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A Thought Experiment: Family Business and Upside Down Thinking

As I was considering what to write for this blog, it occurred to me that the key themes important to family businesses are well documented and frequently explored: succession, leadership, governance etc etc. The theory underpinning family business systems is now developed to such an extent that it is difficult to propose something completely new or fresh...But the blog format begs for something embryonic, an idea not yet fully formed. So instead, what came to mind was looking at family businesses from a different angle, in fact what came to mind was upside down thinking. What if we look at family businesses and their complex challenges and opportunities the other way round? Can we learn anything?

Rather than a typical family business lifecycle starting with the entrepreneurial founder, passing the enterprise on to his/ her children, a sibling group, and then these  brothers and sisters passing the business onto their children, a group of  cousins, imagine the process in reverse: a group of cousins passes a business to some siblings (their aunts and uncles); then the siblings pass on to their parents moving backwards through time ... Apart from being a little whimsical (maybe even nonsensical), might there be any insights that can be applied to the real world the right way up? Well a few came to me...

1) Each generation lives within a certain paradigm and this can be hard to shift

Let's start our fantasy upside-down-family-business today in 2014 with a group of cousins…Technology plays an important part in their lives: their business systems and processes most likely rely on it, as do their relationships with each other; they keep in touch via skype, email and other applications. Their parents, the sibling group to inherit the business next in our upside down world, however are not technologically literate and are calling for the cousins to “keep up with the times” and adopt the new reality of “fax machines and typewriters”. Could the cousins easily take this leap, shed their ipads and skype calls? Maybe not. The environment in which we grow up shapes who we are and adapting and changing away from this is not any easy process. Perhaps next time a next generation member of a business is clamouring for modernisation and change (which is quite a common occurrence in family businesses), they should consider how they would feel, if they had to give up their texts and instead start using telex?

2) Governance models for each generation must necessarily be different

Decision making amongst our imagined cousin group is, as is typical, complex with lots of different people involved with differing levels of competence and differing roles within the family business (some simply shareholders without any management responsibilities). To deal with this, the cousins have a governance system including councils, committees and detailed processes and protocols. In our upside-down world, handing on such a structure suitable for cousins to the sibling group proves to be unwieldy to say the least and overly bureaucratic; sustaining it takes up far too much of the siblings’ time and attention is taken away from the business.  Let’s look at the imagined next phase; moving forwards (or backwards in our case, from siblings to Founder), the sibling’s decision making model actually makes the founder feel restricted; he is in total control and wants to make decisions on his terms, when and how he chooses, not in accordance with a specific pre-agreed process.

The different needs of each generation seem obvious in this thought experiment, working backwards through the generations. However, all too often, in the real world of family businesses, one generation does not recognise the need to change their structure and processes to incorporate the next generation; they expect the next generation to fit into how they do things and underestimate what is needed to create the conditions for success as the family and business evolve.

3)  Preserving family values across the generations is impossible!

Every family grouping has its own set of values and norms sitting below the surface of every day interactions. Typically some of these are passed down through the generations of a family - the trick is to hold onto those that are positive for example “honesty” and remove those which are inhibiting for example “blame”. However, imagining passing values back from cousins, to siblings, to parent, is pretty difficult, despite suspending reality for the purpose of this thought experiment. One of the reasons for this, is the seeming impossibility of funnelling a set of values from a collective group to a single person- how can all that a cousin group stand for fit within a single founder? And this is where, I think there is something to be learned from our imagined scenario, because the same applies the other way round: channelling the values of a single person into several is also nigh impossible –over time as the family expands, new experiences affect the system and the values, norms and beliefs change. This is not inherently negative and nor can this be prevented. However, despite this, many family groups want to imprint the values and traditions of the founder on the generations that follow: I am often asked, for example “what should the repercussions be if someone steps out of line from 'our values'?”  And the answer is that rather than focus on reprimand, it is more useful to celebrate rather than enforce the values and principles of the founder(s). In tandem, families who explore the real current values of the group, as they have evolved, with the aim of discussing which of these are helping the family and its business and which are hindering it, are those that really benefit from harnessing the “familiness factor” within a family business.

So what is the conclusion of all this? First, in this particular case, I think it demonstrates that the transformational change required of a family at each generational transition is not to be underestimated and it is no wonder that without support family businesses can struggle during these phases of deep change. Second, while this blog may have started as a little whimsy, as it turns out, letting my imagination run away with me for a short while actually generated some interesting perspectives. I think it proves that exploring new creative ways of looking at an issue, even for a brief while, can generate valuable new ideas, or simply build on what you already know to be true. I dare say this can be applied to all contexts, not just the world of family businesses so next time you encounter a problem, why not try an upside down thought experiment?

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