Podcast: Deconstructing Conflict in Enterprising Families

Lisë Stewart:
Hello, and welcome everybody. This is the Family Business Advisors Alliance. My name is Lise Stewart, and I’m so pleased to have you here today, and I get to introduce you to a good friend of mine and a professional colleague, Doug Baumoel. Thank you so much for coming. And you know, I am going to let you introduce yourself because you do the very best job about talking about Continuity Family Business Consulting and your company, so, with that, can you just take a minute to let our listeners know who you are and what you do?

Doug Baumoel:
Sure. Thank you Lisë. Pleasure to be here. And thank you all your, all of your listeners for tuning in. So, I’m Doug Baumoel. I’m the founder of Continuity Family Business Consulting. I founded Continuity in 2003 to focus on what I believe is the most existential threat to family businesses, and that’s poorly managed conflict. So even in our purpose statement for my company … Our purpose statement is: we believe every family should be able to enjoy what they have, know where they’re going, and make the most of their lives together. That’s why we do what we do. Can’t do that if you’re in conflict. Right? And most often conflict occurs when people are not in agreement on where they are going or where they want to go. So we spend a lot of time on that purpose statement, and it really fits with this focus on conflict.

Lisë Stewart:
Hmm.

Lisë Stewart:
I would agree, and knowing a little bit about your work, I think you’ve done a really good job with that mission statement and purpose statement. So I’m a little bit curious though, Doug, ’cause I know in my experience, , a lot of advisors really shy away from conflict. You know, when there’s a conflict situation, this is not something they want to do. So, before you even start talking to us about your methodologies and how you do this, I just have to know why, why did you go into this area of working in conflict, which is, you know, sometimes the messiest ugliest, hardest part of advisory work. So yeah, shed some light.

Doug Baumoel:
So I got into this field because of my own personal experience with conflict and family business. So I grew up in a family business, was a wonderful family business. It was part of who I was. When you grow up in a family business and not just a job, you know, I, I got my engineering degree, my business degree for a career in the family business to work beside my father who founded the company. He founded the company in the sixties in the basement of our house. It ended up being a well-known internationalindustrial instrumentation company leader in its field. And I worked there, you know, on and off summers of my life, et cetera. I worked elsewhere out of college, but came back to the family business. I worked elsewhere out of business school, came back to the family business and everything should have been great, but we had a lot of conflict.

Doug Baumoel:
Conflict, um it was about typical things that families fight about: succession, authority other things organizational issues, ownership issues—we had the full gamut. And throughout the the eighties, the latter half of the eighties, and throughout the nineties, we hired family business consultants. So I spent about 15 years on the client side of this work. And to be honest, most made matters worse, not better. Mm-Hmm . We actually entered that death spiral of litigation in the family and the wonderful business that I, you know, devoted my career to was sold through the courts. And so how I get into the business, so as the company was, you know, in the throes of litigation, our last family business consultant standing at the time suggested I go into this field. The rationale was at the time around 2000, there weren’t a lot of folks in this field with actual family business experiencebusiness experience in general. There were some, but again, that was a long time ago.

Doug Baumoel:
The business has matured in the last 25 years. But around that time I was given this advice to consider transitioning from a family business that was in litigation and, you know, headed to, headed to a sale. And I thought, well, why would I go into a field that I felt so poorly served by? So I gave it some thought, and I actually thought that’s the reason why I should go into the field. And I spent, I, I came to this epiphany that if I was gonna go into this field, I needed to understand not only why my family failed, but why did the consultants that we hired and the therapists and the mediators, why did they fail to get us to a better place? So I studied dispute resolution and all forms of conflict management for about a year and a half.

Doug Baumoel:
And what I came to understand was what we experienced as a family from consultants at the time fell into two categories. Either sort of best practice consulting, you know, this is what you should be doing for success in your family business, certain structures and organization and policies, et cetera. And typically dispute resolution approaches. And as I was studying the field, it came to me that with best practices approach, when a family’s in conflict, some best practices will speak to the interests of some stakeholders and against the interests of others. And that will serve to only polarize conflict and exacerbate conflict. So while consultants were well-meaning, and they had, you know, great ideas, they were smart, great analysis, great potential solutions, a family in conflict can’t simply adopt them. And then I looked into dispute resolution. We hired mediators, we hired all kinds of people.

Doug Baumoel:
Right. And I learned that conflict in a family business had more in common with other types of identity-based conflicts. Rather than civil dispute. So identity-based conflict are conflicts that involve who each stakeholder, who they are, and what is their place in the world. Those things aren’t negotiable. You can’t negotiate your identity. Dispute resolution techniques are typically a negotiation, facilitate and mediation. It’s facilitated negotiation. And you’re trying to, to apply these great frameworks for dispute resolution on a system where negotiation and compromise of your values, who you believe you are, and what you believe your place in the world is, those are not negotiable. So I learned that those were the reasons why we weren’t successful with other approaches to family business consulting. And I set out to develop a new approach, a different approach one that borrowed more from other identity-based conflicts such as ethnic, political, religious conflicts.

Doug Baumoel:
Um and I developed a, you know, in around 2003, I started the firm and I started with a pretty rudimentary understanding of identity-based conflict. And over the years, I learned more and I learned more about dispute resolution, because in, at some point there, you’re gonna hit some speed bumps in any process. And sometimes you do need to negotiate a single dispute on your way to a more systemic solution. So I learned that I got mediation certification and other, other approaches that I learned. I met my business partner, Blair Tripp, around that time. And together we fleshed out very robust approach to understanding and managing identity-based conflict in family business and family enterprise system.

Lisë Stewart:
I know a little bit … for your book.

Doug Baumoel:
the book …

Lisë Stewart:
I was gonna say …

Doug Baumoel:
For the that outlines the the process. And that book serves as the, literally as the training manual for our team. So our team now about 15 people. And while we do what you would expect from a family business consultancy, we work on governance, family and corporate governance organizational development, leadership, succession planning, we do that. But everything we do is through the lens of managing conflict. And it’s not just managing conflict, but it’s helping families prevent, manage and heal from conflicts.

Lisë Stewart:
Right? So, you know well, first of all, I have known you for many years, Doug, and that is the best explanation I think you’ve ever given me about why you went into this field. So I really do appreciate it, and it’s a powerful story. You know, I do remember that your family kind of disintegrated around this, this big, you know failed business. So and then I, I did read your book. I found it fascinating. I read it quite a number of years ago now, Deconstructing Conflict. So for any of our listeners out there, if you’ve never heard about it, please look it up because it’s, it’s an excellent guide. And it’s, it really helps you to understand the basic model, the framework that you use to do this work. Doug, so I know it’s rather complex but can you sort of, in a nutshell, help our advisors to understand what this model is, is all about? I, I feel like it’s a big ask, but give it a go.

Doug Baumoel:
Sure. At a, at a high level, I think about a spectrum of differences. Differences start with simple disagreements. So we, we think about differences along a spectrum. We, the, the early stages or simple disagreements, I think of disagreements as the cuts and bruises you get when you are learning new skills, you heal from them. They’re not a big deal. You end up learning more about the other person when you have a disagreement, if you resolve it well. And I think about, well, what if you were having difficulty resolving coming to a agreement over an issue? The kinds of people you can bring in would be content experts communications experts to help you articulate your position in a disagreement better.

Doug Baumoel:
And in the, the language that your sort of adversary or your opponent in that disagreement could better hear and understand. So again, disagreements are not, they’re, they’re normal. Everybody has them. And there are opportunities to learn more about each other. And they benefit from some degree of outside help. Content experts, communication, uh folks. When those disagreements escalate, they become disputes. The disputes are much more serious, a little bit more systemic. But on the scale of intensity, they’re more serious. And sometimes you need a different approach. You need to articulate your position well. You need to maybe get a content expert in as well to, to add some education to the to the dispute. But you, in a dispute, it’s serious enough that you might need facilitated negotiation and the various frameworks that can be applied to resolving disputes.

Doug Baumoel:
And I look at a dispute … Resolution of a dispute as sort of a, you know, healing from a broken bone. When you get on the other side of a broken bone (or a dispute), you can often be in a better place. You’ve learned a lot about the other person. You’ve accomplished something. You’ve learned about dispute resolution, you’ve gained some skills, and like a broken bone can heal back stronger. So can relationships on the other side of a well-managed dispute. Conflict is the next level. Conflict is where the issues are not only more intense, but they’re more related to identity. They’re more about, again, stakeholder identity and their place in the world. And they’re more systemic. It’s not just a dispute. It’s, and it’s not even just a series of disputes. It’s the system. It’s embedded in the system.

Doug Baumoel:
And that requires, and when I make that analogy, I look at, and I hope this isn’t a triggering word for people, but I think of it as more of a cancer. Right? So when conflict takes hold in a family business, it sort of metastasizes. And if you try to approach conflict in the family enterprise dispute by dispute, mediation by mediation, which is sort of what we did, you’re likely to make matters worse, not better. Like whack-a-mole, another dispute will pop up because conflict is embedded, it’s systemic. And when you, when you push on this button, this button will pop up. So that’s why you need a much more robust approach to managing conflict. And like cancer, you know, I, I always hear people say, well, conflict is good. I take a very different view. I think conflict is bad. It needs to be prevented, not avoided.

Doug Baumoel:
If you have it, you have to deal with it. But nobody will say they had a good cancer. Just like you shouldn’t say you have a good conflict, can have a good healthy disagreement. You can have a robust dispute that you can resolve. But conflict leaves, scars, conflict creates damage, damage to relationships and it also damages the business itself or the underlying wealth in a family. It’s, I would say it’s not a, it’s, it’s sort of unavoidable because there’s a lot of overlap in family enterprise systems, A lot of complex overlapping systems creates the potential, the opportunity for conflict every day. So it’s not something you can avoid. It’s something that you, that families are well advised to try to prevent through a variety of approaches that we help families learn when it happens. It needs to be properly managed.

Doug Baumoel:
Uh and if you are interested in that, we can talk about some of that. But I’ll tell you how, how we approach it a little bit. But it needs to be managed well. And if it isn’t, it leads to cutoffs, cutoffs, or in my case, the sale of a business. Now, my family healed, it took 10 years, but my family became a connected family again. And our business was lost, though, with a lot of wealth lost in our family. So yeah, it does leave scars. Right. So that’s sort of the, that spectrum of differences. Uh and then how the methodology actually unfolds with a family. We typically work in a concentrated three month (plus or minus) schedule. The first month is discovery. We want to learn everything from every stakeholder, every document, every report that we can find, every shareholder’s agreementor trust agreement.

Doug Baumoel:
So we read everything. We speak to everyone. That’s where we get the data. And the data we’re looking for are, we’re trying to understand each stakeholder’s goals, the values that they bring to their roles, the histories that they bring to their roles, and with each other. And with the enterprise, we’re looking for who holds power, how do they use power. And all of that, and some of the additional factors as well. But those are the main ones. And all that sits on something we call the family factor. And the family factor is the answer to this question, is the family bond strong enough to leverage compromise, forgiveness, and a commitment to change? So from the moment we pick up the first call with a prospect, we’re trying to gauge that, is this a family that cares about each other? They might be angry, they might say, we don’t trust each other.

Doug Baumoel:
They might say they never wanna speak to each other, but if we get the sense that this is a family that values being family with each other and needs help mm-hmm. That’s a family we can help. Even if the family factor is low, if there’s a desire to build that family factor, we can be helpful. You know, we’ve had a couple of prospects call in when it was obvious that yeah, they have a dispute, not a systemic conflict because they’re not a connected family anymore. They’re a late generation family, perhaps you know, of, of wealth that are no longer connected by anything other than maybe a family office, which is really just managing, managing money. And there’s some disputes and they want help. But if there’s no, if there’s no family bond that means something to the families, we’re not gonna be that, you know, it’s not a case we would take.

Lisë Stewart:
Right. Right.

Doug Baumoel:
But families that wanna be family, we, we can help them. So the first stage is discovery, second stage is what we call triage …

Lisë Stewart:
Before you move to that second stage, just a point of clarification here, because I find this absolutely fascinating. So it sounds like in that discovery phase, part of what you’re trying to figure out is whether or not that “family factor” is actually there, and it may be evident immediately, and it might not. Right? Like, do you have to do a little bit of digging to sort of see if that family factor exists?

Doug Baumoel:
It’s, I don’t think we have to do digging. It’s just we have to listen for it in all of our conversations.

Lisë Stewart:
Right. Okay. All right.

Doug Baumoel:
And it’s in some ways, the intensity of those differences reflect a stronger family factor. It reflects the fact that people are disappointed. That they’re being treated in a certain way because that relationship is important to them, and they didn’t anticipate feeling like they are feeling. So very often, the more severe conflicts happen with families that care about each other, not with families that don’t care about each other.

Lisë Stewart:
Does everybody if you’re looking, say, for this family factor, I mean, I would assume that everybody who’s involved in the conflict has to have that family factor that, that that desire. I mean, if only one or two feel really committed to this, I have worked with families where, say the parents are very committed. They really, the whole family, the idea of a committed and a loyal and loving family is very important to them. But then you look at the next generation and they’re like, nah, I don’t, if I know anything to do with my siblings or my parents, I, I don’t really care. So it d do you find that it it really has to be, you have to find that family factor in everyone who’s involved? Or can you work with them if it’s only some?

Doug Baumoel:
So it depends what they’re trying to accomplish. Okay. You know, our, our goal with families is not to, at the end of the day, have everybody hug and say they love each other. It’s to have a, to to enable them to make decisions together in a functional way and to be a functional family. And yeah. It’s common family factor varies across the board. It varies with by generation, by distance, by involvement in the family business or the, or the whatever enterprise it is. So no, it doesn’t have to be equal.

Lisë Stewart:
Okay.

Doug Baumoel:
It has to be present with a core group that’s, that is engaged in accomplishing the goal that we’re hired to accomplish. Mm-Hmm

Lisë Stewart:
Got it. Okay.

Doug Baumoel:
And even if it’s low, I mean, you bring up next gens. Sometimes with next gens, the family factor is low because they’ve seen the conflict that occurs in the prior generation, in the senior generation. They say, we don’t want any part of that.

Lisë Stewart:
Sure.

Doug Baumoel:
That, but when they see that, when they see the growth that happens, when that family … When that older generation is able to manage that conflict well, and to learn from that history and to share what they learned with that next gen. Being family suddenly becomes less scary. And maybe they’ll be open to the benefits of building their family bond, building their family factor. That’s really what we find that once we manage the negativity surrounding family and a family in conflictothers take a new look at being family together.

Lisë Stewart:
That’s a very powerful outcome. That’s really, yeah. That, that’s, that’s lovely. It’s lovely. Even just to think that it’s possible. I know, stopped you midway. You were going through discovery, you’ve got that second phase.

Lisë Stewart:
Phase. Yeah.

Doug Baumoel:
So our, I’ll jump to the third phase. The third phase is where we have developed options, long-term options for the family to develop. You know, in, in some cases it could be a improved governance, corporate or family governance. Right. In some cases it could be rejiggering the success, the succession plan or trust agreements, whatever it is. We’ll develop those options. And our goal in that third phase is to surface those options and to get family alignment on at least some of them to build out over what we call the implementation process or the implementation phase. So to get family aligned on these options that we’re gonna develop, there has to be a middle section. And that middle section is what we call triage. And that triage piece of work is where we work with individuals and groups, smaller groups to overcome if there’s a dispute between them or if there’s systemic conflict between smaller groups, we need to address that. And we address, we have a process for addressing those. And it involves, it may involve education, may and trial involve trust building. We look at trust very differently than most folks. I don’t know if we’ll have time to get into that. That’s a, that’s a whole Oh, we’ll have

Lisë Stewart:
Bring you back for that one now.

Doug Baumoel:
Yeah, exactly. But so the triage portion, the middle portion is where we start breaking down those barriers to alignment that we will need in the third phase. So we set the broken bones, we, you know, feel as best we can. We’re not looking for a perfect long-term settlement of conflict. In fact, we don’t believe that that’s possible. You know, one of my consultants recently said you know, what’s on top of that hill? You’re trying to get over another hill. Yeah. conflict exists in family enterprise. It’s built in it’s part it’s, it’s, we say woven into the fabric of family business, I should say. The potential for conflict is woven in. And by doing this work, families are not only to get to the top of that hill that they’re trying to get to now, but they’re also not afraid of climbing that next hill.

Doug Baumoel:
Because they have better skills. They have history of successfully navigating that first hill. And they’re able to have some degree of confidence because they’ve gotten those skills and that history of success. They’re able to manage conflict more successfully when it comes up again. We do a lot of work with families that have had a terrible conflict and need to heal from that conflict. So that’s part of what we do in the triage phase. Um and then once we have gotten families to align on longer term fixes or structures that’ll support them then we build that out. So that’ll get to agreement. For example, an easy example isimprove corporate governance, for example. Have a disparate group of owners, some in the business, some not in the business, different branches with different ownership.

Doug Baumoel:
You know a good board of directors is a way to manage those disparities in power and, and, and benefit and influence. So we’re not gonna build a board in three months, but we might get agreement in three months to build a board that previously some stakeholders felt would serve their interests, and some felt it would be against their interests. But by educating, educating tweaking the model of governance for this particular family we’re able to get the alignment. And then in the following, typically we’ll work with the family maybe up to a year, rarely beyond that. ’cause We believe in the beginning and middle and an end to this work. Believe me, I was on the client side of this work for a long time. Right, right. And sometimes, you know, consultants want to just be part of your family or your business .

Doug Baumoel:
That’s right. It’s not their role. Yeah. It’s not our role. Our role is to have a beginning, a middle, and an end to give families the, the skills the training they need to be available to them in the future for tuneup here and there. You know, a training for younger, younger folks that haven’t gone through what we take our families through. But yeah. So, so typically we’ll build out, if it’s a board, we’ll build that out over the next remainder of the year. If it’s running family council meetings, developing policies like a dispute resolution policy we’re working on with a family now. Those will be built out. We might outline them in the triage or the plan development phase, but we’ll build it out into robust pro structures and policies in the in the implementation phase.

Lisë Stewart:
So tell me, Doug, I think one of the things that’ll be of interest to our advisors who are listening, and of course, you know, our advisors are members for the alliance. We have attorneys and accountants and financial advisors, and, you know, experts in ESOPs, you name it. You know, there’s quite a wide variety of people, and I know that you get plenty of your work from referrals from other people who are already working with with their clients. So how do you work with other advisors? So let’s say for example, an advisor calls you and they’re, they’ve been working with a client on an estate plan, and they’ve picked up that conflict. This family really is in, in conflict. You know, it’s gone beyond just a, a dispute and it’s not within the skillset of, say, the attorney’s office that they’re working with. How do you tend to work with the advisors who are already associated with the family?

Doug Baumoel:
So with if we get a referral we’re brought into a system that has existing trusted advisors, maybe not trusted by all, but you know, existing folks who, who know what’s going on. There are three ways that we can work with them. The first is as a backstop for them. So sometimes the family never meets us.

Lisë Stewart:
Okay.

Doug Baumoel:
And we are a and we serve to educate the advisor that’s already embedded in, in certain frameworks, how to approach a meeting that’s coming up to help debrief a difficult conversation that happened. So we can work with the advisors, I call it behind the scenes.

Lisë Stewart:
Okay.

Doug Baumoel:
We can work side by side. We’re doing that in one case now with a family from one of the large accounting consulting firms we’ve brought in. And we work side by side with them. Actually that’s not true. We’re working side by side with them now in the implementation phase, when we were brought in, it was in this third way we worked with them, it was a handoff.

Lisë Stewart:
Okay.

Doug Baumoel:
And that’s where the advisor felt that they could not continue their work with the client until the conflict was managed. So in that particular case, we got the handoff for a limited period of time for that three-month period. And we were able to then hand back a client that was in much better shape. Still needed some work. So we became a sidecar to the other organization as they built out governance. And, and they were in charge. It, it was their engagement to build out, for example, one of the things that they were, was in their mandate, a board of directors. So while we can do that, that’s their engagement, not ours. Our engagement was simply to help manage the conflict that was going on and hand it back to them so that they can continue their work with the client. And they, the client and, and the company chose to keep us on to assist in, in several areas of, of their work. So that it was really, it’s a really good partnership actually.

Lisë Stewart:
Right. Right. Now it makes perfect sense because again, as you said, you have a beginning, a middle, and an end. And with some of the consultant relationships in other types of projects, say building out a multi-year governance program or whatever it might be leadership development, succession planning, so and so on this may go on for, for much longer. So I think it is important. Yeah. I, I will say that over the years of working with many, many, many advisors dealing with conflict, when it becomes just so difficult and so disruptive they don’t know where to turn. And you are absolutely right. There are very few resources, I think often for our advisors, you know, where do we go, how do we get help? And how do we get help from somebody who’s not gonna simply swoop in, take it all over. Yeah. And, you know, kick us to the curb. Right. We need to have somebody that will work in a really a well coordinated way. And so that it feels more seamless, I think, to the, to the end user client too. So that’s, yeah.

Doug Baumoel:
You know, and during our, our, our implementation phase, that sort of plus or minus nine months after our conflict management phase, that’s where we bring in outside advisors. You know, we’re not the estate attorney, we’re not the accountant, we’re not the coach. We’re, and, and that’s important. We bring in outside coaches, outside advisors of all types. When we get alignment on a plan forward you know, we’re not the the one stop shop for all things that families need. So yeah. So that’s an important part of the work, knowing who to bring in at what stage. But you also made a point, you know, who do you call? And that’s why I think that’s why I’m so excited to do this podcast, to spread the word that yes, sometimes family families get into disputes.

Lisë Stewart:
Right.

Doug Baumoel:
And I would say, I would say it’s rare, but it’s not unheard of that there’s an isolatable dispute that will lend itself to a mediation process. More often than not, it’s a much more systemic issue that involves the identities of the stakeholders. And I think it’s important for all advisors to understand the difference. And that when you attempt to manage this type of systemic conflict dispute by dispute, you can actually be making matters worse.

Lisë Stewart:
Hmm. I think that that’s an extremely important message. You know, we often talk about knowing where your boundaries are in terms of your expertise and what you can do. And I would say that if people are not sure if what they’re dealing with is, is a dispute, or whether it’s truly conflict, as you say, a systemic issue, that now they’ll know who to call, who to ask what do we that, that’s great. Wait for your phone to start ringing. And I also , I wanted to make sure that people know that your book is available Deconstructing conflict. I it’s it, yeah. Hold that, hold it up. . It is a great, well, and

Doug Baumoel:
And not only yeah. I think this is a great opportunity to, to invite people to not only read the book, other advisors all my team, we’re happy to talk about reactions to the book answer questions on the book. You know, we think you know all boats rise when you give this kind of information and we’re here to help.

Lisë Stewart:
That’s great. And that’s a wonderful note for us to start to put a bow around this. Doug, what I do wanna say is we’ve only just scratched the surface today. I know that you have a tremendous amount of experience, such, such a rich background in this work, and you’ve certainly helped me over the time that you, we’ve known each other to better understand what we’re, what we’re facing. Likewise.

Doug Baumoel:
Yep.

Lisë Stewart:
Likewise. And you’ve helped me with my clients. So you know, we’ve got some panel discussions coming up later in the year and we’ve got some other opportunities. So please look for that invitation because I would love to invite you back and to all of our audience that’s listening today, thank you so much. We are an alliance. We are here for you. Our role is to try to make sure that we are bringing knowledge, expertise, and resources to you so that you can better serve your family business clients. So we thank you very much for listening. And Doug, thank you very much for being here.

Doug Baumoel:
Thank you. Thanks for the opportunity, Lisa. Speak to you soon. You’re welcome.

Lisë Stewart:
Okay, thanks. Goodbye everybody.