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UNIVERSITAS PELITA HARAPAN
Family Business Enterprise | Universitas Pelita Harapan 2016
MEETING 5:
CONFLICT IN FAMILY BUSINESS
Family Business Enterprise | Universitas Pelita Harapan
TOPICS TO COVER
Outward looking
Inward looking
Emotion based Un-emotion based
Principle = loyalty & equality Principle = cost vs benefit
Care & nurture each other Membership last only as long as
Lifetime membership regardless you perform up to standard
performance Stay working or look work
Aversion to change elsewhere
Embrace to change
CONFLICT
Family Business Enterprise | Universitas Pelita Harapan
1 Conflict in Family Business: Family VS Business Values (1)
Issue Family Values Business Values
1. Goal conflict
Goal conflict happens because there are various goals for business, goal
for immediate family members and goal for one self.
For example:
One of Aunt Elisas goals is to make her son, currently the marketing manager
becomes the next marketing director to replace her brother.
However for the current CEO and COO, which is your father and aunt Elisas younger
brother respectively, you are being prepared to be the next marketing director even
though you are younger and less competent than your cousin.
For example:
As younger generation in your family business, you want every single
transactions to be recorded using advanced accounting software. However
the older generation believes this will be too much for the whole company to
handle.
For example:
The 70 years old CEO of a big family business running the business with his
brothers, sisters, and cousins whom all sit in directors and managerial
position. There is no second generation family members in those position
because he believes they are not ready, and there is no training for these
successors.
Family Business Enterprise | Universitas Pelita Harapan
1 Conflict in Family Business: Between Family Members (5)
Leaving the nest conflict happen because the kids feel they are
constantly under the family microscope. Thus, they are directed to
study and work according to the family business needs.
For example:
Sisca who wants to work in graphic design industry are forced by her family
members to study marketing because the family business need her to be
the next marketing director.
Spillover theory (Evans and Bartolome 1984) is used to explain how work
influences family life.
Positive spillover involves the spread of satisfaction and stimulation at work
to high levels of energy and satisfaction at home.
With negative spillover, the problems and conflicts at work drain and
preoccupy the individual, making it difficult to participate in family life.
For women, the family role intrudes into the work role more than the work
role is allowed to intrude into the family role; for men, the opposite is true.
Family Business Enterprise | Universitas Pelita Harapan
2 Identifying Sources of Conflict in Family Business
Moreover, Beckhard and Dyer (1983) suggest that the failure to adequately control conflict
may contribute to the high mortality rate of family-owned firms. Family businesses are, in
fact, rather fragile. Roughly two-thirds of family-owned and family-controlled businesses do
not survive the founders' generation (Beckhard and Dyer 1983; Dyer 1986), with only 10 to
15 percent surviving to a third generation (Applegate 1994).
Competition - -
Avoidance - -
Collaboration + +
Compromise + +
Accommodation - +
Effective communication
Ellin (2001) says communication-building is a necessary management
tool and one that is especially important in family business. She says;
I made an iron clad rule. We shall not discuss business out of work unless
we're at a business meeting or business luncheon or a dinner. That goes
without exception
Succession planning
Sol Elvira Perez (Egade University, Mexico), cites statistics showing that a
third of the world's wealth is expected to change hands within a decade
(Fastag 2002, 2).
Joseph Astrachan (Kennesaw State University) cites research showing
that only 30 percent of such endeavors make the transition from one
generation to the next.
Defined roles
Family members who work closely together should develop written job
descriptions.
By separating work roles (job descriptions) between each other this will
aid in clarifying and separating business roles from spouse/family roles
and help reduce confusion.
If roles lack clear work boundaries then family work colleagues will keep
missing cues from one another and this will be a source of conflict.
Family Business Enterprise | Universitas Pelita Harapan
3 Addressing Conflict in Family Business
Reward systems
By agreeing on defined roles and determining accountability for family
members, a system of rewards can be implemented that fairly reflects the effort
and performance of each member.
This is especially useful for avoiding conflict with siblings who may otherwise be
rewarded equally regardless of their roles.
This process for determining the rewards or remuneration for family employees
could also be extended to fairly distributing equity to family members based on
their contribution and responsibilities.
Family Business Enterprise | Universitas Pelita Harapan
3 Addressing Conflict in Family Business