Private businesses that seek to endure across multiple generations must have thoughtful, effective methods to prevent and resolve conflict and promote open communication. Yet our 2023 Private Business Owner Survey results suggest that many private business owners are anxious about conflict when it arises within businesses they operate or own. Nearly half (46%) of owners surveyed said that the possibility of work disputes damaging relationships was a challenge in managing a family business.
What’s driving concerns about discussions of strategic matters with the family? Owners voiced several reasons for the hesitation, including that:
- Family members would make decisions based on their own personal interests rather than what’s best for the family and/or the business (41%).
- The discussion could negatively affect family dynamics and strain relationships (38%).
- Such discussions tend to get heated and emotional (36%), and owners had previous bad experiences having these discussions with family (35%).
- Owners were unsure how to start these conversations (34%).
- Some family members seem uninterested in the business (32%), and it’s uncertain if they understand the business enough to weigh in (27%).
While these anxieties are plentiful, proactive communication around potentially contentious issues is quite important for long-term success. Here are four strategies for approaching and improving communication in a business for those facing communication hurdles.
Start by Building a Solid Foundation of Shareholders’ Knowledge
Leaders’ concerns about how to start difficult conversations with shareholders are understandable, as those involved in making the decision may have very different levels of understanding of the enterprise, business matters overall, and the potential implications of the decisions to be made.
The best way to thwart this problem is to start by leveling the information playing field: Work to help each shareholder understand what they own, why they own it (along with balanced risks), and the high-level issues needing consideration in making a decision in a manner that is free of bias.
It’s important to share the company’s documented core values and mission with shareholders, even if interpretations vary among them. Leading with values can establish opportunities for close agreement – if not consensus.
Properly Identify the Stakeholders Needing to Be Engaged – Including the Next Generation
The engagement level of the next generation varies from one enterprise to another. Some of the next generation of owners may have pursued careers away from the business, or perhaps they simply never expressed an interest in learning about the company.
Before assuming a lack of interest, leaders may find it beneficial to speak with potential successors about the business and possible ownership roles. Opening a dialogue with the next generation not only allows owners to gauge the next generation’s interest, but also shows potential successors the different roles they may be able to assume within the enterprise.
In our experience working with private and family businesses, we have found that this dialogue has the potential to reveal that the next generation has indeed been interested all along but did not know how to start the conversation. It may also highlight some of their interests outside of the business, which can be leveraged to engage them in future discussions. In cases where the next generation’s level of interest is uncertain, it can be helpful for owners to provide more insight into what a potential future in the business looks like by explaining the role of ownership.
Alternatively, there is often implicit trust in the family members who are stewards of the business. The general ownership group might assume that those in leadership roles have everything under control, which may – unintentionally or not – result in less-involved family members being excluded from discussions in which they should have input. As business leaders know, there are certain situations, often where decisions about the business’s future and upcoming transitions are involved, that merit every eligible party to be present.
How can leaders engage disconnected shareholders and family members so that they have the necessary level of information required to provide input where needed? We have seen a few key strategies that help make opening the door to these conversations easier.
- Sharing key information about the business helps get disconnected stakeholders’ feedback as owners around decisions of material nature. Perhaps owners’ seeming lack of interest stems from never being included in the important discussions. Sharing important information or involving disconnected parties in key decisions shows them that their input as owners is valued.
- Helping withdrawn parties understand the big picture allows them to gain an appreciation for where it’s important they have input (and where they can remain uninvolved). Engaging disconnected parties in discussions around decisions and/or areas that can affect their personal situations allows them to be involved and relieves concerns about involving them in areas where they are not interested.
- Finding a way to appeal to what they’re interested in helps bridge the gap. Connecting an element of the business to a passion or cause that interests disconnected parties often motivates them to contribute to or be present for conversations about the business.
Work to help each shareholder understand what they own, why they own it (along with balanced risks), and the high-level issues needing consideration in making a decision in a manner that is free of bias.
Embrace Stakeholders Having Their Own Interests
Before engaging in discussions about the enterprise, it is essential that business leaders come to the table with the right mindset. A component of this is understanding that everyone involved in the discussion – both inside and outside the operating enterprise – has a right to come with their interests front of mind. This doesn’t mean everyone is self-interested; it simply means that values – collective or individual – are subject to each person’s interpretation and prioritization. The best leaders consider these perspectives for each stakeholder.
Consequently, they also reach best decisions when owners can openly discuss the alignment and divergence of their views and find ways that will balance the varying needs of the shareholders without unduly prioritizing one stakeholder’s views over another’s. It’s not easy, and it requires patience, creativity, and resourcefulness to find common ground.
Consider the alternative: a situation where owners simply accept a decision where there is “tacit disagreement.” In this case, those who are not overtly talking about differences may not be sharing what they really want. Maybe they are accepting an option thinking this is the best way to keep the peace, or they may not think their opinion or desires for the business are valued as much as others. This is a caution condition for leaders. Shareholders feeling as if they don’t have a valued voice is often a precursor to future discontent in an ownership group.
Conversely, leaders who embrace the fact that it is okay for owners to have different views and needs will better their relationships with their shareholders and have the potential to increase shareholder commitment. The hard work upfront to find the most integrative solutions creates the greatest long-term stability.
Focus on Facilitating Agreement (and Avoiding Advocacy)
Before an important owner strategy discussion, leaders must critically and honestly ask themselves:
- Am I coming to the discussion with a preconceived outcome?
- Am I trying to defend a position, or am I listening to the other people in the discussion to develop a deep understanding of their interests prior to engaging in solution-finding?
The truth is that stakeholders participating in these discussions often have enough emotional intelligence (EQ) to know when they are being used as pawns or whether they are authentically asked to be collaborative in reaching a decision. Defense of a position or unguided advocacy increases the likelihood that the discussion will turn heated and emotional – which 36% of owners cited as a reason they avoided discussing the business with family.
A conversation between good listeners moves forward, finds solutions, and develops a strategy for acting on goals. A conversation between bad listeners goes in circles and exacerbates disagreements. If all parties are listening well, the conversation is likely to end successfully.
At Brown Brothers Harriman, we have helped countless business owners navigate complicated business discussions and achieve their objectives. If you are looking for further guidance, please reach out to our Center for Family Business.
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