A family business is something precious — not only financially, but certainly emotionally. Generations of shared effort, shared pride, shared identity. Unfortunately, the wrong emotions can sometimes surface. So how do you prevent conflicts from putting the family business at risk?
Reports of disputes within mid-sized family businesses appear in the news with regularity. Sometimes conflicts escalate to a point where the governance and continuity of the company are genuinely at risk. What was once a natural, unspoken collaboration between family members can suddenly give way to irrational, even destructive behaviour. In our work as interim CFOs, we see the consequences of such conflicts on a regular basis. They can go so far as to squeeze profitability and liquidity — until external intervention becomes unavoidable.
The importance of family businesses
CBS figures show that family businesses are a cornerstone of the Dutch economy. Over 270,000 companies account for approximately 30% of employment. When we break this down by the degree of family control, the following picture emerges:
At the start of a family business, a single owner typically holds full control. The family-led business emerges when ownership transfers to the next generation — multiple owners from one family, such as sons and daughters. Only a small proportion of businesses are family-controlled, meaning the family still holds a majority of shares and therefore retains decisive authority, even if external management has acquired a stake or private equity has been brought in to fund further growth.
Family businesses share a number of distinctive characteristics in terms of focus, financing and local rootedness. The focus is typically on long-term continuity of the family’s ownership. Owner-managers tend to have long tenures, with the explicit goal of handing over a financially healthy business to the next generation — the principle of stewardship. These companies are often conservatively financed, which gives them sufficient reserves to absorb setbacks. Their local roots are reflected in strong community involvement and long employee tenures.
So why does it still go wrong?
Family conflicts tend to surface primarily in family-led businesses with multiple family shareholders. Some of the most common causes:
- Diverging views on stewardship and entrepreneurship
- TGrowing complexity during generational transitions
- Informal family structures from the past that no longer fit the current organisation
Tensions can arise in the balance between stewardship and entrepreneurship — for instance, when a younger generation with different capabilities and ambitions enters the business, or when decisions have to be made about new leadership. A collaboration that once flowed naturally can come under pressure if clear agreements were never put in place. This is often compounded by the long tenure of senior family leaders, who have run the business in their own way for years. New ideas are not always welcomed, and discussions about the future direction of the company can quickly become emotionally charged.
It is clear that the complexity of ownership, governance and operations increases significantly with each generational step — from a single founder to a sibling partnership, and then to a cousins’ consortium in the third generation. The more family members involved, the greater the need for a shared vision, a clear governance structure and open communication.
Prevention is better than cure
Family conflicts can smoulder behind closed doors for a long time before they escalate — but when they do, the emotions can be intense and hard to manage. The conflict escalation model developed by Friedrich Glasl, widely used by mediators, maps this process across nine steps and three phases of increasing severity. In the second phase — the emotional phase — a trusted confidant or external adviser can still attempt mediation to find a resolution. But once a conflict reaches the third phase — the escalation phase — blocking other family members becomes more important than preserving the company. At that point, a more forceful intervention is needed to prevent the organisation from becoming ungovernable.
Notably, family-controlled businesses appear less likely to reach this third phase. This may be the result of better governance structures — with agreements established in advance that provide for de-escalation when conflicts arise. For family-led businesses, the strong recommendation is to get the umbrella before the rain starts: put a family charter in place, consider a STAK (foundation holding shares), or establish an external advisory board or supervisory board. A family charter that captures the shared vision, decision-making procedures, and the roles and involvement of family members can prevent a great deal of damage. Once it starts to rain, the foundation of mutual trust is already eroded — and finding the path to de-escalation becomes far more difficult.
The role of the interim CFO
The primary responsibility of an interim CFO is to safeguard the continuity of the business — independently and objectively. That goes beyond improving financial structure and performance; it also means investigating the root causes of financial problems, whether those are strategic misjudgements or weaknesses in operational control. When the underlying issue is a dispute between family members, the governance of the family business moves firmly to the top of the interim CFO’s agenda.
An early warning sign of potential conflict is when the goal of business continuity is no longer aligned with the personal interests of all family members. At that point, it becomes essential to formalise agreements about the roles and involvement of family members, and to reaffirm a shared vision for the future. Only then can the bond of trust be restored — and the family business refocus on the common horizon it was built to reach.
Call on CFO Netwerk
We cannot predict the future — but we can shape it through the decisions we make today. As an independent external expert, the interim CFO can play a pivotal role in establishing a sound governance structure that protects the long-term continuity of a healthy family business. Don’t wait until it’s too late. Contact CFO Netwerk today.
