Feuds within Family Businesses: Prevention and Cure

Most employers witness tension between employees in the workplace, perhaps through differences in pay or promotion opportunities.

In family businesses, there are also opportunities for tensions to arise between family members for reasons arising outside the workplace, and between family and non-family employees.

Communicate and tackle tensions early

The separation of work life and home life is important, but often very difficult to achieve in family businesses. Marriages might run into difficulties, and brothers and sisters might fall out or believe that their parents are favouring their siblings over them. 

Non-family directors and managers might feel that they are being left out of important decision-making processes, or that they are being treated less fairly overall than their colleagues who are in the family.

To try to maintain a proper separation between work and family life, family businesses should avoid having business discussions in family time such as over Sunday lunch, and should instead have properly-scheduled business meetings so that lines of communication are kept open and nobody feels left out.

Once you have detected underlying tensions, whether between family members or between family and non-family employees, you should deal with them as soon as possible. Engaging in conciliation or mediation services can be really helpful, as talking through issues will encourage a resolution before the issues erupt and have potentially serious implications for the business.

Be prepared

Disputes often arise within family businesses when second-generation family members join the business, or when non-family members take up positions of responsibility.

The most effective way to prevent conflicts arising in these situations is to ensure that the correct infrastructure is in place from the start. This infrastructure can be formal or informal:

• A Shareholders Agreement sets out the way in which the business is to be run, and who makes which decisions.  This creates certainty for all family members in terms of their role as shareholders of the company.
• You should also have Employment Contracts for each family member and non-family member employed in the business. These documents give formality and clarity to each individual in their role as an employee of the business.
• An alternative, informal mechanism to those above is a Family Charter. It isn't legally binding but could still provide a useful tool for regulating the management of the business. All family members should contribute to the content of the charter because, in the case of this document, the journey is as important as the finished article.

Although agreeing these documents can sometimes be a painful process, it is best to have them in place at the earliest possible stage, so that everyone is sure what their roles and responsibilities are - and so that there is something to fall back on if there are ever any disputes.

And finally, protect your legacy

Crucially, you should have plans for the future of the business, and for your succession, so that there are no misunderstandings about the future of the business or the role of any second-generation family members within it.

If you have any concerns about existing legal documents relating to the ownership or succession of your business, you should seek legal advice sooner rather than later.

Feuds within family businesses can be expensive and destructive, but careful planning and close observation can help to prevent tensions from getting out of hand.