A family business lesson: gridlock can lead to war or peace: a strategy for keeping a family business peaceful and prosperous.

• Author: Morley, Stuart

Big Family Manufacturing Inc. struggled to find the best direction for its mid-market, family-owned manufacturing business with close to 100 employees. Sam, its founder, was in poor health, and he and his two younger brothers, both of whom were fellow shareholders, had trouble deciding what to do next. Because of differing financial situations between Sam and his brothers, the company was in gridlock.

The family followed all the textbook advice: They hired an advisory board, brought in two retired senior executives from large companies in the industry, and engaged a consultant. The consultant recommended that Sam retire immediately, given his health issues, and that one of his younger brothers take over the business. Unfortunately, when Sam's wife found out, she presumed the worst and started a family war! The family could not break the gridlock.

In the corporate world, gridlock often is a more straightforward issue. Common situations that create gridlock include when shareholders are deciding on a direction, taking new approaches to revenue growth, and developing creative ways to refinance the business. Often, the nonfamily shareholders engage an analyst to value the business and attempt to buy out the company's founder or get the founder to buy them out. In a family-run business, the typical reaction to a gridlock-related conflict, especially among family shareholders, is to do nothing and avoid the issue.

Sam's family decided to discuss the challenge with colleagues from other family-owned businesses that belong to an association for families in business. The association has a peer group, which Sam's family joined to discuss its issues, in confidence, with families that owned businesses in other industries. The peer group convinced them to hire a strategist who specialized in mid-market family business issues.

The strategist directly distilled the issues at hand by conducting a brief series of interviews with the company's principals--not an easy task when you consider the business- and family-related issues involved. Then, the family was able to use the process to help members of senior management change roles and to facilitate a smooth succession in the business. Thankfully, this new strategy worked.

A Gridlock-Breaking Strategy

The family heeded the strategist's advice to take the following steps to break their gridlock:

1. Call each participant ahead of time to get his or her advice and insight. People will say things in confidence...