How can I resolve conflict in my family business?

29 November 2011 -

“My son is CEO of the family business and it has performed well under his leadership, but recently some staff were found guilty of misconduct. My daughter says the issue has been badly handled. I support my son, but how do I clear up the mess without compromising his position?”

Professor Joseph Lampel says:

You are fortunate in confronting an issue that often emerges after a family’s founding patriarch is no longer able to intervene: Is the family business more family or more business?

I suspect that your daughter represents the view that the family business is first and foremost a business, and that the first duty of the family is to preserve the wealth that the business creates for the family for future generations. For her, contrition is not enough. What you need are new faces at the top, preferably managers with impeccable integrity that have no previous association with the company. This should improve the image of the company in the public mind, reassure investors and guarantee financial stability.

This is a logical view, but your heart says otherwise. The trouble is, it is not simply a matter of loyalty to your son, but of your legacy. The family business is not just a business – you did not spend decades building up a great company so your descendants spend their days in idle luxury, creating more headlines for debauched antics than astute business ventures. What you want is to create a family dynasty in the same league as the Rothschilds and the Rockefellers; a company that MBAs will study for decades to come.

To maintain the dream, you must distinguish between loyalty to your son and maintaining family control. Your unwavering support for him in his current position as CEO is not helping the situation; it only provides ammunition to those who believe that your inquiries into misconduct are merely window dressing. Appoint another CEO with a mandate to get to the bottom of what happened, and set things straight. Ask your son to move aside for a while. Give him a high-profile venture that will allow him to show his abilities – if, as you believe, he has done nothing to merit criticism, he can come back slightly older and much wiser.

Joseph Lampel is professor of strategy and leadership in the Faculty of Management at Cass Business School