MON 25TH SEP 2017

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Family Business Leadership Styles

18th February 2017 Wayne Rivers, Family Business Institute Inc

Which of the three 'paternalistic leadership styles' works WORST for family firms?

Leadership – that commonly used but nebulous term – is present to one degree or another in all family businesses. Here we shed light on which leadership variations are the most desirable in facilitating family business succession – as well as which is the worst.

First, a bit about leadership in general. The term itself is very difficult to define although there is no shortage of people trying to do so. Between the years 1986 and 1996, there were 17,800 articles published on leadership, and that number has surely increased in the time since. A quick search on Amazon reveals that they are 18,855 leadership books available. And every author has his unique take on what it is, what it does, what makes for the best leader, etc. For our purposes, let's use John Maxwell’s simple definition and say that “leadership = influence.”

Leadership

The scholarly article at hand identifies three types of leadership, all of which are paternalistic. The author states that paternalism is a defining characteristic of the family ownership model because “…paternalism is like the relationship between a father and daughter or father and son,” so the family leadership model is translated into the family business.

Paternalistic leadership is present in founder-led family businesses or in ones where a Generation Two (G2) sibling has assumed a role similar to the one established by her father. As family firms succeed into G3, G4, and beyond, there is less and less likelihood that one would find the same paternalistic leadership styles. Perhaps in the future as more family firms have female executives, academics may comment on maternalistic leadership styles!

What, in alphabetical order, are the three leadership styles?

  • Authoritarian:  The authoritarian paternalist asserts control and expects unquestioned obedience from subordinates.  
  • Benevolent:  The benevolent paternalist respects subordinates, cares for them, satisfies their individual feelings and needs, and provides them with support.  
  • Moral:  The moral paternalist leads with superior personal virtues and by example.

Two of the leadership styles are associated with successful intergenerational transition, and one is associated with detrimental succession outcomes. Can you guess which one that might be? You got it! Family business leaders who think they know best, make all decisions unilaterally, and think that the decisions they make on behalf of others are always best contribute to feelings of dissatisfaction and inertia among their successors.

They can be characterized as “judge and jury on everything" and tend to meddle in the affairs of even anointed successors. Authoritarian leadership may be acceptable or even desirable at some stage of a family company’s evolution, but when it comes to succession, authoritarians present many difficulties and make the job of continuing the family business and the founder’s legacy much more difficult.

What alternatives are available for family firms who are simultaneously interested in successful intergenerational transition AND have an authoritarian leader who may harm – consciously or subconsciously – the succession process?

1. Utilize a family business advisory board.

Boards which are comprised of one or more, in Leon Danco's words, “risk-taking peers” are able to look authoritarians in the eye with nothing to lose and give them blunt counsel. It's a very different dynamic when an authoritarian’s peer tells him to go jump in the lake rather than his daughter. A risk taking peer, ideally from a business larger, more complex, and more successful than the authoritarian’s, is a wonderful balance point between the generations who, while interested in the same long term goal, may propose dramatically different paths for getting there.

2. Hire nonfamily, professional management.

A professional business manager can serve as the bridge between senior and junior generations. Bridge managers should be somewhat younger than the senior generation but a bit older than the successors. In addition to being a management bridge, this executive can be a demographic bridge as well.

3. “Man up” (and this applies to women as well!).

Grow some courage and stand up to authoritarian behavior. One of the reasons authoritarians utilize this leadership style is that they may sense weakness among the next-generation. Standing up to an authoritarian, although he may not appreciate at the time, is about the only way to demonstrate that the next generation has the backbone and moxie that it takes to continue the senior generation leader’s success. Strong leaders appreciate and expect strength in their successors.

4. Walk away.

There are times when that most wonderful, essential quality for family business succession is missing, and if that’s the case, NextGen family members should have the courage to recognize the situation for what it is, put aside foolish hopes that “Mom and Dad will see the light if we just take them to one more seminar,” and find employment in a place where they can get their economic needs met without all the weeping and gnashing of teeth present in the family company. Oh, by the way, that wonderful, essential, often missing quality is REASONABLENESS. It’s awfully hard to reason with people who insist on behaving unreasonably!

In most contexts, the term paternalistic leadership tends is used in a derogatory way. However, paternalistic leadership doesn't have to be a negative and may be a great blessing if the senior generations’ hearts are in the right places. Irrespective of the leadership dynamics of the senior generation, it's incumbent on all stakeholders from all generations to come together and do the hard, sometimes dirty work necessary to assure succession planning bears fruit in the family business.

About the Author - Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success. 

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