Every family should take time to identify and discuss what it values as a family and a business. Beyond this, it is also important for family members to make a deliberate effort to know and understand the personal values of all the members who are contributing to the business. Taking a genuine interest in understanding values at each of these levels and supporting them can build trust, unite family members, and increase the quality of decisions that are made.
While there may be differences in how each family articulates its values, it is essential that the values serve to support the business and family:
1.Business – It is important the needs of the business be met first. Ultimately, when the business thrives it is better equipped to meet the needs of the family, employees, customers, and other stakeholders. Decisions must strongly consider what is in the best interest of the business and act accordingly.
2.Family – Family members must work diligently to foster an environment that encourages its members to value the family as a unit and individual family members. Trust is a central component to meaningful relationships and, if a family is to develop healthy relationships among members, it is imperative the trust is built with a genuine concern for the wellbeing of the family unit and each member.
“The idea of passing on a value system is fundamental to the most successful business-owning families… They may include integrity, persistence, openness, respect for and caring about people, trust with customers and suppliers, and a belief in the entrepreneurial spirit. As the values are seen to really make a difference and serve the business, enhancing its success, they bring strength back to the family because it can use the business as a mirror and as a reminder that the family’s values really do have merit”
(Ward J. L., 2004, pp. 92-93).
Enhance family emotional intelligence
“Family emotional intelligence aims to improve the ability of individual family members to know their feelings in order to use them appropriately to make decisions. It also enables family members to manage their emotional life without being hijacked by patterns in their family of origin and increases empathy for others’ emotions” (Poza, 2010, p. 37).
Daniel Goleman has written many articles and books on the theory of emotional intelligence. It is a useful tool that facilitates the development of practical skills needed to work more effectively with others. The theory gained traction when Goleman’s research compared emotional intelligence to other professional competencies such as technical skills and intelligence quotient. In his studies, Goleman found and argued emotional intelligence was a significant factor contributing to the professional success of high caliber executives - who were the primary subjects of his initial research. He further argued that technical skills and intelligence quotient were critical, but were also merely “threshold capabilities” and emotional intelligence was two times more important than the others at all levels of professional employment (Goleman, 2005).
The five primary components to emotional intelligence are self-awareness, self-regulation, motivation, empathy, and social skill. We have observed that families who work to develop their emotional intelligence, with or without formal knowledge of the theory, tend to work well together and experience more success in business.
It is our hope that families come to value emotional intelligence and work at developing it to enhance their relationships and grow a strong business. There are numerous assessment instruments that can be purchased and used to measure emotional intelligence, but a very practical and inexpensive place to start is to pick up any one of Daniel Goleman’s articles or books on the topic and read it as a family.
Develop a governance mechanism
“A business that is well-governed is free to work toward the highest and best objectives of business – maximizing profit, improving strategy, creating jobs, fostering employee development and serving all stakeholders, including shareholders, employees, customers, suppliers and the community… [Yet] many business-owning families drift unconsciously into haphazard or destructive patterns of decision-making and communicating that can threaten and even destroy those shared interests” (Aronoff & Ward, 1996, p. 1).
Family business governance is concerned with the manner in which decisions are made. It is imperative for families to give significant thought to how they will make decisions and the values that will guide their decisions. A strong governance system acknowledges there are distinct characteristics of the family and the business and where particular boundaries exist. This requires an understanding that there are areas in which the family and the business are independent of each other and areas in which they are interdependent. We have observed an underlying theme that is central to every family’s philosophy of governance – family first or business first.
Based on our observations, we believe families who have the capacity to place the needs of the business first when making decisions are in a position of strength. We are not suggesting every decision has to be a zero sum game in which one of the two must win or lose. The primary point is when the needs of the business come first, the business has an enhanced capacity to thrive. When decisions favor the family, the business may become vulnerable which can also put the family at risk.
Others argue there is no right or wrong answer to which philosophy is best. Regardless of the position, it is imperative the family is in agreement regarding which philosophy they will govern by or which philosophy will be applied in various circumstances. There are advantages and disadvantages to both. Family Business Governance: Maximizing Family and Business Potential by Craig E. Aronoff and John L. Ward (1996) is a tested resource that can provide further insight and strategies for managing some of these complex challenges families encounter when developing governance systems.
A Note from the Authors:
This is the third article of a four-part series on the importance of healthy family relationships within family-owned restoration firms. Part one introduced the nature of family-owned businesses; Part two discussed the impact relational health has on firm performance and strategies for assessing relational development needs. Next month, the conversation ends with two vital strategies for healthy family-owned restoration firms.