Woodbury-Farm Family Business 06/26 07:43
A Big Reason for Family Business Conflict
Lance Woodbury points out that family and business conflicts are usually
about money on the surface, but usually other issues are just out of sight.
By Lance Woodbury
DTN Farm Business Adviser
I've recently been listening to the audio version of Daniel Schulman's new
book, "Sons of Wichita: How the Koch Brothers Became America's Most Powerful
and Private Dynasty," which chronicles the history, growth, politics and
especially inter-family conflicts of the Koch family from Wichita, Kan., some
of whom are owners of one of the largest family businesses in world, Koch
No amount of financial success prevents family conflict. In fact, business
success can be a contributor to family squabbling. While the evidence of
success -- money -- is a tangible item over which to argue, many family
business conflicts are actually rooted in things other than money, such as
decision-making authority, sibling rivalry or inadequate feelings of love,
respect or inclusion. The money, especially when there is plenty of it, gives
people an easily quantifiable target on which to focus their attention.
But the conflicts over money often represent something else at work in the
psyche of family members and business partners. In the case of the four Koch
brothers, who flung lawsuits at one another over several years after two of the
brothers sold their ownership, Schulman suggests that some of the more
substantive business decisions around company strategy, shareholder liquidity
and support of charitable (chiefly political) causes were made without key
shareholder participation. A family pattern of disagreement may have been set
in childhood: The Koch brothers' father would force his twin sons David and
Bill to resolve disputes by fighting each other in boxing gloves until they
Effective decision-making in a family-owned enterprise honors the balance
between individual autonomy and group process. It recognizes both the
independent thoughts of each person as well as the way that independent people
come together to discuss their different ideas and concerns. In this column I'd
like to introduce a decision-making process that, if followed, tends to produce
less conflict. Conversely, when there is family business trouble, I can usually
find a point in the process that was missed and thus became a jumping-off point
for family wrangling.
PHASE ONE: ENCOURAGE INDIVIDUAL REFLECTION
Any decision-making process usually starts with the parties involved
reflecting on the choice at hand. Some people simply think about the issues
they face. Others might write down their thoughts. The point is, we each go
through some sort of process where we analyze the issues, think about pros and
cons, shape our opinions and form our position.
Consider, for example, the decision to purchase new tractor. You might
reflect on your current equipment fleet, your plans for growth or expansion,
the cost of a new tractor versus the likely repairs and maintenance of your
current tractor, the current agriculture economy, and the demand for new and
the market for used equipment.
PHASE TWO: CULTIVATE MUTUAL EDUCATION
In a family business, the next step in the process involves educating your
business partners, and having them educate you, about the considerations that
inform everyone's thinking. It is where you turn individual perspective, what I
call "I knowledge," into a group perspective, or "we knowledge." It is the
chance to get on the same page about how you see the problem or challenges you
This is a critical step that many family businesses take for granted.
Because family members often feel like they know each other well, fully
explaining one's thinking can seem inefficient and time-consuming. We make
assumptions about how our parents, siblings, cousins or adult children will
feel about our decisions. We presume they will see the logic in our thinking.
We believe they will grasp the purity of our intentions. Unfortunately, those
assumptions and beliefs often turn out to be wrong.
In the tractor example mentioned earlier, if one family member decides to
make a $300,000 purchase without consulting other owners, conflicts can quickly
emerge. Who gave that family member the right to commit the family's capital?
What other business priorities should have been considered? If the business is
owned jointly, does anyone else's opinion matter? Alternatively, surfacing each
owner's perspective, or developing "we knowledge," might have prevented those
difficult and conflict-oriented questions from arising.
PHASE THREE: PARTICIPATE IN JOINT PLANNING
Once participants in the decision-making process have a chance to share
their opinions and arrive at some consensus about the challenge they face
(which can take a long time and several rounds of discussion if the issue is
significant), they can begin to strategize together, in effect creating a
jointly-defined game plan for how they will move forward.
Back to the tractor example, this might involve planning for how best to use
a trade-in, determining the timing of the transaction, developing a negotiation
strategy with the dealer, how the purchase might be leveraged into a multiple
unit discount (MUD), how the transaction might be financed or whether it is
leased or purchased. In this phase of the process, having business partners
participate in the discussion helps everyone understand the implications of the
PHASE FOUR: EXECUTE THE PLAN
This phase simply involves implementing the decision and strategy developed
in the prior two stages. If family business partners have done a good job with
phases two and three, the implementation should be uneventful from a
perspective of family dynamics. But if your partners don't know about the
conclusion, or didn't have a part in developing the plan, there is some
likelihood conflict will emerge.
After the decision is made and the plan is executed, the process will begin
again. People will reflect on how it is working out, and if following the
process, will take time to educate one another about their feelings and
perspectives. Then they will plan for the next round of implementation.
Working through each of the four phases of group decision-making will not
eliminate disagreements, as there will always be differences of opinion. But
giving your family business partners a chance to fully participate in the
decision-making process on key business issues increases the odds that those
determinations won't become fodder for the kind of significant conflict that
can destroy family relationships.
Koch Industries, Inc. is extremely successful from a financial perspective,
but it has apparently come with no small amount of relational toil and
emotional pain. How will you define success in your family business?
Editor's Note: Lance Woodbury writes for both DTN and our sister
publication, The Progressive Farmer. He is a Garden City, Kan., author,
consultant and professional mediator specializing in agriculture and
closely-held businesses. Over his two-decade career, he has guided many
families through inter-generational farm transfers as well as mentored
successors. Email questions for this column to email@example.com.
Copyright 2014 DTN/The Progressive Farmer. All rights reserved.
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