When not managed well, conflicts in family businesses can spiral out of control like mighty tornadoes that destroy everything in their paths. No family sets out expecting to get into a feud. And yet they happen, nonetheless. That conundrum led us to explore how it is that family feuds unfold. We discovered seven standard stages of conflict. While there is a tendency to believe that if you leave a conflict alone it will stay the same, we have found it much more common that it will worsen over time. Major conflicts have a gravity to them, pulling families down the spiral, as each step makes sense after the previous one failed to resolve the situation.
These are the seven stages:
Exhibit 12.1: The Conflict Spiral
1) Interests diverge. In their book in Getting to Yes, Harvard negotiators Roger Fisher and William Ury define an interest as a broad desire that a person or group of people have for something. Some interests are shared; others are individual. Most business families are united first and foremost in their wanting to protect the golden goose; i.e., to keep the business healthy. However, given that family members have different roles and responsibilities as the family business grows, interests naturally diverge. Some family members work in the business, and some are owners (some are both; others are neither). Those employed in the business will be more inclined to channel profits to reinvestment and bonuses, while owners not in the business may be disposed to pay higher dividends. Where anyone stands on a particular issue will be influenced by where they sit in the family business system.
2) Positions harden. Once interests diverge, individuals or groups typically adopt different positions on issues. A position is the specific way that people try to get what they want, and positions become clear when decisions must be made. Again, all families have to make important decisions – e.g., where to live and where to send the kids to school – but business families are called upon to make significant decisions more frequently. Because these decisions often involve the allocation of resources, positions can degenerate into zero-sum games: He wants more; therefore, I get less. Positions harden, and suddenly everyone feels that the matter can be resolved in only one way – their way. Positional bargaining begins, and even if a solution is reached, one party often comes away feeling that the solution is unfair. Consequently, positional bargaining typically leads to outcomes that are neither successful nor sustainable.
3) Communication breaks down. When there is a failure to recognize common interests, and when positions harden, then communication gets badly muddled. Family members start shunning one another or sending flaming emails. Typically, it’s neither silence nor all-out fighting, but rather a tense dynamic where people break away and don’t talk for a while, and then the tension bubbles up to the surface again, and things explode. We worked with one client family where three brothers would get into huge screaming matches, yelling verbal abuse, before lapsing into silences that threatened the business because no decisions would be made. Although the brothers were effectively the CEO, COO, and CFO, they wouldn’t talk to one another for months after a fight, not even on business matters.
4) Alliances form. When people stop talking directly to each other, alliances inevitably begin to take shape. Everyone feels forced to take sides, and partisan camps spring up, often starting with the spouses of the “wronged” family member. Alliances harden as confirmation biases set in: All actions of the other side are interpreted through a lens that confirms the righteousness of the alliance’s view. In this stage, things get very personal, and each side labels the other as crazy, stupid, lazy, or worse. This polarization makes compromise even more difficult. In business families, five kinds of alliances are common: around family branches (e.g., brother’s side versus sister’s), owner groups (e.g., voting versus non-voting shareholders), participation levels (Operators versus Investors), gender, and generations (current versus next).
5) Proxy wars are unleashed. As alliances get entrenched, those on opposing sides look for ways to bolster their positions, and inevitably they entangle other people in the conflict. Family members call in insiders, non-family managers, and employees, for example, to serve as pawns in a game that nobody will win. Proxy wars take multiple forms: In a very large firm, businesses aligned with, or led by, the other side are sold; aligned senior managers are fired; dividends are withheld to hurt a few Investors, at the expense of the many. At one client family, for example, a board member actually threatened to unleash an out-of-the-ordinary audit of the work of a CFO aligned with the other branch, not too subtly accusing him of fraud.
6) Advocates are called in. After involving innocent insiders, the next move down the conflict spiral is to bring in expert outsiders as advocates for a particular point of view or position. Warring Co-CEOs, who were cousins, called in a compensation consultant, whom one cousin accused of being biased. The cousins dismissed the consultant, but the tension between them mounted. Even worse, family members lawyer up. Since lawyers are obligated to advocate for their clients, they make the strongest possible, uncompromising case for why their side is in the right, and the other side in the wrong. The nature of the dialogue changes, too, as the search for unlawful behavior takes center stage over reconciliation. For this reason, even the best-intentioned lawyers almost always ratchet up the conflict. We remember one painful board meeting with seven family board members, each with their personal counsel sitting behind them. The meeting degenerated into one legal objection after another that smothered all attempts at making important decisions.
7) Family war begins. The final stage is the all-consuming fight for supremacy, where only one side can win, and where the ends justify virtually any means. Oftentimes, these family wars take the form of lawsuits. It’s almost always counterproductive, and expensive, both financially and psychologically. Our colleague, Steve Salley, himself a former attorney, summed up the situation: “Family litigation is the ugliest form of warfare: civil war. Hostages and casualties vastly outnumber apparent winners, and the scars are permanent. Any victories end up being tragically unsatisfying.” When families think of lawsuits as the remedy, they are not taking into account the likely regret they will feel for the next five or 10 years, or longer, as well as the impact on their employees and the community.
These stages are predictable, but they’re also avoidable – if the owners of family businesses are aware of them and of the ways to extricate themselves when they get caught up in a spiral.
As one client told us, “conflict is inevitable, but combat is optional.”
Not every situation follows the pattern precisely, but families in a conflict situation have found it useful to understand where they are in the spiral. It helps them to recognize that the conflict has not been caused by any one individual, but by an escalating process that has happened to all of them.
Understanding where you are in the conflict spiral can then help you address the situation together, since it becomes clear that continuing down the spiral may mean you could easily lose control and end up in a family war that no one wants.
*Adapted from the Harvard Business Review Family Business Handbook by Josh Baron and Rob Lachenauer. Pages 223-228.
Summary: Major fights in family businesses often follow a pattern, which we call the conflict spiral. These stages are predictable, but they’re also avoidable. Conflict a gravitational pull, left unresolved can spiral to the point of no return. But if you’re aware of how your conflict call spiral to a destructive place, you can take steps to ensure that doesn’t happen.