"Successful family businesses tend to have the family's values and culture deeply embedded into their business strategies, policies and practices…. How well the business performs can be directly tied to how well the leadership and the people work together. Having a strong and well-defined organizational culture produces high performing businesses."
- Don Schwerzler, Founder of Family Business Institute
Leading family business expert Mr. Don Schwerzler asserts the organizational culture of a family business plays an important role in determining its success. Culture affects employees’ morale and productivity as well as their commitment to the business’s mission and values.
Define and Understand Your Family Business Culture
Family businesses must define and implement their culture to prepare for industry changes to ensure success beyond the first generation. If properly nurtured, the culture will internally adapt over time to respond to industry and generational shifts.
To understand their own culture, family business leaders should examine their values, norms, and traditions. Recognizing those attributes will help leaders to apply the family culture to the business’s day-to-day operations.
- Values and shared ethics are important ideals on which the family business’s mission, policies, and practices will be modeled. They may not be situation-specific, but they set the overall tone of how the business is run.
- Norms are established by the leaders’ perspectives and serve as rules of culture. They may be spoken or unspoken, but effectively set standards of employee behavior. These constraints additionally act as a guide in problem solving and in making certain decisions, such as hiring and firing.
- Traditions are passed down from the family business leaders to future generations. They might set standards, for example, for how much importance is placed on the past methods or technologies versus those in use in the present or those likely to be used in the future; they might set standards for how relationships are formed and strengthened in the workplace.
Each family business must develop its own expectations about the level of conformity required for its values, norms, and traditions. Family business leaders may want to determine whether total allegiance is required, or to what extent divergence is allowed.
Despite the potential for variance in organizational culture, family businesses are perceived as less institutional and more personality-based than comparable non-family businesses. Customers may expect to be a face and a name rather than a number because of the business’s size or its long-lasting family member employees.
Emphasis on family culture promotes long-term strategic thinking and creates stability though generational transitions.
The Competitive Edge of a Family Business
The underlying value of permanence in a family business can be a competitive edge. Cultural consistency can be a significant advantage and a competitive differentiator that comes at little cost to the family business.
If superior organizational culture is maintained, loyalty, both inside and outside the business, will be generated. A focus on resilience will lead to profits and increased financial performance. It’s important to remember that culture directly impacts key decisions and has the ability to strengthen the family business.