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Values in Family-Owned Businesses
August 20, 2010
Written By: Michelle Clark, Ph.D.

One of the biggest challenges of a family business is managing competing values. The table below describes some of the competing values between the family system and the business system.  

In the family system, effort counts. For example, in a family, how hard a family member tries typically is more important than the quality of their performance.  Decisions about inheritance are often based on treating children equally. In a business system, performance counts and rewards are based on results. In a family business where one family member’s performance exceeds another’s, this can create values conflict around succession and compensation. For example, a savvy business succession strategy might be to center the highest percentage of business ownership with the most competent successor. A family inheritance strategy would normally be to divide assets equally among all children.
 
Differences Between Family and Business Values

Area
Family System
Business System
 
Goal
Development and support of family members
 
Profits, revenues, efficiency
Relationships
Deeply personal, of primary importance
 
Semi-personal or impersonal, of secondary importance
Rules
Informal, unwritten rules based on shared history
Written and formal rules, often with rewards and consequences written out
 
Evaluation
Support generally unconditional and based on who you are; effort counts
Support conditional on performance and results; employees can be promoted or fired
 
Succession
Caused by death, divorce, or illness
Caused by retirement, promotion, or departure
 
Authority
Based on family position or seniority; may be fluid and depend on situation
 
Based on formal position in organization hierarchy
Commitment
Lifelong and based on one’s identity in the family
 
Short-term; based on rewards received for employment

 
So, what are the strategies for dealing with values conflict in your family?
 
First, the more your organization can agree to family business policies in advance of the values conflict, the better. One example of planning in advance might be a family compensation policy that identifies how salary decisions are made and how raises are decided upon. Second, avoid demonizing family business members who protect the values of the business over the family or vice versa. Both the family and the business are important. People who identify and champion the values of either have something valuable to add to the conversation.
 
Always shoot for the win-win.

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