Managing People Problems in Family Businesses

Maryland has a number of family run businesses that began in the late 1700s and still operate to this day. When ownership of a family business transfers from one generation to the next, or when a family business is sold, intense interpersonal problems can emerge. Although this is true for all small businesses, the relationships that exist inside a family business are more intimate and personal; thus, the conflict can be all the more intense.

For example, if an owner brings in a son or daughter who may take over, other family members (and non-family members) may become jealous or resentful. Married couples who start businesses may have escalating disputes at home that spill into the business’s day-to-day operations. Personal relationships can – and often do – degenerate, creating serious or debilitating problems for family or closely-held businesses.

  Of course, it is critical for owners to avoid conflict by organizing the business before problems emerge and when it expands or changes. Clarity is key. Documents need to clearly describe the personnel involved, their responsibilities, decision-making processes, a succession plan, etc.

            Litigation is usually not a good option in these circumstances. Waging war with lawyers in court is lengthy, costly, and unpredictable. Moreover, the interpersonal problems are likely to remain after years of paying legal bills and chasing “justice.” Furthermore, litigation prohibits businesses from focusing on customers or developing new income opportunities.

  There is a better way. Fortunately, these disputes can be resolved quickly and privately by negotiating with the help of a third-party. Difficult conversations need to be managed by an outsider so that bias is not perceived by any of the family members. In addition, tempers need to be controlled so that critical issues can be articulated and addressed. An experienced mediator can provide structure and ground rules that foster meaningful discussions. Lastly, control over the ultimate outcome is a big priority for most parties. Mediation can do what courts cannot: give parties control and help them create targeted, customized solutions that address specific needs and concerns.