A Founder's Core Values May Become Part of the Family Business Culture Because:
Family businesses are known for their strong, distinctive cultures — cultures that are oftentimes heavily influenced by the vision, way and values of the founder and carefully maintained through the generations. These cultures bind employees to a common cause and foster loyal and stable workforces. If managed well, a strong culture can prove to be a major competitive advantage for a family business seeking to attract and retain the all-time talent in society to reach sustainable long-term goals.
A strong culture can also be a liability. In an ever-irresolute business environment where digital transformation and business model disruption is inescapable, every family business organization must examine whether its culture is fit for purpose. The good news is that company culture can be measured and actively managed, enabling leaders to grasp new opportunities and take their organizations along with them.
Spencer Stuart has been advising family businesses on their leadership and talent needs since its founding more than six decades agone. At present more than e'er we run across culture as a differentiator in the businesses we work with. But as family unit businesses abound, commence on a new strategic direction or respond to the many external forces of alter, they must invest in both understanding and managing their culture. It is a mistake to believe that culture should be fixed and unchanging. A business with an entrenched culture is vulnerable when the basis starts shifting around it.
To explore how family businesses are learning to evolve their cultures without sacrificing what makes them unique, nosotros interviewed owners and leaders of 10 family businesses across Europe and the Center East. In this article we combine their insights with our groundbreaking research into organizational culture and our experience advising companies on their transformation journeys.
Purpose
Family businesses are more often than not very good at articulating their purpose. Purpose is an increasingly critical cistron in attracting and retaining talent; it defines what the business is doing to improve the lives of others, how its products or services do good the customs or society at big. Purpose infuses twenty-four hours-to-day work with greater meaning; information technology resolves to catechumen effort into something that transcends the pursuit of turn a profit and acknowledges the interests of stakeholders.
Mads Nipper, CEO of Grundfos, a Danish pump and water solutions business firm, considers purpose "vital in shaping an inclusive culture where various people can piece of work together well." Charlotte Korsager Winther, head of communications for THE VELUX FOUNDATIONS, notes the innate advantage that a family unit-owned organization has over other types of organization "because we were born with these values and these purposes. It'south a lot more than difficult if you have to invent them." The company's purpose is unremarkably closely connected to its values.
Family unit values
Values are the glue that binds the family, the business and its employees. They usually reflect the founder's philosophy and act as a guide to "the style we practise business". Sometimes they are enshrined in statements of 'cadre values' that are frequently referred to in company communications and that underpin day-to-day determination-making. "Our values go back almost xx years and nevertheless ascertain our business," says Torben Østergaard-Nielsen, CEO of United Shipping and Trading Company (USTC). "We don't employ people who cannot identify with our values."
Mohammed K.A. Al-Faisal, president of Al Faisaliah Group Holding, is too clear that creating an effective culture involves translating values into activity. "I am not happy with our values until we actually put the application of those values into the annual remuneration calculation of senior direction, myself included." A few years ago, while addressing bug inside one of the Group entities, Mohammed K.A. Al-Faisal discovered that the visitor'southward values meant different things to different members of the management team. So, it became necessary to articulate three to five actionable items under each one of these values. "Ane of our values is 'ethics and integrity'; it is non open to estimation," he says. "We told people that we only need five things from y'all. First, we don't lie, cheat or steal; 2d, we respect ourselves and respect others; third, we treat others how we want to be treated; 4th, we never talk desperately backside some other's back; and fifth, we acknowledge mistakes and correct them. If you have done these v things, in our eyes, you lot have lived up to the ethics and integrity value." As Korsager Winther says, "Values are fine, merely it's the way you lot live them and the stories you lot tell to illustrate them that really matters."
Values are closely linked to culture, but they are not the same thing. Understanding the stardom can make information technology easier to uncouple them when the concern context changes.
Distinguishing culture and values
There is a maxim that "families have values and companies have cultures". Values are highly personal and, in a family context, result in shared behavior, attitudes and ideals that tin permeate a business.
The values of a family unit concern are invariably congenital off the core values of the founder. Over time they are amplified by family unit members, whether they sit on the family unit council, the lath or the direction team. Companies may demand to grit their values off and reinvigorate them from time to time, just our experience is that nigh successful multi-generational family businesses are constructive at preserving their foundational values and championing them across the enterprise. "Values accept to exist both credible and consistent," writes Colin Meyer, Peter Moores Professor of Management Studies at the Saïd Business School in Oxford. "They take to be believed and enduring. They have to stand the examination of fourth dimension — for better for worse, for richer, for poorer, in sickness and in wellness."
A visitor's culture, at its best, is an outward manifestation of its values. At Spencer Stuart, nosotros define civilization as:
Culture has a powerful outcome on business results, helping to make or pause even the most insightful strategy or the nearly experienced executives. It can encourage innovation, growth, market leadership, upstanding behaviour and customer satisfaction. On the other manus, a misaligned or toxic civilisation can erode concern operation, diminish customer satisfaction and loyalty, and deflate employee appointment.
*'The Leader's Guide to Corporate Culture', Boris Groysberg, Jeremiah Lee, Jessa Price, and J. Yo-Jud Cheng, Harvard Business concern Review, Jan-Feb 2018.
Changing the culture
Whereas values are abiding and provide the underpinnings of a family unit business, culture is necessarily more pliant; information technology is a catalyst for performance and however information technology must evolve over time. The company culture needs to be able to conform in line with a irresolute strategy. Since every company has to revisit and upgrade its strategy (with increasing frequency and urgency in the current climate), it must likewise devote fourth dimension and energy to examining whether its culture is upwards to the chore of delivering on the strategy.
Even the best laid strategic plans will go to waste if the organizational civilisation is non aligned to the changing context, realities and goals of the business organization. When alignment is missing, civilization eats strategy for breakfast, every bit the saying goes.
Fifty-fifty before the coronavirus pandemic, the earth was in a constant country of flux as new technologies appeared, consumer behaviours inverse and business models were upended. When leaders take their companies in a new strategic direction they need their organizations to respond. When transformation is required, the biggest barrier companies face is often their culture.
Cultural change is daunting, especially when the current civilisation has served an organization well for many years. Grundfos has a strongly rooted culture of social responsibility; for instance, iii to five per cent of its workforce has 'reduced work power'. According to CEO Mads Nipper, experience is highly valued and the company invests heavily in training. Like many family businesses it has e'er taken a long-term view. Merely whereas information technology might once have been able to invent a new hydraulics engineering science and accept the market to itself for many years, competitors today are far quicker to respond, specially those in China. "Today, everything is about speed, about existence fast to develop and deploy new initiatives. That's where our civilization works against us," he says. "The world, thankfully, is moving in the direction of taking more long-term decisions, and then should we. But the execution of those things needs to exist faster — non five or x per cent faster, but twice as fast." For Grundfos, this has meant adopting completely new ways of working that were strange to the culture — overlapping processes, more self-guiding teams and a loftier degree of empowerment for 'on-the-fly' decision making.
Nipper created a digital transformation office, a semi-independent unit at HQ which gathered people from across the company to work on digitally enabled projects. He invited an entrepreneur with digital transformation experience to come in and lead the unit, simply he wanted to avoid sending out a signal that cultural change could only come up by importing talent. "Digitalization is for everybody. In my opinion, it'south wrong to presume that somebody who has worked in a strong civilization for 20 years is by definition unable to modify. I find that our almost tenured employees are among the almost curious and willing to conform. If you are a 60-yr old hydraulics engineer and yous want to go involved on a digital projection, you lot have the opportunity to practise so. And by bringing together younger and more experienced staff everyone can learn from each other."
Different, more active processes were essential for Grundfos to retain its competitive edge. They could not be embedded in the arrangement without cultural modify. This change was made easier by values of inclusivity and fairness and past a shared belief in the mission and social purpose of the business.
Østergaard-Nielsen says that civilization has been a frequent topic for discussion in meetings of the board and the family unit council, well-nigh recently as part of a major restructuring involving changes to the business model and supplier and customer relationships. "Having the right civilisation contour enables us to charge more for our services," he says.
Towards a learning culture
Organizational transformation tends to accelerate during a crisis. Change programmes that might have taken years under normal circumstances are being implemented chop-chop, an obvious example beingness the mass shift towards working from home caused past the coronavirus. One of the disadvantages of securely embedded cultures with their long-established ways of working, habits and behaviours, is that they tin can be found wanting during a catamenia of upheaval. Unless, that is, they also have a bias towards learning agility.
We come across a number of cultural shifts taking place in family-owned businesses: for example, a motility away from patriarchal, hierarchical and authority-based cultures towards ones that are flatter, more than decentralized and inclusive, where people are encouraged to be learning-oriented, open to change, capable of having "courageous conversations", and willing to embrace new ways of working.
For an organization to achieve this kind of modify, its leaders must embody the change they wish to encounter — leadership behaviours are critical in reshaping culture. Equally Alain Bejjani, grouping chief executive officer of Majid Al Futtaim Holding, says: "Every bit a leader, y'all not only take a critical role, but a very personal stake in your visitor's readiness to handle the challenges of business cycles. To be successful equally a leader is to continually challenge yourself to learn, to embrace a mindset of curiosity and an openness to alter. To do so enables the identification, adaption and adoption of new ways of working, thinking and seeing the globe around you. Without this, yous are doomed to fail." Bejjani stresses the importance of stretching people and ensuring that they do good from an 'outside-in' view of the business. "Perhaps most importantly, your role is to actively contribute to a civilisation that sees learning and self-development equally a means to personal, professional person and organizational growth."
When Dr Mohsen Sohi, CEO of Freudenberg SE, took function, it was clear to management and shareholders alike that an development in the company's organization and culture was necessary. While preserving Freudenberg's long-term orientation, he prepare almost implementing comprehensive changes in how the company was run. "I felt that a more agile, performance-driven organization would only be brought about by transferring decision-making ability from the headquarters to the divisions where the bodily entrepreneurial vigour of the company was most impactful and helpful to our customers." He emphasizes that his function was just to exist the catalyst. "My colleagues and I defined the processes and supported behaviours which brought nigh change. All the innovations were aligned with the company'southward existing values; indeed, there were designed to make the values more than real." Through constructive communication and the multiplying upshot of getting the top 45 managers on board, the cultural change began to spread throughout the organization.
Civilization and leadership are inextricably linked, and then select and develop leaders who support the civilization you want.
Despite its influence on business operation, civilization is notoriously difficult to manage because the underlying drivers are normally hidden. Truly understanding the civilization and diagnosing the elements of the culture that do or do not support the strategic priorities of the family unit business concern can unlock its full potential.
An important part of shifting culture in a certain management is leadership selection, since the senior leadership team tends to have a asymmetric influence on the culture. If strategic or cultural change is on the agenda, family businesses tin can hire and promote leaders who will serve as catalysts for change. These leaders should possess the style preferences of the platonic target culture, but also take the influencing skills to model the right behaviours and bring along others in the organization. Bringing in a change agent from outside tin can be particularly difficult in a family business unless that person has the full backing of the owners who are, themselves, willing to model whatsoever desired changes in behaviour.
The about effective culture change leaders are credible in the current culture but likewise able to assist push button the civilisation in the desired management. Every bit Bejjani says: "Breaking entrenched practices and challenging 'the way things are ever done' tin can require fresh eyes or a new perspective. Bringing about this shift means non simply onboarding new people, but identifying the organizational culture that will drive your company'due south success and seeking the talent that reflects those aspirations to become an agent of the alter you desire to see." Recruiting people into a family business e'er carries a risk, especially at senior management level. Our research shows that in around 70% of cases where executive hires practice not work out, cultural factors are involved. When bringing someone into the business organisation, information technology helps to have a clear definition of the existing culture and to be able to articulate the desired culture if change is needed. Just so is information technology possible to assess an individual to make up one's mind their potential cultural affect on the organization.
The civilization framework adult past Spencer Stuart directly connects individuals to the civilization past using the same language to describe both organizational culture and the personal styles of individual (run into box-out).
Diagnosing civilisation helps de-hazard recruitment decisions
An organization's culture can support or undermine its business strategy. Nosotros assistance clients assess the alignment of civilisation and strategy, plant a target culture and evaluate the degree to which executives are likely to fit with, suit to and shape culture.
Our framework for assessing civilization is rooted in the insight that each organisation and each individual must accost the inherent tension betwixt two critical dimensions of organizational dynamics:
- Attitude toward people, from independence to interdependence
- Attitude toward change, from flexibility to stability
Applying this central insight, we have identified 8 primary and universal styles, which can be used to diagnose highly complex and diverse behavioral patterns in a culture and sympathize how an individual executive is likely to marshal with that culture.
Each style represents a distinct and valid way to view the world, solve bug and be successful. While no single manner can fully draw a culture or personal way, private styles and organizational cultures tend to be more than heavily weighted in two to three styles that reverberate their orientation toward people and change.
For more than information on Spencer Stuart'due south arroyo, read 'The Leader'due south Guide to Corporate Culture', i of HBR'due south 10 Must Reads of 2019.
Conclusion
Family businesses are facing the most turbulent, confusing catamenia in generations. They must brand sure that ane of their sources of competitive advantage — their culture — does not get a liability. During a time of alter it is vital that a company's culture remains aligned to its strategy. Failure to practise and then will nigh certainly result in underperformance.
With the assistance of a elementary only robust framework, it is now possible for whatsoever family business organization to define its existing culture, identify changes it may wish to make and measure progress towards a redefined, target culture.
Are y'all comfortable that you understand your culture sufficiently well to be certain that it is fully aligned with the direction of your business concern?
We are grateful for the following leaders who contributed generously to our research with their time and insight:
| Alain Bejjani Group CEO Majid Al Futtaim Holding | Juan March* CEO Banca March | |
| Mohammed K.A. Al-Faisal* President Al Faisaliah Grouping Belongings | Mads Nipper CEO Grundfos | |
| Thomas Fischer* Chairman Isle of man & Hummel | Torben Østergaard-Nielsen* CEOl United Shipping and Trading Company | |
| Charlotte Korsager Winther Head of Communications THE VELUX FOUNDATIONS | Mohsen Sohi CEO Freudenberg SE | |
| Alexander Krautkrämer* CEO Bericap |
* Shareholder
Source: https://www.spencerstuart.com/research-and-insight/culture-in-family-business
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