Understanding Tensions in Family Businesses

1. Family Business Tensions as They Affect Business Viability Sharon M. Danes, Professor University of Minnesota Department of Family Social Science

2. 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 athresholdat which conflict is no longer beneficial (Ward, 1987).

3. 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

4. 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

5. Content of Family Business Conflicts • Justice Conflict • Work-Family Conflict • Role Conflict • Identity Conflict • Succession Conflict

6. 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

7. 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

8. 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

9. Household Manager’s Work Decision Status

10. 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

11. 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

12. 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

13. 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

14. A Mutual Gains NegotiatingApproach to Conflict Resolution

15. Mutual Gains Negotiating:an attempt to get people to synthesize aims rather than enter into win-lose competitiveness

16. Competitive Win as much as possible through negotiation/demand/ claiming Mutual gains Provide a process for parties to reach creative mutual gains agreements Mutual Gains Negotiating

17. Competitive Win as much as possible through negotiation/ demand/claiming Competitive, suspicious, closed Win – Lose Mutual gains Provide a process for parties to reach creative mutual gains agreements Cooperative, trusting, open Win - Win Mutual Gains Negotiating

18. Competitive Each party: Defines their positions Establishes bottom line demands Negotiates with other parties changes demands, surrenders, threatens Agrees or withdraws Mutual gains Each party: Seeks to identify interests of all parties Defines their common goals Identifies problems and constraints Generates a range of alternatives Works toward agreements acceptable to all parties Mutual Gains Negotiating

19. Four Principles of Mutual Gains Negotiation • Focus on INTERESTS Not Positions • Separate the People Issues from the Contextual Issues • Invent Options for Mutual Gain • Insist on Using Objective Criteria

20. Jones’Vacation Role Play

21. Joan Two Weeks at the Beach Bill Two Weeks in the mountains Jones’Vacation--Position

22. Joan Need a rest Need time with Bill Swimming/Sunbathing Sandy beach, salt water smell and ocean beach dining Bill Need a break Time with Joan Fishing and hiking Mountains - tradition and views Jones’Vacation-- INTERESTS

23. 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!

24. Competitive Power: The key to resolution of traditional negotiations. Mutual gains Empathy: The key to mutual gains negotiations. Mutual Gains Negotiating