Family Business Enterprise
A 14-person multi-generational family divided by geography into three family units owned twelve commercial properties in the Chicago area. These properties included a factory, a warehouse, a Chinese restaurant, a bagel shop, an apartment building, an office building, and a strip mall.
The gradual and reluctant transfer of authority from the older to the middle generation led to increased anxiety and insecurity among many family members. They also debated how to initiate and introduce the youngest generation into taking on some entry-level responsibilities such as property inspections, reviewing income expense sheets, and learning about procurement.
The family hired us to facilitate the issues that created conflict among the three family units.
Issues and Goals
A triangle of psychological, substantive, and procedural issues often applies to family enterprise situations. This triangle provides a useful framework for examining common issues that arise in conflict resolution. However, in dynamics like this, it’s important to note that these three “sides” of the triangle seldom stand alone. Each of these three issues tends to have elements of the others intermingled within it.
For example, this family was in conflict about how to develop a plan of succession from the older generation to the next, which was a psychological issue with procedural underpinnings. The family also disagreed about whether and how to form a single business entity that would distribute the authority among the three family groups–a substantive issue. Communication and collaboration had broken down among the family members, which is a procedural issue with psychological underpinnings.
To complicate things, most of the relatives within this larger family unit were unwilling to talk business with family members outside of their respective smaller geographically based unit. The entire family worked with a Chicago area law firm. However, this firm was perceived by two of the three family units as “in the pocket” of the family unit who lived there, and therefore biased toward their wishes. This perception caused the other two family units to hire their own separate law firms based in the areas where they lived.
The primary goals of this facilitation were:
- To reestablish communication and a willingness to collaborate among the family members
- To develop a succession plan, and
- To create a single business entity to re-balance the power and income among the three geographic family units.
Secondary goals included:
- To agree upon a reasonable leasing commission for a Chicago-based family member who managed the commercial properties there,
- To receive more frequent reports and accounting from that family member, and
- To resolve some remaining estate issues arising from the death of a family business patriarch years earlier.
We began this conflict resolution and collaborative learning process by conducting assessment interviews with the family members. Next, we circulated a report summarizing the main issues, tensions, and opportunities we identified in those interviews.
We then worked to identify and build conversations structured around:
- Financial reporting and accounting
- Commercial property management and investment matters
- Estate planning issues, and
- Relationship and communications issues
We did this by searching for compelling and/or unifying family symbols, stories, and artifacts. For example, we found and showed an old video featuring the family patriarch to the entire family. We also did an informal market study of standard leasing commissions to help the family members agree upon the ideal leasing commission amount to pay to the Chicago family member who managed leasing operations.
Despite the number of parties, their geographic and emotional distance from each other, and the level of conflict between them, we were able to help the family come to agreement on several important issues:
- Resolution of long-standing estate and deed transfer issues related to the estate of the senior generation’s patriarch.
- General agreement on the use of a limited liability company, along with specific agreements on major business, accounting, and legal issues concerning the allocation of authority between family members.
- An outline of an agreement for regular communication and reports between the family member appointed as the commercial property manager and the rest of the family.
- An agreement establishing quarterly phone calls and annual meetings between the three family units.