Research: Preserving the spirit of a family business though the heirs are no longer in charge

This is the subject of Patrick LÊ’s research, professor at NEOMA BS, accompanied by two co-authors (Julia Vincent Ponroy, IPAG Business School, Camille Pradies, EDHEC Business School) published by People & Organizations (a Rank 1 review according to CNRS).

Based on a French pharmaceutical company specialising in the production of veterinary products, the 3 researchers have outlined a map of the processes at work.

A number of studies demonstrate how working for a family enterprise can bring many benefits. The internal ambience is often better and more benevolent. Decision-making also tends to be more ethical because it focuses on the long-term and the working methods of a family business are often more responsive and adaptable. From the outside, clients are more likely to view such a company as more reliable and offering better quality products and services. However, when the company survives and prospers, the founders do not always have the ability or the desire to carry on running the company and the role of preserving the family spirit and values is passed on to non-family members.

So how can the family identity be maintained when the family, for whatever reason, is no longer at the helm of company operations?

le patrick2 article esprit familaial entreprise 150The study's subject company – named VetCo - is the world's leading family company exclusively dedicated to animal welfare today. VetCo has a strong identity as a family enterprise and the preservation of this identity is somewhat remarkable. The various family members withdrew from the company when its founder suddenly died.

Extremely hardworking, well-known and respected by his staff, VetCo's founding father transformed the small laboratory he set up in his apartment at the very beginning into a successful multinational company. However, after his passing, the values of the family business found themselves under threat and in danger of gradually fading away.

The identity of a family business at risk

The researchers succeeded in identifying a number of factors that threaten the sustainability of a family business identity:
  • The erosion of the founder's values
  • The dissolution of the collective cohesion
  • And finally, an increase in formalisation and procedures
The charismatic founder is no longer present to uphold the company values they once embodied, thereby risking their erosion. In addition, the transition from a family-sized company, where the employees are on first-name terms, to an international company, where teams no longer have the opportunity to work together directly, poses a real threat to the collective cohesion. Finally, the implementation of a 'large group' structure with a high number of procedures and a more vertical hierarchical structure challenges the flexible and adaptable model of the family business.

The emergence of mechanisms to preserve the identity of a family business

These threats are also perceived subjectively by the company staff members. However, the study manages to identify how certain mechanisms that go towards preserving the identity of the family business are triggered.

>> Identifying with the founder: employees who knew or had heard of the founder share the values they embodied and therefore can relate to them.

The employees take pride in working for a family enterprise and are receptive to the idea of preserving a family heritage through their work as opposed to working to provide dividends for shareholders who consider their company merely as a financial investment.

>> Collective identity: Mutual trust exists between Top Management members, and this is also true of the laboratory technicians and workers who are extremely supportive of one other.

Through this collective relationship, the company becomes a family in the metaphorical sense,  "together we are one big family".

>> Exposure to strategic rationale: other employees from larger groups decide to leave such organisations to join a company with a family structure because of the pragmatic way the company is run. For example, the rapidity with which decisions are made (vs. the number of hierarchical levels in large companies)

When these employees see how the company structure is taking shape, they ensure that flexibility, agility, dynamism and ability to innovate are retained. They also see that the long-term approach is maintained, which is an ethical operational approach to which they are sensitive. They will avoid decision-making in favour of short-term or high-risk profitability.

A self-sustaining virtuous circle

Patrick LÊ and his co-authors also reveal how these preservation mechanisms are reinforced by an additional phenomenon they refer to as "connections".
This first phenomenon is likened to a net and stems from the fact that there are few collaborators who are not concerned by any of the preservation mechanisms described above. Consequently, they  almost systematically fall into a strategic net that preserves the identity of a family business.

The second phenomenon of connection concerns relationships. The researchers find that for many employees, the strategies for strengthening the family company's identity are in synergy with one another and mutually reinforcing.
Other factors also contribute to strengthening the identity of the family business. The fact of being recognised as such by fellow professionals, clients etc. accentuates this position by a mirror effect.

Conclusion and useful insights

he Directors and family members, although they are no longer present in an operational capacity, should endeavour to provide symbolic resources (e.g. common rituals, etc. such as festive celebrations, Christmas trees, etc) to encourage and reinforce a sense of belonging for employees who are not direct family members. Members of the founding family should also be sensitive to the members of the organisation and their permanent contribution to the organisation, and attempt to adapt to them. Otherwise, their actions could be perceived as artificial or oppressive.
Moreover, had the family's ethical behaviour been questioned in the past, or a negative work climate prevailed, it would be virtually impossible to rely on certain methods that aim to preserve the company's identity, which has now been discredited.
 
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