How to Prevent Conflict Among Family Members in a Family-held Business


Seminar Paper, 2018

10 Pages, Grade: 1


Excerpt

Table of Contents

Abstract

Introduction

Dispute Cases of Family held Businesses
The Case of Real Estate in the Silicon Valley
The Case of Seaside Villa in Southern California

Conflict Prevention Strategies

Conclusion

References

Abstract

Management of family held business presents enormous challenges, owing to the presence of conflicts among family members. This hinders progress of the business and cause family tension, which may lead to adverse consequences. In most cases, disputes over family businesses are addressed through litigation. However, courts do not provide opportunities for healing and reconciliation. If that is the case, then the principal question we should ask is ‘how can we prevent conflict among family members in a family held business using management approaches?’

To discuss these issues, two cases will be presented in which the impact of disputes among family members will be substantiated as reported by Ray Folberg. These cases are the case of real estate in the Silicon Valley and the case of seaside villa in southern California.

Introduction

In the real world, management skills enable different people to provide solutions to many issues related to management. A knowledgeable management expert seeks to the prevention of conflict, especially in entrepreneurship. However, management of family held business presents immense challenges to managers and legal experts, as well. This aspect was reaffirmed by Jay Folberg, a legal expert who remarked “of all of the cases I have mediated over the past thirty years, the most challenging and rewarding disputes have been those between family members over family property, estates, trusts and businesses” (Folberg, 2009 par. 1). In most cases, the management of family held businesses cause disputes among family members owing to divergent expectations, misunderstanding of intent and conflicting feelings. This scenario advances to an intra-family lawsuit in the effort of solving conflicts. Despite the advantages of litigation in solving family conflicts over family held businesses, courts do not seem to provide appropriate healing and reconciliation. Folberg (2009) states “courts are limited in the remedies they can impose and frame family disputes in legal terms inhibit the parties’ ability to invert or accept creative solutions” (par. 2). It is also worth noting that, “most businesses have an informal management style… every family business is unique and complex in its own way, so boiler plate solutions do not always work” (Brown, 2011 par. 3). If that is the case, then how can we prevent conflict among family members in a family held business using management approaches? This research paper will attempt to provide answers to the above question by discussing several strategies, through which conflicts among family members in a family held business can be prevented. In addition, it will present two case scenarios which explain the consequences of conflicts in a family held business.

Dispute Cases of Family held Businesses

In explaining the scope of conflict in family held businesses, two cases reported by Ray Folberg, the former Dean of the School of Law, University of San Francisco will be discussed as examples. These cases present the impact of conflict among family members in a family held business.

The Case of Real Estate in the Silicon Valley

This dispute involved two brothers, Sid and Sam who managed strip malls and apartment houses in Sunnyvale after they acquired the property from an old couple who did not have adequate knowledge to develop the property. As Folberg reports, these brothers developed the property successfully until it became a highly rewarding venture. Despite the progress in their jointly-owned property, their interests in the business seemed to take divergent perspectives. Folberg reports that, Sam who was the older brother wished to ‘conservatively manage the appreciated properties’, in order to pass it over to his children as an inheritance. In contrast, his brother, Sid held a different management approach into the business. He wanted to “leverage the properties with new developments to create greater value in a vibrant market” (Folberg, 2009 par. 4). As a result, Sid took an advanced step to counter his brother’s conservatism in the business by creating liens on the estate after mortgaging his shares without consulting Sam. In his view, mortgaging his share of the property was an appropriate move to although Sam viewed it as a significant threat to his financial security. Consequently, Sam filed a lawsuit over the property in which mediation served as the principal approach of solving the conflict (Folberg, 2009).

The Case of Seaside Villa in Southern California

This case involved three siblings, Jack, Bob and Ann, who inherited a family property from their grandfather. Bob sold his one-third to Jack and left the property to Jack and Ann, their elder sister. Therefore, Jack and Ann were to manage the villa equally although Ann did not have adequate financial resources compared to his brother Jack, despite her profession as a college professor in business management. Later on, Jack and Ann disagreed over the management of the villa, in which Jack wanted to undertake remodeling of the property while Ann held Jack’s attitudes with mistrust, resulting into a property dispute which was solved through mediation (Folberg, 2009).

Conflict Prevention Strategies

It has become evident that, family held businesses encompass disputes which require appropriate mediation to enhance profitability of the business and family cohesion. However, it appears relevant to seek for management strategies, which can prevent the occurrence of disputes among family members in a family held business before rift lines develop. This is so because, conflicts arising from family property may cause irreparable damage to the business and the family involved, altogether. In reality, disputes among family members, especially on family business do not receive appropriate solutions in the public domain. Courts are believed to offer superficial solutions to such disputes, whereas healing and reconciliation within the family remain unsolved, and this creates wide rifts in the concerned family (Ross, 2003). Therefore, appropriate measures are required in preventing conflicts among members in a family held business.

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Excerpt out of 10 pages

Details

Title
How to Prevent Conflict Among Family Members in a Family-held Business
Grade
1
Author
Year
2018
Pages
10
Catalog Number
V429724
ISBN (eBook)
9783668733459
File size
504 KB
Language
English
Tags
prevent, conflict, among, family, members, family-held, business
Quote paper
Caroline Mutuku (Author), 2018, How to Prevent Conflict Among Family Members in a Family-held Business, Munich, GRIN Verlag, https://www.grin.com/document/429724

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