Question: Resolving board conflict in a family business group

I run a 3rd generation family business group. Though we have several professional managers in senior positions, our board is almost all family members (with the exception of 1 outside advisor.)

I took over a very successful group, but we were hammered by the downturn, and the recovery has been very uneven. As we try to regenerate the group, it is obvious to everyone that some businesses are pulling us down.

The founders of these businesses are on the board, and have been sending very contradictory messages. While they have lots of useful input; they keep us from taking objective, decisive action.

Its a delicate path forward. Conflict of interest is unavoidable for a family business like ours. I appreciate the guidance of this group & service.

6 Expert Insights

Well, since I'm a big fan of the idea when there's a problem facing the group that one puts the problem in the group's hands to solve...I'd say pose that entire challenge, including what' you've articulated here into a truth telling message. And then ask, how do we want to solve this?

You'll need to get their attention and it may have to be provocative in some way to do so.

You might contextualize it in this way.  "I'm appreciative of everyone's needs and concerns on a personal basis, however, what happens to a football team when it splinters into individual agendas with each player seeking to get their own needs met over the need of the team to succeed in a highly competitive environment? Has anyone in the room ever seen that be successful?"

Then follow it up with a challenge..."I"m challenging us to have more than our own myopic vision, and personal attachments to the way things were, and realize that the world has changed dramatically.  So much so that without unity of purpose, without a 'Super Bowl' for us to play for that is larger than our individual selves,  we will disintegrate into factions that are concerned only with our own version of personal passing stats, tackles and receptions. This approach can only ultimately have us lose market share, market value and whatever additional consequences those losses may mean. So while we're desperately attempting to protect our own patch of turf, the entire landscape gets lost

Bottom line, our company is one gigantic team, if the larger team loses, then each individual in the team loses.

'Confront the brutal facts' was one of the attributes distinguishing great companies in Jim Collins's  wonderful book, Good to Great. As with other attributes of great companies, 'confront the brutal facts' is remarkable because it so rarely happens. And whatever stops most companies from dealing with reality is probably compounded in family-owned businesses. Which is probably one big reason the vast majority of family-owned businesses don't make it to the 3rd generation, much less beyond.

So, how to get the board to confront the brutal facts? Ideally you would have an objective, respected third party who could do an independent assessment of the business group and then lead a facilitated dialogue among the board members, based on the assessment data, to identify common ground. By first addressing what the board can agree upon, you can establish a reference point that should be useful in then addressing areas of disagreement.  E. g. does the board want the business group to continue into the 4th and 5th generations and more?

You've been given some very good advice by my fellow mentors.  It appears that you are teetering between  falling further or rising above what you have encountered during the past few challenging years.  Your overcoming the situation today and reclaiming the driver's seat of your company is very much dependent on getting all of those on the board, for starters, on the same page as it pertains to the seriousness of where  you are today as well as the definite risks to the 3-generation old company if the current and apparent gamesmanship isn't replaced by a group who recognizes the seriousness of the situation and come together focused on doing whatever it takes to right the ship.

I have often referred clients to the book entitled "If it Ain't Broke ... Break It!".  If ever there was a need to break apart what has been and reconstruct the company in terms of approach, product and  the realities of the market demand for that product, this certainly seems like it's what might be called for here.  I do agree that having this session of a day or two facilitated by an objective person experienced as such is an effective way to accomplish what needs to happen.  It also allows you to play an active role as a member of the board without responsibility of leading it.

I have facilitated off sites in which family members of a board have finally realized that their contribution is not appropriate any more and that more qualified and probably detached people are needed if the business is to thrive.

These are indeed sensitive and delicate conversations which need to be planned very carefully I would suggest before the brutal truths or facts are laid out.  You have to manoeuvre yourself into a place where the relevant people can hear the unpalatable message.

The comments already offered are valuable.   One important piece of information missing is how the family board members are compensated.  Assuming that they depend upon the success of the group,  the suggestion already made of submitting the problem to the board for resolution is valid.  But, as part of that planning review, I suggest that you extrapolate todays businesses, given no change, to demonstrate the fallacy of a do nothing strategy.

The ego's of these founders are the next obstacle to be overcome.  However, if they are included in the recovery planning and subsequent operating oversight, you may be able to penetrate this barrier.

I fully support my peer's advice. Having led a turnaround of a family owned company I found out that:
- when I show results they couldn't achieve, I gained respect.
- respect allowed me to grow my leadership position.
- I initiated one on one meetings with each critical family member, listening to their concerns and proposals.
- I addressed their proposals OR wrote a document/analysis, both qualitative and quantitative (high level) depicting the impact of their proposal
- I proposed adjustments to make their proposals profitable. It will probably be your business plan.
- Defuse their claims and help them buy into your proposals.

It is tedious but you gain the lead, you are on top of things. With very 'hard nuts' you may need to be very decisive (and patient).

I hope to have helped.