Family Business Conflicts PDF

CHAPTER 4 CONFLICT AND SOLUTION The unique nature of disagreement in Fambiz; 1. Risk to Family & Job Security  A fight in a fam biz is not just about money. It can put the whole company at risk  family members yg depend on the business for their income might lose their...

CHAPTER 4 CONFLICT AND SOLUTION The unique nature of disagreement in Fambiz; 1. Risk to Family & Job Security  A fight in a fam biz is not just about money. It can put the whole company at risk  family members yg depend on the business for their income might lose their jobs.  This is especially tough for those who don’t have other job skills or work experience. 2. Hard to Sell Shares/ stocks  public companies where shares can be easily sold but family business shares are difficult to sell.  There might be rules that prevent selling to outsiders, or buyers may not be interested in a minority positon in fam biz. 3. Damaged Rela onships & Business Opera ons  If disagreements between family members tk se le they can lead to long-las ng revenge(dendam).  This can create tension that affects decision-making and teamwork, can disrupt company’s success.  In the worst cases, personal conflicts will disrupt business opera ons, making it hard to run the company effec vely. SOURCES OF CONFLICT IN FAMBIZ Have 4 par cular issue that cause fam conflict/problem; 1. Disagreements on appropriate Business Strategy (perselisihan m tntng startegi png yg ssuai) o Arguments that relate abt “should the biz expanding product lines/ making acquisi ons” , “should the biz increasing the adver sing budget, or hiring more employees” 2. Conflicts Over Family Members' Skills, rela ve en tlement (hak rela f) to compensa on, responsibility, advancement opportuni es (peluang kemajuan) o Dlm fam biz, employees are selected not based on their skills or talents but based on their status as fam members. o Disputes arise (per kaian mbul) that relate with pay, promo ons, and responsibili es. o Leaders must choose between priori zing business success or favoring (memihak) family members. 3. Lack of Open & Honest Communica on  open&honest communica on in the context of fam biz can make a relay affected (terjejas) and will lack the open&honest communica on o Example: A leader cri cizes a nephew’s (anak saudara) work, leading to tension with the nephew’s mother (his sister). 4. Lack of Respect for Contribu ons (less respect in sumbangan) o Some family members may feel their contribu ons are invaluable (tak value) o This feeling diff to hide and can cause the prob if dont have effort to solve this issues o Conclusion: If these conflicts are not properly managed, they can harm both family rela onships and business success. TYPICAL FAMBIZ CONFLICT 1. Employment & exit policies  Some family members feel en tled (berhak mndpt) to jobs and posi ons.  Parents may expect their children to take over the business cause the biz it is their legacy and their responsibility to carry the biz for the good of the fam(demi kebaikan keluarga) 2. Exit policy  If fam mmber not perform well, to fired them can be difficult bcs of have a personal relay.  Some fam mmbe want to leave but they feel obligated to stay or others fam members thing that he/she tkde skill to work at others place  Aging founder/ senior membe is not ready to consider as a re rement 3. Role Defini on  Have disagreement about who will become the next leader  Conflict over who gets the most desirable tasks, benefits and responsibili es  Unclear job roles can cause the blame with each other. So by have clear job descrip on can solve the conflict  Filling the posi on based on the competencies criteria 4. Control issue  Control ni primary issue of conflict in fambiz  Struggle in : who will make the decision? Who controls the resource? Who resolved the conflict?  Some fam follow tradi on like eldest child will takes control, so younger sib may ques on this  Lack of trust leads to control issues, this happens due to past dishonesty (dsbbkan ke dakjujuran). To solve the lack of the issue is make a open discussion to address the trust issues 5. Salary policies  Some fambiz pay all fam mmbe in the same wages to avoid favori sm (pilih kasih)  Have issues in terms of compensa on(pampasan), perks(faedah), use of company assets (penggunaan aset syarikat), ownership (pemilikn) and dividend 6. Recogni on (pengik rafan)  Fam members seek approval (mndptkan klulusan) through hard work(kerja keras) or favori sm (pilih kasih)  Recogni on come in different form: praise(pujian), promo on (kenaikan pangkat), financial reward, leadership roles and travel opportuni es   Recogni on that based on clear business value( nilai png yg jls), can reduces unhealthy compe on and conflict HELPING FAMILIES IN CONFLICT ADVISOR’S ROLE IN CONFLICT SITUATIONS  Advisor must understand their own feeling abt the conflict  If advisor feel uncomfortable they may struggle to help their client effec vely  “Countertransferences” = when advisor show their emo ons onto the client, can affect their objec vity  Advisor must remain neutral and professional to provide the best guidance  If the advisor cant handle the situa on, they should limit their involvement or refer to another expert. The public health model provide 3 level of interven on: 1. Primary preven on (pencegahan awl)  Educate families/client abt the challenges in the fam biz system (nmndidik drg abt cbrn dlm sistem) & provide them with the tools to prevent unnecessary prob (mslh yg tdk perlu)  Set up fair system utk minimize conflict happen like: family forums (regular mee ng to discuss important ma er), rules of entry (have guideline how the fam member can join biz make sure joint through certain qualifica on or requirement) and compensa on policies (should based on skill,experince, job responsibili es)  Training on conflict resolu on (la han penyelesaian konflick) - teaches family members how to handle disagreements in a professional manner, focusing on solu ons rather than emo ons. 2. Secondary preven on  Adress conflict bfr ge ing worse and srs  In this stage, communica on start to deteriorate(merosot)  Iden fy communica on breakdown (mngenalpas kerosakan komunikasi) and address the issues early  Advisor can introduce structured conversa on to solve the misunderstanding 3. Ter ary preven on  Manage severe/srs (teruk) conflict that threaten the biz survival (mgncm klngsungan png)  Help client/families consider the solu on like: finding compromise, separa ng biz interests amicably ( seperate biz interest in way peacefully and fair fr all par es include divide aset, responsibili es and mngmnet of the biz), selling the biz (if conflict dh tk bole nk solve ths can help to avoid financial loss) SYSTEMATIC CONFLICT RESOLUTION APPROACH (ADVISOR FOLLOW THS STEPS) 1. Iden fy the issues - Simple but o en overlook (sering trips pndng) - Ppl assume tht everyone understand the issues are o en falsely - Misunderstandings can arise if assump ons are made without proper discussion - Cth; sorng ahli kluarga might assume issue drg psl leadership tapi others sees it as financial mismanagement 2. Determine each party mo va on to address the issue - Iden ty what the consequences (akibat) to each individual if not resolve the issue - Important to evaluate the level of rigidly or flexibility of each individual & discuss that need (kprluan) fr all par es to commit to make a some changes (mmbncngkan kprluan utk smua phk komited dlm mmbt bbrpe prubhn) 3. Outline the posi on & op on suggested by all - Iv each individual to iden ty issues and posi on - Iv each privately blh reduce defensiveness (pertahankan diri) and increse opennes to solu ons - Iden fy common goal (matlamat bersama) like goals and values 4. List the characteris cs of an ideal outcome - Define the solu on tht can meets the need of all par es involved - Asking what would the best situa on that solve to ensure all sa sfied - Establish the criteria for a good desicion 5. Consider a list of op on - Consider all the pros and cons of all the op on - Ensure the op on will align with shared goals and criteria fr succes  6. Select the best op on - Help the fam to choose most prac cal and beneficial solu on - Encourage fam members to propose concrete and detailed vision (mncdgkan visi yg konkrit & terperinci) 7. Give an opportunity - Give fam members me to reflect on the choices that their made bfr finalize it - Encourage them to “sleep on it” ( means= take me to think abt a decision carefully bfr finalize it) 8. Monitor implementa on - Advisor kne monitor the implementa on to ensure solu on being effec vely - By asking fam mem: is the solu on working? How do fam mmbe feel abt conflict resolu on process? MECHANISM FR RESOLVING DISPUTES (MEKANISME UTK SELESAIKAN PERTIKAIAN) 1. Voluntary Resolu ons  Arbitra on - Common method that use to solve fambiz conflict - Fam mmbers and co owner (pmilik brsma) agree to allow arbitrators (penimbang tara) decide the outcome Adv: - preserve the biz (memelihara png) - drp sell the biz, arbitra on offers a way to solve the issues - Confiden al & low cost - unlike (tdk spr ) court li ga on, arbitra on more private, faster and cheaper - Flexible solu on- arbitrators create unique solu ons that judges (hakim) also may not be able to do. Disadv: - Arbitrator lack understand of fambiz dynamics- cause arbitrator kan external en es may not knw the overall fambiz pa ern, so that should make decision is only fam members - May not foster long-term coopera on (tdk memupuk krjsama jangka panjang) - if fam mmbe cant resolve thei own disputes, its possible the fambiz to have longterm collabora on  Outside Consultant - Person tht hv experience and qualifica on that provide advice - Advice from outsider will be respected & accepted even have same advice frm mouth of another fam member would be ignore as a selfish Adv: - Unbiased (tdk brt sblh)- an outsider offer fair and professional advice without fam biased - Be er acceptance of advice- fambiz will respect recommenda on frm the consultant  Se lement Agreements - Wri en formula agreement between co-owner to resolve conflict - Co-owner have at least 2 opportuni es to resolve their disputes by contract  Have 2 types: - Shareholder agreements – An cipate future disputes and set rules in advance. (jangka per kaian masa depan and pkan prturan trlbh dhulu) - Se lement agreements – Resolve ongoing conflicts between co-owners. (selesaikan konflik yg brtrusan antra pmilik brsma)  Business Spin-Offs  - The single biz divided into 2 @ more parts to allow different fam members manage their own divisions Adv: - Reduce conflict- run the biz division independently - Preserve fam wealth (memlihara kekyaan kluarga) - instead of sell comp, each division con nue their own biz  Buy-out of Dissen ng Shareholder - Using ths approach make sense if dh try to resolve the disputes but failed - 1 @ more co-owner buy out another co-owner who dont want to be involved dh - Sale of the business - This is the final op on which is selling en re/overall biz to a 3rd party 2. Involuntary resolu on - co- owners of the biz unable to solve their disputes voluntarily (scra sukarela@wiling) they may depends on law  Voluntary Dissolu on  Court-Ordered Dissolu on - Corpora ons can be dissolved(dbubarkan) by court for various reason (atas plbgai sbb) - Common reason: - Shareholder misconduct (salah laku shareholder)- act illegally and unfairly towards minority shareholder - Shareholder deadlock - director and shareholder unable to agree on major decision that can suffer (menderita) the corpora on due to inac on  Buy-Out in Lieu of Dissolu on  Instead of dissolved the company (bubar comp) , 1 @ more shareholder buy out their co- owners CHAP 5 SUCCESION Establishing Succession in Ownership & Leadership (penggan an in owner and leader)  Succession most cri cal and risky period (temph kri kal and risk) fr a fambiz  Its happen when ownership and leadership move frm 1 person to another person like frm the first genera on (founder) to second genera on (mul ple fam mmberz)  Transi on frm 1 leader to mul ple successor (penggan ) can create conflict  Kebanyakkan fambiz crises are related dgn succesion issues  The new leader can be a fam member, a representa ve or an outsider Role of Professional Advisors:  Help families plan early for leadership transi on.  Ensure both business success and family harmony.  Guide decision-making to avoid conflicts and financial risks. 6 steps for advisor cover in order to make successful succession planning: S1: Get commitment from all fam mmbe to work on succession planning  All family members must agree to work on succession planning.  Commitment means Requires me, financial resources,  Fam mem kene open minded, pa ent and willing to compromise self interest fr the good of the grp (bersedia untuk menjejaskan kepen ngan diri demi kebaikan kumpulan)  Understand the financial and personal impact of failure.(Fahami kesan kewangan dan peribadi kegagalan) S2: help family member to work in teamwork rather than compe ve w each other  each family members to work together rather than compete.  Minimize sibling rivalry (kurangkan persaingan adkbrdik) and encourage construc ve collabora on.(galakan kerjasama yg mmbina) S3: Develop biz plan tht align w mission & strategy  Create separate mission for family and also for business are first step to Being more systema c abt the future direc on of the biz and fam S4: Create a personal development plan for family members who work in the business.  train family members in business skills for future leadership.  common weaknesses of the successor grp is fail to understand fully financial aspect the company so all must have financial literacy (Celik kewangan)   Encourage business courses, seminars, and industry events. S5: Develop a governance structure  set up a family board, board of directors, or family forum can balance the diverse of interest tht can give impact to the biz, fam and each individual  Provide a pla orm/ forum for discussing business & family concerns & oversee biz decision (mngawasi kputusan png)  Ensure fair decision-making and balance interests. S6: put legal and financial structure to implement succession plan  Align business and estate plans simultaneously.(Menyelaraskan rancangan perniagaan dan harta pusaka secara serentak)  Avoid conflicts and ensure a smooth transi on of ownership.(pas kan peralihan pemilikan berjalan lancar) RESISTANCE TO SUCCESSION PLANNING - The Founder (TANTANGAN TERHADAP PERANCANGAN PENGGANTIAN) 1. Fear of death  Founder facing the fact that they will not always be arounds to look their biz & they will no longer the best person to run the biz is make the founder feel painful and threatening (mgncam) 2. Reluctance to letgo of power (enggan nak serah kuasa)  Founder enjoy have a power over others (suka ada kuasa ke atas org lain), so making hard to step down(berundur)  Owner dah terbiasa responsible in their biz and feel most comfortable in a situa on where the owner has full control in their biz. 3. Loss of iden ty  Owner fear to loss their power  Sees the biz as part of their personal succes, so to let go the power to others they feel they loss of personal effec veness and poten al (dirasai sebagai kehilangan keberkesanan dan potensi peribadi) 4. Fear of Re rement  Owner tend to nega ve thinking if they do not have outside interest that could be developed in re rement (kepen ngan luar yang boleh dibangunkan semasa bersara)  Owner Lacks hobbies or interests outside of the business.  worried about losing self-esteem (hargadiri) and purpose. RESISTANCE TO SUCCESSION PLANNING - The Family (TANTANGAN TERHADAP PERANCANGAN PENGGANTIAN) 1. Spouse resistance to change (pnntgn psgn utk perubahan)  Spouse are difficult to encourage their husband move into re rement  Might be spouse also play many important roles in the biz  Spouse may also play a big role in the business.  Fears losing influence or importance if husband re res. 2. Family taboos (avoid biz discussion)  Many parents avoid talking about what will happen to the business a er they re re or pass away.  They fear discussing inheritance(harta pusaka) because it might seem like they are planning for their own death, which is uncomfortable. 3. Fear of parental death  If the succession plan is unclear, may create fights over who gets what. (siapa yg akan mndpt apa)  siblings may disagree on how the business should be run or who should be responsible  This can affect the comp if not manage the conflict properly RESISTANCE TO SUCCESSION PLANNING - The Employees (TANTANGAN TERHADAP PERANCANGAN PENGGANTIAN) 1. employee Resistance to New Leadership  Because this manager hv strong relay dgn owner so If the founder passes away or steps down, the manager struggles to adjust with the new owner's way of running the biz.  They also afraid losing their current job during process of change in the administra ve system 2. Fear of change  Employees fear fr new changes that made by successor in terms of biz policies and strategy  The changes in administra ve will lead employees low loyalty to the biz 3. Fear of differen a ng key managers  New management style may take me for employees to adjust. RESISTANCE TO SUCCESSION PLANNING - The environmental (TANTANGAN TERHADAP PERANCANGAN PENGGANTIAN) 1. Founder’s Friends S ll Working  the founder’s old colleagues/ friend con nue to work, making re rement feel unnecessary.(rasa re rement tdk prlu) 2. Client Dependence on Founder  Customers trust the founder and may not accept the successor.  Fear that business quality will decline. 3. Cultural Values Discourage Succession Planning  Society may not accept new ideas from the successor.  People prefer the business to run as it always has. 4 PHASES OF SUCCESSION 1. Ini a on (permulaan)  The ini a on phase is when children start learning about their fambiz, start from a young age.  Their experience during this phase can shape their interest or disinterest in joining the business in the future  How Parents Influence Their Children's Percep on  Nega ve Influence – If parents constantly complain about work, employees, or family conflicts, children may develop a bad impression of the business and want nothing to do with it.  Lack of Communica on – Some parents never talk about the business or show a hands- off a tude (sikap lps tgn), make children unaware (tdk sedari) that they are welcome to join the biz  Freedom of Choice – many parents avoid to pressure their child to join the biz can allow them to choose their own career..  How to Encourage Children to Join the Business  Show Passion for the Business – A posi ve a tude will make children more interested and curious about being part of it.  Gradual Involvement (pnglibatan scra beransuran) – Introducing children to the business through small roles or experiences can help them develop interest over me. 2. Selec on  Challenges in Choosing a Successor:  To decide the next leader can be difficult  Choosing one child may be seen as favori sm (pilih kasih), causing sibling conflicts.  Some owners avoid making a decision, leaving it for the children to think abt it later  Factors Owners Consider in Selec on:  Age – Older children may be preferred.  Gender – Some families may have tradi onal preferences.  Qualifica ons – Educa on and skills ma er.  Performance – A child who has shown capability in the business may be chosen.  Solu on: Use Job Descrip ons (JD)  Removes emo ons – Decisions are based on skills, not personal feelings.  Helps prepare the successor – They (successor) can get necessary training.  Sets future goals & obj tht have been developed by the whole family  Gives the founder confidence (founder blh re re w peace of mind cause they knw their biz is in good hand) – Knowing the business has a clear plan.  Addi onal Step:  If the business has a Board of Directors (BOD), their input can help make a fair decision. 3.Selec on  Training the Next Leader is Challenging  Parents may struggle to train their children as successors.  If needed, another experienced trainer within the firm can take over (trainer brpglmn dlm comp blh ambl alih)  Quali es of a Good Trainer;  Logical and structured in approach.  Commi ed to mentoring and development.  Credible (dipercayai) and respected within the organiza on.  Ac on-oriented and focused on results.   Effec ve Training Method: Training By Objec ves (TBO)  Trainer and successor set clear goals and melines together.  Defines what the trainee will do and how they will be evaluated.  Provides a structured, responsible role for the successor.(sediakan prnn trsusun and brtggjwb fr successor)  Importance of a well Defined Role for the Successor  Successor should enter with a specific job descrip on.  In small businesses, defining roles can be tough as employees o en handle mul ple tasks.  Key Criteria for Evalua ng a Successor  Decision-making skills.  Leadership abili es.  Risk-taking and problem-solving approach.  Interpersonal and communica on skills.  An excellent way to assess these skillls is to let the successor give his/her insight on a current problem or situa on (mmbiarkan successor bt nilaian trhdp mslh @ situasi smsa)  By doing tht can observe how successor think, strategize, and make decisions.  This is not a test, but a way to understand their problem-solving approach. 4. Transi on  Gradual Transfer of Responsibili es (pindhkan tgjwb scra brpringkat)  Start by delega ng small tasks to the successor.  Increase their decision-making power over me.  Ensure they gain hands-on experience in managing the business.  Announce a Clear Re rement Date  Once announced, do not take it back (canceling the re rement can create confusion and resistance (rintangan)).  Support & Guide, but Don’t Control  Act as a mentor, offering advice and guidance.  Allow the successor to make mistakes and learn.  Ensure a smooth and stable transi on for employees and customers. DEVELOPING A SUCCESSION STRATEGY INVOLVES SEVERAL IMPORTANT STEPS: 1. Understanding the contextual aspects  Time  start planning early to find the right successor.  Avoid last-minute decisions that may lead to poor replacements.  Types of venture  Some businesses are easy to replace leaders, others are not.  High-tech or rela onship-based businesses may struggle to find a good successor.  Simple businesses with less specialized skills are easier to transi on.  Capabili es of managers  The successor’s skills and abili es determine the company’s future.  As industries change, different skills (e.g., tech vs. marke ng) become important.  A knowledgeable (brpngthuan luas) leader with mul ple skills is more valuable.  Entrepreneur vision  The successor should align with the founder’s vision for growth.  If the company is struggling, a new vision may be needed.  Environmental factor  Changes in the business world may require a new leader.  A fresh perspec ve can help the company adapt and stay compe ve 2. Iden fying successor quali es  Knowledge of the business: They should understand the business, especially in areas like marke ng and finance.  Honesty and capability: Being trustworthy and capable of handling responsibili es.  Good health: Maintaining physical well-being to manage the work.  Energe c: Full of energy to work hard and take ac on.  Enthusiasm about the business: Passionate about growing and improving the business. 3. Understanding influencing forces  When choosing a successor for a business, consider these key points:  Family and business culture: Make sure the successor respects the family values and the business way of doing things.  Owner’s concerns: The current owner (founder) will likely have certain worries about the business’s future so the successor should align with the owner's vision for the business.  Family member concerns: The feelings and opinions of other family members involved in the business are important too. If the successor is a family member must consider how they will affect family rela onships and whether other family members are comfortable with this choice. 4. Carrying out the succession plan  Effec ve ways dealing with succession which consist of 4 important steps:  Iden fy a successor  The owner should choose a successor or at least define (tentukan)the quali es and experience needed.  The key ques on: Who is the best person to keep the business running?  The main focus should be on business survival and growth.  Groom on heir  Some founders openly choose a successor, while others keep it a secret.  If no formal training is given, valuable me is wasted, and the successor may not learn the job properly.  Agree on a plan  A clear succession plan ensures a smooth transi on.  In large companies: Mee ngs are held to ensure a proper transfer of leadership.  In small businesses: A detailed, direct discussion is needed on how responsibili es will shi (akan beralih)  Owners prefer successors who maintain the company’s vision rather than making dras c changes.  Consider outside help  Promoting from within is ideal, but it can sometimes be a mistake.  If the current leader is ineffective, promoting the next in line may not solve the problem.  Sometimes, an external expert is needed if no one in the company has the right skills.