Identifying and Understanding Your Family Business Culture
Sometimes the most important step a family business leader can take in furthering the success of his or her firm is to examine the culture of the family business. That’s because the culture of any business can greatly affect the employees’ morale, their buy-in to the family business mission and values, and their productivity. In his article, “Culture and Continuity in Family Firms,” W. Gibb Dyer, Jr. of The Family Firm Institute outlined four main types of cultures found most commonly in family businesses.
This, the most common type of family business culture for first generation businesses, places great emphasis on the leader, the family and on the hierarchy within the organization. In a paternalistic family business, leaders are charismatic family members who micromanage but inspire their employees, and employees are expected to do as they are told. Family members enjoy preferential tre ATM ent in this culture because of its emphasis on the founding family – and carrying on the family legacy is very important to them.The paternalistic family business is good at developing innovative solutions to emerging market trends. This is partly because decisions can be made quickly, with all eyes looking to the decisive family business leader(s) alone for those decisions.
The paternalistic culture can pose problems for the family business in times of transition, especially during transition of power. Because of the heavy reliance on the family business leader, successors may be left feeling incapable or overlooked. And because of this culture’s tendency toward micromanaging, it is usually only effective in smaller organizations.
This culture is rather similar to the paternalistic culture, but in the laissez-faire culture, employees are trusted with more decision-making responsibilities. While employees are still expected to further the goals of the family, those employees are given greater leeway in how they accomplish that. This type of culture affords its employees with more opportunity to be creative and to react to changing business circumstances. However, when employees don’t uphold the family’s values in how they carry out their work, this laissez-faire culture can produce negative outcomes for the business.
This culture, very common in second and later generation family businesses, is one in which the family turns over the management responsibilities of the business to outside professionals. Family businesses with this culture are very similar to many non-family businesses, because they are run in much the same way.Employees are more concerned with their own careers, rather than the furthering of the family’s mission, and hired leaders evaluate employees by how they contribute to the financial success of the business. There is more emphasis on efficiency, and the professional managers may make sweeping changes to improve efficiency.
The professional culture is usually one brought about suddenly during a time of transition from the founding generation or during a time when the business was struggling.By bringing in outside expertise, the creation of this culture can bring a fresh perspective to a family business. However, long-time employees of the family business may feel abandoned, as this culture can create employee morale issues.
In this most rare kind of culture, equality rules supreme. Family members work side by side with employees to collaborate on solutions and make decisions, and everyone is encouraged to contribute. In fact, family members are given no preferential tre ATM ent. Communication, teamwork and proactive management are vital. In this culture, employee innovation, morale and creativity are high because employees who actively participate in the direction of the business are more committed to it and its values as well. However, because this kind of culture leans so heavily on group decision making, it can take too long to respond to certain circumstances that require immediate action.
Each kind of family business culture comes with its own set of unique pros and cons – and in most cases, the culture must shift from one type to another as the family business passes from one generation to the next in order to continue to succeed. Learn more about how to assess your family business culture and, when needed, how to change it, in our articles, Your Family Business Culture – What It Is and Why it Matters and Effecting a Culture Shift in Your Family Business.
Source: “Culture and Continuity in Family Firms,” W. Gibb Dyer, Jr., published in The Best of FBR II from The Family Firm Institute