How To Proceed When Conflicts Emerge?

In time, family business structures will become more complex, leading to inevitable conflicts within the family circle. Disagreements are necessary to break from inertia and adapt to new circumstances which arise from changes in the environment or because of the family or company's natural evolution. Therefore, we must understand that conflict or crisis' in family businesses are not necessarily negative: depending on multiple factors, these situations can be healthy, functional, or dysfunctional.

An instructive approach can be seen in kanji (a writing system adopted by the Japanese), which comes from the word "crisis" (Kiki, in Japanese): This concept is formed by the characters "danger" and "opportunity": precisely the understanding that the Japanese culture has of adverse circumstances, which has helped them overcome multiple tests which they have been subjected to throughout their history. The more there is at stake or, the more serious the conflict, the better it will be to affront it. What doesn't work is to avoid or deny it. That is why, to solve it, a healthy level of communication between family members and acknowledging the growth opportunities that danger brings us is advised.

The different ways of conflict resolution are, by the end of the day, possible strategies in the same scenario, but none is a panacea. If the rules of the game are established in advance, many conflicts can be avoided in the business family and the family business.

There are three ways to solve them:

Conciliation: the parties in dispute must understand that the best way to reach an agreeable solution is to comply with an alternative that benefits the whole and not only one of the parts. Therefore, we are before a conflict-solving mechanism based on a consensus of ideas, in which each individual commits to a solution that delivers an acceptable level of satisfaction for all. This requires a good dose of generosity from the individuals, acceptance, and respect for the other, a good disposition in wanting to find a solution to the conflict, effort, and in many cases, sacrifice, or transformation of one of the original viewpoints, which were presented at the beginning of the discussion. In these cases, an external figure with peace-making abilities may assist the group in a satisfactory solution to their conflicts.

Mediation: this comes into effect when no conciliation is desired, the conflict is more significant, and the best way to solve the situation is by negotiating between the parties since conciliation has been ruled out. It is the most successful method used in divorce cases. It attempts to establish a dialogue between the parties to reach the best possible benefits for everyone, not for the group. If they cannot face the conflict by themselves, they may seek expert professionals (mediators) to help them find acceptable solutions for everyone.

Arbitration: The parties admit that there is an irreconcilable conflict and being unable to solve it by themselves and having ruled out mediation, they seek other instances. This is when the figure of an arbitrator comes into place, a third party which may be a trustworthy employee who does not belong to the family, a lawyer, an advisor, a priest, or any person whose integrity is unquestionable and is accepted by everyone in the group. In this case, the arbitrator will act as a judge favouring some parties. We are no longer before a solution based on agreements, dialogues, or negotiations that have satisfactory results for everyone, which is why this is not the most recommended alternative. However, when significant family conflicts arise, those real sagas which make history, arbitration becomes the most popular way out of the crisis.

How conflicts can be solved are different possible strategies to address the same scenario. However, none of them is a panacea. If the game's rules are established beforehand, many conflicts between the business family and the family business can be avoided.

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.