Family Businesses that Embrace Conflict Find More Success

NEW YORK, Sept. 6, 2016 /PRNewswire/ -- Conflict can actually be an asset to companies when it's effectively managed and properly resolved. This is according to study findings from EY and Kennesaw State University (KSU) compiled in a new report, Can embracing conflict spur positive change?. The study collected data from 25 of the world's largest family businesses in each of 21 top global markets, which average $3.48 billion in sales and 12,000 employees.

It examines how family businesses can identify, manage and grow from conflicts that emerge in their operations and from other sources. Given family businesses represent 80-90 percent of all enterprises in North America and nearly 80 percent of new job creation in the U.S., many stand to benefit from embracing conflict¹.

"Especially as we come off the Labor Day holiday, celebrating the well-being of the American worker, it's important to pay attention to the health and continuity of family businesses," added Carrie Hall, Americas Family Business Leader. "These companies employ the majority of American workers and represent the biggest amount of job growth in the economy. Understanding how to resolve conflicts within these companies is crucial to ensure they continue to be a thriving part of the market."

EY initially identified the benefits of embracing conflict in an earlier report as part of an ongoing effort to measure how family businesses can enhance their performance².

Communication is key to reducing conflict  
According to the study, nearly half of family businesses report some level of conflict, but higher family cohesion leads to less family conflict. The study outlines five activities that limit unhealthy conflict:

1. Engaging in frequent communication. The survey finds that 90 percent of respondents have regular family or shareholder meetings to discuss the business issues and 64 percent have regular family council meetings.
2. Unifying emotional attachments through Corporate Responsibility (CR) efforts. Family businesses that place a high importance on CR report lower incidence of conflict. CR supported by all family members creates a shared view of the family's legacy, promoting pride and unity.
3. Setting expectations. Expectations might vary across various business operations such as terms of employment, salaries and shareholder status. Emotions can run high during these conversations and lead to conflict, so setting expectations early is a good practice.
4. Building a sense of purpose and mission. Family members must be willing to sacrifice short-term gain for long-term success. By setting goals together, family members are more likely to put aside differences for the sake of the business and family.
5. Creating formal mechanisms for recognizing and resolving conflict. Appointing family members or creating a family council to identify and handle potential conflicts can help defuse volatile situations. 

Joe Astrachan, PhD, professor of management and entrepreneurship at Kennesaw State University, said:

"For family businesses facing conflicts without an easy solution, having a formal resolution process can be key to successfully solving problems. This process should include detailed responsibilities for each person involved in the process, a procedure for resolution, accountability and monitoring, as well as post-dispute analysis. Shareholders and other third-party individuals can be brought in to help ensure that conflicts are resolved fairly and that all parties are represented."

Different types of conflict have different impacts
The study, conducted with KSU's Cox Family Enterprise Center, highlights three forms of conflict: task, process and relational. Task conflicts, which refer to goals and strategies, and process conflicts, which refer to process management, are generally healthy and can earn positive results if there is no relational conflict. Relational conflict refers to negative feelings such as jealousy and anger, which can destroy a family business if left unchecked.

"Paramount to the family business is the family," says Carrie Hall, EY Americas Family Business Leader. "While conflict can spur innovation, growth and positive change, it can also become detrimental to the organization. In family businesses, conflict can spread past the family to negatively impact employees, the corporation's image and even the market. By handling conflict appropriately, encouraging family cohesion and communication and inviting healthy conflict, family businesses can rise above issues and continue to thrive."

To view the full report, please visit ey.com/conflict. View more carve-out reports from the survey at ey.com/us/familybusiness.

About EY's Growth Markets Practice
EY's worldwide Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we've helped many of the world's most dynamic and ambitious companies grow into market leaders. Whether working with international, mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed.

ey.com/sgm   @EY_Growth

About EY's Family Business Services
EY is a market leader in advising and guiding family businesses. With almost a century of experience supporting the world's most entrepreneurial and innovative companies, we understand the unique challenges they face — and how to address them. We offer a personalized range of services aimed at the specific needs of each individual business — helping it to grow and succeed for generations. Our Family Business Global Center of Excellence is a powerful resource that provides access to our knowledge, insights and experience, connecting family business owners to their peers through the strength of our global network.

ey.com/us/familybusiness   @EY_FamilyBiz

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

About the Cox Family Enterprise Center
Since 1987, the Cox Family Enterprise Center at Kennesaw State University has been dedicated to the education, recognition and research of family businesses. As one of the first university-based centers of its kind, the center remains focused on connecting people, ideas and knowledge to create a dynamic community to transform the family business ecosystem and further economic development. 

familybusiness.kennesaw.edu.

About Kennesaw State University
Kennesaw State University is the third-largest university in Georgia, offering more than 100
undergraduate, graduate and doctoral degrees. A member of the University System of Georgia, Kennesaw State is a comprehensive university with more than 32,000 students from 130 countries. In January 2015, Kennesaw State and Southern Polytechnic State University consolidated to create one of the 50 largest public universities in the country. 

kennesaw.edu

EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by Ernst & Young LLP, an EY member firm serving clients in the US.

¹ Astrachan, Joseph H., and Melissa Carey Shanker. "Family businesses' contribution to the US economy: A closer look." Family Business Review 16.3 (2003): 211-219.
² Staying Power: How Do Family Businesses Create Lasting Success? Rep. EY, n.d. Web. http://www.ey.com/Publication/vwLUAssets/ey-staying-power-how-do-family-businesses-create-lasting-success/$FILE/ey-staying-power-how-do-family-businesses-create-lasting-success.pdf.

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