Flaunting the family values

“As I look back on my life’s work, I’m probably most proud of having helped to create a company that by virtue of its values, practices and success has had a tremendous impact on the way companies are managed around the world.  And I’m particularly proud that I am leaving behind an organisation that can live as a role model after I am gone.”

- William R Hewlett, co-founder, Hewlett-Packard.

For many family businesses, family values are a key competitive strength. While all businesses have values built around integrity, quality and customers – without which you wouldn’t have a business – family businesses have distinctive values that set them apart. They tend to have stronger 'people values' than non-family firms and can put customers and employees ahead of profits. Sam Walton, the founder of Wal-Mart, controlled by the Walton family, claimed to put the first focus on "concern and respect" for the people.  Nordstrom's four generation department store company's values are based on the “goodness of people”. These values are seen as giving them a competitive advantage.

One study done out of the IESE Business School in Spain analysed the websites of the 100 largest non-family owned corporations listed in the Fortune 500 company rankings and the websites of 100 of the world’s largest family owned businesses. From the 200 companies, the researchers collected 832 values, 427 came from family owned firms. The values were ranked according to how often they were mentioned on the company website.

No surprises that the stated values of integrity, respect and customers were the three most mentioned for family and non-family companies. These are the foundations of any company. Indeed, without customers, you wouldn’t have a business.

However, the study found that the values for family companies included generosity, humility, communication and service. Generosity implies orientation towards others, something that goes beyond the self. Humility was defined as “letting one’s accomplishments speak for themselves.” All these are common traits for a sector where a family, as opposed to an individual, has created the business.

The researchers, Lucia Ceja and Josep Tapies, say these values are the drivers that give family businesses a competitive advantage.

“The survival of family owned firms depends on the ability to enter new markets and revitalise existing products and services, while keeping the best quality in their products and maintaining a spirit of service,’’ they write. “Third, having the family name on a brand gives family business leaders a sense of stewardship and responsibility toward their family and the society in which the company operates…By dedicating energy to achieving the highest quality standards in their products and services, as well as by being humble and generous, they are able to establish deep connections with other stakeholders, which often results in long term success and a competitive advantage that non-family organisations find hard to replicate.”

There are many examples of family business values. The Smorgon family dynasty developed its businesses around what it called the Smorgon Way. Many of the Smorgon businesses have followed it: two heads are better than one, so key issues require consultation and discussion; everyone has a right to be heard in a non-threatening environment and there is an expectation that the truth will be told. All underpinned by the following: our word is our bond; we will demonstrate a high level of personal integrity; we are committed to satisfying customer needs and we expect to grow and develop the business, which in turn will increase shareholder value.

John Ward, a professor of family enterprises at Kellogg School of Management,  says the values of family firms are more personal and connect more to employees.

“My research shows that non-family firms have more commercially oriented values; family firms have more community-oriented values," Ward writes. “The personal fundamental values typical to family firms also underpin the behaviours to succeed in the marketplace. For example, efficiency comes from discipline, frugality and hard work. Quality comes with empathy, reputation and sincerity. Innovation comes by curiosity, courage and tenacity.” 

Ward argues that these values puts them close to the market and makes them more adaptable to change.

But is that always the case? Some non-family executives, who have worked for family businesses, have said privately that the emphasis on long-standing employee relationships and family influence can result in inertia and risk avoidance where conflict and confronting difficult issues are avoided. This is one reason why change management in family businesses can be so difficult. No names, no pack drill but there are family businesses now struggling to adapt to a changing market. Asked how he went about change management in family businesses, one consultant told me: “With a baseball bat”.

Certainly family values give family business a strategic edge and longevity over nonfamily companies. The challenge is combining that with the need to create a company with the flexibility and skill base to compete in today’s market. 

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