The Importance Of Values In Family Businesses

Family firms have long been a cornerstone of the global economy, contributing significantly to job creation and economic growth. These enterprises are unique in their organizational structure, with ownership and management intertwined by familial ties. One crucial factor that differentiates family firms from other business models is the emphasis they place on values. The values upheld within a family firm play a pivotal role in shaping the company's culture, decision-making processes, and long-term success.

In this article, we will delve into the significance of values in family firms, explore essential values they should embrace, and outline strategies for incorporating these values into their operations.

Importance Of Values In Family Firms

Values serve as a moral compass, guiding family firms through the myriad challenges they encounter. Instilling a set of shared values can enhance communication, foster trust among family members, and facilitate smooth succession planning. Research has shown that family firms that prioritize their core values tend to outperform their counterparts, maintain greater stability across generations, and adapt more effectively to changing market dynamics (Miller & Le Breton-Miller, 2005).

Key Values For Family Firms:

Integrity And Ethics: Integrity and ethical conduct form the bedrock of any successful family firm. Upholding high ethical standards in business dealings and decision-making fosters trust among stakeholders, including employees, customers, and partners. Research by Gómez-Mejía et al. (2007) highlights how family firms with strong ethical values benefit from enhanced reputation, leading to long-term sustainable growth.

Long-Term Vision: Family firms that focus on long-term vision rather than short-term gains tend to weather economic fluctuations and make more prudent investments. A study conducted by Chua et al. (1999) revealed that values-oriented family firms exhibit greater resilience during economic downturns and tend to prioritize reinvestment in the business, leading to increased innovation and competitiveness.

Respect For Employees: Treating employees with respect and care fosters a positive work environment and encourages employee loyalty. Research by Uhlaner et al. (2007) suggests that family firms that emphasize employee well-being and work-life balance experience reduced turnover rates and higher levels of commitment from their workforce.

Customer-Centric Approach:

Prioritizing customer satisfaction is critical for any business's success, and family firms are no exception. Customer-centric family firms enjoy better customer loyalty and higher levels of customer referrals. A study by Sharma and Irving (2005) supports this claim, finding that family firms with a customer-focused culture tend to outperform their peers in terms of growth and profitability.

Incorporating Values Into Family Firms:

Lead By Example: The leadership of a family firm must embody the values they wish to promote. Leaders should demonstrate ethical behavior, a long-term vision, and a commitment to employee welfare. When family members exemplify these values, other employees are more likely to embrace them as well.

Formalize Core Values: Family firms should articulate their core values explicitly and incorporate them into the company's mission statement and code of conduct. This formalization ensures that values are consistently communicated and upheld across all levels of the organization.

Transparent Communication: Open and transparent communication within the family and the firm is crucial for aligning everyone's vision and goals. Regular family meetings and structured communication channels can help address conflicts and ensure that all family members have a say in decision-making.

Succession Planning With Values In Mind: When planning for leadership succession, family firms should consider candidates who not only possess the necessary skills but also align with the family's core values. This approach ensures continuity in the firm's culture and values across generations.

The importance of values in family firms cannot be overstated. These shared principles shape the firm's identity, culture, and long-term success. By embracing values such as integrity, long-term vision, respect for employees, and customer-centricity, family firms can create a positive organizational environment and remain resilient across generations.

By incorporating these values into their operations through leading by example, formalization, transparent communication, and value-oriented succession planning, family firms can thrive in today's ever-changing business landscape.

About the Author - Kyler Gilbert is a Consultant and Vice President at Business Consulting Resources (BCR), a family owned professional services organisation that has been championing successful transformations for 40 years. They provide a comprehensive portfolio of consulting service solutions to help solve complex problems.

Find out more about their work with family businesses here

Citations:

Miller, D., & Le Breton-Miller, I. (2005). Managing for the Long Run: Lessons in Competitive Advantage from Great Family Businesses. Harvard Business Review.

Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J., & Moyano-Fuentes, J. (2007). Socioemotional Wealth and Business Risks in Family-Controlled Firms: Evidence from Spanish Olive Oil Mills. Administrative Science Quarterly, 52(1), 106-137.

Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the Family Business by Behavior. Entrepreneurship Theory and Practice, 23(4), 19-39.

Uhlaner, L. M., Wright, M., Huse, M., & Brockhaus, R. H. (2007). An Exploration of the Attributes of Effective Boards in Family Businesses. Family Business Review, 20(3), 199-216.

Sharma, P., & Irving, P. G. (2005). Four Bases of Family Business Successor Commitment: Antecedents and Consequences. Entrepreneurship Theory and Practice, 29(1), 13-33.