Why Conscious Culture Matters for Family-Owned Businesses
10th December 2020
Everybody knows it exists, and everybody knows it matters to family-owned businesses. But there’s little consensus on what conscious culture actually is. Let alone how it influences family dynamics, or how it can help achieve lasting success.
Let’s agree on this, to start with: culture is too important to leave to chance. It will either help or hinder the family’s ability to execute strategic objectives, preserve their wealth and retain family bonds. The right culture will inspire the engagement of family members – which is why it is a leader’s primary role to develop and maintain it.
To examine the idea more closely by addressing these questions:
Why do family business fail? What is culture?
How does culture interact with norms of behaviour?
How can it address critical challenges to family businesses?
And how can an effective culture support business lasting success and the family bond?
Why Do Family Businesses Fail?
More often than not, they fail because the family lacks a shared culture and set of values. It means when new members join the business, they are badly orientated and don’t share the same vision: because there isn’t one defined in culture, but only in words, at best. The family begins to argue amongst itself instead of focusing on the business. This has an impact across the board: the ‘it’ dimension of the business and its capacity to preserve wealth; the ‘we’ dimension of relationships between family members; and the ‘I’ dimension, which may involve self-value and personal wellbeing.
An effective conscious culture is the key to lasting success and retaining the family bond. And the key to such a culture is conscious leadership.
What Is Conscious Culture?
For the purpose of our discussion, ‘culture’ is a system of shared beliefs (what is true); shared values (what is important); and shared norms (what is right). These orient family members and show them how things get done in their organization; what expectations they need to fulfil to fit in; and what they can expect – or indeed demand— from others. The culture is conscious because it is explicit and collectively agreed.
Like a magnetic field that invisibly forms iron filings into infinitely intricate designs, conscious culture can align human thought and behaviour into productive patterns. The energy of this cultural field comes from our deepest needs and aspirations: to survive, to belong, to achieve, to grow and to find meaning in our lives. We can only satisfy these needs in a community, and there’s no community without culture.
What Is Culture Made Of?
As expressed above, culture is in part comprised of norms. Norms are shared standards derived from a family’s values. Norms help family members interpret and evaluate events and set expectations about appropriate behaviours in response to these events.
Norms represent expressions of a family’s core beliefs, such as how to prioritize objectives and treat one another.
Norms influence how family members see themselves, one another, the family as a whole, the business, and the world in which the business functions. They define how they approach decisions, and solve problems.
Norms are powerful. They ensure conformity. Not by formal sanctions as rules do, but by praising compliant behaviours and faulting deviant ones. Research shows that norms shape behaviour even more powerfully than financial rewards.
We humans are, after all, social animals who want to fit in. We care about other’s expectations. We are willing to adjust our behaviour to assimilate, knowing that we risk ostracism if we don’t. That’s a powerful incentive to comply.
How does an effective culture support family-owned business to address their most critical challenges?
In at least five ways. Let’s break them down here:
1. An effective culture is strategic.
It supports long-term family business success by creating a context in which people are encouraged and enabled to do their very best to achieve strategic objectives. It responds to the primary question: how do people need to think, feel, and act in order to execute this strategy?
2. An effective culture is integrative.
It aligns family members’ efforts without the costs and inefficiencies of bureaucracy or close supervision. To do so, it has strong agreement about what’s valued and intense engagement. One organizational block to the lasting success of family business is a culture of high intensity but low agreement. For example, some family members may focus on business needs while others focus on family needs. Without the integrative force of a culture that demands that each ‘thinks like an owner’, the family can quickly degenerate into warring factions. This doesn’t always resolve conflict, as even owners might disagree on the best course of action. But when we address these differences of opinion, we may expect everybody to be open, honest and constructive.
Another block to satisfactory outcomes is high agreement but low intensity. In these somewhat ‘vacuous’ family-owned businesses, members agree on what’s important, but they don’t care strongly and are unwilling to go the proverbial extra mile. To prevent this, one cultural norm is to demand excellence from one another.
3. An effective culture is cohesive.
It provides family members with a sense of belonging. It establishes a boundary between
‘anyone’ and ‘one of us’ and unifies each one of the ‘I’s’ within that boundary into a collective ‘We.’ This is achieved with binding norms that affect how we think, feel and act. Here’s an example. At a family business I have been working with, they hold the belief that
4. An effective culture is based on curiosity.
It supports risk-taking and change. A culture of curiosity encourages habits such as asking questions, seeking feedback, experimenting, reflecting on results, and openly discussing errors or unexpected outcomes. It creates a safe environment to do this, thereby promoting family engagement and creativity.
A culture of curiosity discourages aggressive-defensive attitudes such as perfectionism, criticism and authoritarianism. For example, at another company I’ve been working with, we ask family members to ‘criticize by proposing’ (an alternative solution), and to ‘make the other right’ - in other words, recognize the kernel of truth in her argument – ‘before you make her wrong’ – in other words, point out where you think she’s mistaken.
A culture of curiosity also discourages passive-defensive attitudes such as conformism, conventionalism, and traditionalism. At that company, for example, we encourage each other to ‘take intelligent risks’ and ‘celebrate (and learn!) from intelligent failure’.
5. An effective culture is adaptive.
For a family-owned business, this cultural norm is extremely relevant: families, business and family business are inevitably in continuous change and evolution. An adaptive norm promotes flexibility and experimentation. Adaptation is externally driven, and concerned with how to respond to challenges such as succession and external requirements to change. An adaptive culture is the antidote to ‘groupthink’. Family-owned businesses that have a high agreement and high intensity of values can become overly conservative and rigid in outlook. If you like, their outlook becomes a kind of ‘inlook’. This can prevent them from adapting to succession and exogenous changes.
Sounds familiar to you? "We’ve always done it this way here…"
An adaptive culture also encourages learning and discourages defensive mindsets, creating the environment in which family members thrive.
How does an effective culture support business lasting success and the family bond?
There are three ways in which these goals are met through conscious culture:
1. It uplifts family members’ spirits, appealing to their sense of purpose and value.
It quenches our thirst for meaning, eliciting an internal commitment to pursue a noble ambition. This alone unleashes tremendous energy towards the accomplishment of the business family goal. For example, in a manufacturing plant of a big textile family-owned business producing fire-retardant fibres, they are justifiably proud of their contribution to saving lives. It’s not just about the fibres: it’s a matter of life and death. The appeal of such a message to current and future members is clear.
2. It shapes how family members respond to ever-changing, unique circumstances.
It guides their actions without constraining their autonomy—as formal rules or micromanagement practices might do. For example, at a family-owned business I work with, we hold that ‘family members come first’, that ‘relationships matter’; that we must ‘manage compassionately’ while ‘demanding excellence’; and that our difference must be resolved in ‘open, honest and constructive’ ways.
3. It aligns family members’ efforts, orienting them towards a shared goal.
The immediate result is that the family mission remedies the bane of resource allocation trade-offs – a huge benefit to any business, family-owned or otherwise. One of those I work with, for example, has agreed to negotiate conflict through this cultural prism: what will best allow us to ‘preserve family wealth, keep the family bond and deliver value for all stakeholders’. Which sounds like a goal we can all agree on. And perhaps we can agree on this, too: that conscious culture is a tremendous asset in achieving such a goal. And that as I have shown here, it need not be mysterious and is accessible to all family-owned businesses.
Axialent is a global leader in culture transformation. They help multinational organisations drive sustainable business results by creating effective behavioral change in people throughout departments, across languages and around the world.