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  • Writer's pictureTrella Advisory Group

Navigating Storms: 6 Consequences of Unresolved Conflicts in Family Businesses 


mother and daughter holding hands, dad back turned with arms crossed.

Conflicts within family businesses are not uncommon, but the repercussions of leaving them unaddressed can be profound. This article explores the six potential consequences of conflicts in family enterprises and delves into how these issues can undermine the long-term success of the business. 


Emotional Toll on Family Members: 

First and foremost, unresolved conflicts take an emotional toll on family members. The constant strain when things are left undiscussed and unresolved can lead to stress, anxiety, and strained personal relationships. The emotional well-being of family members is intricately tied to family relationships and oftentimes to the success of the business.  Neglecting these aspects can jeopardize both family harmony and business success. Ultimately, if left unresolved for long periods, these conflicts can completely shatter the family bonds which has far reaching generational impacts. 


Erosion of Trust and Communication 

Unresolved conflicts breed mistrust and hinder effective communication. When family members avoid addressing issues, it has a myriad of impacts.  First, one small issue unaddressed over time can turn into a very large issue that is very difficult to resolve. Secondly, avoiding issues can create a culture of silence, making it difficult for open and honest dialogue to occur. In research conducted by Syracuse University's Whitman School of Business, it was revealed that 60% of family business failures stem from issues related to communication and trust breakdowns. This breakdown in trust doesn't just stay confined within the family but instead spreads throughout the organization, and sometimes even to suppliers and other stakeholders.  The impacts to the dynamics among family members, non-family employees and other stakeholders can be significant. 


Succession and Estate Planning Challenges 

Conflict avoidance can complicate succession and estate planning, which are both critical aspects of family businesses. When conflicts are swept under the rug, choosing the next leader becomes a daunting task, and the lack of clarity can lead to power struggles, hampering the smooth transition of leadership and potentially putting the business's future at risk. Unresolved conflicts can influence estate plans in potentially ineffective ways that can hamper the ability for multigenerational success.  Research findings indicate that nearly half of all family business failures stem from the owner's death. Additionally, while a substantial 70% of owners express their desire to pass the business to the next generation, merely 30% achieve successful transitions highlighting a clear indication of an inadequate or nonexistent succession plan. 

 

Impact on Employee Morale and Productivity 

The unresolved tensions within the family can create a toxic work environment, negatively impacting employee morale and productivity. Team members may feel caught in the crossfire or may become disengaged due to the constant undercurrent of unresolved conflicts. This, in turn, can hinder the overall performance of the business and even lead to a high number of non-family employee turnover.  


Financial Implications 

Unresolved conflicts can have direct financial implications for the business. As previously mentioned, unmanaged conflict can lead to non-family employee turnover, which consequently brings about various financial implications such as "severance/termination packages (voluntary or involuntary), recruitment and staffing costs, expenses related to onboarding, training, and development associated with new replacement employees, and the loss of human capital investment in skilled employees" (Baril, Mark Batson. "The High Costs of Unmanaged Conflict In Your Organization." Forbes.com).  Additionally, disagreements over key decisions, investments, or strategic directions can lead to less-than-ideal choices. The unfortunate worst case for these unresolved disputes may eventually escalate to legal battles which of course drains resources that could otherwise have been invested in the business's growth, however the most tragic impact is the permanent fracture in the family that can last a lifetime.   


Risk of Business Failure 

The cumulative impact of unresolved conflicts can increase the risk of business failure. The lack of cohesive decision-making, strained relationships, and financial challenges can create an environment where the business struggles to compete and sustain itself in the long run. 


It’s not surprising then that leaving conflicts unresolved has far reaching impacts on the business and the family. Addressing conflicts within a family business is not just about resolving disputes; it is about safeguarding the enterprise and the family for long-term success. By acknowledging and proactively managing conflicts, families can foster a healthier work environment, cultivate better relationships, ensure smooth successions, and fortify their ability to adapt and thrive in an ever-evolving business landscape. 

 

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