Beyond ‘Fight-or-Flight’: A Guide to Managing Ownership Group Conflicts

Moving Past the ‘Flight-or-Flight’ Response

The human body has a natural physiological response to danger. When confronted with a perceived threat, our bodies experience a chain of reactions that leads to a near-automatic response, where we either confront the challenge or run away from it.

This same response often applies to the way we handle conflict.  We either react by fighting the conflict head-on or by trying to avoid it.

Today’s psychology professionals will tell you that the ‘flight-or-fight’ instinct is no longer useful in solving modern-day conflicts. Running from our problems solves nothing. Immediately turning adversarial also won’t help. Instead, conflicts need to be dealt with.

Identifying and managing conflict is a healthy life skill in any profession, and it is undoubtedly an essential skill for business owners. This is especially true when it comes to navigating the complex waters of ownership group conflicts.

Ownership Group Conflicts Are a Different Beast

Resolving conflict within a business organization is different from dealing with conflict between members of the ownership group. For example, employees are frequently more risk-averse than fellow investors. When conflict arises between owners, the disadvantaged parties still have rights, regardless of whether they are protected by statute or by the corporation’s by-laws.

So, inside the boardroom, managing ownership group conflicts gets trickier. Power dynamics play a critical role here, necessitating different rules of engagement.

Tips for Resolving Ownership Group Conflicts

Managing disputes within an ownership group requires clear communication. Here are a few helpful guidelines that can make resolving issues a little easier.

Call It Like It Is

People can usually tell when a problem has developed, even if no one is talking about it. As that problem grows larger, our ‘fight-or-flight’ instincts tend to kick in.

What’s actually more effective in resolving conflict is neither a ‘fight’ nor a ‘flight’ approach. Instead, the better approach is to engage in direct, clear communication.

Start by identifying the issue and advising that it needs to be addressed, using a calm voice. Say: ‘Let’s talk about the issue’ first, instead of starting with: ‘This is what we are going to do.’

Crucially, talk about defining a process for dealing with the issue. Don’t jump to problem-solving before developing a plan for productive conversation. Sometimes, just agreeing to talk about the issue is the hard part.

Define the Issues at the Heart of the Ownership Group Conflict

Separating the person from the issue and the business interests from the personal interests is essential. Failing to do so will only lead to conversations focused on symptoms rather than solutions.

Stay on task. Hone in on the issue that causes the conflict, without placing judgment on the person who made specific choices leading to the problem. If everyone can show a degree of restraint, the path forward is more likely to reveal itself.

Get Perspective Before Engaging

When addressing complex ownership group conflicts, it’s crucial that you look at the issues from all angles.

Parties often feel certain that they are right. However, that feeling is often limited by their individual perception. Time, age, and evolving personal judgment frequently color how we view a particular problem.

Miles’ Law states: “Where you stand depends on where you sit.” You likely have to change where someone is sitting if you want to change their position on the issues. This change can occur by giving someone more facts, perspective, and data.

When in Doubt, Bring in an Outsider

Not every conflict is resolved through basic communication. Sometimes, you will need a third party to intervene. This puts some grease between the gears.

Managing the dialogue is different from making decisions. There is an art to getting disputing parties to discuss the issues and reach a resolution. This is why our society has professional mediators, negotiators, and facilitators.

Facilitators may be consultants, coaches, mediators, social workers, psychologists, or psychiatrists. They bring to the table the experience and impartiality that can aid in navigating pronounced ownership group conflicts.

The Facilitator’s Perspective on Ownership Group Conflicts

If the governing documents of the ownership group don’t provide a resolution mechanism, negotiating a settlement may offer the only path forward. No one really wants to engage lawyers or go to court, as both sides have increased risk of loss. This is where a facilitator comes in.

The Settlement Facilitation Process

Having served as a facilitator a few times, I’ve seen the process unfold firsthand. This is how it typically goes:

1. One of the parties or a trusted advisor asks a facilitator to intervene. They provide the facilitator with a summary of the situation and then step back into their role.
2. From this initial encounter, the facilitator develops a questionnaire addressing what the issues appear to be. This is to explore each participant’s point of view and sensitivities, and to confirm the facts
3. The facilitator then meets with each participant individually, using the questionnaire as a guide to the discussion. These interviews provide context to points already known and clarify the intensity of feelings on the issues. In almost every situation, the interviews reveal other issues not presented in the opening brief. These often become the central themes of the project.

After the interviews are completed, the next step is to consolidate the results. These typically fall into one of three buckets.

Issues with Fundamental Agreements that Need a Few Tweaks

If the business has enjoyed success, there have to be reasons why. The owners know they need to compromise on some things, just because it makes sense for their business.

My advice here is to take the wins where you can get them. You will want to create some positive momentum before heading into the more challenging issues.

Issues To Be Negotiated

These issues likely prompted the hiring of a facilitator. The ownership group may feel that a deal is possible and desirable; they just can’t get there on their own.

This presents the biggest challenge for the facilitator. It will require creativity, pushing some boundaries, and a lot of back-and-forth to resolve each point. Hopefully, most (if not all) of these points can ultimately be resolved.

Dealbreakers

Sometimes, things just don’t work out. Issues can turn unresolvable for any number of reasons. No one wants to believe this, and sometimes, they just need someone else to say it.

A good facilitator will recognize this sort of dynamic quickly. They will push on the first two lists of issues to make it equally clear to the ownership group. This will ideally generate the necessary momentum to move the parties toward difficult and often painful decision-making.

I have used this process in several mediation processes and have found it to work well. Before wondering what a deal might look like, facilitators must answer the question: Is there even a deal to be made?

Bucking the ‘Fight-or-Flight’ Response in Ownership Group Conflicts

Ownership group conflicts are never fun. Not every situation has a happy ending, but achieving any happy ending requires having the strength to address the conflict.

The ‘fight-or-flight’ response might have once made sense as a survival mechanism, but ownership groups must do better than this when it comes to resolving their conflicts.

No matter how you address it, you will need to make some potentially difficult choices. In my experience, even if a facilitator can get the parties to agree on most of the issues, the last mile is still the hardest. The parties will often need to figure it out on their own.

We think you’ll also like:

1. How Ownership Structure Influences Your Exit
2. Governance Systems Should Anticipate and Resolve Business Ownership Conflicts
3. Happy Owner, Happy Board: The Strategy of a Private Company Board of Directors

[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Alternative Dispute Resolution
2. Bare Bones Board Basics Episode 4: How to Conduct an Effective Board Meeting
3. Bare Bones Board Basics Episode 8: Soft Skills Workshop: Leadership, Communication & Trust

This article was originally published on May 4, 2023.]

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