Family Business Culture and Why It Matters

One of the ways that a family owned business – of any size – differs from other businesses is that the values and habits of that family tend to influence the business as a whole. The family business culture that pervades it affects the company’s mission, values, productivity, profit, community relations, and even employee morale. Many people who work in a family business – even run a family business – are not aware of its culture. That doesn’t change the fact that culture is extremely important. Not understanding your company’s family business culture will put you at a real disadvantage when the time for a transition approaches.

Types of Family Business Culture

Every family business is unique, but that doesn’t mean that we can’t find commonalities among them. W. Gibb Dyer of the Family Firm Institute identified four types of family business cultures he had observed in family businesses. Each of these has distinct features. They are:

The Paternalistic Culture

As the name implies, paternalistic culture places a tremendous amount of importance on the leader of the company and the family itself. Businesses with a paternalistic culture tend to value and reinforce the internal hierarchy. These can easily turn into “Father Knows Best” situations where the family leader’s opinions carry tremendous weight and everyone else is expected to fall in line. A paternalistic culture elevates members of the family over other workers. The family’s legacy is considered highly important and associated with individual family leaders.

The strengths of a paternalistic culture are that decisions can be made quickly if they need to be. Everyone looks to the leaders of the company for answers, and everyone knows who those people are. Because the “head of the family” is such an important figure, however, transitions between generations can be rough, especially if successors do not have the same talent or charisma. Micromanaging can be a problem within this culture too.

The Laissez-faire Culture

The laissez-faire culture is less hierarchical than a paternalistic one and allows for workers who aren’t family to have more input and power within the organization. Top-down leadership and micromanaging are less of an issue here. The family is still central to the business in this kind of culture, however, and family values are expected to be promoted and respected.

The Professional Culture

This culture is common when a family has run the business for multiple generations and then turns over management to unrelated professionals. With this transition, the values of the family take on less prominence as do family members who remain with the business. It’s easier for motivated employees to get ahead in a professional business culture, as the outside leadership will reward actions that improve the bottom line. However, this culture will often lose sight of what made the family business unique in the first place: its family values. Also, when outsiders are brought in to shore up the business, employees who are loyal to the family can feel alienated, disrespected, and brushed aside.

The Participative Culture

This type of culture, a totally egalitarian one, is rare in family businesses. In a participative culture, family members and employees work together to advance the business in a collaborative way without the hierarchy of the paternalistic culture. Family members are not considered above employees or more important, and employees are encouraged to give their opinions and offer solutions to problems. Employee morale tends to be high in this culture as long as the company is successful. It can take a long time to make decisions, however, because of the lack of a central leader.

Why Is Family Business Culture Important?

It’s always wise to know what factors are at work in your company. What many fail to realize is how pervasive family business culture is. Leadership, values, decision making, employee opportunity and moral, and even productivity and profitability are directly affected by company culture. When you identify what your company’s culture is, it will be easier to identify its leadership style and see strengths and weaknesses.

One caveat, however: a company’s family business culture does not stay the same forever. A paternalistic culture may morph over time into a professional culture, especially if the company goes through a crisis that requires involving outside help. Younger generations may not have the same values as older generations or the same leadership characteristics. They might not inspire the same loyalty from staff. Many things can force a change in the culture over the years.

Examining a company’s family business culture will bring hidden rules to light. These rules may be about who is allowed to make decisions and who isn’t, what values the company embraces, or what the roles of family members are relative to each other and employees. Culture affects communication styles, rules about dress and social interactions in the workplace, marketing and branding, implementation of technology, training and mentoring, pay and advancement opportunities, customer service, and even what ideas are allowed to be expressed and debated.

Business owners who don’t know what kind of culture their companies have are, in a sense, flying blind. To better learn what your company’s strengths and weaknesses are, try to examine it with a view towards its family business culture. It’s often better to do this with people who are not also enmeshed in the business because they will be able to be more objective. If you would like assistance with this, contact Prometis Partners. We would be glad to help you identify your company’s family business culture and discuss with you how it might impact a transition in leadership.

 

Vincent Mastrovito

Vincent Mastrovito

vincent@prometispartners.com
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503

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