Since the 1980’s, scholars and practitioners have made significant strides in their efforts to advance our understanding of family businesses through scientific research, consulting, professional literature, and popular books. These efforts have brought about the awareness that family-owned businesses make significant contributions to the economic climate in most countries and the communities in which they serve. In the United States, family-owned businesses account for approximately 90 percent of incorporated businesses and employ 85 percent of the private sector (Astrachan & Carey, 1994). In addition, they account for 37 percent of the Fortune 500 companies and 60 percent of all publicly held companies (Bristow, 2000), among many other factors. Family-owned businesses can range from small community banks to large retailers and we encounter them in business and as consumers on a daily basis.
While much of what we have learned has been positive, research has also revealed some of the many challenges that are unique to family-owned businesses. For example, despite all the valuable contributions they make, most family-owned businesses do not survive beyond the first generation. Approximately 30 percent survive the first to second generational transition while the third and fourth generations transition at a rate of 12 percent and 4 percent, respectively (Ward, 1987).
Unraveling the reasons for such a drastic decline is an ongoing and complex undertaking that is mired in competing theories. Explanations and terminology will vary depending on the theories applied; however, at the end of the day there is strong evidence that suggests the potential for family business success can be greatly enhanced by one vital factor – healthy relationships (Eddleston & Kellermanns, 2007). Healthy relationships facilitate effective communication, decision-making, cross-generational cooperation, and conflict management among many other factors and are essential for sustaining family business success (Gersick, Davis, Marion, & Lansberg, 1997).
In this article we are going to discuss findings regarding the health of family relationships from a recent study on family business dynamics within the restoration industry (Avila, Jacobs, & Crosby, 2015). In addition, we are going to discuss the importance of healthy family relationships and strategies for building healthy relationships.
Finally we are going to address the importance of common values – the most important being that family members genuinely value people in a manner that promotes respect for the family unit, each other, and those they employ. Some of what will be presented in this article is supported by peer-reviewed research while other elements are anecdotal. Regardless, the latter is built upon our experience and is delivered with the hope and intent that it will resonate with the readers and inspire a desire to build families that are as strong as their restoration businesses.
Research suggests family firms run by families with healthy relationships experience more success in business (Eddleston & Kellermanns, 2007). While this is an interesting finding, this should not be the driving force behind cultivating healthy relationships among family members. Healthy relationships need to be cultivated because the family values them and they are good for the family. When healthy family relationships are a priority the family and the business reap the benefits.
Relationships within family-owned restoration firms (findings from a recent study)
A recent exploratory study examining family business dynamics in the restoration industry found that, overall, the relationships among family members of family-owned restoration firms appear healthy. There was a high level of value alignment among family members and family and business values appear to experience high levels of alignment as well. Most families reported that they agreed with strategic initiatives, felt the business has had a positive impact on their lives, and were willing to go above and beyond the call of duty to help the business be successful (Avila, Jacobs, & Crosby, 2015).
The chart on the following page shows the rating system, and results, from participants.
In addition to having elevated levels of value alignment and what appear to be healthy relationships, approximately 86.84 percent of respondents reported the current leadership wanted the business to remain in the family and 75.44 percent have already begun discussions with the upcoming generation about the future of the family business (Avila, Jacobs, & Crosby, 2015). While this appears to be good, the challenge is that research has produced an overwhelming amount of evidence that suggests most of these businesses will not survive or remain in the family despite having high levels of value alignment and the desire to maintain family ownership. It is our hope that this article will provide valuable insight to family-owned restoration firms and help them tackle challenges that prevent many families from achieving their desired business growth and ultimately, succession.
Scholars and practitioners still have not been able to precisely identify where the succession rate lands on the spectrum of being highly positive or negative, but we can say that family businesses are good for the economy (Poza, 2010) and families with healthy relationships perform better (Eddleston & Kellermanns, 2007). So based on what we do know, enhancing the health of family-owned businesses is a worthwhile pursuit. We can also conclude that, for the restoration industry, most family-owned firms appear to be enjoying some of the benefits associated with healthy family relationships as families are demonstrating care, involvement, support, and a desire to maintain family ownership across generations (Avila, Jacobs, & Crosby, 2015). Future studies should examine the possible correlations among these factors and the financial performance of family-owned businesses in the restoration industry.
We also know most of these families will experience challenges, many of which have the potential of having a devastating impact on their businesses. For example, challenges can range from a lack of interest, proper training, or competence to the inability of family members to effectively manage personal challenges, addictions, or relationships. Regardless of the challenge there is strong evidence that suggests healthy relationships among family members can equip family-owned firms with an enhanced capacity to effectively address these challenges, make decisions, deal with adversity, and achieve greater success in business.
A Note from the Authors:
This is the first article of a four-part series on the importance of healthy family relationships within family-owned restoration firms. Part one (December) introduces the nature of family-owned businesses and discusses findings from a recent study that examined various dynamics of family-owned restoration firms. Part two (January) discusses the impact relational health has on firm performance and strategies for assessing relational development needs. Part three (February) introduces strategies for developing healthy family relationships. Part four (March) advances the conversation regarding strategies for developing healthy family relationships and ends on two vital strategies that have contributed greatly to the success of many family-owed restoration firms.