Mediation’s Limits in Conflicts Arising in Family Business — Blair Trippe

As an experienced mediator, I believe that mediation should always be considered to remedy disputes. This is especially true when families are involved because mediation is less likely than litigation or continued animosity to destroy important relationships. In mediation, all parties have a voice at the table. In addition, because each individual is respected as the expert on his or her own particular situation, family members should be empowered to craft resolutions that work for them — which is what mediation is all about. If parties are helped to create their own solutions and if they accept only agreements that meet their interests, then those agreements will be durable and will improve the situation for all involved.

There are, however, clear limitations to the benefits of mediation when applied to conflict in family business. The mediation process, by definition, is a dispute resolution technique. It presumes that the dispute involves issues that lend themselves to negotiation. These are typically issues of money, power and specific instances of behavior. When the issues do not lend themselves to negotiation, mediation can actually set back the conflict management effort and do more harm than good. One cannot negotiate one’s values, beliefs, personalities, emotions and skill sets. Such issues — issues of identity — often lie at the heart of family business conflict.

Conflict or Dispute?

There is an important distinction between managing conflict and resolving disputes. Conflict in family business is systemic; it is built in to the very structure of the family business system. Individual stakeholders in the family business system often have multiple roles that pose internal conflicts of interest. Among groups of stakeholders, roles are often structurally conflicting. For example, a family shareholder in the business may expect distributions of income from the company profits. His or her sibling who is an executive with the business may be more inclined to prioritize high salaries, good perks and reinvestment for growth, instead of what a business executive might consider to be excessive distributions for non-contributing shareholders. A mediation that addresses one specific dispute arising from these systemic conflicts is at best chipping away at a much bigger conflict issue that the process cannot address in totality.

Mediation works best when the issues can be well articulated and are fixed in time. Conflicts in family business are not well bounded by circumstance because they typically involve many stakeholders whose issues are very intertwined and commingled. In addition, these issues are not static; they change as the family changes and develops. For example, if there is a seemingly isolated dispute about the size of the vice president’s bonus, mediation may be able to help. But consider a situation in which the vice president is the CEO’s youngest daughter. She believes that family members disregard her and views the low bonus as continued evidence that her father doesn’t value her contribution.

In this case, an attempt to determine a “fair” bonus amount through mediation will most likely fail. And even if a negotiation is successful, what if the CEO’s son takes the position that if his sister is getting a raise, he also deserves a raise? That could end up spreading, rather than resolving, the conflict. And what if the son’s wife sees her sister-inlaw’s new salary as a slap in the face to her husband and refuses to let her father-in-law into her house until her husband is treated “fairly”?

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