Family firms possess unique advantages which can give them the edge in today’s turbulent business climate, according to a London Business School expert.
Nigel Nicholson, Professor of Organisational Behaviour, London Business School, says that despite popular misconceptions, family-owned firms are uniquely endowed with particular strengths which other businesses could learn from.
“A number of myths tend to be associated with family firms, emotional overspill or family feuds for example, but this is just not true,” Professor Nicholson argues. “There are many family firms that are powerful, adaptive and ethical as businesses, owing to their smart use of all that is best in the family.”
Succession, conflict, networks and governance are just some of the areas in a family firm that present opportunities which other businesses could benefit from, says Professor Nicholson.
“Succession offers the chance to blend and introduce new perspectives with the old through a single unified family commitment,” Professor Nicholson explains.
“A change between generations doesn’t have to be a killer speed bump. All firms face what is called “the liability of newness” and family firms are no more vulnerable than others, if they manage succession intelligently.”
Extending and professionalising the family also needs to be taken slowly and sensibly so that the firm benefits, Professor Nicholson urges.
“Entertaining different perspectives without fear of disintegration is a key strength of the family firm. New employees need to understand the power of the family culture pervading all the hearts and minds in the firm. Likewise for non-family firms – a general family feeling within the culture is what has given many of the best entrepreneurial firms their cohesive power, and helped them to mature into the best big businesses.
“Employees are held together by the confidence that bonds of love give them in a family firm,” says Professor Nicholson. “There is good conflict and bad conflict. Family firms can have more of both! But personal conflicts can be avoided by good governance.”
Governance is more complicated in family firms than other types, but can be readily crafted to ensure the family speaks with one voice, Professor Nicholson explains.
“Selection decisions are made according to professional standards, and strategic decisions are guided by the explicit and shared goals of the business. These include a powerful sense of social responsibility and principled relationship with the wider communities and societies they are part of,” Professor Nicholson continues.
“The best family firms are often very quick, open-minded, and pragmatic when it comes to making decisions and taking action. This is because they know who they are and they know what they want. They are embedded in strong and enduring networks with their stakeholders and are able to make difficult decisions with confidence.
“In every firm, corporate culture is the only sustainable and inimitable source of competitive advantage that you can have.”
Nigel Nicholson, Professor of Organisational Behaviour, teaches on London Business School’s new Executive Education programme ‘The Sustainable Family Business’. More information.