10 Recommendations for the Resilient Family Business

Newswise — Family businesses are unique and complex; they have aspects and layers to them that are unlike any other organizations. Interesting and importantly, they combine Freud’s idea of what constitutes a complete life: “lieben und arbeiten [to love and to work].”1 At the root of family businesses’ identities are the aspirations of both the business and the family.2 These two sets of goals are often seen as opposites, which suggests a need to “reconcile,”3 “manage,” or overcome such “conflicting sets of demands.”4

Perhaps a more effective approach is a more expansive view — one that identifies ways to unify family and business, exploring new possibilities and building a strong resiliency in the process.

REMEMBER IT’S NOT FAMILY VS. BUSINESS

The combination of family and business can create a multitude of personal and operational challenges. Discussions around topics such as “livelihood and savings”5 can quickly become “emotionally charged,”6 and major disagreements between family members on these or other topics may have a long-lasting impact.7 If the attempted answer is to isolate business from family — believing “family is family and business is business”8 — this may lead to more complexities.

Instead, flexibility allows for family business leaders to respond to what is needed most at any point in time: crucial family issues may need to be settled so the business can function properly, while necessary business decisions may have to outweigh feelings among family members.9

EMBRACE LEGACY AND RENEWAL

Honoring the organization’s rich history and proud legacy while also facing the reality of a different present era is difficult but important for family businesses to master.

A commitment to honor and preserve the family’s legacy is critical. “A foundation of shared values” becomes the key constant amid life cycle changes; it predicates the successful transfer of the family business from one generation to the next.10 And “respect for the challenge” creates the mindset required to embrace both the past and the present at the same time;11 it signals that the family business has the “resiliency and regular renewal” to move forward in a thoughtful way that cherishes its past.12

CREATE OPPORTUNITIES FOR INNOVATION

Although family businesses may be viewed as “risk averse, traditional and stagnant,” there are ways in which they can be particularly innovative.13 Their concentration of wealth can lead to a tighter investment focus on the best initiatives and the most effective use of resources.14

Importantly, though, the firm and its leading family must have a growth mindset that accepts changing conditions and anticipates business evolution.15 Creating opportunities for innovation to occur and spread both rapidly and organically is useful here — whether through “‘idea exchanging’ lunches with the CEO and employees,” an annual innovation competition, “‘friends of the organization’ gatherings” or informal store/plant walks, in which family leadership interacts with and builds trust among front-line workers.16

MENTOR AND PLAN FOR TRANSITION

A productive way for family firms to view generational transitions is as an opportunity for clarity and redefinition.17 The formulation of and dialogue around questions that include “Why are we a family business?” distills what really matters;18 it focuses the family and the business on a shared purpose.

It is a critical and perhaps necessary chance for renewal; it’s a process of change that, when done right, can “keep the entrepreneurial flame alive in succeeding generations.”19 Viewing succession as inevitable can lead to better planning, as well as the creation of a “development process” in which younger family members are “nurtured by assimilation” through “apprenticeship,” the “sharing in important tacit knowledge” and mentoring by “positive role models.”20

POP THE BUBBLE

Family businesses inherently have an insular component to them; it’s important for them to recognize this and find ways to overcome this limitation. Looking outward,21 listening to external viewpoints, understanding different tolerances for risk22 and seeking out ways to evolve will give the organization the opportunity to move and shift rather than remain stagnant.

To be an “open bubble,” a family firm must protect the internal and be curious about the external. With this approach, a family firm may choose to consider the incorporation of an “independent governing body” that includes people outside the family; the group can aid with conflict management, offer different perspectives and skill sets, and enhance “objectivity and professionalism.”23

PREPARE FOR A CHANGING MARKET

Peter and Gerry’s Organic Eggs was almost bankrupt when third-generation family member Jesse Laflamme joined; the initiation of various changes — primarily to solely focus on organic and depart from traditional farming methods — eventually propelled the company to the “No. 2 brand in the country across all egg types.”24

Family firms should pinpoint risks to their business so they can identify ways to reduce their potential severity.25 And, importantly, family businesses should identify “what the business, and also the family, does exceptionally well” to develop an “agile strategy framework” and proper market positioning.26 This process helps the firm stay relevant and aligns with the inherently ever-changing nature of the overall marketplace.27

BUILD AN ENVIABLE COMPANY CULTURE

Family businesses should focus on building upon their inherent strengths regarding their culture: keeping to their core and continuously adapting their workplace environments to better suit their employees. Benefits for family businesses over other organizations — including “an ethical touch,”28 loyalty, “a level of intimacy with principals,” greater stability,29 and a stronger belief in “senior management and strategic direction”30 — already give them a sizable advantage with employees.

Building an “enviable culture” — rather than “relying on family loyalty for employee retention” — is key for the short- and long-term health of the organization.31 Growing an organization’s capacity to care for its members will differentiate it from its competitors and help it to thrive.

COMMUNICATE TO ALIGN

Communicating with employees and family members alike ensures alignment; openness and honesty can prevent various forms of conflict and tension.32 Types of communication may change to best reach employees quickly; however, face-to-face dialogue is and always will be most effective.

Storytelling and the transfer of oral histories is critical for the perpetuation of shared meaning within any tribe. The role of elders here matters because they transfer family knowledge and history to the group, “preserve and carry out the tribe’s rituals,” and aid individual family members in “their individual growth at each stage of life.”33

LISTEN TO NEW AND ESTABLISHED VOICES

Family businesses should find ways to invite, include, and act upon younger generations’ ideas. Indeed, “members of the next generation should have a special voice in the family” as a way to stimulate collective “innovation and…adaptation.34

Younger family members need to do their part by treating “their elders with respect and humility” and determining ways to collaborate and compromise.35

An ongoing commitment to “respectful dialogue” by every family member is vitally important to the future of the business as well as the preservation of the family.36 Transparency within the family — enabling the free flow of information and insights across members — is a characteristic of “successful generative families.”37

DEVELOP SEVENTH-GENERATION THINKING (IN BOTH DIRECTIONS)

Planning ahead is important for both the business and the family. Families today should develop the “seventh-generation thinking” mindset that originated with the Iroquois.38 It calls for the respectful recognition of the family members seven generations ago, with the hope that current choices will be useful to the family seven generations into the future.38

Setting “specific, long-term goals for ownership” is an important exercise for a family.40 A family must think about, talk through, and ultimately act upon how best to maintain strength and health in the family and in the business.41

Much is dependent on the mindset of the family leaders, and on whether they are energized by the tremendous opportunity to honor their ancestors and guide their family and its organization before handing it off to their future progeny. Perhaps it will be worthwhile for these leaders to remember that families are “the most compelling institutions,” consisting of a “remarkable durable social structure;”42 and that sharing a business together grants the family a special opportunity to honor, build, grow, and ultimately, give.

The preceding is excerpted from To Honor and Grow: Recommendations for the Enduring Family Business (Darden Business Publishing), prepared by Darden alumna Alana Wall (MBA ’19) under the supervision of Professor June West.

• 1.Kelin E. Gersick, John A. Davis, Marion McCollom Hampton, and Ivan Lansberg, Generation to Generation: Life Cycles of the Family Business (Boston: Harvard University Press, 1997), 2.
• 2.Robert Sher, “5 Strategies to Prevent Family Business Heartbreaks,” Forbes, June 29, 2018, https://www.forbes.com/sites/robertsher/%202018/06/29/5-strategies-to-prevent-family-business-heartbreaks/#5e8a40ae4089 (accessed Jun. 25, 2019).
• 3.“Family Firms: Business in the Blood,” Economist, November 1, 2014, https://www.economist.com/business/2014/11/01/business-in-the-blood (accessed Jun. 25, 2019).
• 4.https://www.forbes.com/sites/robertsher/%202018/06/29/5-strategies-to-prevent-family-business-heartbreaks/#5e8a40ae4089.
• 5.Kevin Daum, “7 Tips for Successfully Running a Family Business without Drama,” Inc., April 8, 2016, https://www.inc.com/kevin-daum/7-tips-for-successfully-running-a-family-business-without-drama.html (accessed Jun. 25, 2019).
• 6.Beth Fisher-Yoshida, “3 Ways to Turn Stress into Success for Your Family Business,” Inc., July 10, 2018, https://www.inc.com/beth-fisher-yoshida/3-ways-to-turn-stress-into-success-for-your-family-business.html (accessed Jun. 25, 2019).
• 7.https://www.inc.com/kevin-daum/7-tips-for-successfully-running-a-family-business-without-drama.html.
• 8.Thomas Koulopoulos, “3 Do or Die Tips If You Want Your Family Business to Succeed,” Inc., March 23, 2017, https://www.inc.com/thomas-koulopoulos/3-do-or-die-tips-if-you-want-your-family-business-to-succeed.html (accessed Jun. 25, 2019).
• 9.https://www.inc.com/kevin-daum/7-tips-for-successfully-running-a-family-business-without-drama.html.
• 10.Dennis Jaffe, “If You Want Your Family Business to Last Several Generations,” Forbes, August 30, 2018, https://www.forbes.com/sites/dennisjaffe/2018/08/30/if-you-want-your-family-business-to-last-several-generations/#7adbf7c17c16 (accessed Jun. 25, 2019).
• 11.John L. Ward, Perpetuating the Family Business: 50 Lessons Learned from Long-Lasting, Successful Families in Business (New York: Palgrave MacMillan, 2004), 11.
• 12.https://www.forbes.com/sites/dennisjaffe/2018/08/30/if-you-want-your-family-business-to-last-several-generations/#7adbf7c17c16.
• 13.Nadine Kammerlander and Marc van Essen, “Research: Family Firms Are More Innovative than Other Companies,” Harvard Business Review, January 25, 2017, https://hbr.org/2017/01/research-family-firms-are-more-innovative-than-other-companies (accessed Jun. 25, 2019).
• 14.https://hbr.org/2017/01/research-family-firms-are-more-innovative-than-other-companies.
• 15.https://www.inc.com/kevin-daum/7-tips-for-successfully-running-a-family-business-without-drama.html.
• 16.https://hbr.org/2017/01/research-family-firms-are-more-innovative-than-other-companies.
• 17.Gersick, Davis, Hampton, and Lansberg, 72.
• 18.Gersick, Davis, Hampton, and Lansberg, 72.
• 19.Ivan Lansberg, Succeeding Generations: Realizing the Dream of Families in Business (Boston: Harvard Business School Press, 1999), 69.
• 20.Keanon Alderson, Understanding the Family Business (New York: Business Expert Press, 2011), 65, 92.
• 21.Randel S. Carlock and John L. Ward, Strategic Planning for the Family Business: Parallel Planning to Unify the Family and Business (New York: Palgrave, 2001), 5.
• 22.https://www.inc.com/ami-kassar/keeping-it-in-family-pros-cons.html.
• 23.Adam Fridman, “From One Generation to the Next: Keeping Your Business in the Family,” Inc., June 23, 2016, https://www.inc.com/adam-fridman/from-one-generation-to-the-next-keeping-your-business-in-the-family.html (accessed Jun. 25, 2019).
• 24.Emily Canal, “How a Young CEO Turned His Family’s Failing, Third-Generation Business into the No. 2 Egg Brand in America,” Inc., February 23, 2018, https://www.inc.com/emily-canal/how-pete-and-gerrys-organic-eggs-bounced-back-from-bankruptcy.html (accessed Jun. 25, 2019).
• 25.https://www.forbes.com/sites/francoisbotha/2018/10/11/redesign-your-family-business-for-agility-in-the-digital-age/#1f92c16471bc.
• 26.https://www.forbes.com/sites/francoisbotha/2018/10/11/redesign-your-family-business-for-agility-in-the-digital-age/#1f92c16471bc.
• 27.Gersick, Davis, Hampton, and Lansberg, 24.
• 28.Francois Botha, “How to Recognize Human Capital in Your Family Business,” Forbes, September 10, 2018, https://www.forbes.com/sites/francoisbotha/2018/09/10/how-to-recognize-human-capital-in-your-family-business/#74c7336253e8 (accessed Jun. 25, 2019).
• 29.https://www.inc.com/ami-kassar/keeping-it-in-family-pros-cons.html.
• 30.https://www.forbes.com/sites/francoisbotha/2018/09/10/how-to-recognize-human-capital-in-your-family-business/#74c7336253e8.
• 31.https://www.forbes.com/sites/robertsher/%202018/06/29/5-strategies-to-prevent-family-business-heartbreaks/#5e8a40ae4089.
• 32.https://www.inc.com/adam-fridman/from-one-generation-to-the-next-keeping-your-business-in-the-family.html.
• 33.James E. Hughes Jr., Family: The Compact Among Generations (New York: Bloomberg Press, 2007), 111.
• 34.https://www.forbes.com/sites/dennisjaffe/2018/10/03/how-champions-of-change-from-the-rising-generation-transform-their-family-businesses/#580b74655a55.
• 35.https://www.forbes.com/sites/dennisjaffe/2018/10/03/how-champions-of-change-from-the-rising-generation-transform-their-family-businesses/#580b74655a55.
• 36.https://www.forbes.com/sites/dennisjaffe/2018/10/03/how-champions-of-change-from-the-rising-generation-transform-their-family-businesses/#580b74655a55.
• 37.https://www.forbes.com/sites/dennisjaffe/2018/08/30/if-you-want-your-family-business-to-last-several-generations/#7adbf7c17c16.
• 38.a. b. Hughes Jr., 19.
• 40.Marc Emmer, “How to Create a Successful Succession Plan for Your Family Business,” Inc., December 21, 2017, https://www.inc.com/marc-emmer/how-to-create-a-successful-succession-plan-for-your-family-business.html (accessed Jun. 25, 2019).
• 41.Ward, 8.
• 42.Gersick, Davis, Hampton, and Lansberg, 57–60.