The Promise of Mediation for Family Business Disputes

Meera and her husband had built a successful business which grew beyond their expectations. As a young man, Vijay, her husband, had dreams of being an entrepreneur. Together they started a company. As a director and equal share holder, she supported him with good counsel, silent financial acumen, skillful management of human resources and efficient operations on the ground. Vijay was a loving husband and a man who knew how to lead the family and the business. He had vision, creative ideas and strong leadership qualities. They complemented each other and brick by brick, they built their empire. 

Their two sons, Anil and Ashok, were loving children and from childhood were noticeably different personalities. Anil was bold and always protective of his younger brother. Ashok was the sensitive and gentle one. Anil went to Singapore for higher education and then worked with a multinational company there, while Ashok studied in India and joined the family business. Meera’s family was her pride and the envy of their community. Everything was perfect until Vijay’s grave diagnosis that required intense and prolonged medical treatment abroad. The family came together as families always do when crisis hits. It was decided that Anil who was living abroad, would quit his job and focus on taking care of his father along with Meera, while Ashok would focus on the business in India. The long intense treatment was to no avail. Vijay passed away. As desired by the father, Anil moved back to India and joined the family business.

Adaptive challenges were many for the family. Vijay’s death left a vacuum in the family. They were all gripped with grief and the brothers were struggling to work together. Communication was getting harder. Their wives were also struggling in their relationship with each other. In despair for a solution, Meera approached a friend who was a lawyer. The wise lawyer, pained by the anguish of her dear friend, explained that litigation would only further divide the family. Since they were looking for a solution as early as possible, the lawyer suggested that the family try mediation first.

What mediation revealed

When the family came into mediation, they were almost unable to look at each other. The frequent quarrels had created a divide. However, as mediation progressed, the mediator gently built trust in the room and created a safe space for them to be open and frank. She set in place a structure for them to communicate productively.

Gradually, the family addressed the many issues that existed in their relationship. Ashok found Anil overprotective and patronizing. Ashok had been running the business successfully on his own with his wife’s support over the past two years but was now being labelled ‘irresponsible and impulsive’. He felt that he was being relegated to the back room, taking care of the technical aspects of the business, while mother and Anil were client facing. His older brother’s domination, insistence on transparency, accountability and other ‘MNC’ jargons were impractical for the Indian business environment. It was even disrespectful and hurtful. Ashok needed his space and freedom and did not appreciate frequent interference. He enjoyed the technical work but saw personal growth only with more interactions with his customers. He felt his wife complemented him and they could work well together in the business. 

Anil meanwhile found Ashok naïve and casual in the business operations and was struck by how he would trivialise and ignore grave situations. He disapproved of the way Ashok spent money lavishly and was maintaining a flamboyant lifestyle. Ashok completely ignored Anil’s international experience and seemed to reject all his good and well-meaning suggestions. Anil wanted to be respected for his international exposure. He wanted the company to have the systems in place for future international collaborations. He was concerned about the involvement of the wives in the family business.

The childhood pattern of the siblings was to run to their mother with grievances. This became dysfunctional when it continued into this phase of their life. A grieving Meera could not handle this anymore and was slipping into a depression. Her children focused only on their issues and failed to notice the impact on their mother. Meera’s priority was the relationship between her children and she immensely feared the loss of family reputation.

Long conversations between the family members at the mediation, jointly and sometimes separately with the mediator, unearthed each one’s underlying needs, concerns, goals and priorities. These valuable discoveries formed the material to create several options for resolution.

Mediation was also able to bring out the common grounds that existed between the parties. Despite all the differences and the acrimony, it was clear that each of them believed in being together in the family business. They were not willing to give up their sense of belonging, safety and security that the family business gave them. Often heard statements during the mediation were ‘I will give every drop of blood for my brother’; ‘It is important that Ashok focuses on the technical aspect of the business as he is good at it’ ; ‘Anil has always been there to pull me out of difficult situations.’

The family also recognized that although the business had to remain under the same umbrella, many aspects were not working and restructuring was required. Boundaries had to be built, roles defined, disagreements to be anticipated and mechanisms to address them was to be set in place.

After almost 25 hours of mediation sessions which included technical and financial experts, lawyers and even a business consultant, a family settlement agreement, optimally incorporating what they all wanted, was found. There was relief all around. The air felt lighter. An animated, friendly and satisfied family left the mediation to go back to daily business. Meera was silently rejoicing. Her family survived the storm.

As they lived the family settlement for a year, they realized that this new path needed further fine tuning. The family returned to mediation to make a few changes to the agreement. What was obvious to the mediator this time around was that their earlier experience of mediation had given them a learnt skill – an enhanced ability to work on disagreements and differing perspectives. They were open to creating many more options to find a solution. Spinning off a new venture, bringing in investors and even dividing the business in a manner where they could continue to support each other. As these options were discussed, Meera looked stronger and more optimistic. Meera, to whom staying together was overwhelmingly important, began to see other ways of keeping the family together. Time was allowing realizations that were impossible a year earlier. Mediation gave the family time to walk through grief, unearth their true needs with minimum damage to the business and their personal relationship and come to realisations that enabled informed decisions.

Layers of Complexity Unique to Family Businesses 

Family business disputes entail the complex intersectionality of running a business and preserving family relationships. There are overlapping values in both, yet sometimes these two values do not align. Historical issues such as sibling rivalry, unresolved childhood incidents, dysfunctional communication patterns, outdated family traditions, children’s desire to differentiate themselves from their parents or parents’ apprehension to turn over the reins come to the forefront. These factors add fuel to the fire. Coupled with this, families are inherently wired to stay together and safeguard family reputation. All these complexities make resolution even more challenging.

It is precisely for the said reasons that mediation is perfectly suited for family businesses. This process is structured on understanding each one’s experience without judgement and is based on the premise that differing viewpoints exist. It skillfully addresses emotions and encourages creative options.

The Promise of the Process – Set up for Success 

Parties often come into mediation after unsuccessful attempts to negotiate. A mediator assists the parties to frame the negotiation differently.

The mediator engages in extensive pre-mediation work to understand the family dynamics, sensitivities involved and obstacles to negotiation. Attention is given to the documents required to bring clarity; participation of decision makers on the table and identification of influencers. The mediator works hard to ‘design the mediation’. When Meera’s family was sensitive about confidentiality and insisted that nobody else from their city should get to know of the mediation, they brought lawyers and experts from other cities. In some mediations, parties want spouses to be included and, in some others, not.

As Steve Jobs said, ‘Design is not just what it looks like and feels like. Design is how it works’. For family businesses, bearing in mind the competing interests of family and business, careful designing is necessary to ensure that business interests and family relationships are protected.

Additionally, the mediator structures the negotiation to withstand high emotions that are almost always present in Family Business disputes. Roger Fisher and Daniel Shapiro in their book Beyond Reason: Using Emotions as You Negotiate, provide for a framework for effectively managing emotions in negotiation. According to Fisher and Shapiro, by addressing the five core concerns – appreciation, affiliation, autonomy, status, and role – negotiators can be successful and effective in dealing with conflict.

The mediator works through each of these core concerns to facilitate a successful negotiation, especially when emotions are high:

• Appreciation: The mediator listens deeply to the parties and helps them feel heard, understood and appreciated. This allows them further to understand and appreciate the other.
• Affiliation: Affiliation is described as the sense of connectedness with another group or person. Building affiliation bridges the gap between parties and increases the ability to productively work together. The collaborative structure of the mediation process allows the mediator to foster feelings of affiliation between the parties, which come naturally to most parties from the same family. The process is designed to get parties to work together to find solutions as opposed to setting them up as adversaries that naturally isolates and disconnects parties.
• Autonomy: Mediation is a process of self- determination. Solutions are not imposed by the mediator. Instead, the mediator works with the parties to enable them to find creative solutions. Autonomy empowers the parties and motivates them to move on and find solution.
• Status: Fisher & Shapiro share that “Status refers to our standing in comparison to the standing of others.” In this party centric process, the mediator structures his/her responses to acknowledge and respect the status of the parties. The flexibility of the mediation process also allows the mediator to creatively design sessions that allows parties to acknowledge and respect the status of the other. The example of a recent mediation, involving a long-standing dispute between two brothers, wherein the dynamics of the negotiation completely changed when the younger brother touched the feet of his older brother, strongly evidences the power of status in negotiation.
• Role: Parties work hard in a mediation. They have a clear role and are not bystanders. The sense of participation and responsibility is enhanced when they are actively working towards the common goal. They organize information, work with lawyers to prepare briefs, invent options and forms a core part of the team involved in drafting the settlement terms. The mediator ensures that each party feels they have a clear role in the process. This moves parties away from the grip of emotion to active involvement.