Monday, December 8, 2014

How and Why Family Values Matter in Family Businesses

It is unusual to come across articles focused solely on values in family businesses, and as a result, the ones that are published usually make an effort to contribute to increasing awareness and discussion about the important role of values in family enterprise.

Values are indeed essential in a family business, and more crucial than one would think given the little information known or written about them. The article Values in Family Business by Ritch L. Sorenson, published in the SAGE Handbook of Family Business, 2014, provides an overview of values-related research in the organizational behavior discipline. While parts of Sorenson’s summarization of research is not directly related to family firms, the latter part of the article addresses how values are established in a family and subsequently in a business, and provides illustrations and depictions of the otherwise invisible characteristics of family firms which are defined as ‘values’ and ‘culture.’

 Notable points from the article illustrate that in order for individuals to work together, they must communicate in a manner that helps them develop common values and culture; and that the fundamental organizing element of social capital is communication, which is a conduit for sharing information. The article uses an example of a real-life couple’s forms of communication which demonstrates how they began to form a social foundation for their family (p. 470), noting that communication patterns created in the home become rituals, and rituals instill and reinforce values in children.

    He includes an excellent description of how values differentiate family firms from non-family firms:

[W]hat makes a family business unique is that the pattern of ownership, governance, management, and succession materially influences the firm’s goals, strategies, structure and the manner in which each is formulated, designed and implemented. In other words, we study family businesses because researchers believe that the family component shapes the business in a way that the family members of executives in non-family firms do not and cannot. (Chua et al., 1999:22) The author describes several ways that family values may become incorporated into the family business in Figure 23.1, Social Processes that Develop Similar Values and Culture in Family and Business, on page 472.

A few other key points include:

  • On how values play a role in succession: “values are the social bedrock for next generation socialization”
  • Invisible influences on values: “Symbols, rituals and heroes reveal values and culture in the family and the family business. They can be purposefully designed to call attention to desired values”
  • How values play a role in governance: “[v]alues are incorporated into collaborative documents such as vision, mission, goals, policies, practices, and the like, often compiled as a constitution or charter”
  • Uniting the family and the business: “[f]ormal collaborative processes within families and between families and businesses promote common values that unite the family and the business”
  • And on the crucial importance of values: “Family and business are so fundamentally different they naturally pull apart over time … There must be common ground that is stronger than the forces that pull family and business apart. Many families in search of this third dimension turn to shared values. Values are often the only glue strong enough.” (Aronoff and Ward, 2007:17)

 While Sorenson’s most relevant points have been outlined here, this is by no means an exhaustive summary of the article. Anyone wishing to delve deeper into the nuances around values in family firms or wishing to strengthen their awareness around the power of values at play in family enterprise is strongly encouraged to read this article.


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