Ensuring Continuity In Family Firms

The experience of family firms suggests that cultures do indeed change as new leadership takes over.

Other articles in this series illustrate four types of cultures found in family firms. While not every family firm may fit exactly the patterns of assumptions outlined, these articles have nonetheless categorized family firms according to four patterns. The paternalistic pattern is the trait most commonly found among family firms, particularly among first generation enterprises, whereas firms with participative and laissez-faire cultures are less common. However, in succeeding generations paternalistic family firms experience culture change, and a large proportion transform into professional cultures.

It seems that in order for family firms to transfer leadership to the next generation successfully, the paternalistic culture must evolve into one of the other three cultural patterns. Paternalistic cultures do not prepare the next generation well for leadership responsibilities and give them little chance to develop their leadership skills. The experience of family firms suggests that cultures do indeed change as new leadership takes over.

Change Management

All cultural patterns bring their own set of problems and challenges for management, and they may need to change in order to meet new conditions in the external environment, in the business, or in the owning family. For example, family firms that face an increasingly turbulent environment often need to foster assumptions of the participative culture in order to respond quickly to changes, develop new ideas, and improve decision making. Companies experiencing the negative effects of nepotism may need to move to professional management. Family firms experiencing rapid growth generally must delegate authority and to non-family employees, thus becoming more laissez-faire in nature.

At some point in time, most leaders of family firms are faced with questions: How do I change the culture of my business to make it more effective? The answer to this question can be threatening, because leaders of family firms often must change their own assumptions and behaviours. The experience of many family firms is that such assumptions change only when there is a major crisis in the firm. However, if the leaders wait for a crisis to occur before they begin to change, the outcome is generally not favourable either for the family or for the business.

Conclusion

Despite this rather pessimistic assessment, there are some actions that leaders of family firms can take to initiate culture change. These activities can include analyzing the culture and planning for change, changing the assumptions of the leaders, or developing new leadership through the use of hybrids and outsiders. The planned change approach represents a method for changing the culture incrementally, while the other two approaches represent more drastic remedies where change is more abrupt. In any case, it is difficult to change the culture of the organization, and to attempt any of the activities that have been described in this series of articles requires leadership that is committed to change.



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 Laissez-Faire Culture in Family Firms

The Participative Culture in Famiy Firms

The Professional Culture in Family Firms

George Tanewski is Research Fellow in the AXA Australia Family Business Research Unit at Monash University. Dr Tanewski writes extensively on family business issues and also sits on the board of a prominent Melbourne family business. For further information please contact George Tanewski on 61-3-9903-2388 or george.tanewski@buseco.monash.edu.au
First published: 31 July 2001.
Last updated: 5 October 2005.