Conflict management as part of corporate governance in a family business undergoing transformation

Abstract

Introduction and the problem description. The success of a business depends on its ability to maintain stability while managing change in the face of internal and external factors. Although all organizations have some difficulties adapting to changing conditions, one type of them – the family-owned and managed businesses represents several unique issues and problems. The interdependance between ownership and management in these firms creates forces that tend to make executive and strategic decisions really challenging (Beckhard & Dyer 1983: 6). The oldest and most prevalent type of company organization is a family business. Family firms account for more than 70 percent of all businesses in several nations and are crucial to both worker employment and economic growth. Small, medium-sized, and big conglomerates that conduct business across numerous industries and nations all fall under the category of family firms. Some of the well-known family-owned companies are Volkswagen, FIAT, BMW, ALDI, Auchan, Roche, LVMH, IKEA, L'OREAL, Swatch. Families are prone to disagreements and conflict, which makes them the biggest threat to family enterprises. Managing disagreements is essential for the survival of the family as well as the business. Family members must have solid, organized commercial partnerships. Being brothers, sisters, or cousins may not be enough at times (Nassser 2014). About two-thirds to three-quarters of family businesses either collapse or are sold by the founder(s) during their own tenure. Only 5 to 15 percent continue into the third generation in the hands of the descendants of the founder(s) (Neubauer & Lank 1998: 66). Family members must continue to cooperate, they often have similar long-term goals, and they are members of multiple intersectoral systems at once, not just the one where the conflict occurred, so managing conflict in family enterprises takes unique consideration (Yin et al. 2012: 151). Managing conflicts is vital for the family businesses and requires sufficient practical instruments to overcome tensions between owners on the way to sucsess. Target of the Master Thesis. This paper aims to examine the implication of conflict among the company owners on the corporate governance of the family-owned company. The paper will indicate the challenges and barriers to effective company management in the times of a family conflict. It will combine literature study and empirical part, where it will focus on practical case to understand the tensions between owners during the company’s history, starting with the founder, followed by his two sons until the transformation – the transition of operational management from owners themselves to the employed CEO. Methodological approaches. The planned methodological approach of this paper is theoretical and empirical research. This paper will combine a comprehensive literature study of the state-of-the-art conflict management knowledge with an analysis of practical approaches to gathering valid and useful data, followed by the case study – an in-depth investigation of the family-owned company. It will be based on observations and deriving knowledge from actual experience. Case studies have been used frequently in research on business organizations. The entire set of steps required to conduct case study research are included in the case study approach. These tasks include designing a case study, collecting the study’s data, analyzing the data, and presenting and reporting the results (Yin et al. 2012: 152). Data will be gathered from observations and open-ended interviews with family owners, as well, as with key personnel and top managers of the company. Archival records and company documents, like newspaper articles, letters and reports, will be analyzed, as well. The majority of this data is probably qualitative. This research will be limited to one family-owned organization, therefore representing a holistic single case study approach. Summary of the expected results. First of all, this paper aims to present an overview of the state-of-the-art modern knowledge of understanding business family dynamics and family conflicts. Followed by the study of the examples of conflicts of family-owned companies from the industry, both – success and failure stories. It will seek practical recommendations for a conflict avoidance and resolution mechanisms. Possible application of the found tools will be investigated in the case study of the particular company. The expected outcome of the case study is analysis of the nature of a conflict, and its dynamics in the family-owned company during the time of transformation. Possible practical solutions – conflict avoiding and resolution tools will be studied and investigated. Evaluation of those tools may serve as a practical guideline for other companies in similar situations in the future.