Eddleston and Kellermanns (2007) published a study that applied stewardship theory to explain why some family-owned firms flourished while others seemed to be plagued by challenges. Their findings served to validate discoveries from similar studies (Dyer, Jr, 2006) – when family relationships are characterized by altruism, trust, and affability, we see positive effects on firm performance. In addition, they found evidence to support the hypothesis that relational conflict is not a neutral factor – that is, when relational conflict is not managed in a productive manner it has a negative impact on firm performance. The key is to address relational conflict in a productive manner so families can mitigate the impact of relational conflict on the family and business. Relational conflicts stem from many areas and quite often emerge from disagreements related to compensation, dividends, strategy, financial management, and succession – each of which have contributed to the implosion of otherwise successful family-owned businesses (Poza, 2010).
The effects of healthy relationships:
“When asked about the drivers of continuity for their 115-year-old company, Richard Smucker of J.M. Smucker Company confidently replied, ‘A family with the same religious values, a board of directors with independent outsiders, and a deep appreciation that the consumer is king so we have to continue to improve and innovate. He also highlighted the exemplary role that his father and CEO (Paul Smucker) played by not hanging-on but instead becoming a statesman for the company in 1981 when Tim and Richard succeeded him, and the tremendous influence of his mother, a strong matriarch’” (Poza, 2010, p. 331).
The effects of unhealthy relational conflict:
“Sam Steinberg grew a small grocery store founded by his mother into a multimillion-dollar supermarket and real estate empire. However, his dictatorial leadership style led to animosity and resentment among family members. The conflict among the family members became so great that the Steinberg’s eventually sold their enterprise” (Gersick et al., 1997; cited in Eddleston & Kellermanns, 2007, p. 546).
“Similarly, Peter Pan Bus Lines suffered when third generation family members began undercutting each other. The conflict among family members was so intense that lower-level employees rated ‘company squabbles’ as the greatest problem in a company-wide survey. To combat the conflict, the company was split so that the siblings could operate independently of each other” (Samuelson, 1996; cited in Eddleston & Kellermanns, 2007, pp. 546-547).
Partnered with other challenges family-owned businesses face, it could be argued that a lack of altruism, trust, and affability and the presence of unhealthy relational conflict may contribute significantly to the demise of many family-owned firms (Harvey & Evans, 1994; Beckhard & Dyer, Jr, 1983). Eddleston and Kellermanns (2007) describe the relationship among these factors and argue that the lack of altruism is a key factor that does seem to increase relational conflict. The relationship among such factors needs to be explored further.However, based on empirical evidence to date, it is logical to reason that a lack of altruism, trust, and affability can have devastating effects. If underdeveloped or absent, these conditions could increase a family member’s propensity to serve their own self-interest over other members of the family and the business. Such actions could cause the family and the business to suffer and lead to unhealthy relational conflict among family members.
On the other hand, we can also argue unhealthy relational conflict may cause altruism, trust, and affability to diminish. Regardless of which comes first and the magnitude of their impacts, unhealthy relational conflict is a challenge and distraction that causes families to focus their attention on warring among family members rather than the needs and performance of the business. If cultivating and maintaining healthy family relationships is so critical, how can families assess their relational development needs and what are some practical strategies for developing healthy family relationships?
Strategies for assessing relational development needs
We believe that, no matter how healthy a family is, there is always room for improvement. Even the healthiest families need to take deliberate steps to develop a culture of continuous improvement in this area. The literature seems to lack an “easy-to-use-do-it-yourself” instrument for specifically measuring the health of family relationships. Regardless of the starting point, we recommend families begin by sitting down over a meal to discuss questions similar to the following and having candid conversations to determine what next steps might look like on the journey toward healthier family relationships.
1.Do family members value and respect each other?
2.Are we able to address business challenges in a productive manner?
3.How does conflict among family members affect the business and employees?
4.Are we able to resolve internal conflict in a manner that is respectful and productive?
5.Do we spend quality time together outside of the business?
6.Do family members know each other’s strengths, weaknesses, personal goals, professional goals, and support each other in all areas of their individual development?
7.Do family members have clear and open communication with each other?
These questions, and others like them, should be discussed on a regular basis to avoid complacency and to foster an environment of continuous improvement and growth. Families wanting to further examine these types of questions should read Perpetuating the Family Business: 50 Lessons Learned from Long-Lasting Successful Families in Businessby John Ward (2004). It is a fascinating book with valuable resources, including the book’s Appendix C: A family business checklist. The idea behind this anecdotal yet more comprehensive checklist is to arrive at a point in which a family can answer “yes” to as many questions possible and the “no” answers identify areas in need of improvement.
In addition, based primarily on our experience and observations, we believe the following strategies (forthcoming in February) are vital to developing healthy family relationships and are important for all families to examine regardless of their developmental stage.
A Note from the Authors:
This is the second article of a four-part series on the importance of healthy family relationships within family-owned restoration firms. Part one (December) introduces the nature of family-owned businesses and discusses findings from a recent study that examined various dynamics of family-owned restoration firms. Part two (January) discusses the impact relational health has on firm performance and strategies for assessing relational development needs. Part three (February) introduces strategies for developing healthy family relationships. Part four (March) advances the conversation regarding strategies for developing healthy family relationships and ends on two vital strategies that have contributed greatly to the success of many family-owed restoration firms.