HOW CAN WE AVOID CONFLICT?
My topic today revolves around family and business, a subject I’ve previously explored in my writings and interviews (https://muratulker.com/aile-sirketleri-gelecege-uzanan-deger-olusturmak/; https://muratulker.com/sirketlerin-sinirlarini-biliyoruz-ailenin-sinirlari-ne/; https://muratulker.com/aile-sirketleri/).
The book Untangling Conflict: An Introspective Guide for Families in Business caught my attention. What makes it particularly fascinating is the way it uses the Srivastava family, which forms the foundation of the narrative and its delivery style, fictionalized as a well-established family in India, encompassing all the necessary conditions. The authors are remarkably accomplished: Dr. Janmejaya Sinha, Chairman of Boston Consulting Group (BCG) India, is renowned for his work on family businesses. Since joining BCG in 1998, he has specialized in strategy, governance, and large-scale transformations. He’s also a co-author of the book Your Strategy Needs a Strategy.
Carol Liao, Chair of BCG China and a member of its Global Executive Committee, has over 20 years of experience in family businesses, digital transformation, and innovation. She received the “Exemplary Leadership” award in 2016.
Ryoji Kimura, Senior Partner at BCG and Global Leader of the Corporate Finance and Strategy practice, has two decades of consulting experience, focusing on strategy and business model innovation. He holds a degree in Economics from Kyoto University.
Dr. Brittany N Montgomery, Project Leader at BCG, has a PhD in Political Economy from the Massachusetts Institute of Technology. She has expertise in strategy, family businesses, and urban planning.
The authors meticulously break down conflicts into smaller components, demonstrating that each can be resolved through different approaches. The core idea of the book is profound: “A family must first know itself.”
Let’s explore the members of this fictional family, their business, their industries, and their conflicts as a whole. Along the way, I’ve sprinkled in some of my own experiences.
Note: This article was originally published on December 1, 2024.
The Srivastava Family Members:
- Mahendra Srivastava: Founder and Chairman of the Srivastava Group. Upon his passing at the age of 87, he left a multifaceted legacy behind. The lack of a will heightened conflicts among his children and created significant uncertainty about the future leadership of their companies.
- Yamini: Mahendra’s 80-year-old wife. She prefers to stay away from the family business and the conflicts between her children.
- Abhijit: Mahendra’s eldest child, serving as CEO and Chairman of the family’s company, Crusher. Seen as the natural successor for the family leadership, his priority is to grow the family businesses and improve profitability. However, this approach often puts him at odds with other family members.
- Nandini: The second child and President of the Parivartan Foundation. She has no desire to be involved in the family’s business operations. Her opposition to Crusher, a mining company known for its environmental impact, places her in constant conflict with Abhijit. Beyond her environmental activism, Nandini is focused on the ethical and social aspects of the family’s operations, challenging their sole focus on financial success. She is both environmentally conscious and active in her political career.
- Vaishnavi: The third child of Mahendra. Despite playing a critical role in Living Lime with her engineering expertise and innovative solutions, she does not receive full support from Abhijit or other family members. She aspires to take on more responsibility and develop forward-looking projects, but finds herself constrained by the family’s traditional leadership structure.
- Sai: The youngest child of Mahendra, heading the financial services company Ribbon. His leadership is undermined by personal scandals and struggles with alcohol, making him a weak candidate for family leadership. He is not widely regarded as a trustworthy leader.
- Ikuo: A non-family executive who plays a key role in the Srivastava Group, particularly in strategic decision-making. In Mahendra’s absence, Ikuo has become a crucial figure in managing the family’s businesses, though his influence has sparked jealousy among certain family members.
- Bijoy: Third-generation CEO of Zap. Bijoy downplays environmental concerns and takes a conservative stance on transitioning to renewable energy. He shares similar views with his father, Abhijit, on these matters.
- Kartik: Abhijit’s son, who works as a manager at BuildMor. Despite his father’s support, doubts about his leadership capabilities persist, and he has not earned much respect from professionals outside the family.
- Naaven: While not actively involved in the Srivastava Group’s operations, he contributes strategic insights from the outside. Rather than being directly in the family business, he plays a more advisory and observational role, without seeking an active leadership position.
- Jajaj: A professional consultant to the Srivastava family for 10 years.
Srivastava Group Companies:
- Crusher (1959): Mining and coal extraction, CEO: Abhijit.
- Living Lime (1982): Cement manufacturing, CEO: Ikuo.
- MegaMix (1998): Concrete production, CEO: Ikuo.
- Zap (1994): Energy production, CEO: Bijoy.
- BuildMor (2003): Infrastructure construction, CEO: Vikram.
- Ribbon (2000): Real estate financing, CEO: Sai.
- Parivartan Foundation (1988): Environmental protection and social justice, CEO: Nandini.
Now, let’s dive into the story…
The sudden passing of Mahendra Srivastava, the head of the family, at the age of 87, triggers significant uncertainties and conflicts in the governance of the family business. With differing opinions on leadership and contrasting business strategies among family members, these challenges have a direct impact on the management and sustainable success of the companies.
I remember, however, that my father never left us a will or inheritance; he divided everything among us while he was still alive. When I asked him why, he said, “Go ahead and try it out; if it doesn’t work, I’ll step in and fix things.”
The eldest child, Abhijit, embraces a profit-focused and traditional management style. As the CEO of Crusher, a mining company, he strongly advocates for expanding mining activities and increasing the company’s profitability. However, his sister Nandini, who heads the Parivartan Foundation—a social responsibility initiative—adamantly opposes such projects due to their environmental impact. This contrast leads to serious strategic disagreements within the family. Nandini argues that companies should not solely pursue profit but must also generate social value. Meanwhile, other family members face their dilemmas: Vaishnavi, an engineering-focused professor contributing to innovative projects at Living Lime, struggles to gain full family support. On the other hand, Sai, CEO of Ribbon, a real estate financing company, grapples with personal scandals and alcohol dependency, which undermine his standing in the business world.
The Srivastava Group spans a diverse range of industries, including mining, cement production, energy generation, and infrastructure development. This “diversity” might seem impressive at first glance, but differing business strategies and personal priorities among family members create uncertainties about the future and lead to significant challenges. For the group’s sustainability, family members must align on a shared vision, communicate effectively, and agree on a common language to move forward. After all, the family’s core challenge isn’t just preserving their bonds but ensuring the continued success of their companies—something that has become increasingly difficult.
Now that we’ve met the Srivastava family and understood their roles, the authors break the problems into parts, showing us how each can be addressed through different approaches.
I recall a moment with my sister, just the two of us, when my father asked how he should divide his wealth between us. I said, “Let’s split it equally, but I’d like to have a little more—just to ensure there’s no room for future criticism.”
One of the book’s most striking points is its emphasis on how emotions, fairness, and trust are fundamental drivers of family conflicts. We all have families, and we all face conflicts from time to time. Feelings of jealousy and perceived unfair treatment can arise among siblings. At this point, maintaining open and transparent communication, fostering mutual understanding, and, when necessary, seeking external support are of paramount importance.
Family businesses don’t just face shareholder or succession challenges; such problems often exacerbate deep-seated emotional wounds from the past. The authors highlight the importance of establishing family rules and shareholder agreements among family members. Not every family member aspires to lead the business, and that’s perfectly normal. However, knowing when to step away from management or adapt the leadership style is equally crucial. Sometimes, the best decision for family harmony and the company’s health is to withdraw from active management.
Another significant source of conflict lies in disagreements over strategic business decisions among family members. It’s essential to keep all family members informed and, if needed, seek expert guidance, even regularly.
Whenever we pursued significant acquisitions like Godiva or McVitie’s, or delved into entirely new sectors such as retail, we always made sure to consult with trusted advisors and engage in thorough discussions with my sister, my nephews, and even my children. This approach must remain unchanged moving forward.
Lastly, the differing expectations between family members and external professional managers or business partners come to the forefront. Family businesses tend to think long-term, focusing on the future rather than quarterly financial results. This difference in perspective can lead to gaps with professional managers who are more results-oriented in the short term. Managing expectations and maintaining open communication are, therefore, critical.
The authors quote Mahatma Gandhi with a statement that holds invaluable wisdom not just for family businesses but for all companies and individuals: “Peace is not the absence of conflict, but the ability to cope with it.”
Family Businesses in a Global Context
Family businesses evoke different perceptions across various regions of the world. In the United States, they bring to mind small-town enterprises, while in South Korea, colossal “chaebol” families dominate the scene. In India, post-independence industrial achievements stand out, and in Japan, family-run businesses that have survived for centuries are often cited as examples. In Turkey, however, family businesses have played a pivotal role in economic development, especially after the establishment of the Republic, becoming the cornerstones of industry and commerce. Despite regional differences, families have been regarded as the fundamental building blocks of the economy since ancient times.
Family businesses come in all sizes, ranging from small family-run shops to global giants. For instance, in Germany, small and medium-sized family businesses known as “Mittelstand” account for a significant portion of the country’s exports. In leading Asian economies, family businesses act as key drivers of economic growth. In both Korea and India, many of the highest-revenue companies are family-owned, contributing not only to economic expansion but also to the creation of millions of jobs.
Family businesses are notable not just for their economic contributions but also for their longevity and the stability they offer to their communities. However, conflicts within families can pose a serious threat to these companies.
Conflict in the Srivastava Family
In the first chapter, the authors delve into the deep roots of conflicts within family businesses. Using the Srivastava family as a case study, they explore the challenges that can arise in family enterprises and examine potential solutions. In the Srivastava family, Mahendra’s failure to leave behind a clear “what happens after me” plan leads to a power struggle within the family. Although the eldest child, Abhijit, is seen as the most suitable candidate to take over leadership, his siblings question his abilities. Notably, Nandini, who is known for her environmental advocacy, openly opposes the environmental damage caused by the family’s mining company, “Crusher.” At this juncture, significant ideological rifts among the siblings begin to emerge.
The family’s matriarch, Yamini, chooses to remain uninvolved in the chaos, withdrawing from the situation. However, even her neutral stance fails to ease the tension within the family. On the other hand, Vaishnavi, one of the family’s most talented members, has been unable to assume a leadership role due to Mahendra’s sexist attitudes. Despite her groundbreaking work developing a highly durable cement formula, which has been pivotal to the success of “Living Lime,” one of the family’s most profitable ventures, Vaishnavi has not been allowed a seat at the management table. This has left her deeply disillusioned.
The youngest member of the family, Sai, is not regarded as a reliable leader due to personal scandals and struggles with alcohol addiction. Despite his achievements in the family’s financial services company, “Ribbon,” Sai’s erratic lifestyle has drawn severe criticism from the family. His position within the family has become increasingly precarious compared to other members, and the company’s future appears uncertain.
Would the issues in the Srivastava family have been avoided or resolved more easily had Mahendra left a will? I highly doubt it. I am not in favor of wills. Trying to control and manage the family, business, and future after passing away seems futile to me. Succession is a matter that the next generation must understand, decide upon, and take responsibility for. Naturally, elder family members should gradually and systematically step back from active roles to make way for the new generation. However, this is a process that must be carefully planned and executed over time.
The Complexity of Family Businesses
Managing a family business is far more complex than running a conventional business. This is because it requires simultaneously managing the operational demands of the business, organizational relationships, and close familial ties—a skill that not everyone possesses. Throughout the book, the authors emphasize the need for families to develop rules and conflict resolution methods tailored to their unique circumstances.
Types of Conflicts in Family Businesses
Conflicts in family businesses generally fall into three main categories: emotional conflicts, property-related disputes, and disagreements over business strategies. Emotional conflicts revolve around values like fairness, love, and respect within family relationships. Property-related disputes concern disagreements about rights and responsibilities tied to business ownership. Strategic conflicts, on the other hand, focus on the company’s growth objectives, risk tolerance, and key management decisions.
Key Relationships in Family Conflicts
Common sources of family business conflicts include sibling rivalries, disagreements among cousins, and generational differences. In cases like the Srivastava family, such conflicts often peak around critical issues like leadership, inheritance distribution, and business decisions.
Understanding Your Family and Business is Crucial
The authors highlight that every family and business is unique, and decisions should be based on a thorough understanding of the specific dynamics and intricacies of each situation.
Understanding the Family
Grasping the structure and values of the family is essential for preventing conflicts. This involves examining two key dimensions. The first one is “Family Characterization”: Who is considered part of the family? What are the individual skills and aspirations of family members? What norms and values govern interactions within the family? These questions help clarify who the family members are and how they interact with each other. The second dimension refers to “Family Expectations:” How do personal differences and expectations among family members affect the family dynamics? Cultural backgrounds and generational gaps often form the root causes of conflicts. For instance, how family members perceive themselves as a collective unit and how these dynamics translate into business interactions must be carefully examined and understood.
In some cultures, for example, family is strictly limited to immediate blood relatives, akin to aristocratic lineage, where in-laws are not considered part of the family. In other cases, the concept extends to a tribal structure, defined by ethnicity or region. These perspectives always seem strange to me, but…
Understanding the Family Business
How families view their business and the way they relate to it is another critical factor. Is the business merely a source of income, or is there a deep sense of attachment to it? Naturally, family members’ perceptions and risk appetites vary. For instance, while founders and their generation might focus on growth, subsequent generations may show less interest. These differences in perception often lead to conflict. While a family defines itself as a family business, the market and the business itself do not always recognize this definition. Ultimately, the true boss is the business’s demands.
Foundation, Scale, and Maturity of the business are crucial for its future. The business needs to be analyzed from this perspective. The ability of the business to adapt to unexpected changes and its dependency on specific individuals or factors—its flexibility and vulnerability—are key to mitigating future challenges.
Ecosystem is another important factor with a direct effect on business decisions. Issues like the political climate, regulatory environment, labor relations, and cost of capital influence business decisions.
Emotional Baggage: At the core of many family business conflicts lie “sensitive” issues. Over time, emotional wounds—caused by disagreements, feelings of neglect, or perceived threats—can accumulate and spread across the company’s operations. I often refer to this as “baggage.” Sensitive issues, though frequently overlooked in family businesses, are often the foundation of conflict. These issues are deeply tied to psychological needs such as security, self-esteem, and self-actualization.
The authors outline four key categories of sensitive issues:
The Definition of Sensitive Issues
Sensitive issues are among the most significant triggers of conflict in family businesses, often shaped by threats to family members’ identities, self-respect, and emotional needs. These matters are not typically based on objective facts but rather on personal perceptions. For instance, one family member may feel less loved or valued compared to another. Reflecting deep psychological needs, these issues directly impact family relationships, and the way family businesses operate. Emotional wounds can cast a shadow over business decisions, making it crucial to address these issues appropriately.
For example, in the Srivastava family, Mahendra’s grandson Kartik harbors jealousy toward his uncle Sai. Kartik feels that Mahendra openly shows more affection for Sai, causing him deep emotional pain. Simultaneously, Mahendra’s choice to give his daughter Nandini more visibility in public while not offering Sai the same opportunities has created a perception of emotional unfairness within the family. These scenarios exemplify the sensitive issues that profoundly affect family dynamics.
I often refer to the accumulation of such sensitive issues as “baggage.” Yes, everyone carries some baggage, but it’s better to let it go. After all, the world will never move backward, the past will not become the future, and this baggage will only weigh you down. Chances are, you won’t even be able to make others understand your troubles. Here’s the critical takeaway: Do not pass this baggage on to the next generation.
Motivations and Violation of Sensitive Rules
Violation of sensitive rules often occurs unintentionally. When these rules are broken, family members are left dealing with emotional pain and mistrust.
For example, if a family member believes that another family member is unfairly receiving more love or attention, it can lead to resentment. Kartik’s feeling that he doesn’t receive the love and attention he desires from Mahendra has led him to compare himself to uncle Sai, which eventually escalates into a family conflict.
Motivations, on the other hand, typically stem from personal needs, varying life experiences, or mismatched personalities. A family member’s lifestyle, upbringing, or life experiences may differ significantly from others, potentially leading to rule violations. For instance, one family member may adopt a more liberal lifestyle, while others remain more traditional. Such differences can spark disagreements and deepen conflicts within the family.
Shaping Family Culture to Eliminate Sensitive Issues
Family culture serves as the foundation that shapes relationships, behavioral patterns, and norms within the family. Family leaders consciously shaping this culture can prevent sensitive issues from escalating into conflicts. With mutual respect in place, most problems can be resolved before they grow.
Open communication and active listening skills within the family must be cultivated. Family members should show respect for one another’s emotions and opinions, making an effort to listen and understand. This approach facilitates early detection and resolution of sensitive issues, both in the business and within the family.
Managing Conflict When Sensitive Rules Are Violated
Even with a strong family culture that acts as a robust conflict prevention mechanism, sensitive issues may still arise. In such cases, effectively managing the conflict becomes critical for preserving long-term relationships and business success. Family leaders or designated mediators often step in to resolve the conflict in case of sensitive issues.
The authors propose that during this process, a neutral expert mediator, trusted for their outside perspective on the family, or an internal family member acting as an “emotional mediator,” could be chosen to facilitate resolution. If conflicts remain unresolved, family leaders or a family council may intervene to initiate a more formal resolution process. The key is to address conflicts swiftly and fairly before they inflict further harm on the business or relationships. I’ve yet to see a family benefiting much from the concept of mediation. But the choice is yours!
The reality that emotional wounds and violations of sensitive rules can threaten not only family members but also the success of the business underscores their importance in ensuring the sustainability of family enterprises.
Ownership-Driven Conflicts: Financial Matters and Critical Decisions
Conflicts in family businesses often stem from financial issues, referred to as “tough” topics. These matters revolve around the ownership rights over the business, frequently leading to visible, tangible conflicts between family and business interests. Key issues include differences in interests among family members, ownership rights, management responsibilities, and how shares will be distributed.
The distribution of shares is not only about determining who gets what among family members, but also raises critical questions about voting rights and profit shares. Topics like share transfers, determining inheritance, and deciding who has the right to sell shares can easily become points of contention, potentially threatening family harmony.
When discussing ownership issues in family businesses, leadership is another critical element that cannot be overlooked.
This section focuses on four key decisions:
- How will ownership be distributed?
- How will governance and employment rules be established?
- Who will take on leadership roles?
- What business model will be selected?
Decisions on whether family members will take active roles in management or remain as passive investors significantly shape the family’s influence on the business.
The choice of a business model determines the roles of family members within the business. While some families prefer active involvement in management and decision-making, others opt to remain as investors, entrusting professional managers to run the business.
Matters like taking the company public and determining how shares will be sold offer family members an exit strategy, but they also diminish the family’s control over the business. When shares are publicly traded, new challenges arise, such as how family members should present themselves in media and public settings. Additional issues include defining the roles of family members in the company and deciding when and how external professionals will be brought into management.
Even if financial matters are resolved, maintaining emotional bonds and harmony within the family is essential. Otherwise, emotional disconnects can lead to long-term conflicts within the family.
Ownership-Driven Conflicts: Tough Topics and Governance
Ownership rights over the business go beyond economic value; they intertwine with individuals’ self-worth and concepts like familial love. Resolving financial issues within the family involves addressing deep emotional elements. To prevent financial matters from escalating into conflicts, establishing a robust governance structure is essential.
For example, a family council can serve as a forum where family members with ownership rights participate in business decisions. In such a setting, family members are informed about the business, and discussions on topics like profit distribution and share allocation take place. If needed, a family council may appoint a family committee to define roles such as leadership positions within the business.
A family office, moreover, focuses on managing the family’s financial assets, offering support in areas like tax planning, asset protection, and wealth distribution among family members. Such structural support provided by a family office can help reduce conflicts over financial matters within the family.
Disagreements Over Strategies: Business Matters
Business matters such as: Should we grow? How fast should we grow? How should we allocate capital? Questions like these often spark serious disagreements within families. Strategic disagreements are even more challenging in publicly traded companies, where family members may face conflicts of interest with other shareholders as they try to steer the business in line with their vision. For the business’s future and maintaining family control, it is critical that family members speak with a unified voice. Acting collectively ensures the family’s control over the business and secures future success.
For good and all, establishing a forum where family members can discuss business decisions and adopt a unified stance can be highly beneficial. Such forums play a vital role in making strategic decisions about the management of the business and safeguarding family interests. Creating structures like these can help ensure the sustainability of the business and its future success. For these forums to effectively promote family harmony, they must be grounded in principles of transparency and participation.
Practical Approaches to Preventing and Mitigating Conflicts
If you were in the Srivastava family’s position, where would you begin? What steps would you take to address these complex family issues? Which matters would you prioritize, and what kind of platform would you create to resolve these conflicts? Who outside your family would you consult for support and guidance?
The book does not merely offer theoretical insights into the challenges faced by family businesses; it also provides practical solutions, supported by real-world examples. It clearly demonstrates the impact of proactive steps that family members can take in managing conflicts on the long-term success of the business. One of the book’s strengths is its use of real-world scenarios to illustrate the unique challenges of family businesses. The stories and scenarios shared through the Srivastava family make the presented theories more accessible and relatable. This book is a valuable resource for both family members and professionals, offering comprehensive guidance on managing and resolving potential conflicts in family businesses. My recommendation would be to carefully read the case studies for deeper insights.
Thank you, Fezal Okur Eskil, for your recommendation.
Note: This open-source article does not require copyright and can be quoted by citing the author.
