Some of the oldest companies in the world are family-owned – many dating back several centuries. They are the epitome of durability. Like other companies, family businesses live in a volatile, uncertain, complex and uncertain (VUCA) world where past success does not guarantee future success.
While family businesses may have the advantage of a deep connection to their mission, strong leadership from one or more family members, and a close group of advisors, these strengths can actually be weaknesses in a world of VEAL. In a rapidly changing environment, being too insular can inhibit the ability to see early warning signals in the market or changes in customer profiles, and it becomes all too easy to believe that past success will almost guarantee future success. next. An eco room can be created with the same perspectives and ideas that are very common in business.
To build resilience for the future, one of the most important things family businesses can do is increase the diversity of perspectives in the business and include different voices. Research shows that companies that have high levels of diversity and inclusion are almost twice as likely to be innovation leaders in their market, outperforming their peers by 35%. To bring in more diverse perspectives, senior leaders must create psychological safety and allow constructive dissent, while maintaining deep connections to the mission. Here’s how:
Create psychological safety.
Psychological safety is a prerequisite for different ideas and opinions to flourish in any business. But in family businesses, where there may be additional fear of damaging family relationships or family reputation, the need for psychological security becomes even more pronounced. To create psychological safety in a family business, it is important that:
Admit mistakes. Psychological safety begins when older family members admit business mistakes. The older generations in the family business are rightly proud of the success and wealth they have created for their family. But alongside this pride, there may be less willingness to express fallibility.
The admissions of senior leaders set the tone for others to follow. It is important to communicate that, moving forward, not every decision or action will be without error and to position these decisions as an opportunity for analysis and learning. For example, an elderly family member may say:
- “I have years of experience, but I’m not as close to some of these areas as you all are. Pull back on the solution I’m going to propose.”
- “What else should we think about, based on your point of view?”
- “I made a mistake. Here’s how I’m going to fix it.” Or, “I made a mistake. Let’s talk about how to move forward.”
When admitting mistakes, don’t stop at explaining the various reasons why it happened or who is to blame. One of the best executives I ever worked with was president of a division in a family-founded specialty chemical company. At a meeting of division heads, the CEO called him out on a mistake he made. He replied: “Yes, I made a mistake. Here’s what I’m doing to correct it and learn from it.” No long explanation. There are no excuses. No finger pointed. By demonstrating his fallibility, he strengthened the confidence of his colleagues and the CEO.
Put up communication barriers. Advocates or behavioral and financial guidelines can help provide clarity on how and when to speak. Family businesses have the advantage of a deep commitment to a clear mission – their “why”. In the face of rapidly changing technology, global conditions, and customer expectations, this “why” can provide the necessary guardrails to give way to the “how.”
In more than a decade of research, Donald Sull and Kathleen M. Eisenhardt found that identifying critical business needs and creating simple guidelines allowed people to understand business priorities and generate innovative ideas. Simple guidelines operationalize your mission, core values, and business. They may include rules such as “our environmental impact must be neutral” or “we serve the customer first”.
Set clear boundaries for disagreement. Psychological safety is enhanced when clear distinctions are made about when and how business and any ensuing disagreements are discussed.
My company is a family business. We do not talk business during business hours unless it is urgent. Family dinner is not a time for new product development. After a difficult business discussion, we discuss making sure no hard feelings spill over into family time.
“When every family dinner or party becomes a board meeting, the likelihood of resentment to join is very high,” as Ryan Ansin, former president of a co-working network of 300 family offices, told me in a recent interview. “Keep family vacations away from chatter about everyday things, away from professional decisions and focused on gratitude, presence and innovation together.”
Once you’ve created an environment of psychological safety, you’re ready to set the stage for different perspectives and voices to join the conversation.
Encourage a variety of perspectives and voices.
Sharing different perspectives within a family business can be fraught with challenges. But the following four actions, when implemented together, can increase the diversity of perspectives and increase cohesion within the business. Each helps to address the dilemma of using the ideas of an older generation while harnessing the new ideas of younger generations and non-family management, advisors and staff.
1. Make disagreement and sharing different perspectives a core value. I once worked with a family business in which the founders regularly made decisions within the family and told non-family team members the decision without explanation. When a team member questioned a decision, the founders took it as a lack of confidence in their direction for the business rather than an opportunity to gain different perspectives.
Instead, family leaders would do well to explore constructive disagreement by explaining why decisions were made, being curious about concerns, and having a conversation about the reasoning and data behind the decisions. This shows a genuine interest in hearing different voices.
2. Hire more diverse non-family workers. Hiring managers most often hire people who are similar to themselves. It’s a basic human tendency to be more comfortable with those who are more like us. But hiring those who are different from us accelerates building a culture of diverse perspectives.
In your hiring efforts, define diversity broadly. Look for diversity of thought and communication style. Look for different generations, backgrounds, and demographics, to name a few examples. To successfully hire non-family employees into the business, consider how they will be able to contribute to the business in a meaningful way. Make sure you are creating psychological safety for them, just as you would for other family members.
3. Use a consistent decision-making process. Ansin advises that before making final high-stakes decisions, family business stakeholders should “encourage systematic decision-making that brings case studies and unbiased input into the process, either from the managers and beneficiaries themselves, or through to third parties”. The family can develop family forums for assessing the situation and generating possible alternatives, with additional forums for the insights of non-family members.
Again, data is key in these conversations, and data-driven decision-making must be modeled by older generations. A more dictatorial implementation of their perspective would only shut down future conversations. And be sure to distribute responsibility for bringing in new prospects, including identifying outside advisors or experts. For example, members of the next generation may have better knowledge of technology or Gen-Z culture, while older members may have deep expertise in governance issues.
4. Use proven techniques for constructive disagreement. The questions a leader poses sometimes get in the way of fostering constructive disagreement and making smarter decisions. To avoid this problem:
- Ask perspective-shifting questions like “What am I missing here?” or “How will younger customers approach this?”
- Assign a devil’s advocate to deliberately argue the other side. Rotate this role among family members. Preface remarks with, “I’m playing devil’s advocate here” to reduce the likelihood that people will feel attacked.
- Respond with curiosity rather than trying to defend your position. For example, when you hear disagreement, first try to understand their point of view as fully as possible before responding by using open-ended questions and statements such as: “Tell me more,” “Help me understand your point,” or “What do you see? as influence?” If it’s a group conversation, once you feel you have a deeper understanding, invite others into the conversation.
As you bring more diverse voices to the table, you’ll often find that having a variety of perspectives has some compelling advantages. One of these advantages is the opportunity to introduce “both/and” thinking into your team’s discussions.
Adopt a “both/and” mentality.
Often when different ideas and data are presented, one view or solution is not completely right and the other is not completely wrong. Each may be incomplete or have biases. The key is not to dig in, defending one position in complete disregard of another. How can a mix of ideas create a better final decision? Adopting a “both/and” mindset can result in decisions that turn out to be sounder over time.
For example, in an environment where the venture capital sector has experienced more than 10 years of growth, the 20- and 30-somethings at your firm may never have experienced the concept of losing their shirts; they have only seen increases in value on paper. They are working with an incomplete data set. Over-40s who have lived through more volatile cycles will have different perspectives. As Ansin noted when sharing this example, “Finding the overlap in the ambitious thinking of the younger generation and the more conservative outlook of the older generation is critical. There is a balance that needs to be struck.”
The challenges facing family businesses are more complex than in the past. No single person in the company will have the solutions to those challenges. Not even a person can know the future challenges and opportunities that will present themselves. By combining the depth of experience with a culture of constructive disagreement, a family business will be able to proactively resolve pressing issues, increase the effectiveness of their decision-making and open the door to innovation.
