Thursday, June 23, 2011

Management of Internal Conflicts in Family Businesses - A Prescription for a Breakdown of Communication, Trust and Respect

This article was written by Steven Wawra.

Editor’s Note: Author Mr. Wawra has been a mediator, arbitrator and settlement conference officer exclusively over the last decade with dispute resolution programs for various periods of time, including those administered by such agencies as county and federal courts, U.S. Postal Service, Financial Industry Regulatory Authority (formerly National Association of Securities Dealers), IVAMS and others. He also was an instructor for a period of time with University of California, Irvine, Extension in the Certificate Program in Conflict Management and the Use of Alternative Dispute Resolution, and has been a speaker on various topics in the field of alternative dispute resolution.

Some years before the difficulties in the family business arose, the family had started the business looking ahead with great anticipation to success and financial rewards. It benefited initially from a high energy of family spirit and talent. Spouses, parents, children and in-laws all contributed to the entrepreneurial effort. With clear communication and management rules of the road to guide the operations, the business could have developed and prospered.

Yet at some point relationships became strained and communication and respect broke down, and the break-down affected both the family relations and the on-going operation of the business. Because it involves both family and business issues, the family business presents one of the most intractable conflicts to sort out.

Let’s look at the dynamic of a family business dispute. Bitterness between family members running a business can develop for many reasons, and spin out of control. One brother works 12 hour days and the other brother or sister works little, yet both collect the same pay check, or have equal shares of company stock. The father may alienate one or more of the now grown children in the business with his authoritarian manner, which brings up the insensitivity the children felt to their needs in early life. The father on his part may feel the children do not appreciate the hard-driving, all-encompassing work ethic that was necessary to bring financial success to the family business, and why he should continue to be in control. The father gives preferential treatment in the running of the business to one son, which just opens up wounds of unfairness the other son felt while growing up. This feeling of unfairness may become more apparent as the discussion of succession planning proceeds. The reasons for feelings of unfairness, injustice or ingratitude are, of course, many, but the result is often that one family member stops communicating with another member, and this action sets off an equal response. Relationships between family members involved become strained and the whole family is affected – parents, children and grandchildren.

As a result of this family bitterness, the business suffers because business decisions are not made and deadlines are not met. The result of not acting to address the issues can be an end to the business, followed by a messy fight over the ownership of the assets, financial obligations in the winding-up, and often large legal bills and time in court. There are many examples over the years of family business conflicts which became very public, and we currently read in the press about the McCourts’ battle to own the Dodgers.

So how to approach the sorting out of a family feud before the business fails or the conflict lands in court. What is critical is that the family needs to understand that something needs to done and to take the steps to resolve it before the conflict becomes irreconcilable. The option of doing nothing and hope it gets better is very rarely a successful choice. The family members could struggle with it themselves and sometimes wisdom will prevail and measures will be taken to set the business on a good course. But beyond a correction by family members themselves, a third party can be introduced. Lawyers can be hired and can work together in a cooperative fashion to resolve the issues. However, if not successful, the conflict can end up in court.

Alternatively, a mediator can be asked to become involved to help to reestablish communication and trust, so that business issues can be addressed. There is a natural hesitancy to invite a third party mediator into the private dispute of a family, which understandably may feel uncomfortable about discussing or exposing the dispute. However, if the family cannot resolve it themselves, one of the least intrusive methods to resolve the dispute may be for the family to use a mediator, who is bound by confidentiality as part of the mediator’s code of ethics.

Unfortunately, most mediations occur after a lawsuit has been filed and after much cost in terms of financial and emotional stress on the parties. Aside from using mediation in this formal legal track, few people realize that the mediation process can be used to bring about an end to internal conflicts in family businesses long before any thought of filing a lawsuit occurs. Through this process at this stage, a de-escalation of the conflict can occur, communication can be reestablished and relationships and respect can be restored.

So how is this accomplished? The tools used in the mediation of formal court conflicts are available to use where there has been a breakdown of family communication and a damaging of relationships, which has so affected the family and business. Family members in conflict have gotten on a wrong track and they don’t know how to get off the track. That is where a mediator can help them rethink their positions and transform the conflict into dialogue and understanding.

Families have long ties, and the goal is to reconnect the ties and reestablish the relationship. First, the mediator sits down with each family member involved (and possibly any important other) and lets them talk – so the mediator can map out the conflict. This is not just a passive listening to the person telling their story, but an active questioning and encouragement to develop what is at the core of their dispute. This is the only way to get the emotional intensity of the true feelings of the person.

Part of the talk with each family member is to give constructive help on how to talk with each other so as not to continue the conflict. If one continues to attack and blame the other for the past, the track the conflict is on will continue with argument on argument. But if the nature of the conversation is altered to tell how things have affected you – what it felt like to you – when this or that occurred, the other person cannot argue with you. You are not attacking or blaming, you are stating how something affected you.

Once separate meetings have taken place with each family member, all family members in conflict are brought together to talk with each other with the mediator. The unfairness, injustice or ingratitude felt by family members is discussed at length. Each can tell how the other affected him or her with the intensity each felt. Before starting all involved agree to rules – treat each other in a respectful way, with no blaming or attacking. Each person is asked to really listen to the other, and if agreed at the beginning, to repeat the essence of what the other said. This tells a party that he or she is being heard and trust starts to develop as a result.

An environment of sharing is created, with each being empowered to tell his or her story in full detail. This is really the first time a conversation can start to take place. As this occurs, eventually the emotionality of it all decreases and a change starts to take place. The perceptions that were formed about the other which inflamed the conflict are seen in a new light and each starts to learn about how the other saw it and was affected.

This process can take anywhere from a few hours to days. As a result, a reconnection can be made, in either the reestablishment of the old relationship again or just an understanding of, as they say, “where you are coming from”. In either case, the important element of communication is re-established, which is good for the family and also will allow business decisions to be made.

Rules for better operation of the business can be agreed upon and family members can pledge to talk to each other with respect and to call the other if a problem comes up. An arrangement can be made to call in a mediator to help talk it out if desired. What was a family business in danger of failing because of the failure of communication can now be restored to full vitality.

QR Codes – One More Marketing Tool

imageThis article was written by Barry McKinley, SCORE Orange County Management Counselor

You almost can’t go anywhere without seeing QR codes (Quick Response). They are very common in Japan where they were created by a Toyota subsidiary in 1994. The code consists of black modules arranged in a square pattern on a white background. The information encoded can be text, URL or other data. The QR code is rapidly becoming one of the most popular types of two-dimensional barcodes. It is been designed to be read by Smart Camera Phones or barcode readers. The user merely points their smart phone and scans the code and they are launched into the virtual world. The use of QR codes is free of any license. The QR code is clearly defined and published as an ISO Standard. Denso Wave owns the patent rights on QR codes, but has chosen not to exercise them.

The uses of QR codes in business are endless. You will see their application in magazines, newspapers and used in 1,000’s of others marketing and information tools.


Recently the Pet Shop Boys used QR codes for the artwork of their download-only single release.


Authors are incorporating the QR codes into a new genre called devise literature, writers and publishers are using the graphics to create a bridge between printed and electronic media. A new version of Around the World in 80 Days uses QR codes to provide the readers quick access to the audio versions of the book chapters and to Google Maps. U.S. libraries have begun adopting QR codes as a method of delivering information to patrons via their mobile devices.


QR codes have been used in Japanese cemeteries on grave markers as a way to share additional information and unite mourners. In the U.S. QR codes are being etched into medallions to allow the mourners to get images and video regarding the deceased.


The application is endless! You can place QR codes on business cards, your company literature, signs, point-of-purchase displays, in-store displays, tablets, napkins and buses. You can place them on a display of products that then takes the users to a site about the product, features and perhaps pricing. Other applications might be direct mail, websites, email marketing, trade shows, and even billboards. QR codes can drive customers to your Face Book and even YouTube. You can go to nearly any Real Estate Section of most newspapers and you will see QR codes helping to sell houses.


The QR codes can become one more tool in your sales and marketing bag. For effective results you need to tie together all your tools from your printed literature, web site, social networks, You Tubes and of course the newest technology QR codes. For more information you can go directly to the inventors web site;

Customer Service is not for Sissies!

imageThis article was written by Jerry Margolin, SCORE Orange County Management Counselor

There is a tendency in the market place to put “new hires,” or the lowest paid personnel in places of trust such as Customer Service, the switch board, (if you are fortunate enough to have one) and other important places. Your Customer Service Department is not for the faint of heart or your newest employee. The people responsible for dealing with the public must be trained and allowed to make decisions dependent on the length of time they have been employed. There must be some leeway to make those decisions, while speaking both for the client and the customer. A trained employee capable of making decisions is a must if you consider your company to be a quality operation. Customer Service is not a training ground. The employee should be allowed to be a decision maker within reason, an experienced employee, and have a positive attitude, be easily likable, and someone who has been with the company for a long time. He/she will be making decisions as to refunds, future discounts for appeasement, etc., while also making decisions handling problems. It should never be left for a new employee unless their experience is lengthy and tested.

Often customers are angry, the product has been shipped later than expected, mishandled, or some mistake has been made. It takes a strong, pleasant, likable personality to handle the job. Sometimes, the problem is something that the customer caused, and either doesn’t know or doesn’t care. How you handle the situation determines whether they will return or not.

The truth is that Customer Service can make or break a company. It’s how you react that your customer determines whether your company is “customer oriented,” rather than just another place to purchase goods. Did you show concern, or did you argue? Placing the blame with the customer may save you money, but it costs you in the long term. When something goes wrong you have an opportunity to shine . Customer Service personnel should always like people, and be sympathetic to their problems. Sometimes they are right, and sometimes they are wrong, but they are always the customer. One of the most important things that you can do is to remain calm, and perhaps offer a compromise, such as a discount on a future purchase, or at least something which makes him/her feel they got something positive for their time. If the customer continues to be upset and you can’t do anything, you will have to determine whether you should make a final offer, or that that particular customer is someone that is not salvageable. Always remain sympathetic. You can’t win them all, but this method is a lot more effective than “Sorry; you’re a day past warranty”.

Jump Start Your Business

From , reprinted by permission

Starting a business is one of the most exciting–and terrifying–moments in a person’s life. It is that time when the stars align just so and you get to venture off in a new direction, doing something you love, maybe something you have always dreamed of, and being your own boss.

What makes the moment even more intense is that you typically have a lot on the line. Risks have been taken. Money may have been borrowed. Reputations are at stake. It’s no wonder then that, aside from the exciting adrenaline rush of the moment, intense stress is the other over-arching emotion at play.

Is there some way then to make sure the risk pays off? Indeed there is. More on that in a moment.

The final reason that makes being part of a startup so unique is that it is all so new. Unless you are a serial entrepreneur, this starting a business stuff is not something most people do more than once or maybe twice in a life, and it’s that very first time that is the most frightening of all:

§ How do you wear all of those hats?

§ Where do you find customers?

§ How will you pay the bills?

So yes, while being part of a startup is fun, interesting and exciting, it is also fraught with danger. Being part of a startup is a high-wire act, and usually one without much of a net below. One false move, one big mistake, and down you plunge.

Want some more startup advice? Check these out:

§ Mentor Whiplash: What It Is And Why Your Startup Needs It

§ How To Find And Select Investors For Your Startup

§ Bootstrapping Your Business: An OPEN Forum Guide

So what is that thing that you can do to ease the stress and help ensure that you get to pass Go and collect $200? It is as simple as it is ingenious. “Have a great location” you say? Come on. No, that’s not it. “Get sufficient funding?” Close.

No, the secret is this:  Have a customer before you start, as James Altucher explained in this great post on Business Insider.

Think about it. One of the hardest parts of any new venture is getting that first customer, that first deal, the first dollar in the door. I have an uncle who likes to say that business is, with all due respect to Forrest Gump, like a jar of pickles. When you get a new jar, the pickles are all jammed in there, right? Getting the first one out is hard. But then what? All of the other pickles come out easily.

You have to get the first pickle out of the jar.

That’s why it’s so smart to do everything you can to start your new business with at least one customer in place. It may be a client from your old firm, or the business that you used to work for, or a friend. Whatever the case, by starting with at least one customer in place, you accomplish several important goals all at once:

§ You can tell potential customers and clients about your existing client. You won’t look quite so green.

§ You will entice more business; most people would rather not be your first customer.

§ You will have a source of income, albeit probably a small one.

§ You will get a chance to learn how to run your business.

§ You will gain confidence.

The upshot of all of this is that while there is a lot to think about and do–when you start a business, there are few things more important than landing that first customer as soon as you can, before you open the doors even.

Doing so will erase a lot of the panicky feelings mentioned above and, even more importantly, pave the way for a lot more pickles to come out of the jar.

Management Philosophies to Ponder

imageThis article was written by Joe Di Stanislao, SCORE Orange County Management Counselor

If you think management of your business is floundering, you find yourself having difficulty leading your workers, and you’re unable to grow, here are some time-tested truths to remember:

1. Activities mean nothing without results

2. It’s not how much you do, but what you do and how you do it that counts

3. Accuracy first, then momentum

4. Become market driven, rather than product driven

5. There’s no point in doing something well, that you shouldn’t be doing in the first place

6. Your ability to think strategically, plan comprehensively, and implement intensely will directly determine the caliber of your success and achievement

7. Develop, understand and implement the process, the document and the strategy

8. The objective is to influence, not to impress

9. Become alert to the difference between effectiveness versus efficiency

10. An accurate plan, regardless of how poorly it may be executed, is more effective that a vague plan which has been carried out with brilliant precision

11. Everything involves people, personalities, and behavior

12. Things don’t fail, people fail

13. An idea does not care who has it

Growing the Franchise

imageThis article was written by Betty Otte, SCORE Orange County Management Counselor

(Editor’s Note: This is the third in a series of articles on franchising by Ms. Otte. If you missed the prior two parts, you may access them in the newsletter archives under the “franchise” heading.)

When most of us think about franchises, we are referring to the business based franchise like the top 500 franchises published in Entrepreneur magazine each year. Entrepreneur’s 75 different categories range from automotive to services, but they all have one thing in common – a systematic method to deliver services or products.

You, the franchisee, have supported this system with your royalties and initial purchase price and now will be one of your biggest assets as you decide to grow your business.

Since the systems for the franchise are already in place, your biggest concerns as you grow your business are:

· Finances – having sufficient capital and assets

· Location – for many businesses, location is critical

· Employee training

· Culture transition

Employee Training and Culture Transition

You have worked the business in the first franchise location, so those employees have translated your style into their work habits. They have seen by example how to handle a customer. To expand, you are required to hire people who will accept your style and be able to train other employees in that culture without your presence. Turnover of employees is expensive and time consuming. Finding the right managers who can translate your wishes should be high on your priority list before taking on that second location.

How will your role change? Will you still manage the first location with a manager in the second, or will you try to manage both? Trying to be in two places at once is difficult if not impossible. Will you put a manager in each location and personally tackle marketing and public relations? Can you relinquish control? It may be harder to do than you think.

Due Diligence

Be sure you exercise due diligence and investigate the following before you decide to expand:

· Figure out why the franchisee is selling. If it’s because the franchise is not successful, you need to figure out why. Lack of motivation or self discipline, poor territory, inability to keep employees, there could and will be many reasons. You have the advantage of knowing the system so it is easier to differentiate perception from reality.

· Protect yourself from liabilities. You will want to do a net asset sale to protect yourself from liabilities connected to the present owner with an indemnification clause. Even though he or she may have given you many reasons why they want to sell, you may never know the true reason, so make sure to protect yourself from any outstanding legal actions.

· Check financial statements. It is mandatory to check out the owners financial statements for 5 years or as long as they have been in business. What has the growth pattern been over this time period? Look at the sales tax returns and the income tax returns. It is easier to determine accounts payable, but equally important, in some businesses, is the accounts receivable. Often last minutes games are played with receivables.

· Can you assume an existing lease? It is important to check with the landlord if you are taking on an existing location. Many resources are available online to define due diligence requirements for the purchase of a business. Read one from SCORE.

· Right of first refusal. In many franchise agreements, the franchisor has the right of first refusal. That means if the existing franchisee has someone who is willing to purchase the business, the franchisor has the first right to come in and make the purchase at that price.

How to Grow the Franchise

· Purchasing another territory. One way to expand is to purchase a territory from another franchisee. The same due diligence must take place here, however, as with the purchase of any business.

· Purchase more territory or locations directly. Exercising this option means you will adhere to the same requirements published in the Franchise Disclosure Document (FDD) for the given year. FDD’s need to be renewed each year within the state of the sale. California and New York are states with the strictest requirements.

In many ways, growing a franchise is easier than growing an independent business. Take advantage of the network of other franchisees in the system. You all share a common goal and work within a given framework. Call them for marketing, PR and management tips.

Multiple unit management is a very difference challenge but it comes with many rewards. You, the owner, will change what you do, but your philosophy will double and triple with each new growth step. Make it the fan that it really can be. Remember that SCORE has over 12,400 volunteers ready to help mentor you, many of whom have franchise experience. Seek help from your nearest SCORE office or online counselor. SCORE counseling is always free and confidential.