Common Causes of Family Conflict & How to Deal with Them.
Video 7: Equal Isn’t Equitable.
One of the most common causes of family business conflict comes from confusing equality (same treatment) with equity (fair treatment).
At first blush, it’s hard to argue with the view: “Because I love my children equally, I must treat them equally”. Although this is a perfectly acceptable family dictum in “normal” times, it tends to be dropped quickly – as soon as individuals need help: the family directs its resources towards the needy, with little regard for other family members, at that time.
From an external perspective, a parental decision (or lack of decision) that results in family members receiving equal pay, irrespective of their individual commitment or contribution to the business, represents a dangerous confusion of family with business imperatives. Family decisions are based on needs and nurture, where business decisions should be based on tangible contributions, and measurable outcomes.
A business is only viable over the long term if its revenues exceed its expenses by a large enough margin (of profit) to fund both adequate returns to owners AND to maintain business competitiveness. Profits result from effective business contributions.
When a family member perceives that their commitment and contribution to the business are significantly greater than those of other family members, and that those extra efforts are not properly acknowledged (through pay and/or other measures), resentment often takes root. Anger builds against parents for supporting an unfair system (sense of betrayal) and against any siblings benefitting from the unfairness (parasites).
Conclusion: when equal pay is provided for family, rather than for business reasons, it may be seen as the very opposite of equity (fairness). If that feeling starts to grow, it’s all downhill into conflict, unless the family identifies and resolves the problem.
Solution: get real in your thinking and pay family members according to objective external benchmarks (ie: what would you pay an employee to do the same job?).
If a family member needs additional financial or other support, deal with it through the family, not through the business. Then manage any issues of perceived unfairness within the family, rather than in the business.
Keep business processes and decisions objectively commercial, so everybody knows, understands and respects where they stand, what they’re supposed to do, and what they’re entitled to receive, from the business. In short, avoid conflict by managing, and agreeing, individual expectations.