens • Generates a range of alternatives • Agrees or withdraws • Works toward agreements acceptable to all parties • Focus on INTERESTS Not Positions • Separate the People Issues from the Contextual Issues • Invent Options for Mutual Gain • Insist on Using Objective Criteria Jones’ Vacation Role Play Jones’ Vacation--Position Joan Bill • Two Weeks at the • Two Weeks in the Beach mountains Jones’ Vacation-- INTERESTS Joan Bill • Need a rest • Need a break • Need time with Bill • Time with Joan • Swimming/Sunbathing • Fishing and hiking • Sandy beach, salt • Mountains - tradition water smell and ocean and views beach dining Focus on INTERESTS-- 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 Negotiating Competitive Mutual gains • Power: The key to • Empathy: The key resolution of to mutual gains traditional negotiations. negotiations.