Applying Corporate Best Practices to Family Businesses
Cornell University’s Smith Family Business Initiative hosted its first roundtable discussion on family conflict in partnership with the Hult International Business School in San Francisco last April 5, 2018. With the theme of “Conflict: From the Inside Out”, the roundtable discussed how family businesses differ from traditional corporations, and how to adapt corporate practices into family business settings.
What makes family businesses and its conflicts different?
A family business can range from your mom-and-pop stores to big multinationals (SC Johnson, for example). Ideally, a family business is at its core, a business. In practice, however, it is not.
Conflicts within a family business are more common, extreme, and intractable. There are a lot of factors as to why this is, but we focused on two—interdependency and lack of common language and bond.
Interdependency. As Doug Baumoel, one of the roundtable facilitators emphasized, families running businesses have more interdependency with each other and the business. Family members within the business are interdependent on both fronts—the family unit and the business unit. Therefore, conflicts can cross lines and get personal quickly.
Lack of common language and bond. As families grow bigger, there tends to be a lack of common language and emotional ties to the business. This may be especially true for 3rd and subsequent generations as they see the wealth but not necessarily understand where the wealth came from. A common language and bond can be formed by investing in resources that focus on the family’s learning and development about the business’ background.
Corporate practices into the family business
“The best practices for your family business has not been written yet”
No family business is alike. While a family organization can apply best practices as much as they can, they face organizational politics unique to their own family dynamics. Therefore it is important to adopt best practices that can fit into how your own constraints.
I worked in my family business for five years before coming to Johnson. Based on my experiences, I chose two scenarios that could get… “delicate” with some advice on how to overcome it.
Scenario 1: Giving feedback
Giving feedback to a supervisor or subordinate can already get awkward. Can you imagine if you had to give feedback to a family member?!
“Hey (insert parent, aunt, uncle, sibling, cousin), you tend to take over during meetings. I think you should step back and allow others to share their ideas. I’ll see you for Sunday dinner!”
I don’t think so.
If family members are already hesitant to give feedback, employees may be even more hesitant due to the repercussions they can face.
Solution: While having non-family supervisors, an independent board of directors help evaluate performance; they may not have their ears to the ground. To get a more well-rounded evaluation, implementing an anonymous 360-degree feedback system can incorporate subordinates’ and colleagues’ feedback.
Scenario 2: Initiating Change
When your boss or supervisor has known you since birth, it gets hard to be taken seriously. Furthermore, they may already be resistant to change because it can signal the need of letting go of their ‘baby’ a.k.a. family business.
Solution: It may not come as a surprise that research on 100-year-old family businesses show that change is usually initiated by the younger generation.
While initiating change may be easy, getting buy-in from the older generation can be tedious. The facilitators suggest building allies and accounting for intergenerational cultural differences to help bridge the gap.
Allies can be in the form of family or non-family members. The important thing is they understand the business’ history from a different point-of-view than yours. These allies can help you to build a better context of the situation. A non-family member also has a different relationship than what you have with your boss (most likely your elder family member) and you can gain insight on their communication preferences in a professional setting.
Intergenerational cultural differences can be found in 8 scales—communication, evaluation, persuasion, leadership, decision-making, trust, disagreements, schedules. For example, an older generation may follow a hierarchical leadership style. A younger family member may be influenced by a Western education and prefer a more democratic process for decision-making.