The success of a family-owned business is defined by relationships – relationships with employees, vendors, customers and family. Subjectively, families attribute their relationships on their family values. estate planner’s documents should reflect these family values. Frequently asked is the question of whether family values influence the success of a family business, and if so how?
Now comes new research from the Family Firm Institute on how core values shape family business behavior, which is outlined in the February 17, 2021 FFI Practitioner by Guido Corbetta and Carlo Salvato ,both at Bocconi University in Milan, Italy. Here is a quick summary of their findings.
The unique behavior of successful family businesses has five dimensions, namely:
· Family control and influence,
· Identification of family members with the business,
· Strong binding social ties both in and out of the business,
· Intense emotional attachments by the family to the business, and
· Constant renewal of family bonds across multi-generational succession.
MORE FOR YOU
These values, and their associated behaviors, make a family business successful when the result is an openness to change (grounded on independence and freedom of choice), self-enhancement of owner-managers (through achievements and power), self-transcendence (by prioritizing the interest of others over yourself) and conservation ( through tradition, conformity and security). All of these are necessary for success, but any one outbalancing the others can lead to failure.
What this means for family-owned businesses is that, being self-aware of their shared values, and their behaviors, enables them to take advantage of the strengths and avoid the weaknesses of a family business. For example, when describing their values on the family business web site, there is a risk that the public will perceive this as mere window dressing. When, in fact, a better description of how shared values, and the resulting behaviors, based on these shared relationships is a shared advantage to the business, customers and vendors.
For estate planners and other advisors, being aware of these value-based behaviors, and making the family aware of them also, means that they can better help balance the desire of the family members towards openness to change, self-enhancement, self-transcendence, and conservation. Inherently, estate planners lean more towards conservation, by protecting assets from mismanagement and taxes, which may stifle change and self enhancement.