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Do We Have to Resolve Underlying Conflict In our Family Business Before We Start the Succession Process?

10/05/2016


This is a difficult question to answer as there are so many family specific variables. The succession process, when done properly and with the involvement of all the required individuals, may bring forward conflicts which are often invisible at the outset. No single formula or approach will fit all business families, but there are some things to consider when addressing this question:

  • How well do all of the family members involved understand their specific conflicts and potential struggles?
  • What are the latent, hidden relationship issues which have gone unresolved for too long?
  • What is your family's capacity for having difficult, uncomfortable conversations? Has it been tested before?
  • What is the level of conversational honesty in the family? To what level can individuals have truthful, respectful conversations surrounding uncomfortable issues which need to be discussed?
  • Are family members willing to communicate with each other directly, even when difficult matters arise? It is critical that crucial conversations which need to take place between A and B, involve them primarily or at least eventually if they are not able to participate at the current time. Do not saddle someone indirectly involved in conflicts, with the primary responsibility for resolution.
  • Is the family able to identify areas where they tend to get stuck, before they do?
  • Is the family, especially those leading conversations or having to make the most important decisions, willing to bring in help when needed?
  • Are any family members allowed to bring the whole process to a halt? It is best to decide on how this will be dealt with in advance, while anxiety levels are still low and manageable.

Effective succession planning should anticipate what could cause family conflict. One way to address pressure and conflict between family members who are active in a business and those who are passive, is to have open conversation in advance about matters that may end up in legal agreements (such as shareholder agreements). These agreements, when resulting from honest and full conversations about all the important matters, can reduce divisiveness amongst family members when circumstances change in the future. I would rather have business families discuss these issues in times of low pressure and anxiety, than when big decisions need to be made and all or some of the role-players feel like their backs are against the wall. Get the help of someone to guide you through this if needed.

For more information as to how you can successfully transition out of your business, contact Eben Louw, CPA, CA at 604.870.7413 or [email protected].