Mediate Now Before It’s Too Late!

By Prof. Enrique Soriano

In a Harvard Business Review article entitled “Conflicts That Plague Family Businesses,” noted American psychologist Harry Levinson profoundly expressed the magnitude of family conflict when he said, “It is obvious common sense that when managerial decisions are influenced by feelings about and responsibilities toward relatives in the business, when nepotism exerts a negative influence, and when a company is run more to honor a family tradition than for its own needs and purposes, there is likely to be trouble.”

When these burning issues remain unresolved, are set aside, and totally ignored, a major event like the founder’s death can trigger an avalanche of deeper problems. For many family members mired in this situation, it is either a fight or flight event.

a. Flight responses typically manifest when affected family members deny the existence of the conflict.There exists a huge “elephant in the room,” yet family members tend to look the other way. It is blatantly (or shall I say cowardly) avoided and totally ignored to the point that no one dares to address the conflict and its underlying causes, leading problems to mutate and grow. Out of exasperation and desperation, some even flee from it. I know of one toxic Asian family where the rivalry reached its peak, culminating in the resignation of the children. To the surprise and disappointment of the founding parents, the adult children leave the family business every year to either eventually start their business from scratch or go as far as migrating overseas just to escape the stress of day-to-day conflict.

b. Fight responses, on the other hand, can be more vicious and dangerous. This includes power plays, physical or verbal threats, and intimidation often abetted by legal posturing, instituting litigation, and, in extreme cases, resorting to violence. There is so much hate and the breakdown of any form of objective discourse in this situation. The warring parties are grasping at straws, and usually, the aggressive party is bent on fomenting a hostile takeover or outsmarting the other party even with the risk of permanently damaging relationships and causing the collapse of the business started by their founding parents. The danger of an implosion is imminent if the family will not come to terms fast.

There is a more rational response that is often difficult as it requires objectivity that is almost impossible to maintain for someone inside the conflict, and this is the third type- mediation using a third party and non-family member.

c. Mediation is a preferred approach as it highlights honest, open and transparent communication among family members.This approach includes intense discussions and negotiation. In my experience helping conflicted families in Asia, this intervention is the best approach to resolving conflicts for both the family and the business. There are many upsides to this collective and facilitated approach, and foremost would be the opportunity for all parties with their representatives to be heard and positions expressed in writing. Emotions are methodically managed, and every contentious issue is addressed and attended to until the major sources of conflict, usually economic, are resolved to the satisfaction of all the parties.

The key is objectivity, rational decision-making, promoting trust, and all parties exhibiting great effort in favorably coming to a win-win conclusion. The final test of a committed and sincere family is how they can agree to disagree in a climate of trust, objectivity, and relentless communication. These values are the cornerstone in making this approach successful. As we always say in governance, “If families talk, they can solve their problems. If they don’t talk, they will never be able to solve anything.”