May 2019 Newsletter – Family Business Culture

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Our topic for May 2019 has been understanding the different kinds of family business cultures and how culture affects how companies operate and transition to the next generation or into new ownership.

Family Business Culture

May 2019

One of the ways that a family owned business – of any size – differs from other businesses is that the values and habits of the family tend to influence the business as a whole. The culture the family creates while building and running their company pervades and 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.

Every family business is unique, but that doesn’t mean that we can’t find commonalities among them. There are many types of family business cultures, but four types particularly stand out. Each of these has distinct features as well as strengths and weaknesses.

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Exit Coach Radio Podcast

In this podcast Vincent talks about how important it is to work with families to understand the business culture at work in their companies. Many owners may be better off financially transitioning their companies to children or other family members than they would trying to sell them on the open market. They need the equity in order to retire and maintain their lifestyles, and mentoring and transitioning to family can be better for everyone involved.

When done right, transitioning to family members allows the entire family to create lasting legacies that will continue for as long as they want them to. That legacy will make a difference to family members, company employees, and even the larger community. It matters.  

Because family business culture has many different facets, it’s crucial to begin having these discussions early on, first individually and then in groups. Time passes quickly, and the younger generations may not be prepared for a transition. Talking to them and getting their perspectives will produce ideas and strategies for making the business work better now and in the future. A rule of thumb here is: Unspoken assumptions kill transitions. We cannot emphasize enough how crucial communication and understanding are for the exit planning process.

Click here to listen.

How Does Identifying the Family Business Culture Help Prevent Problems in Business Transfers?

As we know, knowledge is power.

Family businesses can be stronger than other businesses because the family members who own and run them have a greater commitment to each other and their business. There is also a built-in accountability in many family businesses because of pressure family members put on others to not fail or shame the business. That strength often translates to greater trust and better relationships with customers and even the larger community.

If owners do not understand the underlying culture of their companies and how their values influence even small decisions, they will not have what they need to make a smooth transfer of leadership or ownership. They can work with the culture, or they can beat their heads against a wall while trying to work against it. The second strategy leads to frustration and failure.

For example, if the owner of a business with a paternalistic culture understands how centered the power in his business is around certain family members within the hierarchy, he will know that he must train and educate the next generation for the roles and responsibilities that they will have. If he doesn’t, the business will flounder when he leaves. When problems occur, the entire company will look to those family members for answers. If they panic and cannot lead, the entire company will suffer.

If the owner intends on selling the company to a non-family member, there may be work to be done to shore up weaknesses that are a result of the family culture or to fill management positions with people who can help translate the culture to the new owner. Both family and employees need to understand the decision making structure at work before they can make modifications.

Outside of exit planning, knowing and understanding the culture at work will give owners and managers the tools they need to be better employers and run their companies more profitably. There’s simply no downside to understanding the family business culture of a company.

Prometis Partners would be happy to talk to you about the challenges your company is experiencing with its family business culture as well as any transitional planning you may be anticipating. Preparing the next generation of your family to take over key roles and responsibilities in your company is a process that can take years, so please allow for enough time before you are ready to retire or move on.


Vincent Mastrovito

Vincent Mastrovito

[email protected]
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503

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