This awareness comes from an understanding of issues relating to family and organisational cultures, the dynamics of families in business, the overlap between business and socio-familial systems, and from an appreciation of the different perspective’s from which stakeholders view the family and the enterprise.
During the succession process, specific individuals (e.g. owners, active family members, successors) and different systems (i.e. family & business) are involved in a time-space configuration. Life cycle and systems theories are useful frameworks for understanding this configuration. Life cycle generational changes are at the heart of any progression from first-to-second generation, and eventually from second-to-third, and so on. Each transition has its own dynamics which need to be understood and treated accordingly. In the following paragraphs four models are reviewed including:
The Life Cycle of the IndividualAll persons go through a cycle of birth, maturity, decline and death. According to a number of eminent authors such as Sigmund Freud and Erik Erikson individual life cycles unfold in stages and associated with each developmental phase are critical tasks which must be met and mastered at the proper time and in the appropriate sequence.
Erik Erikson, a US psychoanalyst, proposed an eight-stage psychosocial theory of human life cycle development. Within this model each phase is associated with critical psychosocial tasks that an individual has to surmount in order to be fully prepared for a subsequent period of development. The psychosocial tasks of Erikson are as follows:
- During the first stage of development (i.e. 0 to 12 months), the first psychosocial task concerns achievement of basic trust in one’s self and others, as well as drive and hope. Failure to negotiate this stage culminates in varying degrees of mistrust.
- In the second year of life, the principle task is developing self-control, will power and a lasting sense of autonomy. However, shaming and loss of self-esteem lead to a pervasive sense of shame and doubt.
- The critical task of the third stage (3 to 6 years of age) is the development of direction and purpose.
- During the primary school years, children acquire a sense of industry, method and competence.
- By the end of adolescence, teenagers should have developed a sense of identity, devotion and fidelity.
- For young adults, the task is to achieve true intimacy with another person.
- Adulthood sets the stage for laying the foundations for the next generation: being productive and caring rather than stagnating.
- The final phase of the human life cycle involves the attainment of wisdom, mature dignity and a sense of integrity through an acceptance of one’s life. Failure to meet the challenges associated with this period almost inevitably leads to a sense of despair and belief that one has wasted one’s life.
Organisational Life Cycle ModelsLife cycle theory can been used to help understand how organizations pass through predictable transitional stages of development. These stages are sequential, hierarchical and involve varied organisational activities and structures. It has been argued that, while there are a number of different life cycle models based on different organisational phenomena such as structural and environmental factors, all models indicate that firms pass through similar development stages.
In line with the life cycle perspective, Greiner proposes a five-phase
evolution-crisis-revolution model in which an organization’s development is characterised by discrete, standardised stages of prolonged steady growth, followed by periods of internal turmoil. Each stage of growth creates its own crisis and its resolution initiates a new evolutionary phase.
For Greiner, each development phase incorporates two facets which he describes as evolution and revolution. Each evolution sets the stage for subsequent revolution.
The ways in which each family business owner handles each crisis will influence or determine how a firm negotiates and moves into a subsequent stage of development. Like all models, progression into each phase is not automatic, and stagnation or non-survival of the enterprise is possible at any point.
Family Business Life Cycle ModelsDespite the limitations associated with organization life cycle models, family business authors have adopted similar models by incorporating the family system and other factors into the overall framework. In this way, organisational development has been linked with generation of ownership, stage of life of important family members, the family system, and different types of organisational control systems.
Gersick and his associates provide a very useful conceptualisation of a family business life cycle model. This model describes the developments relating to three spheres of influences: family, business and ownership that together affect a family business. Briefly, Gersick and colleagues take a three-dimensional developmental view of these three spheres of influence. For instance, the developmental stages of the business involve start up, expansion/formalisation, and maturity. Although the Gersick model provides a development perspective for family business growth, this conceptualisation, like all others, is best viewed within an overall systems framework.
Systems Theory: A PerspectiveSystems theory owes its origins principally to Von Bertalanffy’s general systems theory and Weiner’s cybernetics (Hayes, 1991). Since its inception almost 40 years ago, a variety of models of family systems thinking have emerged.
Focus on the whole rather than partsSystems theory contends that individuals do not live in isolation, but rather coexist within a socio-cultural context and are best understood by exploring their patterns of relating to others and their environment. The notion of Gestalt or holism is pivotal. That is, the adviser focuses on the whole system including the various structures and divisions of an enterprise and the various facets of the family rather than just the owner. The whole system comprises not only the individuals, but also the communications and relationships between the members.
Systems theory views the family as a dynamically-stable, structured, organised, and self-regulating system. Dynamic stability, which does not mean a steady state, is maintained by the development of structures such as hierarchies and rules for communicating and relating between family members (Hayes, 1991). The same can be said about a business.
The notion of circular causalityAnother central tenet is that of circular causality where every member influences and in turn is influenced by others. This principle can be contrasted with that of linear causality or one-way cause–effect relationships: where A causes –> B. In contrast to systems theory, linear causal principles are a feature of the life cycle models described in earlier paragraphs.
The different schools of thoughtSystems theory involves a number of schools of thought including Structural, Strategic, and Systemic approaches. These schools provide a unique, but at times overlapping way of viewing, working with, and understanding families in business.
Structural ApproachesSalvadore Minuchin has been regarded as the pioneer in the use of structural systems theory. Structural theory suggests that all human social behaviour is a function of the relations that exist between the whole family system and its subsystems: marital, parental, and sibling subsystems.
The importance of patterns of communicatingWhen applied to family businesses, a systems perspective focuses on the interconnectedness of relationships, behaviour and events. The family business is viewed as a dynamic system that co-evolves with its environment. Thus, the family and business are in a constant state of fluctuation as they evolve through their respective life cycles through time and space.
The structural framework purports that over time families evolve structures involving rules, codes, and patterns of interactions and behaviour in order to maintain family harmony and particular roles or functions such as the breadwinner, spouse, manager of the business. These rules are usually unspoken and based on the family’s culture.
The conception of feedback within familiesFamilies and businesses develop structures or rules to maintain stability, order and predicability, as well as governing the flow of information and communication between members. Families often adopt particular patterns of interacting and communicating in order to maintain homeostasis, that is, balance, harmony or stability in the face of change or stress from both within and outside the family.
For example, over involvement by a spouse might be counterbalanced by under involvement by the partner. This mechanism is referred to as feedback and is designed to keep the system in check.
Family subsystemsSimilar to divisions of a business, subsystems are units of a family that share common elements such as generation, gender, interests, duties, functions, goals and aspirations. Accordingly, individuals can belong to multiple subsystems and have multiple roles, relationships and functions.
Parents, children, females and males comprise the various subsystems that make up the family system. Structural theory holds that changes in one subsystem can resonate across other subsystems. Dysfunction occurs when subsystems are either disengaged or enmeshed, and when hierarchies, boundaries and rules of interacting are unclear. These constructs have been used to describe the level of organisation and styles of interacting within a family.
The organisation of familiesRules that indicate who does what with whom, when and where are referred to as boundaries. Boundaries occur within subsystems, around subsystems, and between the family and business and the outside world. Characteristically, functional families have clearly defined boundaries between generations (e.g. rules of participation within the family) and subsystems (e.g. marital and child subsystems). Within these boundaries, subsystems have optional autonomy and contact with other subsystems. The balance of which is determined by the type and developmental stage of each subsystem.
In contrast, dysfunctional families are characterised by boundaries that are either too rigid or too diffuse. When boundaries are too diffuse, information flows too readily between subsystems and consequently family members can be regarded as extremely close. In other words, interactions across subsystems become enmeshed as might be the case when a retired family business owner continually interferes in the management decisions of his daughter who has just taken over the helm. Enmeshment, whilst it might represent a sense of belonging, culminates in feelings of lack of autonomy, individuation and independence.
When boundaries are too rigid, subsystems display too much autonomy and isolation from sources of support and control. In this situation, the subsystem can be described as disengaged. An example of this situation is when an owner spends most of his life at work and remains peripheral to family life. These two extreme patterns of interacting (i.e. enmeshment versus disengagement) can culminate in family and business problems.
Therefore, within the structural framework, problematic behaviours (e.g. frequent arguing between family members) are viewed as the result of a dysfunctional family system. No single individual is at fault or to blame. That is, certain types of family arrangements are linked to the development and maintenance of inappropriate behaviours.
Other characteristics of the structural perspective involve:
- Hierarchies in which each subsystem is organised according to its level of authority or rules of power. For example, the parental subsystem is assumed to have a higher level of executive function and to be at a more powerful level in the hierarchy than a young sibling subsystem. Obviously, in a family business this will depend on the stage of development of individuals.
- Alliances which occur when two or more individuals or subsystems form together to co-operate on tasks either temporarily or permanently. For example, a father may align with a daughter to work on ways of marketing their products.
- Coalitions, in contrast, describe a pattern of interaction that occurs when two members form an alliance against a third person. This type of alliance is also referred to as a triangle, and can pose particular threats or difficulties when alliances are cross generational. Coalitions disrupt family hierarchies and can be indicative of family dysfunction. For instance, an alliance might be formed between a father and son who work towards undermining the authority of an uncle who is also a significant shareholder and active member in the business.
Strategic ApproachesIn contrast, the strategic model focuses on the ways in which family members interact with each other. The strategic framework also holds that the ways a family views problems and the repetitive behaviours used by family members to solve a particular problem can in reality serve to maintain the problem.
Systemic ApproachesThe systemic framework, like the structural and strategic models, has its roots in general systems theory, communication theory and cybernetics. The systemic approach views the behaviours of any members of the family as influencing, rather than causing, the behaviours of another. Thus, inappropriate behaviours are regarded as contributing to interpersonal patterns that tend to perpetuate themselves, and are peculiar to the family system in which they occur. Behavior is considered to be located in these self-perpetuating cyclical patterns of interactions.