Sources of Stress, Conflict, and Tension in Family Firms

By John K. Allen, Ed.D.

Presented to the 1989 Spring Meeting of the Massachusetts Psychological Association, Newton, MA

“It’s my business. I can do with it what I want. I have been running this business for thirty years, and I know how this industry works,” said the father.

“We have to expand these lines and get more aggressive about our sales or we won’t be around. We can’t rely on existing accounts any more. There is just too much competition,” exclaimed the son.

“You can do what you want with it when I am gone. But, I am not going to risk this whole company on your crazy dream,” said the father.

“You don’t see and you’re not willing to listen,” said the exasperated son.

While family firms represent a significant part of the economy, family businesses have only recently begun to receive due attention in popular press and professional literature. The special sources of stress and tension inherent in families who work together have received surprisingly little attention give the proliferation of material on families, family systems theory, and stress.

Many authors have postulated about the causes of problems, stress, and tension in family firms. Conflicts between the rational business and non-rational family components of the organization, each having a distinct set of needs, goals, and structures, have often been cited as problematic (Hollander and Elman, 1988). Davis and Stern (1980), for example, suggest that family business problems are caused by conflicting priorities between the various systems involved. Miller and Rice (1973) describe the family system as a sentient system, or a system consisting of ties of loyalty while describing the business system as a task system. Problems occur when the manager needs to accomplish tasks which conflict with the values of the firm or emotional loyalty toward family members.

Many authors postulate that the stresses and tensions inherent in family firms stem from the entrepreneurial personality of the founder. Danko (1982a, 1982b), for example, suggests that many of the problems in the family firm stem from the owner’s individualism and reluctance to trust or share information, power, or responsibility. Levinson (1971, 1983) postulates that the dynamics of the family firm recapitulate unresolved early struggles between generations, siblings, and the extended family. Other authors suggest that certain developmental stages of businesses, families, or individuals are particularly stressful (Hershon, 1975; Barnes and Hershon, 1976). Barnes (1988) has more recently also suggested that tensions in the family firm may also arise from incongruent hierarchies. That is, situations where a family member’s position within the family is very different from their position within the firm, such as a younger son who is the CEO for example.

We thought it wise to take an empirical approach to understanding the sources of stress or tension in the family firm. Hence, we have asked family business owners to subjectively rate the degree to which certain variables are a source of stress or tension in their firm.

Method

Participants at a 1987 Worcester, Massachusetts Chamber of Commerce sponsored seminar on family firms were asked to indicate the most important sources of stress and tension in their businesses. Fifty-six responses were analyzed into 12 factors which subsequently formed the basis for a survey administered to 48 individuals attending a seminar on family owned insurance agencies at the 1987 Professional Insurance Agents of New England convention. A factor was judged to be an important source of stress if it was rated at a 3 or higher on a 5 point scale. A copy of the survey is included as Appendix A.

The identical methodology was used in conducting a survey with a group of certified public accountants attending a seminar on consulting to family firms sponsored by the New York State Society of Certified Public Accountants in 1988.

Of the 38 CPA’s attending the seminar, 22 (58%) described themselves as members of the family firms. These data were tabulated and along with the insurance agency data were also broken down by generation of family business.

Finally, the same questions were included in a larger survey of the membership of the Smaller Business Association of New England in 1988. Of the 540 respondents (31% response rate) to this part of the survey, 220 (41 %) indicated that they represented a family firm.

Discussion

Factors rated more highly across groups include spillage from work to home life and vice versa. The family business format may make it particularly difficult to leave the job at the office. Similarly, it is easy to bring unresolved personal issues into the work situation when confronted with family relations throughout the day. Time management/work overload is another factor which seems to contribute to stress and tension in the family firm. The high level of job involvement by owners of family firms may well contribute to time pressures. As most of the respondents were business owners, one also needs to question the degree to which a failure to share responsibility may contribute to feeling overloaded. Time management/work overload is probably an issue with all small business and the manner in which decisions are made seems to be another source of conflict or stress in the family firm. Another source of tension, unequal commitment to the business, may stem from disagreement about goals and lack of full consensus and decision making around these goals.

Some factors which are presumed to be highly problematic in the family firm were generally not rated as such by the respondents to these three surveys. Tension between family and non-family members or stress arising out of nepotism in the firm were not strongly suggested by the data. Role confusion was not cited as a strong source of stress, nor were disagreements over stock ownership rated highly. Therefore, further research should seek to identify the conditions under which these factors may be stressful rather than assuming that they are innately so.

Some trends emerge from looking at the breakdown of data by generations in the insurance and CPA firms. Difficulties expanding the business seem to be heightened in the first and third generation. Presumably, those businesses which have survived to the second generation have resolved most of this problem but may face product or market erosion by the third generation. The sheer number of family members who need to be supported by the business in the third generation often precipitates a need for increased expansion. Disagreements over stock ownership seem to increase from the first to second generation, probably reflecting the succession and continuity issues of passing over the firm. Management succession issues and competition for authority appear to lessen by the third generation. Apparently, those who have survived by the third generation have found ways to work through these hurdles. Role confusion seems to increase from the first to the third generation. Spillage seems to lessen.

Because of its larger sample size, the SBANE data would seem to give the best indications for practitioners seeking to identify the most likely sources of tension or stress in the family firm. These include spillage, confusion over roles, disagreements about compensation and management succession problems. While there is some overlap in the results between the different samples, the difference between the SBANE group, insurance agencies, and CPA firms suggests that industry factors may be a stronger influence on sources of stress and tension in a family firm than common sources of stress and tension which are attributable to family involvement. We are struck in our consulting practice with the degree to which each family firm views themselves as unique. Yet, family firms are also businesses and as such, many have more in common than not with non-family firms. While being sensitized to the particular sources of stress and tension in a family firm, and particularly with the feeling that these stresses and tensions are unique to the family firm, the practitioner working with the family firm needs to be aware that the stresses the family business owner faces may be quite normal. These data are biased because they are primarily responses from owners of family firms, those who have the power and may understate some of the tension and stress stemming from issues such as competition for authority, disagreements about compensation, or management succession problems. Future research might focus on differences in perceived sources of stress and tension as a function of family position or as a function of family membership versus non-family membership. A next logical step in this line of inquiry would also be to compare family with non-family businesses to determine if family firms are significantly different on these dimensions.

© 2004 West Falmouth Associates. All rights reserved.

References

Barnes, L.B. Incongruent hierarchies: Daughters and younger sons as company CEO’s. Family Business Review, Spring, 1988, I1, p. 9.

Barnes, L.B. and Hershon, S.A. Transferring power in the family business. Harvard Business Review, 1976, July-August, pp. 105-114.

Danco, L.A. Beyond survival: A business owners guide to survival. Cleveland: University Press, 1982.

Danco, L.A. Inside the family business. Engelwood Cliffs, N.J., Prentice Hall, 1982.

Hershon, S. “The problems of management succession in family businesses.” Unpublished doctoral dissertation, Harvard University, 1975.

Hollander, B.S. and Elman, N.S., Family owned businesses: An emerging field of inquiry. Family business review. 1988, Vol. 1 (2), pp. 145-164.

Levinson, H. Conflicts that plague family businesses. Harvard Business Review, 1971, March-April, pp. 90-98.

Levinson, H. Consulting with family business: What to look for, what to look out for. Organizational Dynamics, 1983, Summer, pp. 71-80.

Miller, E.J. and Rice, A.K. Systems of organization. New York: Harper & Row, 1973.

CPA Firms by Generation

Percentage of Respondents Indicating Factor as a Source of Stress

Factor	Total	1st	2nd	3rd
	n= 22	n=12	n=8	n=2
Disagreements about business goals	55	58	50	50
Disagreements about compensation	50	50	50	50
Management succession problems	50	42	50	100
Time management/work overload	64	58	63	100
Unequal commitment to the business	45	45	36	100
Competition for authority	45	42	50	50
Tension between family and non-family members	36	25	36	100
Spillage between work and home life	72	83	63	50
Confusion about who does that	27	17	36	50
Questions of fairness in hiring, firing, and promotions	32	25	25	100
Disagreement over stock ownership	6	0	13	50
Disagreements about decision making processes	55	58	50	50
Difficulty expanding the business	45	50	36	50

 

Percentage of Respondents Indicating Factor as a Source of Stress or Tension in the Family Firm

Factor	Insurance Agencies	CPA Firms	SBANE Survey
	n= 47	n=22	n=220
Disagreements about business goals	40	55	27
Disagreements about compensation	30	50	33
Management succession problems	37	50	33
Time management/work overload	63	64	*
Unequal commitment to the business	45	45	26
Competition for authority	28	45	32
Tension between family and non-family members	24	36	14
Spillage between work and home life	51	72	49
Confusion about who does that	36	27	34
Questions of fairness in hiring, firing, and promotions	21	32	19
Disagreement over stock ownership	21	6	7
Disagreements about decision making processes	47	55	29
Difficulty expanding the business	57	45	14

* This question was inadvertently omitted from the SBANE survey

Insurance Agencies by Generation

Percentage of Respondents Indicating Factor as a Source of Stress

Factor	Total	1st	2nd	3rd
	n=47	n=18	n=22	n=7
Disagreements about business goals	40	44	45	43
Disagreements about compensation	30	30	32	43
Management succession problems	37	39	41	14
Time management/work overload	63	61	59	71
Unequal commitment to the business	45	41	59	14
Competition for authority	28	24	36	14
Tension between family and non-family members	24	22	19	43
Spillage between work and home life	51	50	55	43
Confusion about who does that	36	35	33	43
Questions of fairness in hiring, firing, and promotions	21	24	18	29
Disagreement over stock ownership	21	12	32	14
Disagreements about decision making processes	47	28	59	57
Difficulty expanding the business	57	61	50	71

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