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Change can be particularly difficult in family-owned firms

Change can be particularly difficult in family-owned firms
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First Published: Sun, May 17 2009. 08 39 PM IST

Updated: Sun, May 17 2009. 08 39 PM IST
With our father about to retire, my brother and I will soon take over the leadership of our family business. Company performance overall is good, but can you offer any advice on how we might bring change to the divisions that would benefit from more modern management practices? We don't want to hurt our special culture.
Name withheld, Kerala
In a way, the question you’re facing is a universal one. Virtually all new leaders, whether they’re taking charge of a small partnership or a sprawling public corporation, have to figure out how to change the ineffective parts of the enterprise without undermining those that seem to be working efficiently.
And so the answer to your question applies universally. A leader fosters change by clearly explaining why it’s necessary from a competitive point of view, painting a vivid picture of the altered company’s future, describing the plan’s upside in gritty detail to the employees affected by it, and then talking about the incontrovertible need for the change to take place, constantly and incessantly, until it has been widely accepted and implemented.
There’s a reason no one says change is easy.
At family-owned firms like yours, change can be especially difficult, and it’s because of what you described as “our special culture”. Family companies differ from large corporations in terms of culture—indeed, that’s why many people are attracted to them.
Regardless of size, family firms tend to have a more intimate atmosphere; you’re working for a real person or that person’s legacy, not some generic entity owned by faceless shareholders.
Family companies also tend to have more forgiving environments, in which underperformance is often understood in the context of an employee’s personal issues, and underperformers are given second and third chances. As a result, feelings of pride, security and continuity are often deeply embedded in the culture of these companies, which makes introducing change an especially delicate leadership endeavour.
But that’s only half the challenge. The other half is posed by your father.
Look, most family-owned firms revolve around their patriarch. His values set the tone; his word carries gospel-like weight. People believe he “gets” the company in his bones. After all, it was his wisdom that built the place—that is, along with his blood, sweat and tears.
And so any new leader who replaces a patriarch and hopes to make a change—no matter whether that new leader is a long-cultivated family member or a newly recruited outsider—has to understand something.
You can’t begin your change effort by focusing in the typical direction: downward, toward the employees. You need to focus upward, on the constituent people trust.
Now, it’s entirely possible that your father has told you he supports your plans for change. In fact, in the most successful family firms, patriarchs actually count on their progeny to initiate the kinds of modernization efforts they themselves could not envision. But in our experience, the retiring leader usually harbours some ambivalence about his replacement’s proposed new course, and, as in any family situation, everyone in the room knows it.
What can you do?
We ordinarily encourage change agents to move more quickly than feels comfortable. We explain that change always takes longer than expected and it’s not possible to make supporters out of everyone, so a leader must fight the urge to delay.
But in your case, we make an exception.
To bring the patriarch aboard, new leaders of family firms, whether insiders or outsiders, need to allow for a certain “slow build” period.
During that time, make sure your father understands that you have sincere respect for all that he has built. Make sure, too, that he comes to see the financial, organizational, and even cultural advantages of your programme for change.
Finally, and perhaps most important, try to find a way for him to take part in the change process, rather than just being a mute witness to it. Nothing will better convince employees of his buy-in—and hasten theirs when the time comes.
Not to make this sound formulaic. Succession in family companies is usually about as orderly and predictable as families are!
But if you handle this period with emotional sensitivity, you will have the opportunity to build something remarkable—a family company that grows better with the next generation.
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Their latest book is Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today. Mint readers can email them questions at winning@livemint.comPlease include your name, occupation and city. Only select questions will be answered.
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First Published: Sun, May 17 2009. 08 39 PM IST