One of the main functions of a family business structure is to guarantee its continuity. To do this, it is necessary not only that the business performs well in the market, is competitive, expansive, and profitable but that the owners respond in a united and harmonious way to the challenges posed by the business and the family. These are the two aims of continuity in one action: survival of the company within the market and preserving the patrimony within the family.
In this context, studies reveal that a significant part of succession failures in family businesses are due more to family conflicts and discrepancies than problems that are strictly business related. As we know, the family business has obvious advantages derived from essential family values. Still, it also has dangerous traps rooted in the confusion of family life combined with a company's strategic direction.
Implementing such processes in a family business is both complex and free of setbacks. In many cases, success can be achieved if two necessary conditions are fulfilled: First, all agreements must be consistent with the "Shared Dream" (their concept of the future together), and every single member of the family's dream must be compatible with the collective one. Secondly, all decision-making within a Family Council should be based on "consensus," which, unlike "unanimity," when well-driven, enriches the debate, increases group commitment, and offers the possibility for everyone to be involved in deciding key issues.
But this is only possible through creating a dedicated space for conversation about family and heritage issues based on effective communication, mutual respect, and recognition. Some families with advanced governance structures that integrate a next-generation own forum create inter-generational dialogues between the current leaders and the proper and mature next-gen members about the future of the family business, having well-organized sessions and addressing issues related to family governance and legacy.
Family ties and emotional bonds between family members can be an important element of strength that brings unity to a company. However, many times, the exact opposite can happen.
Envy, differences, underlying conflicts, and resentments often present in family relationships can be highly destructive to family companies. How a family company handles disputes will determine how the family and the company can be strong and healthy and relates to each other is an important part of family culture.
Family rivalries will eventually deteriorate relationships, dialogue, trust, commitment, and enthusiasm for the business venture. It is important to emphasize the need to define a methodology enabling members to affront and solve conflicts that will inevitably be part of the family business routine. Avoiding or ignoring disputes is not an alternative that will provide long-term solutions. However, opportunities can be gained by exchanging opinions, allowing for better content, ideas, and family business strategy.
But what about the next generation? Do we need to involve them in our decision-making process for the future of the business? Yes, and no. Depending on the grade of maturity of the next generation, the leading generation can manage to shape a forum by adding and separating the functions of the family and the company leadership, which help to strengthen the role of the Board of Directors of the family business, focusing it efficiently on their responsibilities as administrator of the company strategy. When is the best moment to get the next generation involved in this process?
This question usually arises when leaders decide to start implementing a family governance structure process. For many families, the correct answer is always "Whenever the current lead generation is ready." It is only possible to generate a solution that prepares the future owners as the next leaders if the current ones are clear about the objectives and rules of engagement for the next generation.
The best value a family business can deliver to its family members is educational training for current and future owners. In-company courses can be designed exclusively to improve the group skills and knowledge needed to be responsible in their roles in areas not covered by the formal education that family members could have received in their university or high-level studies.
This training can include (but is not limited to) issues related to the economy, finance, company-exclusive know-how, human relationships, and communication skills, among many others.
On top of that, to generate the necessary conditions and safe environment for the establishment of conversations on specific issues related to the transmission of the family inheritance, the participation of both (leading and future) generations in training sessions helps to confirm that the family wants to indeed continue with this heritage in the future or, in the worst case scenario, lead solutions for those who don't want to keep going on together.
About the Author - Guillermo is an Affiliate Senior Advisor at Cambridge Family Enterprise Group and founder of director of Exaudi Family Business Consulting. He is a lecturer, educator, author, and expert advisor on family governance, strategic succession planning, generational transition, and conflict resolution. He is an FFI Fellow, former FFI board member. Guillermo is the recipient of the 2015 FFI International Achievement Award. He can be reached at He can be reached at gsalazar@cfeg.com.
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