Family-owned businesses have so many awesome upsides — superior value creation over time, a shared purpose and lots of time spent with those closest to us.
That being said, they can also be a breeding ground for conflict. Whenever you mix money and family together, you’re bound to have a kerfuffle come up from time to time.
The secret isn’t avoiding conflict altogether — that’s impossible. Instead, it’s about trying to lower emotional temperatures and make decisions that garner widespread respect. While achieving complete consensus is often unrealistic, striving for resolutions that satisfy the vast majority is a feasible objective.
Achieving this delicate balance is no easy task. My great-grandfather Titus Schmid started Crescent Electric Supply Company more than a century ago, and it’s stayed in the Schmid family that entire time. We’ve weathered our fair share of conflicts over the years, but our ability to navigate them through mutual respect and effective structures has kept us unified and moving in the same direction to this day.
Here are some of the strategies that have enabled us to stay the course:
1. Draw clear lines around responsibilities
In the Schmid Family Council, we have a guiding principle that’s served us well: The council’s responsibility is the “business of the family,” while the board of directors is responsible for the “business of the business.”
Essentially, this means that we on the council don’t delve into the nitty-gritty of the business. Most of us lack the expertise required for such matters anyway. Instead, we entrust the task to a capable management team with decades of experience in the electric supply industry. We firmly believe that running the company should be the purview of management and the board, free from our interference.
The domain of the Schmid Family Council, as stated in our charter, is to “serve to advance the common interests and welfare of the entire extended family.” In practice, this means keeping our ears to the ground regarding the family’s wishes and concerns, and bringing those to the company when appropriate.
While some family councils may have broader mandates, including influencing board and management selections, we’ve found that maintaining distinct boundaries between our role and that of the board helps mitigate conflict. Moreover, when conflicts do arise, our structured approach through the family council allows us to address them openly and present a unified front when communicating with management. We govern ourselves based on principles, not personalities.
2. Have one family group that communicates with management
One reason many executives prefer to work for family businesses is that the entire shareholder group is bound by more than just shared financial interest. Unlike public companies, where a mix of activist investors, institutions and retail investors often present conflicting demands, family businesses like ours have the unique opportunity to present a singular, cohesive voice. This is crucial; when family shareholders individually approach management, it can create a chaotic environment, overwhelming executives with varied and sometimes conflicting demands.
Recognizing this potential pitfall, the third generation of Schmids took inspiration from other family businesses that had streamlined their communication. They established a dedicated family council to serve as the sole channel of communication between the family and company management. This approach ensures that our management team isn’t burdened with the impossible task of satisfying a barrage of individual family requests.
Perhaps some smaller family businesses can function with individual lines of communication to the board and senior management, but for our large family, having one voice has made things better for everyone. It ensures that all family members, irrespective of their role or stake in the business, have their voices heard and their concerns addressed in a structured and effective manner. This not only aids in maintaining harmony within the family but also strengthens the connection between the family and management as we all work toward a common goal.
3. Cultivate respect for governance strcutures
Having a family council is great, but if the rest of the family don’t respect the purpose of the council, it won’t be very effective.
In the past, we’ve encountered challenges when some family members bypassed the council, taking their concerns directly to management. This undermines the carefully established boundaries and protocols we’ve set. While we’ve been disappointed when this happens, we’re also careful to not overreact. Instead, our approach has been one of understanding and communication rather than exerting authority.
We emphasize the importance of respecting these internal lines, and how following them benefits everyone. The goal is to cultivate a collective respect for the structures in place. It’s essential to engage in open, empathetic dialogue so council members can understand the perspectives of all family members and gently guide them to adhere to the established channels of communication. Some family members take this to heart more than others, but all we can do is try. After all, having just a few family members approaching management directly is better than dozens doing so.
As with any family business matter, it pays to take a deep breath and talk it out before reacting emotionally. Even if family members aren’t obeying our internal rules, lending an empathetic ear and hearing them out leads to much better outcomes than trying to strongarm them into obeying the rules.
4. Earnestly seek out family feedback
While our family council acts as the primary liaison between the family and management, our annual shareholder meeting gives everyone an opportunity to ask management questions directly. Broad participation during these meetings is encouraged; we want as much of the family as possible to be informed, discerning shareholders. Plus, usually when someone stands up to ask a question, 10 other people were thinking the same thing but didn’t want to speak up.
Furthermore, following the release of each quarterly shareholder report, we distribute a questionnaire to family members, allowing them to anonymously submit questions to management regarding the most recent quarter. After collecting all the submissions, the Owners’ Committee within the council reviews them and adjusts the wording or consolidates questions as necessary. Again, we encourage the family to submit their feedback here.
Finally, all of our family council meetings are open for any family member to join. They can’t vote on resolutions unless they’re part of the council, but sitting in for a meeting if they’re in town promotes transparency, helps them learn about the company and gives them a good idea of what the council does in case they want to join someday.
In essence, the council is constantly seeking to gauge the family’s feelings regarding all matters concerning the “business of the family.” This ongoing process ensures that our communications with management align with the broader interests of the majority, fostering an image of transparency and fairness within our group.
5. Respect generational differences
Respecting and bridging generational differences is one of the most vital aspects of maintaining a multigenerational family business. It’s also much easier said than done.
As a fourth-generation Schmid, I consider myself lucky to be part of a family that’s kept everything together this long. I also recognize some of the vast differences in life experience and worldviews between my generation and the third, and can only imagine the gulf that separated the third from the second, and the second from the first.
Fortunately, the Schmids by and large encourage participation among younger generations and are excited about the emergence of a new cohort of family members ready to assume responsibilities within the company and the council. In fact, we’re currently in the midst of developing a specialized onboarding guide called “SchmidU” that’s tailored to each generation. For younger family members, the content is less business-focused and more about getting to know their cousins and family history. Then, once they’re young adults, family members can start learning more about the business, how it functions and how they can get involved.
Respecting generational differences has been crucial for maintaining family harmony, because there are plenty of things we disagree on! Ultimately though, even if I disagree with a particular third-generation perspective, I still respect their experience in life and in the family that led them to that conclusion. In return, they respect my lived experience that led to my own opinions.
6. Emphasize the big picture
As discussed earlier, having a shared long-term interest is one of the biggest benefits family businesses provide. If people are getting too preoccupied with their particular pet project or concern, gently reminding everyone that we’re all on the same team can be a powerful way to facilitate family harmony.
That big picture is multifaceted, encompassing financial performance, charitable endeavors and employee support, just to name a few.
In the Schmid family, we try to highlight these shared goals and interests as much as we can. In our Owners’ Plan, for example, we specify certain financial metrics that we expect management to comply with. That way, if performance isn’t up to par, we can point to a metric that we all agreed upon rather than relying on any individual shareholder to call it out.
Moreover, we value charitable endeavors highly in our family. During shareholder and family council meetings, we like to spotlight progress we’ve made in these areas. For example, the family supports the Crescent Community Health Center, which provides affordable and comprehensive care to the greater Dubuque, Iowa, community. We also have an Employee Assistance Fund that we set up to support Crescent employees who have been affected by personal crises or natural disasters.
When you keep the bigger goals in mind, a lot of the smaller squabbles tend to fade into the background.
7. Embrace conflict and learn from it
Conflict is bound to pop up from time to time. It’s tempting to squash it anywhere you see it, but doing so can build up pressure that eventually leads to an explosion.
Instead, for us Schmids, putting structures in place that help us diagnose conflict and resolve it in the best way possible has allowed us to operate pretty harmoniously for over a century. When paired with an underlying respect for each other, our shared history and common goals for the future, it’s a powerful combination.
The post Strategies for squashing squabbles appeared first on Family Business Magazine.
