Conflicts and crises in a family enterprise – a model approach

Abstract

This paper presents the author's model of the occurrence of crises and conflicts in family enterprises in the context of the family enterprise life cycle, taking into account its components: enterprise, family and individuals.

Full text

Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2, (ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.),
Łódź-Sinaloa, p. 161-175.
Ewa Więcek-Janka
Poland, Poznan University of Technology
ewa.wiecek-janka@put.poznan.pl
Conflicts and crises in a family enterprise – a model approach
Summary: This paper presents the author's model of the occurrence of crises and conflicts in family
enterprises in the context of the family enterprise life cycle, taking into account its components: enter-
prise, family and individuals.
Keywords: family business, conflicts, crises.
1. Introduction
In Poland, there is a multitude of family enterprises (60% of all businesses), which enables carrying
out research in many areas. A popular theme in recent years is the issue of succession and the accom-
panying processes. Many researchers (Safin in 2007, O'Boyle, Rutherford Jr, Pollack 2010; Hadryś
2011; Popczyk 2011; Bieńkowska 2011; Grześ 2011; Gołaczewska-Cob in 2012; Niemczewska 2012,
Woody 2012) emphasize however, the determining influence of human resources management at the
interface between business and family. According to the author, particularly important for the success-
ful succession are crises and conflicts occurring in a family enterprise, which she understands as the
trigonal market organism, consisting of a family, enterprise and an individual, which operates with
different but mutually adapted goals, and in its realization, it uses its energy in the long multigenera-
tional perspective through the management and control of its activity and property.
2. Presentation of a model
Analysis of the collected research material about crises and conflicts in a life cycle of individuals,
families and enterprises in years 2011-2013 enabled the author to create a general model describing
mutual relationship between crises and conflicts in family enterprises.
The essence of the model is the association between crises understood as actions, in which it is neces-
sary to make difficult decision under pressure of time, and conflicts, which are connected with occur-
rence of contradicting interests or goals and as a consequence the inability to realize these goals by
one of the parties. Both the crises and conflicts decrease the efficiency of every company, but the fam-
ily character of an enterprise causes the accumulation of the potentially negative effects of their occur-
rence (see fig. 1).

!
Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2(ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.), Łódź-
Sinaloa, p. 161-175.
!
Glo bal
Organizational
Family
Indiv id ual
Inter5group
Intra5grou p
Intrape rsona l
Interpe rson al
CRISES CONFLICTS
External )unrelated)e nvironment
External) related)environm ent
Interna l)environment
Family5business
culture
Indiv id uals
in@management
Owners
Family
Life@cycle@s tage
Glo bal@policy
Business@trends
Market@deve lopm ent
Local@policy
Customers
Competitio n
Cooperants
Legal@institutions
Financial@institutions
Tec hno logy@
development
Fig. 1. Theoretical model of conflicts and crises in a family enterprise Source: Więcek-Janka 2013.
The core of the model is placing the family enterprise in the external environment, which is divided
into environment related and not related to a family business.
A related external environment, determines the occurrence of relationships that have been initiated and
accepted by the family business. These are most often business partners, customers, competitors, legal
and financial institutions. The unrelated external environment is such, in which the company is pre-
sent, but does not have a direct impact on its formation; it can be a global and local politics, technolo-
gy development or trends in the industry.
A key element of emerging crises and conflicts is the internal environment, which consists of family-
business culture, authority, property, influence of the family and the life cycle stage. Micro and small
enterprises, which are predominately family businesses or potential family businesses, are also par-
ticularly vulnerable to the global crises, which belong to the external environment not directly related
to the company, for example the global financial and economic policy. The years 2009-2012 show
how strong is the influence of crises in the United States and the European Union on the functioning
on local and national markets. Moving the production of a car brand Fiat Panda from Poland to Italy
resulted in a crisis in hundreds of small entities cooperating with a factory in Tychy. Another example
is the tightening of requirements for companies when applying for EU grants or investment loans. Great
impact is also made by natural crises occurring on a smaller scale, such as natural disasters, floods,
droughts, hurricanes, etc. Their presence has led to the bankruptcy of many family undertakings and
deteriorated economic conditions in many regions of Poland.
The presented model shows the impact of developed mechanisms on the crises, both related to the
course of the family business life cycle, and resulting from the external environment. Lack of harmony

Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2, (ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.),
Łódź-Sinaloa, p. 161-175.
in the internal environment can cause crisis that would destabilize its components, and as a result will
lead to trouble situations. Worked out conflicts can enable the development of new regulatory mecha-
nisms that lead to even further stabilization. The process stabilization-crisis-destabilization-conflict-
solution-stabilization is repeated cyclically when there are changes in the external or internal environ-
ment of a family business. If a change is considered necessary for the development of an enterprises,
then the crisis should be considered its component.
Taking into account the possibility of a crisis occurrence requires from companies changing and un-
dertaking new challenges and tasks. Sometimes, however, instead of attitudes focused at finding solu-
tions different than those that have become routine, crises situations trigger in the individuals a cau-
tious attitude, resignation, frustration and critical thinking. Therefore, the crisis should be seen as chal-
lenges for teams and individuals which can use their resources of knowledge and skills to increase
their own value and the value of the company.
Every company encounter conjunctural crises, crises of over-production (supply-side), and lack of
demand. In the family business life cycle in every generation there are crises associated with adjust-
ment of management to the personality of the owner and other family members and employees.
Choosing the management style by a successor is always associated with the risk of clashes and con-
flicts, just as the development of autonomy in decision-making and their market verification. Often
properly functioning business sphere is subjected to increased control and bureaucracy, which signifi-
cantly reduces creativity and the freedom of generating ideas, locking them into the developed, often
rigid, procedures. It leads to a crisis of authority and the need for succession (Stefańska 2011, Lewan-
dowska, Hadryś-Nowak 2012). The crisis of succession concerns two aspects of "readiness": of suc-
cessor, to take over the company and of current owners, to accept a new vision of the family business.
The combination of these variables gives four possibilities of conflicts occurrence, as shown in Figure
2.
Intrape rsonal+conflicts+occur+
resulting+from+successor ’s+
reluctance+to+submit+individual+
goals+to+com pany+g oals,+
resulting+in+long8ter m+
implementation+or+leaving+the+
company.
Conflicts +on+the+ground+of+new+
success or+being+to+for ced+to+
submit+to+a+previous+owner+and+
the+overwhelming+reluc tance+of+
success or+to+take+over+the+
company,+resulting+in+the+
resignation.
No+confli ct.+Successi on+plan+
carried+out+through+a+proper+
selection+and+p repara tion+to+a+
new+role.+Company+has+a+
secure d+contin uity.
Pojawiaj ą+się+konflikty+
wynikające+z+próby+
zdominowan ia+działań+przez+
poprzedniego+właściciela+
skutkujące+od ejściem+sukces ora+
lub+jego+podporządkowa niem
Readiness+to+
take+over+the+
company+by+
the+successor
Lack+of+readiness+to+
accept+a+new+vision+of+a+
successor
Readiness+to+accept+a+
new+vision+of+a+successor
Lack+of+
readiness+to+
take+over+the+
company+by+
the+successor

!
Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2(ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.), Łódź-
Sinaloa, p. 161-175.
!
Fig. 2. Matrix of conflicts resulting from the succession process (Sułkowski, Marjański 2001, p. 91)
Crises in a family are associated with its lifecycle and realization of its goals. The most commonly
mentioned, both in literature and by the surveyed (see Safin 2007, Surdej, Wach 2010; Sułkowski
2012; Marjański 2012) is the engagement crisis. It is related to companies functioning in first genera-
tion and results from the necessity to share time and energy between business and family life. The
choice between “spending time with children and providing them with basic living conditions” is as-
sessed as the hardest. Many family enterprises at this stage (3-8 years of functioning) end their activi-
ty, because in such situation the family roles often contradict the business roles.
In the survey carried out by the author (2011-2013) respondents indicated the importance of owners’
behavior toward their children employed in the company. Too high expectations and rigorous evalua-
tion can discourage successor to work in the family business. Lenient treatment may produce similar
effects. It is important to keep the attitude toward children balanced, so that they wanted to be succes-
sors of their parents business and at the same time were motivated to expand their knowledge and
skills necessary to manage the company in future. Education of children and their development is the
goal set by a family. Very often however this is connected with them leaving their homes, which causes
the parents uncertainty about the future of the company and the family. The empty nest crisis causes
discouragement of the owners; they begin to question the sense of running a business. Surviving such
crises leads to the acceptance of the process of succession, the development of its plan and ensuring
the future of its current owners.
Individual crises are associated with requirements set to individuals by their families, and the atmos-
phere at home accompanying that process. Setting goals and educating the children in harmony with
the development of the company and family allows to minimize the identity crisis, which they experi-
ence wondering who they are and what is expected of them. Family gives a reference point for the
values and standards which, if consistent with the environment, minimize the impact of the isolation
crisis typical for early adolescence period and associated with the choice a life path, building a rela-
tionship with a future partner and career planning (see Khanin, Turel, Mahto 2012).
For members of a business family, a middle life crisis is associated with a participation in the process
of succession. It results from attempts to deal with a new situation by the successor or his subordi-
nates. Both these parties can provoke a conflict.

Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2, (ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.),
Łódź-Sinaloa, p. 161-175.
C.Ż.$Fir my
Introducti
on Grow th Early$
maturity
Late$
maturity Decline Death
Grow th Early$maturity
Parents$with$small$
childr en
Parents$wi th$
young$children
Parents$and$
independent$
children
Preparing$for$
retirement Succession
Parents$with$small$
childr en
Parents$with$
young$children
Adolescence
Childho
od Adulthood Old$age
Childhood Adolescence
Compa
ny(l ife(
cycle
Individuals(life(
cycle Family(life(
cycle
Crises$
in$CLC
Leadership Autonomy Contr ol Procedures Succession
Crises$in$
FLC
Crises$in$
ILC
Identity Isolation Middle$life
Empty$nest
Stagnation
ExclusionCommitment Role$conflict
Fig. 3. A one-generation life cycle of a system company-family-individual covering crises of each subsystem
From the perspective of the family goals, accepted and pursued by its members, we should take into
account the interference of crises of each subsystem with others, which can result in a negative syner-
gy effect and trigger the conflict. Figure 3 shows the phases of the life cycles of the family business,
families and individuals along with the crises accompanying their course. We can see a certain pattern
of crises overlapping in the three studied areas, which imply the formation of conflicts.
The model includes four groups of conflicts related to the operation of family business: intrapersonal,
interpersonal, intra-group (family) and inter-group. The intrapersonal conflicts occur when, for example,
someone has to give up their personal value system (choice between goals that cannot be achieved togeth-
er), in a situation where they have to choose a so called lesser evil, or in case of cognitive dissonance
(when choosing a behavior incompatible with their beliefs). People with a tendency to experience too
deep and too frequent internal conflicts have more difficulty than others in the family and work envi-
ronment; they often engage in interpersonal conflicts and cause more problems in their solving
(Więcek-Janka 2006a). Dabrowski (1979, p.4) treats internal conflicts as an essential element in creat-
ing a hierarchy of individual values and the multilevel internal psychological environment, as well as
in creating a specific individual or social ideal. For this reason, individuals with tendencies to internal
conflicts, later carried out to outside world, may be considered sensitive and focused on development.
Lewin (1958) introduced a vector theory of an intrapersonal conflict, which main factor is usually the
presence of two motives affecting an individual, that cannot be fulfilled, or are inherently contradicto-

!
Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2(ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.), Łódź-
Sinaloa, p. 161-175.
!
ry, because they use limited resources. He distinguished the conflicts of different emotional coloring,
involving positive and negative themes. Positive bring contentment, joy and satisfaction, negative -
disappointment, sadness, etc. He considered to be the most difficult the conflicts resulting from the
collision of two positive motives associated with a solution of a conflict, such as what to devote more
time to: career or family? Choosing the "lesser evil" was assigned to the collision of two negative
themes, such as the need to choose one of two business partners, none of which fully corresponds with
the expectations. Another example of the application of Lewin's theory is a successive process. We
encounter it, when in the early stages there is a positive factor, but the consequence of taken actions
will be a negative result. This can be illustrated with an example of poorly invested funds from an
investment loan that must be repaid with interest. The opposite situation occurs when the initial sacri-
fices of family, economical use of resources will ensure the survival and development on the market.
Interpersonal conflicts most often arise between two people. Involvement of more people in a conflict
should be understood as an intra-group conflict. In family enterprises we can observe many potential con-
flict situations, and usually they take place between:
− Family members,
− Employees,
− a family employee and a non-family employee,
− a family employee and a family supervisor,
− a family employee and a non-family supervisor,
− a non-family employee and a family supervisor,
− a non-family employee and a non-family supervisor,
− family managers,
− non-family managers,
− family manager and non-family manager.
These conflicts can arise from a variety of causes at the interface between business and family sphere.
The most important, mentioned in the literature of the subject (Poutziours, Smyrnios, Klein 2006;
Stefańska 2011) are:
− choice of incompetent successors,
− a spoiled child syndrome,
− marital conflicts,
− Autocratic tendencies of family members,
− Entrepreneurial aggression (striving to reach the business objective without regard to the conse-
quences in the family).
The functioning of individuals in three demanding areas and the ability to pursue their own dreams
will sooner or later meet with criticism and disapproval, which results in the first place in interpersonal

Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2, (ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.),
Łódź-Sinaloa, p. 161-175.
conflicts. The sources of such understood conflicts both in the family and in the company are: excessive
expectations toward individuals, differences of opinion, conflicts of interest, the struggle for promo-
tion, rewards and privileges, and the availability of financial assets. Another cause of interpersonal
conflict in family businesses is when an individual, such as the owner, takes a number of important func-
tions at the same time, which often makes it impossible to fulfill all the tasks at a desired level, and which
he reports to the co-owners or relatives. Another source of conflict is the fact that very often the employed
family members have low professional qualifications and lack competence and skills, which negatively
influences mutual confidence and delegating important tasks (see Khanin, Turel, Mahto 2012).
An intra-group conflict is a form of interpersonal conflict, which involves more people connected by
business and family relationships. Such understood conflict, included in the model, helps in maintain-
ing stability and balance in a family, and mechanisms of change-crisis-conflict-another change force
the adjusting of behavior of family members to the new market situation, which allows them to in-
crease the cohesion of the group. An important classification associated with selecting by family
members the tools needed to overcome conflict is a classification based on the causes of its occur-
rence. According to this criterion conflicts can be divided into material and emotional. A material
cause of conflict refers to the knowledge base of family members (employed and not employed in a
family business) and a difference of opinion as to how to settle a certain issue. Such conflicts are non-
personal in character and are most frequently associated with the business arena (Sikora 1998,
Sulkowski 2004, Sulkowski, 2006; Więcek-Janka 2006a; Safin 2007; Stefańska 2011, Lewandowska,
Hadryś-Nowak 2012). The basis of emotional conflicts are disturbed interpersonal relationships. Typi-
cally they result from assuming certain emotional attitudes, high expectations toward other family
members or business. Unlike material conflicts, they are often irrational and, as such, can lead to de-
stabilization and crises of a similar nature. Emotional cause of conflicts is sometimes associated with
personality characteristics of owners and family members. Predispositions to get involved into dis-
putes and resistance to emerging crises depend on their temperament, attitudes, behaviors, opinions,
goals, dreams, expectations and projections reflecting their place in the community.
Intergroup conflicts in the family business exist between organizational departments or divisions, and
between fractions in the family. Their sources can be the following:
– inadequate, dysfunctional distribution of tasks or privileges, unequal access to information and
participation in decisions,
– vague decision-making path
– Limited organizational resources (material possessions, position, privileges, prestige, power),
– lack of clear objectives of the organization or disagreement as to the specific tasks
– lack of consensus on the means and methods of achieving goals.
There are also external sources accompanying internal conflicts: location of the company, its social
environment, the labor market, competition, markets for manufactured goods.

!
Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2(ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.), Łódź-
Sinaloa, p. 161-175.
!
Each type of conflict is connected with a situation, which sources rooted in man or the environment,
arouse in him a strong tension and motivate to actions aimed at eliminating this condition by changing
the situation, becoming independent of it or adapting it (Więcek-Janka 2006a).
A detailed study of causes of conflicts was made by Jeżak, Popczyk and Winnicka-Popczyk (2004).
They took into account the polish cultural specificity, and they found that the most dangerous family
conflicts from the point of view of efficiency and business continuity are:
– misunderstanding as to the work contribution in the company,
– disagreements around distribution of benefits from the company.
Kiedziuch (2006) analyzed the development of family businesses and drew attention to conflicts as a
major destabilizing factor in their operation. As the main conflict-generating factor he considered an
inappropriate succession plan, which may entail the occurrence of other sets of conflicts. Table 1
shows the classification of conflicts in family businesses.
Table 1 Causes of conflicts in family businesses
Categories of conflict
Causes
Improper succession
plan
− Lack of testament regulating the inheritance preferences
− no inheritance decisions
− unsettled possession-inheritance documents and affairs
− no prenuptial property contracts
− the testament equally dividing the property between the successors
Passing and taking over
the management of the
company
− delegating authority to potential successors
− no preparation of successors to take a new role, no practical
knowledge of the company
− Prejudice as to the gender and age of a person who is to take the
helm
− a belief that it is the son who should replace the father
− the priority of “firstborns” to take over the company
Financial resources
− lack of arrangements regarding the distribution and reinvestment of
profits
− having own lifestyle ideas by individual family members (con-
sumptionism)
− remuneration of employees – family members according to their
personal needs and not based on their real usefulness
− lack of funds to finance the high inheritance tax
Personality characteris-
tics of a company own-
er
− need of a constant control
− resistance to change and innovation
− belief in being indispensable
− conviction of own infallibility
Family-business culture
− not employed family members meddling into managing the compa-
ny
− conflictuality
− a right to be employed by the company for every family member,
regardless of their usefulness
− excessive competition between family members
− flawed communication (excessive or insufficient)
Source: Kiedziuch 2006.

Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2, (ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.),
Łódź-Sinaloa, p. 161-175.
3. Research methodology
In carrying out the verification process of the described model, studies were conducted in 112 family busi-
nesses in the Wielkopolska region1. One of the goals of this study was to identify conflicts in family enter-
prises and to determine their share in the research sample. A standardized individual interview method was
used. Respondents indicated that in their companies the most often are interpersonal conflicts (85%) and
intra-group conflicts (69%). Intrapersonal conflicts were admitted by 22% and inter-group conflicts by
36% of the respondents.
The structure of conflicts was also examined, which allowed for concluding that poorly executed succes-
sion process is the cause of conflicts in 54% of surveyed companies, and passing and taking over manage-
ment of the company is the reason for conflicting families for 60% of respondents. Distribution of financial
resources has been recognized by 45% of respondents as the main reason of conflicts occurrence. 76% of
respondents indicated as the cause of conflicts the personality traits and difficult character of family busi-
ness owners. Finally, 32% believe that the main cause of conflicts is undeveloped family-business culture.
Results of research are illustrated in figures 4 and 5.
Fig. 4. Percentage distribution of declared conflicts in the sam-
ple (n = 112)
Fig. 5. Percentage distribution of declared causes of conflicts in
the sample (n = 112)
4. Conclusions
This article attempts to present a model of crises and conflicts in family businesses, taking into ac-
count their complexity and mutual interactions. Looking at the family business as a system of individ-
uals, family influences and business interests through the prism of crises they have to cope with at
different stages of their life cycles allows us to understand the complexity of each even the smallest
family business. Awareness of this internal and external complexity may allow business family mem-
bers to create succession strategies and tactics of operational activity free of destructive conflict.
1 Wielkopolska is a region of Poland with 5 million inhabitants
0! 10! 20! 30! 40! 50! 60! 70! 80! 90! 100!
interpersonalne!
wewnątrzgrupowe!
intrapersonalne!
międzygrupowe!
0! 10! 20! 30! 40! 50! 60! 70! 80! 90! 100!
planowanie!sukcesji!
przejmowanie/
przekazywanie!
podział!zasobów!
Finansowych!
osobowość!właściciela!

!
Więcek-Janka E. (2013), Conflicts and crises in a family enterprise – a model approach, Studies and Mono-
graphs, no. 48, ISBN: 978-83-62916-70-2(ed. Contreras Loera M.R., Sułkowski Ł., Marjański A.), Łódź-
Sinaloa, p. 161-175.
!
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