The idiosyncrasy of family businesses is made by the fabric of emotions and values that support the commitment of the family members who work in a family company. The multiplicity of roles and the high emotionality involved might hinder a constructive management of conflicts. Mediation is a powerful tool available for family businesses, and it can help the people to be able to face the challenges that might rise in the area of professionalization. It is advocated here that family businesses should use mediators as naturally as they rely on other professionals on a daily basis such as lawyers, managers of IT experts. Moreover, these professionals play an important role when it comes to refer family businesses to mediation whenever they know it is needed. The North-American experience in family business mediation is a support of the above.
Keywords: Family Business, mediation, conflict, succession, professionalization.
The idiosyncrasy of family business is constituted by the fabric of emotions and values that sustain the commitment of the family members working in the company. And it may be a great strength or it might be a weakness as if conflicts that cannot be managed by the family member arise, the commitment is burdened and high emotionality is released, weakening, in turn, the business and family environment.
Mediation is a powerful novelty tool offering an alternative when the persons involved in the conflict are unable to reach an agreement. And this occurs in any kind of conflict, and regardless of the people involved, which encompasses a multiplicity of roles each member of the family business has.
The article’s title is “Beyond family protocol” because I stand for Mediation as a day-to-day tool that family businesses might use as they use expert consultants for IT issues or staff recruiting, or the legal advisor or lawyer of the company. Moreover, the time factor is crucial to face conflicts.
I agree with the other authors in that mediation is vital when it comes to writing a family protocol, which is very useful to prevent conflicts from happening. However, reality shows that only half of family businesses have seriously thought about the succession moment, and that only 1 out of 5 of these companies have written a family protocol, according to the report on Family Mediation of the Autonomous Region of Madrid (CEIM et al., 2010).
Family Business versus Business Family
According to the analysis carried out and explained in “La Familia Empresaria en la terapia de Familia y Pareja” (Lasheras, 2008, pp. 195-219) it is considered that behind a family business there is a family, which entails that:
The family business shares a legacy and a common origin; that is, they share both the control and the governance of a company that, in turn, is an essential part of their identity. In a business family there is the wish and the will to continue being part of the company which manifests in a call to pass the company and its culture on to generations to come.
The family business is a complex social system in which three subsystems are intertwined: family, company and property.
The main source of stress for a family business among family members working in it is the very same family relationship.
The detailed research of this articles shows that existence of a family business within a family nourishes and feedback very important aspects related to the family as, for instance, the family history, the relationship between the family members, and its own value system.
Family Businesses in Spanish Economy
In Spain, some 80% of companies are family businesses, which accounts for 70% of the GDP. It is estimated that in the Autonomous Region of Madrid the number of family businesses reaches 63%, and that they provide half of the private employment.
This item echoes the reflection of Juan Corona (2012), Academic Director of the Family Business Institute.
“The significance of family businesses as a boosting element of economy is not only based on their quantitative importance but on the qualitative elements that characterise this kind of companies, such as:
Their great capability of job creation account for over 70% of the employment in the European Union and are among the major contributors to economic productions,
Being an engine for the economic and regional development. Their long term investments provide stability and sustainment to the regions as family businesses’ owners are not used to changing their residence place, therefore, the company’s address tends to be the same for long,
Stimulating entrepreneurship as they provide a training field for future entrepreneurs. They have strong business ethics, a long term business strategy and awareness of the social and environmental responsibility.
Long term strategy as they have a stable capital structure that is normally backed by family finances and a structure, strategy and action that is sustained in the long run” (Corona, 2012, pp. 9-10).
Challenges for Family Businesses
The Report on Family Businesses of the Autonomous Region of Madrid concludes with an identification of the stimulus initiatives that are the most appropriate for this kind of businesses. Three of them are identified as those in which Mediation can be very useful.
Human Resources: Talent Commitment Management
Managing the organisation of human resources with a mid-long term oriented vision, which must be completed, moreover, with measures to stimulate the presence of the staff and the evolution of their careers.
Mediation can be the most efficient tool of any talent management position as it prevents usual petty frictions from happening in any labour relation that might have tightened the thumbscrews of the relation to the point of making it eventually break.
Documenting an ordered generation succession, as this is important to guarantee its survival and the continuation of activities. This usually implies the need to rely on a constructive management of conflicts.
The abovementioned report indicates that slightly above one third of family businesses reaches the second generation, and only 10 to 15% reaches the third generation.
Providing themselves with effective management bodies is important to formalise the structure and decision making. This facilitates that the decisions made within businesses be the result of consensus and of a prior assessment by the stakeholders.
Family businesses allow to coordinate two realities, family and business, which must be managed separately, through the establishment of good family governance and good corporate governance. This separation prevents business management from being conditioned by the negative emotional aspects family can entail.
Mediation, in my opinion, finds its space in the support provided to the Family Assembly and the Family Council concerning the constructive management of the conflicts that might arise.
Role of the Mediator in Family Businesses
In the United States (Haynes y Usdin, 1997, pp. 115-117), where mediation has been implemented for thirty years, according to the experience of mediators working with family businesses, 75-85% of the people using mediation reach an agreement.
Mediation is useful to manage all kinds of conflicts: succession, management, fights for power, decisions, pay out or reinvestment decisions, problems as a result of divorce of one of the family members, or strategic decisions of the company.
Mediation in the context of family business is the ideal solution as the following philosophy underlies:
- Conflicts should be faced as soon as they rise, so that the emotional and economic cost is lower.
- Reaching an agreement through mediation saves times, money and emotional cost.
- The people who are the protagonists of the conflict are the most capable to reach a consensus on an alternative that should satisfy their needs.
- The fact that any member of the business family might go to Court to reveal his/her differences irreversibly harms the family relationship.
- When the members are immersed in a conflict, the intensity of emotions hinders their ability to communicate and solve problems. The intervention of third party, the mediator, makes it easier for them to see the conflict from another perspective and reach a consensus that benefits all.
Collaboration with Other Professionals Supporting the Family Business
It is considered necessary for the professionals who collaborate with a family business like lawyers, consultants, advisors from different fields to refer family businesses where hard to constructively manage difficult conflicts are detected to mediation.
According to Ann Lee Begler’s experience (Bergler, 1997, 122-126) is very useful for the different collaborators of a family business to refer the business family to mediation whenever there is a conflict, and this is a very constructive option as the lawyer of consultant stays out of the conflict and fulfils his/her obligation to work for the good of the family business as a whole.
Thus, each specialist finds a specific field of action.
- The lawyer will collaborate in the mediation process from his own role, in order to provide legal information and help the parties to have its place in the process; likewise, he/she can review the mediation agreement before signing it.
- The consultant and the rest of specific specialists in the different areas of the business also find their place in the process and they collaborate whenever their objective and specific knowledge is required in relation to the concerned issue.
- Russ Alan Price (1990) also considers that “Mediation is increasingly considered the best way to face interpersonal conflict resolution or mitigation in family companies. After reviewing the way eighteen legal firms acted with their mid-size family business clients the trend was observed to use Mediation more frequently than Courts for conflict resolution”.
“Many financial services providers and accountants also recommend the use of Mediation for solve the conflicts of some of their clients. Like legal firms these consultants see the long term financial benefits of the family business persisting, and they are able to recognise what clients might benefit from Mediation”.