In the article, Culture and Continuity in Family Firms, culture was defined as a cumulative set of assumptions that a group holds, and the core of any culture is a pattern of interlocking assumptions that creates a unique belief system. Leaders of family firms use very different assumptions in operating their businesses.
For example, owners of family firms uniquely define the nature of their relationships with others and make certain assumptions about human nature, the nature of truth, the environment, and the nature of human activity.
Four kinds of family business culture have been observed. On the one side of the spectrum, the paternalistic pattern is founded on assumptions that emphasize personal and charismatic characteristics of the founder and family, while on the opposite side of the spectrum the professional pattern emphasizes impersonal rules as the means of getting work done. This article discusses the paternalistic pattern and identifies some strengths and weaknesses.
Hierarchical RelationshipsThe paternalistic pattern is probably the most common culture in family firms. In this pattern relationships are arranged hierarchically. The leaders, who are family members, retain all power and authority and make all the key decisions. The family distrusts outsiders and closely supervises the employees. Moreover, family members are afforded preferential treatment. Employees are assumed to have a “doing” orientation, that is, they are supposed to carry out the family’s orders without question. The stance towards the environment tends to be proactive in developing new markets or products. However, the family may also create a particular market niche and prefer to stay within it.
The paternalistic firm also seems to have one of two orientations around the time dimension. Some paternalistic firms tend to be oriented to the past. Carrying on the founder’s and family’s legacy is the primary aim of the owning family. Thus, timeworn traditions are at the centre of the culture. Other paternalistic firms tend to be very present oriented. Although they maintain some traditions, they focus on current problems and needs and quickly change to meet new threats.
The paternalistic pattern tends to work well when the leader of the family business has the necessary expertise and the information needed to manage all aspects of the business. In this kind of culture, there is little uncertainty regarding who makes the decisions. Thus, decisions can be made quickly and resources can be mobilized to meet competitive threats. Since the leaders in a paternalistic culture are often highly charismatic figures, there tends to be high commitment on the part of the followers to carry out the leader’s vision. This commitment has a positive effect when a business is small and struggling for survival.
ConclusionA number of potential problems are associated with paternalistic culture. First, the business often relies too much on the leader for direction. Hence, the firm is in jeopardy if the leader dies or is incapacitated. Second, training and development for the next generation are often neglected. Third, the leader may not be able to manage ambiguity or complexity as the business grows or as the environment becomes turbulent. Fourth, since the leader makes all key decisions, many members of the family business may have feelings of incompetence or powerlessness. Given these potential problems, the paternalistic culture generally is best able to succeed when the business is small and the environment is fairly stable. As the firm grows, the leader’s family matures, and as the environment becomes more volatile, the family business culture often must evolve into a new cultural pattern.
This article has been extracted and modified from Dyer, W.G. (1996). Culture and continuity in family firms. "The Best of Family Business Review (FBR): A Celebration." Family Firm Institute, Inc. Boston, USA. Other articles in this series:Culture and Continuity in Family Firms
The Laissez-Faire Culture in Family Firms
The Participative Culture in Famiy Firms
The Professional Culture in Family Firms
Ensuring Continuity in Family Firms