Did you know that Walmart Inc. (USA), Volkswagen AG (Germany), Tata Group (India), LG Electronics Inc., Samsung Group (Korea) as many as other well-known companies are familybusinesses [1]? The biggest region for the share of family businesses in the world is Europe, with 43% in the world’s 750 family business ranking. According to “Family Capital”, the most family business countries are the United States and Germany. There is no statistics on the Kyrgyz Republic, but some of the known and successful companies such as “Shoro”, “Imarat Stroi”, “Kulikov”, and “Park Hotel Bishkek” are also family-owned businesses. In Sweden, over 60% of working-age population are occupied in family business. At first sight, family companies are the most sustainable entities, very often involving several generations and thriving for decades. At the same time, a family company is a quite risky enterprise in terms of conflict potential. In accordance with the Corporate Governance Professional Association, the vast majority of family businesses have a very short lifespan and only 5 (!) percent of family companies survive after the transition to the third generation of family owners [2]. The reasons for that are different and include contradicting business views, differing approaches, and unhealthy competition between family members. In some family companies, rivalry may appear simply because of psychological fear of the founder that he could be removed from the business scene by his close owners [3]. During ongoing crisis and unexpected economic, political and social changes, the position of family businesses is even more exacerbated. Corporate policies aimed at sustainability of family companies in fragile context are helpful but do not work for every case. Mediation is one of the anti-fragility mechanisms that is already used and undoubtedly should be utilized further by family business owners in all its three dimensions, including project mediation, deal mediation and mediation of disputes.

There is no better dispute resolution method than one that is applicable, reasonable and fits the nature of a dispute. But for family business disputes, mediation and mediation solely is highly recommended. Family business matters when personal and business relations are intertwined are very sensitive and, in addition to business knowledge, require empathy, creativity and a high level of emotional intelligence. In such cases, litigation may be even harmful. Sometimes disputes between siblings, children and parents, spouses turn into a battle of generations and war of the genders. When a dispute arises, it is challenging for parties to separate personal attitudes and business ones. Future of business is completely dependent on the showdown of personal relationships. Furthermore, the case can be even more complicated if family members are not only founders of the company but also occupy particular positions in it.

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Perhaps, the following recommendations, based on family business mediation experience, will be helpful or at least appear as food for thought for those who are starting or already have been running a family business for some time:

1) Be clear and honest when distributing the roles in the family business, so everybody knows what to expect and for what one is responsible.

2) Observe formalities and documentary requirements. In case of a dispute, gentlemen’s agreement will be a too weak argument to rely on.

3) Include independent directors in the Board of Directors, who are not affiliated neither with the owners nor with management.

4) If you live together with your relatives who are your business partners, make an effort not to discuss business issues at home, making your home place a space for pleasant time together with close ones.

5) Choose a dispute resolution method to be utilized in case of a dispute at the outset. When a dispute is already there and emotions are running high, it is quite difficult to agree on the mutually acceptable remedy method.

6) In case of a dispute, do not forget to ask yourself some very important questions: “What is most valuable and really matters for me?”, “How my decision will influence the relations with my relatives?”, “What will happen to the business itself and employees?” Honest answers may prevent from a short-lived and unwise decision.

7) Whether the disagreement is about business strategies, roles, responsibilities or some other related things within a family company, it is reasonable to apply for mediation at early stages. Do not wait until a disaster.

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Why to utilize mediation in family business?

Family business is not a case when business partners can simply split up in the occasion of disagreement. In family business issues, mediation deals with both relations and business interests. Even if parties decide to separate, mediation helps to preserve human relations. Mediation is confidential and for those who prefer home-business affairs are not talked publicly, mediation is a viable option. Last but not the least, in mediation, regardless of age, gender, point of view, role, and position, no one is criticized, judged, or ignored. In family business matters, the goal of mediation is to create enough space for every business-involved family member’s voice to be heard and valued.

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How does mediation provide anti-fragility to family business?

I am a vigorous proponent of differentiating mediation and conciliation. Mediation is not always about peace. Quite often, parties, especially business people, seek for a solution, not for peace. The goal of mediation is not to conciliate disputants, but to reconcile their interests and views, which, at the end of the day, bring sustainable outcome. At the same time, as it was mentioned above, mediation does not put aside the relationship part. Mediator helps family members to explore pros and cons of different approaches. Everyone feels comfortable and understands what is going on. A good example of how mediation can help, is demonstrated in the movie “Fairly Legal”: Kate, the mediator, is invited to facilitate disagreement between father and son regarding their clothing manufacture business because they were not able to reach an agreement on their own.

Anti-fragile mindset considers any problem as an opportunity not only to resist, but to grow. In addition to sorting out misunderstandings, mediation provides family businesses with the unique opportunity to find creative solutions, to build momentum for family business to prosper for the benefit of a family, community, city and country.

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[1] Family Capital, "The World's Top 750 Family Businesses Ranking"// https://www.famcap.com/the-worlds-750-biggest-family-businesses/

[2] A. Okunev, "The Specifics of Corporate Governance in Family Companies"//https://cgpa.com.ua/

[3] Harry Levinson, "Conflicts that Plague Family Businesses"// https://hbr.org/1971/03/conflicts-that-plague-family-businesses

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