The Importance of Mediation in Family Business Management

Managing a business can be difficult enough—but when your in-laws are the board of directors and your sister is the CEO, management of a family business can also become a contentious issue. Problems related to leadership and ownership of family businesses arise in a variety of situations. Sometimes there is a power struggle, other times people feel they have been treated unfairly or do not get enough of a say in the company. While some family businesses are able to resolve these problems on their own, less than 3% survive past the second generation. One reason for such a high failure rate is that management issues are often compounded with family problems like a lack of communication or trust. This family acrimony is so pervasive that it is responsible for the failure of over 60% of family businesses. The obvious question is: Why aren’t family businesses fixing the problem?

The truth is that failing to account for family dynamics in a family business is a business mistake. Just like relying on a handshake or putting all your eggs in one basket, if you do not take the proper precautions, it will ruin your business. Most business owners readily hire accountants, lawyers, finance advisors and insurance professionals to protect themselves from making business mistakes. However, while most business schools teach people the importance of hiring a lawyer, they won’t give a class about what to do when your son gets upset because you promoted his younger sibling. This problem requires a different professional: a mediator!. Addressing the personalities, egos, feelings and entitlements of family members requires expertise and preventative medicine. The shockingly large number of family business failures demonstrates that hoping people will go with the flow and get along is not enough. Family dynamics must be thought of as a problem to be solved; and the solution is a mediation professional.

                       

Joseph Berljawsky

Joseph Berljawsky holds Bachelors and Masters Degrees in Social Work as well as Common and Civil Law from McGill University. He currently works for the Ontario and Quebec law firm MAIN DROIT Inc., which handles business law and mediation for local and international family corporations. MORE >