In the article, The Paternalistic Culture in Family Firms, the paternalistic pattern, which is probably the most common culture pattern in family firms, was discussed. In this pattern relationships are arranged hierarchically and leaders retain all power, authority, and make all the key decisions. This article identifies another common cultural pattern among family businesses, the laissez-faire culture.
Shortcomings of the paternalistic cultural pattern are that the business often relies too much on the leader for direction, there is a neglect of training and development for the next generation, and that this kind of culture generally is best able to succeed when the business is small and the environment is fairly stable.
Another cultural pattern that is quite common among family businesses is the laissez-faire culture. This pattern is similar to the paternalistic pattern in many ways. Relationships are hierarchical, family members are afforded preferential treatment, and employees are expected to achieve the family’s goals. Moreover, the orientations of the paternalistic and laissez-faire cultures toward the environment are similar. Where they differ is in their assumptions about human nature and the nature of truth.
Trustworthiness and ResponsibilityIn the laissez-faire culture, employees are seen as being trustworthy and they are given responsibility to make decisions. While the ultimate truths regarding the firm’s mission and goals rest in the hands of the family, employees are given a great deal of authority and discretion to determine the means of achieving those goals. As a result the laissez-faire firm is quite unlike the paternalistic firm, where the family determines both the ends and the means.
The laissez-faire culture is more amenable to business growth and individual creativity than the paternalistic pattern, since the family delegates a great deal of responsibility to employees. Such a pattern is appropriate if the family is not able or willing to oversee all the day-to-day activities of the business, and the business requires employees to use their initiative and change quickly in order to meet new conditions.
The major danger of the laissez-faire culture is that employees may not act consistently with the family’s basic values and assumptions. Without appropriate review, employees working in a laissez-faire culture can lose sight of the company’s goals and the business can run out of control.
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 Paternalistic Culture in Family Firms
The Participative Culture in Famiy Firms
The Professional Culture in Family Firms
Ensuring Continuity in Family Firms