Consultation to Family Business Enterprises: An International Perspective 3030720217, 9783030720216

Table of contents :
Acknowledgments
Foreword
Preface
Contents
List of Figures
Abbreviations
About the Authors
Chapter 1: Introduction: Consulting to Family Business Enterprises – Locally, Nationally, and Internationally
Living and Functioning in the Universe of Cyberspace
References
Chapter 2: Family Business Consultation: A Psychological Perspective
Case #1 – Severe Intergenerational Conflict
Commentary on Case #1
Important Information for the Family Business Consultant to Learn About a Firm to Which They Are or Will Be Consulting
Composition of the Board of Directors
Case #2 – A Third Generation Manufacturing Company
In the European Union: Working Internationally
Commentary on Case #2
Ongoing Efforts to Agree on a Definition of Family Business
References
Chapter 3: Similarities and Differences Between Family and Nonfamily Business Enterprises
Key Issues of the Business
Founder CEO Characteristics
Power and Priorities
Success Measures
Long-Term Planning and Investment, Risk, and Compensation
Long-term Planning and Investment
Decision-Making
Tenure and Financial Compensation
Innovation
Resilience
Mission, Vision, Values, Goals, and Culture of the Business
Mission Statement
Vision Statements
Values
Culture
Goals and Strategies
Diversity
Gender
Ethnicity
Defining the Family Business
Role of the Family Business Consultant (Fig. 3.2)
Stewardship
References
Chapter 4: Evaluation and Assessment in Family Business Consulting
Case #3: Designating the Founder’s Successor
Takeaway from Case #3
Organizational Stages
Key Information from Observation, Interviews with Individual Members, and Attendance at Family Meetings
Family Involvement
Family Business Assessment Tools
Summary
References
Chapter 5: Governance Structures and Documents
Introduction
I. Structures
A 1. Management or Executive Team
A 2. Board of Directors
A 3. Family Council or Forum
A 4. Family Business Meetings and Retreat Planning Committee
A 5. Special Event Planning Committee
A 6. Family Offices
A 7. Family Philanthropy
II. Documents
B 1. Family Business Constitutions, Charters, and Protocols
B 2. Codes of Ethics and Codes of Conduct
B 3. Family Mission Statement
B 4. Policies and Procedures Manual
B 5. Shareholder Agreements, Owner Agreements, and Buy-Sell Agreements
Status of In-Law Members of the Business Family
B 6. Legal and Ethical Wills
References
Chapter 6: Pathways to Becoming a Family Enterprise Consultant
Preparing for the Interview
The First Interview
Starting in Your New Position
Part I. Information to Acquire/Learn About This Specific Family Business
Part II. Relevant Family Information
Seeking Additional Training and New Knowledge
Conclusions
References
Chapter 7: Untangling and Dealing with Serious Family Conflicts Within the Family Enterprise
The Reconciliation Model
Case #4
Brief History
Two-Day Family Retreat
Positive Conflict Engagement and Conflict Transformation
Conclusions
References
Chapter 8: Succession Planning
Succession Process
Factors Influencing Business Succession
CEO’s Age and Health
Generational Factors
Diversity Factors
Gender Diversity
Religious and Ethnic Diversity
National, Regional, or Cultural Diversity
Birth Order
The Successor
Stages of Family Business Succession
Case #5
Distinctive Definition
Best Practices
References
Chapter 9: The Dynamic Interactive Multifactorial Family Enterprise Ecosystem Model
A New Dynamic Eight-Factor Ecosystem Model
Expansion of the Field
Family Enterprise Ecosystem Model (FEEM)
1. Individual Family Members
Case #5 Application (Continued)
2. Family
Case #5 Application (Continued)
3. Family Owners
Case #5 Application (Continued)
4. Family Business Enterprise
Case #5 Application (Continued)
5. Community Factors
Case #5 Application (Continued)
6. Sociocultural, Religious, and Political Factors
Case # 5 Application (Continued)
7. Economic Factors
8. Institutional Factors
Case #5 Application (Continued)
The Multifactorial Dynamic Interactive Family Enterprise Ecosystem Model
Future
References
Chapter 10: Whither Research
The Importance of Research
Future Theoretical and Research Dimensions
Assumptions Underlying Research
Metrics and Research
Snapshot Data
Research Complexity and Attention to Multiple Variables
References
Chapter 11: Summarization and a Glance into the Future
Recapitulating the Major Themes and Highlights
References
Index

Citation preview

Florence W. Kaslow Lilli Friedland

Consultation to Family Business Enterprises An International Perspective

Consultation to Family Business Enterprises

Florence W. Kaslow • Lilli Friedland

Consultation to Family Business Enterprises An International Perspective

Florence W. Kaslow President Kaslow Associates Palm Beach Gardens, FL, USA

Lilli Friedland President Executive Advisors, Inc. Beverly Hills, CA, USA

ISBN 978-3-030-72021-6    ISBN 978-3-030-72022-3 (eBook) https://doi.org/10.1007/978-3-030-72022-3 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

This book is dedicated to honoring the memory of my late husband, Solis Kaslow, my partner in life and sometimes in Consulting, as he was in Case #2, which appears in Chapter 2 of this book, and with admiration for the way he and our son, Howard, shared an office as financial advisors for 25 years, until Sol’s death in June 2018. It is also dedicated to the many client firms that have provided me with the privilege of consulting with and for them. Florence W. Kaslow, Ph.D., ABPP With deep appreciation, I would like to dedicate this book to the wonderful family enterprise, business, and foundation clients with whom I have had the privilege of working. I would also like to thank my esteemed colleagues and peers participating in this exciting discipline and pushing it forward. I would especially like to thank Dr. Florence Kaslow for her many years of friendship, leadership in our field, and including me in cowriting this book. Most of all, I want to acknowledge the love and support from my family and close friends for encouraging this important endeavor. Lilli Friedland, Ph.D., ABPP

Acknowledgments

I would like to extend my deep appreciation to the many members of family enterprises with whom I’ve consulted and to family business consulting colleagues who have encouraged me to write another “up-to-the-minute and looking to the future” book on family business consultation. Special thanks are also extended to my son, Howard Kaslow, and my daughter, Dr. Nadine Kaslow, who cheered me on during the long months of the COVID-19 pandemic when I was confined to quarters and working on writing this book. And many thanks to our wonderful, talented editor, Sharon Panulla, whose kindness and guidance are so much appreciated. Plus special gratitude goes to my assistant, Lauren Kellar, for her perseverance in typing the manuscript for this book. Florence W. Kaslow, Ph.D., ABPP

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Foreword

Many advisors to family business see their task as primarily a technical one, offering tax, financial and investment advice, creating optimal estate and succession plans, assessing competencies for board and leadership roles, and exercising rational decision making for major decisions. But these advisors too often find out that the best of plans and expert advice can run up against the realities of conflicts in family relationships, which make it difficult to impossible for the family to implement good advice. The field of offering consultation to family businesses, which incorporates both business/financial planning and help with family dynamics, was present in the 1980s when this was first defined as a field of practice. When the first professional association was formed, it included active contributions not just from lawyers, estate planners, accountants, and business consultants, but also family therapists and behavioral organizational consultants. The field that emerged was designed to include each of these elements in helping families to move across generations as both a successful business that shared financial assets and as a harmonious, caring cross-generational extended family. The challenge of helping business families lay in helping them to negotiate and move between family and business roles, and to balance and understand where they were connected and where they diverged. This task is a deep and complex challenge, and in the decades of development of this field of consulting, there have been few guides for how to proceed. Now we have a handbook for how to undertake this task, containing not only an overview of how this field has evolved, but with numerous actual cases, and many of the common tools and practices presented and clearly detailed. A person embarking on this work can find a starting point with this book, as can an advisor from another discipline (e.g., law, estate planning, finance, wealth management, accounting) who wants to better understand what behavioral and family dynamics-oriented advisors are all about.

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Foreword

The authors—psychologists Florence Kaslow and Lilli Friedland—have been part of the origins and development of this field of practice. Over many years, in their own practices and writings, they have spent their time working with countless families on these issues. In the early days, they improvised in their own practices until they, like many others, began to find that certain core concepts, approaches, tools, and practices seemed to really help family enterprises move forward. Over many decades, they have used their professional grounding as family-oriented psychologists as a foundation and linked their work to the emerging big issues that made up the interdisciplinary field. This work represents their massive assembling and integration of what has been learned and how professionals from their field are essential partners in the work of advising family enterprises. While they begin and have their identity as psychologists, their many years of working with professionals in all of the related fields allowed them to write this handbook as a bridge from psychology to other disciplines. Their work helps psychologists to learn that they are not working in the special environment of their own discipline, but that the real work of helping families with business and financial assets involves working closely and seamlessly with those from other professional backgrounds. No discipline is an island unto itself, and a theme of this book is the dynamics of effective collaboration. This volume presents a deep journey into each of the key areas that make up the work of such an advisor. Each thematic chapter begins with a case, and then explains the nature of that area. The emphasis is on practice, not on theory. The presentation includes a long, clear explication of the key tools and models that advisors can utilize. The big issues that face a cross-generational family that jointly owns several different enterprises are explained in these pages. They make clear the interplay of personal, emotional, and family realities that naturally arise and complicate the business, financial, and public activity of the family. They look at the common issues that come up for advisors—gaining alignment of the family on mission, vision and values; creating governance to guide effective decisions that balance multiple areas; developing and creating new leadership for each new generation; succession planning and passing on leadership and control; and dealing with conflict between siblings, family branches, and generations. For example, many family wealth advisors use personal development assessment tools, but to a non-psychologist they all look somewhat similar. This handbook presents the different tools with an explanation of what they measure and how they can be used. While the presentation contains more than any individual advisor can assimilate in a single sitting, psychological and family dynamic advisors will want to consult the relevant possibilities when they are working with a complex family, to help them make choices and decide what to use and how to present it. But the terrain is not just about multiple choices and individual tools and practices. The book has an overall theme, which is the twin concepts of the family enterprise as a complex “ecosystem,” with multiple entities clearly delineated in their Dynamic Interactive Multifactorial Model, and the reality that there is no single best practice to aid all families, that different needs and situations arise as the family

Foreword

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evolves across generations, and the family needs to make choices and take action to implement different structures and tools to navigate the new, emerging reality. The family enterprise is not a thing to which best practices can be applied, but a complex series of entities tied together by a shared vision, which is evolving and redefining itself with each new generation and each new success. Now you are ready to start this wonderful, enlightening, and important journey. Dennis T. Jaffe, Ph.D. Professor Emeritus of Organizational Systems and Psychology Saybrook University San Francisco, CA, USA

Preface

The field of family business enterprise consultation has intrigued me for the past 33 years, since it was just in its infancy. The more I heard and read about it, the more fascinated I became. Consequently, I joined the Family Firm Institute and took their training to become certified as a Family Business Consultant in the late 1980’s. Some contributory factors to this may have been that after I received my Ph.D. and began doing couples and family therapy and teaching family and forensic psychology in a medical school, my client population included numerous couples and families in business together. Many of their conflicts in business entailed disagreements about family matters. In addition, I had grown up living in a house attached to my parents’ “Mom and Pop” corner grocery store. Like many other immigrants to the United States (and other countries), starting their own business had been their only option. My sister and I were expected to pitch in whenever and however we could. The store was open 6  days a week, from 7:00  a.m. until 11  p.m., and closed on Saturdays for our Sabbath. Early on I learned how religious and community factors as well as local political customs impacted such small local businesses. For instance, the store was in a nonJewish community and it was not unusual to come back from Synagogue on Saturday and find a swastika or an anti-Semitic slur painted on a store window. This was frightening! Local politicians dropped in periodically to promise protection— for a small contribution and a pledge of support. This experience gave me a deep understanding and respect for the purveyors of small family businesses, who initially have no other options because of their lack of funds, not yet being fluent in the language of their adopted country, and/or not having the skills to acquire a job working for someone else. However, despite great love for and loyalty to my parents, I realized as a teenager that following in their footsteps was not the route for me, nor was it subtly forced upon me. Fortunately, I was a good student from the first grade on and getting a fine education beckoned as the route up and out of the family store and business. And it was. I lived at home when I was an undergraduate student, and I was able to earn scholarships, get grants, and work at part-time jobs to defray tuition and other expenses. They were not in a position to help financially. xiii

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Preface

Years later, after I began “treating” many couples and families in business together and heard about their conflicts, and their joys and triumphs, I realized how wonderful the creation, expansion, and perpetuation of a family firm could be. At the same time, it became clear that there are times when one or more offspring of the progenitors or current generation at the leadership helm needed to have the freedom to pursue their own dreams and careers of their own choosing, not those of their parents or grandparents, without being made to feel guilty or disloyal, or to be disowned. Some of the freedom to make one’s own choices depends on whether one’s culture places individual choice about the collective welfare of the family group or vice versa. These themes keep cropping up throughout this volume, sometimes subliminally and sometimes detrimentally as they contribute to the family conflicts and wars alluded to. Expending much time writing this, my second book on family business (the first was in 2006) has been an exciting and enlightening journey, illuminated by an additional 15 years of experience working with family enterprises and collaborating with my talented co-author, Dr. Lilli Friedland, who has encapsulated many of the factors alluded to here in the “Dynamic Interactive Multifactorial Model of Family Enterprise Dynamics” (Chap. 9). Our personal and professional experiences are indeed deeply intertwined. Please join us in this journey. Palm Beach Gardens, FL, USA

Florence W. Kaslow, Ph.D., ABPP June 2021

Contents

1 Introduction: Consulting to Family Business Enterprises – Locally, Nationally, and Internationally������������������������    1 2 Family Business Consultation: A Psychological Perspective ��������������    9 3 Similarities and Differences Between Family and Nonfamily Business Enterprises������������������������������������������������������   23 4 Evaluation and Assessment in Family Business Consulting����������������   39 5 Governance Structures and Documents������������������������������������������������   57 6 Pathways to Becoming a Family Enterprise Consultant����������������������   75 7 Untangling and Dealing with Serious Family Conflicts Within the Family Enterprise ����������������������������������������������������������������   83 8 Succession Planning ��������������������������������������������������������������������������������   95 9 The Dynamic Interactive Multifactorial Family Enterprise Ecosystem Model������������������������������������������������������������������  113 10 Whither Research������������������������������������������������������������������������������������  131 11 Summarization and a Glance into the Future ��������������������������������������  143 Index������������������������������������������������������������������������������������������������������������������  149

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List of Figures

Fig. 3.1 Three-circle model����������������������������������������������������������������������������   35 Fig. 3.2 Elaborated three-circle model ����������������������������������������������������������   36 Fig. 9.1 The multifactorial dynamic interactive family enterprise ecosystem model������������������������������������������������������������������������������  116

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Abbreviations

ABA APA CEO CFO COO CPA FBR FFI SOM

American Bar Association American Psychological Association Chief Executive Officer Chief Financial Officer Chief Operations Officer Certified Public Accountant Family Business Review Family Firm Institute Society of Management

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About the Authors

Florence W. Kaslow,  Ph.D.,  is an internationally known clinical, forensic, and family psychologist, and specialist in family business and organizational consultation. She is a past president of the American Psychological Association’s (APA) Division 43 (Society for Family Psychology), as well as of Division 46 (Media Psychology and Technology). She has also served as co-chair of APA’s Committee on International Relations (in Psychology). Additionally, Dr. Kaslow helped to found several other major organizations, such as the American Board of Forensic Psychology, American Board of Family Psychology, and the International Family Therapy Association. She is the author of 32 books and over 200 articles in the professional literature and a frequent presenter on radio and TV shows. Lilli Friedland, Ph.D.,  is a sought-after consultant to family businesses and families of wealth for more than 25 years. She guides multigenerational families and family businesses to create processes that promote family continuity through the transfer of values, wealth, and power. Dr. Friedland has been honored and elected to many positions of the national (American Psychological Association), state (California Psychological Association), and local (Los Angeles Psychological Association) psychological organizations. Dr. Friedland was appointed by the governor to the California Board of Psychology—the state licensing board. Lilli Friedland, Ph.D., is a member of Who’s Who in America and Who’s Who in American Women. She has been quoted in the Wall Street Journal, Time Magazine, the New York Times, the Los Angeles Times, and other national publications. She has made over two hundred national and local TV and radio appearances.

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Chapter 1

Introduction: Consulting to Family Business Enterprises – Locally, Nationally, and Internationally

Abstract  This volume explores the challenging, variegated, and complex world of family business enterprises and what is involved in learning to become and eventually serving as a family business consultant. It provides a brief history of the field of family business consultation and calls attention to some of the major values and emphases of family enterprises throughout the world. In addition, it welcomes the reader to the multifaceted and continually evolving field of consultation to family enterprises and the burgeoning research about family business. Family businesses have existed for many centuries all over the world. They evolve as a natural creation of families who love one another and work together and who are motivated by a wish to take care of and provide for each other immediately and in the future. Whether the activity is some kind of craft making, cooking or serving food (and perhaps starting a restaurant business), farming to raise food for themselves and to sell to others, or a more complex enterprise such as establishing a manufacturing firm or a technology-based corporation with goals of global expansion, the founders exhibit mutual and reciprocal concern for each other. Such values as the importance of a strong sense of family connectedness and deep loyalty to one another are shared and transmitted to future generations (see Chap. 2). Since the beginning of time, the originators of such businesses, small and large, may have sought advice from trusted elders in their tribe or community, from venerated religious leaders, or from others who had successfully built businesses. In more recent centuries, those wanting to start or work in family firms have been able to study about them in books and learn about them by attending excellent MBA business programs in university graduate schools or working in or being an intern in a family business. In today’s world we still find the values of family loyalty and family traditions to be a major precept in all kinds of family enterprises. During the past century, family businesses have increasingly been recognized as having some characteristics which differentiate them in significant ways from nonfamily businesses  – such as well-articulated values and goals; their interpersonal dynamics; ways of interacting to continue to promote family closeness, fidelity, and

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_1

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interdependence; the desire to perpetuate their legacy to and through future generations, perhaps developing a dynasty by the fourth or fifth generation (Jaffe, 2020); and their concern for the businesses’ reputation in the community in which it is located and in the larger universe it serves. These and other differences will be amplified in Chap. 3. As family businesses became recognized as major contributors to their communities, a new specialty called family business consultation began to emerge in the United States and other western countries and in Asian countries where many family businesses are now in Generation Nine (often referred to as Gen. 9). The push to develop this, a new specialty was spearheaded by the efforts of energetic, creative, independent, intelligent, farsighted, ambitious individuals who designated themselves as family business consultants or advisors. (They soon replaced the trusted tribal leaders of long ago). Thus, in October 1984, a small group of pioneers met together in the United States and later coalesced to form what became the Family Firm Institute (FFI). Richard Berkhard and his then wife, Elaine Kepner, decided to hold a meeting at their apartment in New York to discuss the possibility of creating a new field that would stimulate academic research in family business, foster the dissemination of ideas, and serve the “mutual interests of those professionals already engaged in helping such organizations” (Lansberg, 2001). They invited Barbara Hollander, George Raymond, Robin Raymond, Aron Levinson, and Ivan Lansberg to attend (Sharma, Chrisman, & Gersick, 2012). They wanted not only to create an organization that would bring consultants together “for the exchange of ideas” but also to establish a publication in which to disseminate and document their efforts. Not only did this gathering lead to the formation of the Family Firm Institute, but it was followed by the launching of the Family Business Review, its Journal, to be published by Jossey-Bass, in 1988 (Lansberg, 1993). In Western Europe a similar burgeoning was taking place which eventuated in the formation of the Family Business Network in Scotland (Kaslow, 2006). These developments have continued unabated for the last 35 years and have been emulated in many other countries. Over time, the Family Firm Institute has opened its membership to consultants trained and working in other countries, and many of them have taken additional training in the FFI’s well-respected training program. Those who complete the program may be eligible to become fellows of FFI and be certified as family business consultants. Family businesses, from very small ones to huge firms, constitute a major bulwark of the economy of the United States. They contribute over 64% of the gross national product (GNP) in the United States and are responsible for 78% of the new job creation. About 36% of Fortune 500 companies are family owned or controlled (FFI, Family Enterprise USA, 2019). Currently there are over 5.5 million family businesses in the United States; they often are differentiated from nonfamily businesses by the degree of family involvement in ownership and management. Dominant family ownership, propagated by its founding members, plus their significant involvement in management may be sufficient to ensure that the vision of the firm continues to be pursued by the succeeding generations of the family (Chua, Chrisman, & Sharma, 1999). Many family businesses are not only motivated by

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being successful financially but also by the desire to structure the business in such a way to ensure longevity, by social and emotional goals such as providing jobs for numerous family members, expressing their loyalty to employees in tangible and intangible ways, and fostering a fine reputation. In sum, family businesses are not defined by size or whether they are publicly or privately owned. Rather their hallmarks are the pattern of ownership, governance, management, succession planning, and emphasis on shared family values and goals, plus their desire to perpetuate their legacy that differentiates them from nonfamily firms. These factors influence the firm’s shared values, goals, strategies, structures, and the desire to perpetuate their continuity and profitability. The psychological as well as the financial ownership of the founder(s) and their strong attachment to the ongoing possession of the business, sometimes referred to as an “heirloom effect” (Zellweger, Kellerman, Chrisman, & Chua, 2012), are major factors which characterize family business. In the United States, there are now a sizeable number of family-owned companies in their fifth generation (Gen. 5) of ownership. Elsewhere around the globe, some firms are over a century old and in their eighth or ninth generation of existence (Gen. 8 or Gen. 9). They constitute a fascinating variety and multiplicity of enterprises and differ in numerous ways from nonfamily firms – particularly in terms of the interpersonal family dynamics, which can be a major contributory factor to their longevity, if positive, or pose significant obstacles to their continuity, if conflicted (McClendon & Kadis, 2004). Chapter 7 focuses on serious family conflicts within the family enterprise. Gordon and Nicholson (2008) in their illuminating, sometimes astounding chronicling of Family Wars, also mention that some of the world’s oldest existing companies have long remained in family ownership, citing among these a “40th generation Japanese business that repairs temples” (founded in 578) and an Italian vintner (founded in 1141). They indicate that there are a large number of family firms all over the world “that have survived intact” throughout the entire twentieth century and are still turning in great performances in the twenty-first century. These very large and ultra-successful companies all exhibit a strong family identity. Perhaps citing two that are extremely well-known, Samsung in Korea and BMW in Germany, will illustrate that this is truly possible, and reading more about such companies will provide a much more positive picture of family enterprises than the ones described, like the Gucci and Koch families, in Family Wars (Gordon & Nicholson, 2008). It is the special psychological characteristics of the family members and of family firms, some already alluded to the above, such as the emphasis on loyalty, family closeness, and keeping the line of succession in the family, in addition to possible long-standing animosities, jealousies, and rivalries and who does and does not get promotions, that differentiate them in major spheres of functioning from nonfamily firms. Case #1 in Chap. 1 highlights how long existing conflict impacted the relationship of the owner mother and her adult son in their business emporium. Dealing with and defusing family conflicts within the family business is also a focus of attention. The rationale for the use of psychologists as consultants to family enterprises is elaborated in the book. A brief highlighting of it appears here. Most psychologist

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consultants bring their scientist/practitioner dual identity and skills to this role. As scientists, they know how to analyze the data presented to them and how to acquire the additional data they need through observation, skillful questioning, and meeting with people involved individually or in larger groups, depending on what they are hoping to accomplish, and to conduct evaluations and research to collect data they may need (see Chap. 4). They are skilled in assessment, in selecting what interventions to use, and how to build fruitful relationships. Their years of academic and clinical training as practitioners, often followed by an internship and residency, plus prior experience working with organizations and hopefully businesses, should have helped them hone their clinical skills. In addition, part of their education and clinical training/experience should have included learning family systems theory, dynamics, and how to intervene in many different kinds of ongoing relationships. Psychologists are obligated to practice in accordance with the APA “Ethical Principles of Psychologists and Code of Conduct” (APA, 2017) and with the tele-­ psychology/tele-health guidelines generated in 2020 and to be steeped in the concepts of confidentiality and privilege, which are essential in guiding how they practice. Hopefully they have also learned how to facilitate group meetings, arrange and lead family retreats, interface with structures such as a board of directors and a family council, and determine what the boundaries need to be between them and their constituents in the family and how these can sometimes vary, depending on the situation and the country in which the consultation is taking place. Another area that is brought to the fore is how the psychologist consultant may at times be expected to collaborate with other consultants used by the firm who come from other fields, such as law, accounting, and finance or with the professionals in the Family Firm Office and the ethical issues that might be entailed. We discuss what permissions may be needed to do so as well as when and why the psychologist might be the one who initiates the collaboration. The book also highlights important information for the consultant to learn about a firm to which they are or will be consulting such as in what life stage is the business currently? A first generation (Gen. 1), relatively new company will be very different in its structure and operations from a long existing firm that may be headed by several Gen. 5 members. Other vital questions are “who is to be defined as a family member eligible to become part of the family business and/or a shareholder? Chapter 5 is devoted to many of the structures and documents, such as boards of directors, family councils, and sometimes family offices as well as policies and procedures and manuals or protocols, job descriptions, and job requirements for personnel that the firm may already have established or that will need to be created or modified. Case #2 in Chap. 2 presents an illustrative example of consulting to the board of directors of a family business in the European Union which was only comprised of male members of the family, as was also true of the business itself. Both the gender issues that had started to surface in the business and the gender of the female lead consultant as well as issues of differences in country of origin between the company members and the consultation team came to the fore and are addressed, as are the use of long-distance international telephone conferencing and Zoom meetings.

Living and Functioning in the Universe of Cyberspace

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Long existing family businesses have been found to share many commonalities. In the book we highlight some of the most significant which include: • Careful succession planning and succession selection (Chap. 8). • Core values derived from the family’s history, traditions, culture, and perhaps religion. • Emphasis on their “legacy”. • Necessity of providing stewardship and modeling competency. • Strong commitment to family and community (which may be local, national, or international). • Achieving and maintaining an excellent reputation in all of the communities in which they and their business are involved. • The importance of family philanthropy. In Chap. 9 we introduce a new dynamic interactive multifactorial model of family enterprise ecosystems which interweaves the eight factors which we have found to exist separately and are intertwined and impact upon one another in the functioning of the business. They influence the relationships and the decision-making processes of the of the leaders of the enterprise. We have found this conceptual model to be very description of what transpires and also that it illuminates our understanding of the family companies to which we consult and to which we have consulted in the past.

Living and Functioning in the Universe of Cyberspace All businesses, like all individuals, now exist and are connected, not always knowingly or willingly, to the world of cyberspace. Everyone and every organization should have cyber awareness and may now need to upgrade their IT equipment to a higher level of cyber protection. All businesses should be protected by a cyber perimeter, for example, when dealing with their supply chains. They need to be attuned to what constitutes “phishing” in online and offline communiques, like verbal communications, if there is a cyber threat. Some consultants are advising that corporations engage in “cyber stewardship,” possibly utilizing their information technology (IT) person to lead this endeavor in educating all employees about cyber protection. Aiken (2016), a cyber psychologist based in London, wrote about The Cyber Effect and how it impacts human behavior. In a webinar (12/1/2020) for consulting psychologists, she indicated that human resource (HR) departments should take a much more active role in ensuring cybersecurity, that cybercrime is becoming increasingly sophisticated, and that individuals are becoming more vulnerable to cyberattacks and cyberbullying. She emphasized that companies should ascertain who their employees are “on-line” and in person outside of work. (We caution that this must be done in a manner that is legally and ethically permissible).

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Mark Sirkin spoke about working with businesses to create an overall cyber-­ defense strategy for which HR should be responsible (professional security.co.uk, 12/01/ 2020). He emphasized that companies should have a policy as to “what people are permitted or encouraged to do on-line, on ‘off boarding’, which includes revoking their IT privileges,” whether an employee leaves voluntarily or is terminated. Sirkin spoke about “creating a Digitally Secure Company Culture as part of corporate governance.” We fully concur and recommend the all-encompassing cyber world be kept in mind as you read this volume and think about how these businesses function in the real world of cyberspace and whether those you are consulting to might want to acquire Assured Cyber Protection® (ACP™) (issuewire. com 12/1/ 2020) or create their own stronger cybersecurity protection system (Advanced Cyber Protection, 2020). Sirkin posits that “it isn’t about the hardware, it isn’t about technology, it’s about (the) people who interact with machinery.” Thus, every business needs “an overall cyber defense strategy” to maintain a sense of safety, integrity, and security. Cyber immunity requires “that leadership provides top-down support for all immunity efforts.” After becoming immersed in reading this book, one should be able to understand why family enterprise consultants from various professional backgrounds need to become conversant with the businesses’ strengths and weaknesses it’s provisions for cybersecurity as well as the participating family members’ values, personalities, and ways of interacting, their short- and long-term goals, and key areas of their functioning: organizational, intellectual, social, interpersonal and financial  – as being financially successful has always been and remains a major underlying and ongoing reason for the existence of any business.1

References Advanced Cyber Protection. (2020, 12, 1). Retrieved from www.professionalsecurity.co.uk/news/ interviews/hr-and-the-cyber-aware-workforce/. Aiken, M. (2016). The cyber effect: A pioneering cyber-psychologist explains how human behavior changes online. New York: Spiegel & Grau. American Psychological Association. (2017). Ethical principles of psychologists and code of conduct. Washington, DC: APA. Chua, J., Chrisman, J., & Sharma, P. (1999). Defining the family business by behavior. Baylor University. Newbury Park, Calif.: Sage Publishing. Family Firm Institute (FFI). (2019). Family enterprise USA. Boston, Mass. Gordon, G., & Nicholson, N. (2008). Family wars: The real story behind the most famous family business feuds. London: Kogan Page, Ltd.

1  We have not differentiated between the terms family business, family firm, family company, and family enterprise because these are all still in current usage by different businesses and organizations. “Family enterprise” is the term most recently added to the list and has become the preferential term of many owners and consultants working in the field. However, we have used them synonymously and interchangeably to represent inclusiveness and to avoid being boringly repetitive.

References

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Jaffe, D. (2020). Borrowed from your grandchildren: The evolution of 100-year family enterprises. Hoboken, NJ: Wiley. Kaslow, F. (2006). The handbook of family business and family business consultation: A global perspective. New York: Routledge. Lansberg, I. (1993). Twelve Steps in Succession. Family Business Magazine, Phila. Pa. MLR Media. p 18–24. Lansberg, I. (2001). The reflective practioner: A tribute to Dick Beckhard1. Family Business Review, 14(1), 3–10. McClendon, R., & Kadis, L. R. (2004). Reconciling relationships and preserving the family business: Tools for success. New York: Haworth (now Routledge). Sharma, P., Chrisman, J., & Gersick, K. E. (2012). 25 years of family business review: Reflections on the past and perspectives for the future. Family Business Review, 25(1), 5–15. Zellweger, T., Kellermann, F., Chua, J.  H., & Sharma, P. (2012). Family control and family firm valuation for family CEOs: The importance of intentions for transgenerational control. Organization Science, 23, 851.

Chapter 2

Family Business Consultation: A Psychological Perspective

Abstract  This chapter highlights the special characteristics of family enterprises and briefly describes two family businesses, on local and one international, that exemplify some of the common core values, attitudes, and attributes of successful family businesses, each now in their fourth generation. Two very different cases are described, one quite small and one much larger, and how the personalities and attitudes of the CEOs led to markedly different outcomes. Recently I was casually perusing a booklet/catalog from Hamilton Jewelers entitled Accent. On page 3 I read an opening statement from the president of the company, Hank Siegel, that caught my attention because it encapsulates succinctly and emotionally some of the characteristics and values of a successful, multigenerational family business. I called Hamilton’s Jewelry store in the Palm Beach Gardens Mall and told the manager how impressed I was by Mr. Siegel’s statement and that I would like to get his permission to quote it in a book I was writing on family business consultation. Mr. Siegel kindly called back the next morning. I repeated what I had told his manager, that I was writing my second book on family business consultation and that I personally consult to such businesses. He indicated that he does this also and enjoys the reciprocity and learning that come from sharing ideas and experiences. He gave me permission to cite his column, and I decided to use excerpts from his letter in the Hamilton Magazine to enliven this opening chapter with a current real-life story (2020) and to welcome readers to the exciting world of family business consultation and the manifold benefits the CEO’s and presidents of these firms share with their significant others (Siegel, Hamilton Magazine. 2020). In his tribute he writes of a “loving farewell to my father”: the former chairman of this company, who was the “patriarch of the family” with great devotion, even reverence. We see this kind of strong attachment and loyalty between many members of a family who are in a business together and who build on the importance of passing the business on from generation to generation – in this instance Gen. 2 to Gen. 3 and now Gen. 4 as well.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_2

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He honors his father and the legacy he created and discloses he was “larger than life,” which conveys a luminous shining star, perhaps mirrored in the fine jewelry sold in their stores. Many of the outstanding CEO’s we encounter in family businesses are perceived in this matter. He shares with his father the “endless optimism and can-do approach to everything.” Obviously, his father exhibited very important interpersonal skills such as his ability to truly connect with others from all walks of life with a genuine interest in them, their work, and their families. We have found this quality typifies many of the most outstanding CEO’s with and to whom we have been consultants. Mr. Siegel mentions his father’s “strong will, often misinterpreted as stubbornness.” We have frequently encountered this and are convinced that without this “strong will” and the decisiveness that accompanies it, one cannot launch and/or continue to lead, solidify, and expand a family business. Throughout the pages that follow, we often mention “stewardship,” which is one of the most important functions of the senior generation in the business. The author connects his father’s stubbornness to transmitting what he “had learned throughout his life” to the younger members of the family firm. The emphasis on his father’s “extreme love for family and friends” mirrors the deep caring and loyalty often seen within and between generations in very successful, well-functioning family businesses. Mr. Siegel conveyed proudly that his son has now joined the business: the first Gen. 4 member to do so in this “time of growth” of Hamilton Jewelers. Once again, optimism characterized his statements. The determination to carry on the firm’s traditions are expressed toward the end of his statement, “we are steadfast in our commitment to uphold the business tenets instilled by both my father and grandfather; client service first and above all.” Most family enterprises articulate how important a principle good service to their clientele is to them. Jaffee and Lane (2004) have written about “sustaining a family dynasty: and the key issues which face complex multigenerational business owning families? It is incumbent upon family enterprise consultants to be cognizant of these aspirations and ­complexities and the best models for developing a sound governance infrastructure” (see Chap. 5). By way of contrast, we now present Case #1 which is illustrative of the kind of interpersonal and/or generational conflicts that sometimes impede the functioning of a small (or large) family business.

Case #1 – Severe Intergenerational Conflict Mrs. Sarita Fuego started out as a client of mine in my consultation practice beginning around 2012. At that time, she was 65 years old. She drove over an hour to get to my office in order to avoid being seen by anyone she knew, as in her community she was well-known and easily recognizable. She owned and operated a huge retail establishment of luxurious home furnishing featuring rare china, crystal, and expensive gift items on a very “classy” main street.

Case #1 – Severe Intergenerational Conflict

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Her rather poor widowed mother had moved to the United States when Mrs. F was 10 years of age. As a bright, attractive, and very assertive child, she did well in school, worked part time in retail stores, and developed good business acumen. She got married when she was in her early 20’s and had one son, Arturo, before her husband filed for divorce. Shortly afterwards, he deserted and never paid child support nor alimony. With the self-confidence and vast knowledge of the expensive items for entertaining and gifts for friends and family she had acquired, she decided to go into business for herself and had developed a lucrative upscale business with a wealthy clientele. In the prior few years, she had dated an attractive man about 15 years her junior and had employed him to work in her shop as her assistant. Sarita’s son was now in his 40’s and had worked in the store intermittently. He was married and had two children. He now wanted to join the “family business” and replace his mother’s close friend as her assistant, to be given more authority over staff, and to update her will naming him her successor and the owner of the business upon her resignation or death. He wanted an immediate increase in all of his perks but refused to work longer hours or to be more cooperative. This infuriated her as her major concerns were about the business and how to keep expanding it and ensuring its viability for the foreseeable future. Therefore, at this point I suggested she have her son come in with her for a few sessions and then her boyfriend. She agreed that this would be wise for her to do, but she wanted her manager/boyfriend come in first. Her boyfriend joined us for conferences three times. He was attractive, well groomed, well spoken, ingratiating, and flattered her a great deal, which she thoroughly enjoyed. It did appear that at least part of his flattering of Sarita and his hard work in the business were driven by an ulterior motive. Next, she insisted to her son that he come in with her for a few sessions. He did so reluctantly and came in with a hostile attitude toward her and toward me. I asked him, as gently as possible, for his version of what was going on and what he would like to see the arrangement become. I told him it was important that I hear his thoughts and get to know him through my own interaction with him instead of just from his mother’s reports in order to be maximally helpful. I also asked Mrs. F. to refrain from interrupting and to listen attentively to her son’s story and his hopes for the future. She complied with difficulty. Arturo indicated that he and his mother never got along well and that she was rarely there for him personally. He described her as demanding, strict, and rarely satisfied. Sarita had previously told me that when he was growing up, she took off from work to go to important school and sports events and left the manager in charge of the store. He criticized her for not being an attentive, doting grandmother like his friends’ mothers were and for her choice of a much younger man as her both boyfriend and the store manager. As Arturo went on and on with his criticisms of his mother, she was obviously seething. What he wanted was for her to fire the current manager (her “lover”) and appoint him to that position instead; to go to a lawyer with him as soon as possible and rewrite her will, leaving the business, her home, her jewelry, and everything else of value to him and his wife; and to babysit periodically so he and his wife could go on

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vacations alone together – all adding up to her being a different person than who she was, just as she wanted him to be. Clearly both Arturo and Sarita’s emotional response patterns to one another were long-standing and emanated from unresolved issues between them that had festered since his childhood. I saw them separately and together every other week in intensive sessions for about 4 months. After 1 month, with their permission, I audiotaped part of a session and played it back so they could hear how they sounded. Each was somewhat nasty, vituperative, and critical of the other. After listening to the playback, each defended him/herself – along with being unwilling to take any responsibility for their part in keeping the conflict alive. Sarita would not morph into the kind of traditional mother/grandmother her son wanted her to be, nor would she fire her manager/lover who worked hard and competently at the store and with whom she enjoyed life. Her son wanted her to capitulate and do everything according to his terms. When he realized the impasse would not be resolved as he wanted it to be, he withdrew from the family business consultation sessions. He had realized that although I understood his wants and goals, neither of them could manipulate me to side with them against the other and that they were each responsible for their own choices. It was important that I maintain and exhibit a neutral, what’s good for the business, and pro-family harmony attitude. Unfortunately, Arturo was not interested in improving the mother-son relationship nor in fulfilling the needs of the business for the continuing competent, responsible leadership that any business owner wants in their eventual successor. Sarita continued another 6 months and finally accepted that the almost lifelong conflicts between her and her son undermined their ability to work together in the business. She recognized that their personalities and their similar need to be in control and dominant precluded their being able to work together. During this time, she also realized she wanted him to leave the business and so she gave him a lucrative severance package.

Commentary on Case #1 Unfortunately, this type of long-standing intergenerational conflict and competition characterizes a certain percentage of family businesses. Usually I have been able to help the key parties become more flexible, become more committed and loyal to one another and the business, and to be less self-centered. That did not seem possible here, and Mrs. Fuego’s decision to handle the problem by severing her son’s employment seemed the best resolution. Since these types of conflicts are not uncommon in family businesses, it is vital that the consultant be well-grounded in family systems theory and family dynamics and how to adapt these to understanding and working with family business members and be able to accept they will not always be successful. Mrs. F. called me periodically for brief consultations for several more years, and she was pleased with how well the business and her relationship were faring.

Important Information for the Family Business Consultant to Learn About a Firm…

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According to her, her son had had a series of jobs and remained dissatisfied with all of them. She had decided to pay for her grandchildren’s education at the expensive private school chosen by her son and daughter in law as she wanted to insure they received an excellent education. This was an action of hers to which her son did not object. They rarely saw one another. This is the type of case where the long existing interpersonal conflict may not get resolved, no matter how skilled the consultant is, because the parties involved are stubborn and determined to get their way. It is a no-win situation.

I mportant Information for the Family Business Consultant to Learn About a Firm to Which They Are or Will Be Consulting 1. Who is or are the identified clients? Who determines the goals of the consultation or coaching? With whom are we to keep confidentiality? 2. In what life stage is the business currently? A first generation, relatively new company will be very different from a long existing firm that may be headed by several Gen. 5 members. When these succeeding generations are in charge, they may decide new structures like a family council, comprised of family members who are in the business plus those who are not employed in it but whose financial well-being and family relationships are influenced by it, may need to be formed. If so; it is important to sense the appropriate time to suggest this; and guide its formation and the writing of a document about its purposes and relationship to the business. Clarification of the relationship and interface between the executive or management team, the board of directors, and the family council is vital (Frankenberg, 1999) (see Chap. 5 on Structures). 3. A vital question is who is to be defined as a family member eligible to become part of the family business, and/or a shareholder, if it is a privately held firm? Some firms run into serious problems if they do not specify this in their articles of incorporation or another document, such as a family constitution. In some European countries in which I (FK) have lectured and done workshops (like Spain), such a document may be called a family protocol. The central issue is whether eligibility for membership in the business is restricted to those related through the blood lines or if it can be extended to those who marry a bloodline member of the family business family. Sometimes it becomes obvious to a discerning member of the family that the attraction of an outsider to an unmarried member of the family is undergirded by a hope or intention of becoming part of the family and its business. There are certainly times when this outside person may have skills and abilities that would contribute to the mission and operation of the firm, but how well will they be accepted, if the suspicion is confirmed? What impact might learning this have on the family member who believed they were loved for themself and not the future family financial benefits.

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4. Such potential problems can be averted if the firm has a clear policy that before anyone in the blood line family marries or remarries, they must write and cosign a legally valid prenuptial agreement with their future partner. This document should clearly state something like “I know that as an in-law person in the family I cannot become a member of the family business (Kaslow, 1991) nor a shareholder, if that is a rule of the firm.” (This is amplified in Chap. 5 on Documents). 5. In some family businesses, the lack of definition as to “who constitutes family” has led to serious, even tragic problems. In the event of a divorce of a family business member from a nonfamily business member, the later may refuse to resign from the firm, and there may not be legal grounds to terminate the person. He or she may be unwilling to sell shares back to the firm. We are aware of cases in which several members of a family have gotten divorced from their nonfamily partners, and later these “outsiders” have banned together to try to take over control. These possible future weighty problems can be considered early in the evolution of a family business, when the owners are defining “who is a member of the family” and who might be eligible in the future to become a member of the family firm (see Chap. 5 – Section on Documents: Policies and Procedures Manual). 6. Who determines if the consultation has successfully accomplished what the enterprise was seeking? What are the criteria?

Composition of the Board of Directors It is important to know if the board of directors is comprised solely of family members of the business or if it is also made up of some family members who are not part of the business? Are there some female members on the board? If not, should there be or do the men want it to remain a traditional “all boys” club? Are there independent board members from the larger community who might be able to introduce some different ideas to the deliberations and spread the reputation of the firm? Is the current board flexible and secure enough to allow this? Will they be able to consider this if the consultant recommends it? The following case illustrates some of the dilemmas board of directors face, as well as the kinds of challenges one encounters when consulting internationally.

Case #2 – A Third Generation Manufacturing Company In the European Union: Working Internationally I (FK) was invited to consult for a beverage manufacturing and distribution company that was being run by second generation members with numerous third and fourth generation male children and grandchildren involved. I had been

Case #2 – A Third Generation Manufacturing Company

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recommended by several male German members of the International Family Therapy Association (IFTA) of which they had been members when I served as first and founding president. Some of the elder members of this dynasty reluctantly had sought a female consultant as some of the female members of the family were pressing to be “allowed” to become involved in and permitted to be active members of the business. They were hoping a female consultant might pave the way for this to happen. Other senior members of the firm disagreed that this should be done and emphasized that there were female nonfamily members employed in their offices, and this proved they were not sexist. This argument did not prevail. The CEO, who was the patriarch in charge, called me at my office in the United States. He had also been told that my husband was a financial consultant and sometimes we worked together. This was of interest to him as they were at a point of re-­ evaluating what share of the profits should be reinvested in expanding the business to another location and adding additional products, as well as considering other types of investments that might yield larger dividends to their shareholders, the majority of whom were family members. He communicated what they wanted to derive from the consult, and I replied I was interested and thought we could provide what they were seeking. The next day he called back and was ready to negotiate the contract. He wanted me to come and my husband to accompany me to consult on handling the financial issues. They were intrigued at the prospect of seeing a wife/ husband team work together, particularly when the woman was the designated leader. During the first half day of our assignment, we used to become acquainted with the current principals of the firm by meeting with them around a round conference table and having each describe his view of the family enterprise as well as his goals and dreams for both the short- and long-term of the business. In the afternoon I asked them to describe the structures that were already in place. They had a board of directors, comprised solely of senior family members, 1/3 of whom were also active members of the business, and articles of incorporation, which did not articulate the values of the company nor define which persons were considered family members and whether in-law members were included nor did it actually specify that only male family members could work in the firm. I pointed out how this apparently had been taken for granted decades earlier and wondered if they wanted this tradition to persist. Toward the end of the day, I recommended they consider changing the composition of the board so that in the future, it could include some nonfamily members who were knowledgeable about the industry and who could bring an outsider’s perspective to the discussions and decisions. They debated this idea and decided to do this in two stages – first by electing outsiders who would constitute 1/4 of the next board and that at least two of whom should be women. If this proved satisfactory, they would consider additional changes the following year. As the end of the session neared, I suggested they appoint a subcommittee to meet that evening and discuss what categories of people should be invited to serve on the board, who they wanted to define as family vs. nonfamily members and possible implications of their recommendation and to bring a report of the deliberations to the meeting the next day (see Chap. 5 for additional discussion on Board of Directors under Governance Structures).

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The second day was devoted mainly to financial issues, and they responded well to my husband’s suggestions that they diversify their investments by taking a percentage of their profits and investing them in stock of related industries and in some long-term bonds with good yields as well as expanding and establishing a manufacturing and distribution plant in a nearby country. They also solicited his input as to whether it was better to remain a privately held company or go public, something which they had been considering for several years. During these discussions, which were led by my husband, I occasionally interjected questions about the possible emotional impact of the various changes they were considering. One query was whether if they decided to open a plant in another country, the family member or members selected to be sent there to establish and run it initially would consider it a tribute to their abilities or a “banishment” from the center of their world. At the end of the session, a finance committee was appointed to meet that evening and consider the items discussed in order to come in with recommendations the next day. On day 3 they heard the reports of the committees that had been created to deal with the key issues discussed and decided to follow through on all of the recommendations. At the end of the day, the CEO recommended that our contract be extended for a year, and this was unanimously accepted. It was agreed we would have half-day phone sessions each quarter of the year, additional calls as needed, and a final 2-day gathering in person again a year later at their headquarters. They asked that my husband and I again work together and commented on how much they had learned from our respectful interaction and co-leadership.

Commentary on Case #2 This case illustrates many of the concepts articulated throughout the book and describes some of the processes that can be utilized to help families think through where they have been, what they might want to change, and where they want to go. In this era of telecommunications, more might be done using videoconferencing or group phone sessions. However, we stress that some face-to-face contact is vital at the beginning, so we see people’s facial expressions, their gestures, the way they interact with one another, and how we react to them as people, not just in accordance with their titles, and we have an opportunity to begin building a safe environment and mutual trust. In the past two decades, there has been increasing discussion about the efficacy of ownership professionalization or formalization (Kislik, 2020). Some practitioners and researchers have found that “extensive professionalization…might not be needed or appropriate for all family firms alike” (Hall & Nordqvist, 2008). Waldkirch, Melin, and Nordqvist (2017) reported that “Formalization of structures, processes and relationships (e.g., by means of a family constitution or a family protocol) has not been found to be directly correlated with family longevity.” Nonetheless many family firms find adding structures like family councils, weekly staff meetings, and a written policy and procedures manual that specifies job descriptions and the requirements to

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qualify for a specific position can be very useful. From our experiences with different kinds and sizes of family businesses, we agree that while many family businesses are apt to benefit from more professionalization, others do extremely well without this and have survived for generations without a great deal of formalization (FFI, STEP 2019 Qualitative Survey). We believe that each firm has to consider which documents and structures it wants to put into place and when it may need to modify them. Consultants can be particularly helpful in this process if they have familiarized themselves with the specific firm and what will enable it to continue to thrive. A recent issue of the European Family Business Review (7/31/2020) chronicles the growth of one company, the Raben Group, that expanded from a small family business in Holland that had 12 employees when it began in 1931 to a Global Brand. A brief portrait of this very successful family business in Western and Eastern Europe highlights some of the characteristics their CEO emphasizes. These are quite similar to the ones delineated by the CEO of Hamilton Jewelers that we cited at the beginning of this chapter. Ewald Raben, the current CEO of Raben Group and a scion of the founder, reports that they now have branches in 13 European countries, have 10,000 employees, and dispatch over 8500 trucks on the road each day. He stresses that the values characteristic of family-owned organizations, such as treating customers and employees “like family members,” have fostered employee engagement and customer loyalty to the brand. Family firm members have continued over the 99 years of the firm’s existence to uphold their values and ethics and remain loyal to the family and its traditions while building an organization based on honesty, transparency, and mutual respect. In times of crisis, like the 2020 COVID-19 pandemic, when many of the family members of the firm and other employees are working remotely, it may be imperative that various meetings be held using technology. The consultant may ask or be asked by the IT person to help organize these meetings. His or her role may focus on: 1. Helping to determine if one person, like the CEO, is always to be the leader or if this function is to rotate. 2. Ensuring that an agenda is sent out in advance and all on the participation list be asked to send in items they would like added. 3. Stressing that beginning and ending times be specified. 4. Encouraging that a cordial welcome should be extended that might even include a mindfulness exercise that everyone present can do together focusing attention on the here and now. 5. Making sure that ample time be left for “wrap up” at the end.

Ongoing Efforts to Agree on a Definition of Family Business In 1996 Shankar and Astrachan questioned how the research about family businesses could be meaningful in the absence of a precise definition of family business. They suggested there are four categories of definitions:

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1 . “Street lore” – those statistics that have been quoted frequently yet lack evidence 2. “Educated estimates” – data based on expert knowledge and experience in the field 3. “Statistical category” – data extrapolated from known data or small samples 4. “Family business facts” – based on actual research which used a specific definition of family business. Two years later Ward and Dolan (1998) suggested that the definitions which revolve around ownership configuration or stage of ownership are most tied to family firm behavior. The Family Firm Institute (2013) has listed various definitions that have evolved over time. These are: 1. Firms in which multiple members of the same family are involved as owners or managers, either at the same time or over time. 2. Firms in which families exercise control through influence by ownership or management that is measured by percentage of equity held by family members and percentage of management positions held by family members. 3. The enterprise is an economic venture in which two or more members of a family have an ownership interest and are committed to the continuity of the firm. 4. The businesses are governed and/or managed by a group of people from the same family or group of families whose objective is to have it continue into future generations. 5. A family business is: (a) A firm in which the founder/s or person/s who acquired the firm, their spouses, or direct heirs hold the majority of decision-making rights. (b) One in which the preponderance of decision-making rights (of the family) are direct or indirect. (c) At least one person in the family or kin (system) is formerly involved in governance of the firm. (d) An enterprise in which the persons who founded or acquired the firm or their family possess 25% of the decision-making rights. Astrachan, Klein, and Smyrnois (2005) developed an instrument, the F-PEC, to measure the extent to which a business can be considered a family business depending on their degree of influence on the firm. F-PEC offers a multidimensional model to define family business using the family’s three dimensions of influence on the firm: (a) power characterized by the ownership, governance, and management; (b) experience characterized by the family’s summed experience that is brought into the business (the greater the longevity of the enterprise, the greater the experience that can be brought into the firm); and (c) culture characterized by the family’s values and commitment as measured by Carlock and Ward’s FB commitment scale (2010) (see Chap. 4 on Assessment). Rau, Astrachan, and Smyrnois wrote “The F-PEC Revisited: From Family Business Definition Dilemma to Foundation of Theory” (2005), which continued the work cited above that (Shankar and Astrachan) did in 1996.

Ongoing Efforts to Agree on a Definition of Family Business

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Legler (August 2019) in an article entitled “Independent Wealth: How Family Systems Theory Illuminates Successful Intergenerational Wealth Transitions” stresses that family firm leaders should “ensure that the next generation of leaders is prepared for the wealth they will be inheriting.” He raises the question of whether “members of the rising generation will be capable of managing the assets they will be expected to manage.” We believe it is the function of those who have assumed the stewardship role to see that they are taught over time how to do this. He closes stating the family’s wealth revolves around “increasing the odds that the family members in the business will maintain and build the family wealth together,” a conclusion we amplify further in our closing paragraph. Recently Jaffe (2020) has expanded the definition of the family business; instead he now uses the term “family enterprise” and endows the concept of succession with a broader view  – as more than just the business, to include an expression of the intention, identity, and legacy of the families that own and operate them. This family commitment toward a shared future is based upon transmitting the family’s historical values. The following encapsulated picture of another internationally known family business is illustrative of the commonalities shared (and listed below) of many of the most successful family enterprises. One family business, which now includes Gen. 3 and Gen. 4 members, is the Lauder family (Long, Looking Glass, 2020). The Lauder cosmetic brand was founded by Estee Lauder in 1947, and the firm has grown enormously since then. Its leaders engaged in “conscientious brand building.” The tight-knit Lauder clan has acquired other cosmetic lines, most of which are marketed under their original brand names. Leonard Lauder, one of the scions in this cosmetic industry dynasty, stated “there are two things that can destroy a family business: the family and the business, and they both need to be kept in order.” In his book The Company I Keep (Lauder, 2020), he reports that his “tenaciously ambitious mother” (Estee) created the brand with a kitchen sink “magic cream” in 1946. Today (2020), it is a 12 billion dollar corporation and has achieved many firsts in the international cosmetics industry since its founding 75 years ago. He maintains the “secret to his success” as its CEO was treating everyone, including employees of brands the corporation has acquired, “like family,” while fostering a sense of stewardship among the tight-knit Lauder clan, now including what he alludes to as Act IV. Like many other long-time lucrative family enterprises, Lauder family members are extremely philanthropic. Their religious and cultural heritage seems to have greatly influenced their choices. Leonard’s brother, Ronald S.  Lauder, is the extremely active and effective president of the World Jewish Congress (see Chap. 9 about impact of cultural and religious factors on family decisions and activities). This picture of the Lauder family highlights similar characteristics to those emphasized by other successful family firms as being essential in their functioning well and ultimately, to their longevity. As Leonard Lauder has written “It’s really fun to watch the next generations as they find the opportunity where they can contribute the most” (Lauder, 2020).

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2  Family Business Consultation: A Psychological Perspective

In bringing this chapter to a close, we reiterate some of the commonalities long existing successful family businesses exhibit (Kenyan-Rouvinez, 2017), the most significant of which seem to include: • Core values derived from the family’s history, traditions, culture, and perhaps religion. • Emphasis on “legacy”. • The necessity of the leaders providing stewardship and modelling competency to younger family members. • A strong commitment to family and community. • Achieving and maintaining a fine reputation. • The importance of family philanthropy. In light of all of the foregoing, it is incumbent upon family enterprise consultants to become familiar with the businesses’ strengths and weaknesses as well as the participating family members’ values, personalities, and ways of interacting, their short- and long-term goals, the amount of decision-making control various members hold, and the importance of remaining “tuned into” and in agreement with the overarching goal of being financially successful, which, in the overall analysis, remains the major reason for the existence of any business. In keeping with this central raison d’etre of family enterprises, Family Business Magazine hosted a live online conference on “Family Business Generational Wealth” (Family Business Magazine Newsletter, September 7, 2020) designed for multigenerational family-owned companies from September 29 to October 1, 2020. Some of the major highlights were: • • • • • • •

The real-world issues of family wealth. Developing wealth literacy for the family enterprise. Stock ownership issues in the family business. Raising kids with wealth. Diversifying beyond the core family business. The economy ahead: planning for 2021 and beyond. Corporate philanthropy.

We underscore the relevance to family enterprises of each of these areas delineated and therefore the importance of family business consultants being (thoroughly) conversant with them.

References Astrachan, J., Klein, S. B., & Smyrnios, K. X. (2005). The F-PEC scale of family influence: A proposal for solving the family business definition problem. Entrepreneurship: Theory and Practice, 29(3), 321–339. https://doi.org/10.1111/j.1540-­6520.2005.00086.x. Carlock, R., & Ward, J. (2010). When family businesses are best: The parallel planning process for family harmony and business success. Basingstoke, UK: Palgrave.

References

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Frankenberg, E. (1999). Your family, Inc.: Practical tips for building a health family business. New York: Haworth. (Now Routledge). Hall, A., & Nordqvist, M. (2008, March 1). Professional management in family businesses: Toward an extended understanding. Family Business Review, 21, 51. https://doi.org/10.1111/ 2Fj.1741-­6248.2007.00109.x. Jaffe, D. (2020). Borrowed from your grandchildren: The evolution of 100 year family enterprises. Hoboken, NJ: Wiley. Jaffe, D., & Lane, S. (2004). Sustaining a family dynasty: Key issues facing complex multigenerational business and investment owning dynasties. Family Business Review, 17(1), 81–96. Kaslow, F. (1991). Enter the prenuptial: A prelude to marriage or remarriage. Behavioral Sciences & the Law, 9, 375–386. Kenyon-Rouvinez, D. (2017). The secrets of success in long-lasting family firms. IMD: Perspectives for Managers, 2–17. Kislik, L. (2020, May 27). To resolve a problem, stop struggling and do these 6 things. Forbes. Lauder, L. (2020). The company I keep: My life in beauty. New York: HarperCollins. Legler, S. (2019, August 21). Interdependent wealth: Family systems theory illuminates successful intergeneratonsl wealth transitions. FFI Practitioner, 1–12. Long, A. (2020, November). Looking glass. Town and country Magazine (p. 57). NY: Hearst Publishing. Rau, S.  B., Astrachan, J.  H., & Smyrnios, K.  X. (2005). The F-PEC scale of family influence: Construction, validation, and further implication for theory. Entrepreneurship: Theory and Practice, 29(3), 321–339. https://doi.org/10.1111/j.1540-­6520.2005.00086.x. *. Shanker, M., & Astrachan, J. (1996). Myths and realities: Family businesses’ contributions to the U.S. economy – A framework for assessing family business statistics. Family Business Review, 9(2), 107–123. Siegel, H. (2020 Spring). Hamilton Jeweler’s accent magazine. Wainscot Media LLC. The Family Firm Institute, Inc. (2013). Family enterprises: Understanding families in business and families of wealth. Hoboken, NJ: Wiley. Waldkirch, M., Melin, L., & Nordqvist, M. (2017). When the cure turns counterproductive: Parallel professionalization in family firms. Academy of Management Annual Meeting Proceedings, 2017, 16270. https://doi.org/10.5465/AMBPP.2017.50. Ward, J., & Dolan, O. (1998). Defining and describing family businses ownership configurations. Family Business Review, 11(4), 305–310.

Chapter 3

Similarities and Differences Between Family and Nonfamily Business Enterprises

Abstract  This chapter describes distinct characteristics of family enterprises that differentiate them from nonfamily businesses. Family members have multiple roles and historical relationships with each another that influence their attitudes, decision-making, and behaviors within their firm, their social networks, and with one another. Family firms typically are more motivated and have longer-term planning horizons, are longer existing and exhibit greater involvement with their local communities than nonfamily businesses, and tend to be more innovated. When the consultant walked into the room early to discuss a potential business consultation project, several people were already seated on different sides of the large conference table. A few others entered during the next 15  min. The consultant noticed that the later arrivals looked at the seating arrangement before taking their seats. Though the group members around the table were different ages and genders, the looks they gave to one another or diverted from others seemed to indicate power differentials or struggles. The young man who had initiated calling the potential consultant introduced himself to the older man at the head of the table and then suggested to the others that they introduce themselves. If this had been a typical business consultation initial meeting, most likely each person would have introduced themself and their position in the organization and stated their job functions. Then, the leader/s would probably have clarified why they requested the consultation, such as the need to make organizational changes or help developing their leaders. Their seating may have been such that the most senior executives would have been seated closest to the CEO or top leader, influenced by power and title. And most likely, they would all have been on time. Structure (e.g., organizational chart of functions and responsibilities), formal protocols (e.g., rules of conduct, processes, and procedures), and power hierarchy are clearly defined in this type of organization. Such an initial family business consultation meeting is clearly differentiated from a nonfamily firm meeting in that the family firm’s decision-makers identify themselves first and foremost as a family and are aware that their family

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_3

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relationships affect their roles and functions in the family enterprise and vice versa. Probably their seating arrangement would reflect that the favorite or most significant relative would be seated closest to the CEO or president. Coming late to a meeting juxtaposes the family value of “wanting to be accepted/loved for who they are” and respecting the business value of punctuality. The looks by latecomers at the seating arrangement of those around the table can signal a triggering of long-held reactions to certain others. To a psychological consultant to a family business, some of the complexities of the potential engagement may quickly become apparent, and information about the family and the firm’s history will be needed first. Then the focus should shift to the current issues and dilemmas needing to be resolved.

Key Issues of the Business Both family and nonfamily businesses are organizations engaged in economic activity, either buying or selling goods and services. Their main purpose is to make a profit; and, in order to survive and thrive, the business has to assess risks and make investments. The leaders are the architects of their businesses and use their influence in shaping the culture, structures, and procedures. Family-owned businesses are not homogeneous they differ in intra-family dynamics, communication styles, conflict management, role and intergenerational boundaries, knowledge of the business, leadership competences, degree of family involvement, governance, etc. Family firms also are influenced by nationality, ethnicity, religion, gender, and customs. Many of these factors influence the succession planning process and are therefore delineated further in Chap. 8.

Founder CEO Characteristics Both family and nonfamily business founder-entrepreneurs have the motivation and the will to create a firm. As children, many of them were raised in homes where business was discussed; these children tend to go into business more than do others not raised in a business environment (Lindquist, Sol, & van Praag, 2015). Entrepreneur-founders find it hard to share control and power. As they built their firms, they frequently had to develop processes and products on their own, pushing themselves not to listen to naysayers, until after they succeeded. They rarely ask for advice, frequently believing that “no one can do it as well as I can” and “no one else can know what’s best for my company as well as I do.” Founder CEOs are characteristically frugal; they are the builders of the wealth. In the founding stages of a business, the firm tends to expand organically – using the founders’ own resources to grow and develop. In this early stage, it is rare to find defined governance structures have been developed. Founders in both family and nonfamily businesses are found to resist the formalizing of structure and

Key Issues of the Business

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procedures. As the business and the leaders mature, these formal structures and processes are created. When both types of businesses are in their growth stage, they often develop mission statements, goals, and value-driven cultures. There is a significant difference in the tenure of nonfamily business CEOs and family firm CEOs. The family business CEO serves about three times longer than the average publicly traded firm’s CEO term (Stalk Jr. & Foley, 2012). Because of the longevity of family CEOs, they engage in long-term thinking and investments. Family firm founders “chart their own course” as demonstrated by their characteristically being proactive, directly challenging competition, and acting autonomously (Hernandez-Linares, Kellermanns, Lopez-Fernandez, & Sarkar, 2019). Often a family enterprise founder’s pattern of being authoritarian and making decisions without including others can deter communication, leaving little room for open discussion of different points of view with other members of the firm, as he or she can stifle input. Before enlisting the participation of the founder’s spouse and supporting their important role as a purveyor of family interconnectedness, traditions, emotional support, and sharing of the family’s history and values, the consultant encourages the inclusion of others and the continuity of the family enterprise.

Power and Priorities One of the significant differences between family and nonfamily businesses is the family’s influence on the firm. In family businesses, relationships exist because of birth, adoption, or marriage, and the roles in the business are based, at least in part, on family membership. Typically, in family firms, relationships are considered to be permanent, and individuals expect acceptance, love, and fairness. This psychological capital has strong emotional components not found in the nonfamily businesses. On the other hand, nonfamily businesses do not have to contend with the tensions that often exist in a family’s relational system. Nonfamily firms tend to survive and thrive if they are economically successful. If employees want more money or status than is provided by their current employer, they can seek and accept a position with another company. In family firms, leaving the business enterprise may be seen as disloyalty to the family. In nonfamily businesses, power and reward are based upon job title and performance. The relationships tend to be temporary and situational (related to business). Individuals receive approval and get raises and promotions based upon how well they function in their job. Conversely, power in the family firm is often based upon generational status and traditionally also on gender and birth order. The long-term sustainability of the family firm is intertwined with the family’s commitment to it and ability to pass on their values to future generations. Ownership in the enterprise is determined by “belonging” to the family; therefore, the consultant needs to inquire whether all “blood” family members are included? Are in-laws

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included? How does divorce impact ownership? Can ownership be transferred, bought out or sold? Has anyone in the family been excluded? Knowledge about the business is usually different for family business owners who work in the firm, compared to that of those owners who do not. For example, there are situations when family members who own, yet do not work in the firm, may want or need their expected distribution or monetary allocation (e.g., for college expenses) when it is not financially expedient for the firm to allocate it at this time. The business may need the money for fiscal concerns such as a major capital expenditure or the firm may be facing a time of economic recession. The consultant needs to inquire: • Are owners educated and routinely updated about the basic financial and planning needs in order to sustain or grow the business? • How often and in what manner are they updated about the business? • How do family members assess and discuss the firm’s needs and plans? • What are the expectations for financial distributions and other “perks” (if any) for the owners? • Are there written documents describing the allocation process and the basis for this? • Is there a process to review and update the allocation process? • What communication processes do family members use to discuss their different viewpoints? • Do the family members feel there is “safe” space permitted to talk and raise issues? • Are all members “heard” or are some heard more than others? • How does the family manage conflict? • What is the family’s decision-making process? • Are difficult decisions delayed or ignored? • Who is involved in making the “power hierarchy” clear, and how does one become part of it? Getting this information is important, as frequently the family contacts the consultant when they are in crisis or perceive the need to develop a process to constructively analyze, discuss, and reach resolution on thorny issues.

Success Measures Understanding how any business measures their success is necessary for effective consultation. All businesses typically assess success in economic terms. In addition to doing well financially, family firms measure success in terms of human and social capital (Danes, Stafford, Haynes, & Amarapurkar, 2009). New family business

Long-Term Planning and Investment, Risk, and Compensation

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consultants will perceive that an emotional connectedness exists between families and their businesses. These noneconomic factors are called social emotional wealth (SEW), which encompasses the family’s influence on the firm, the family’s identity and reputation, their sense of belonging, continuity of family values and mission, and the opportunity to be altruistic (Gomez-Mejia, Cruz, Berrone, & De Castro, 2011). Family members tend to be closely identified with their businesses and enjoy their influence on the firm, care about their loyal employees, and are attentive to social issues and philanthropy in their local community. These emotional connections cause family members to be more attuned to and involved in social issues and to their stakeholders than are nonfamily businesses (Van Gils, Dibrell, Neubaum, & Craig, 2014). By recognizing these emotional bonds, the consultant understands more deeply the decisions and actions of the family members. Typically, family firm members are also connected socially and financially with their communities, and their local neighborhoods may rely on the family firm’s involvement to help sustain their economies, particularly in rural areas (Marshall & Valdivia, 2019). The firm’s caring for their local community and staff is demonstrated in their tendency to be less likely to lay off employees in difficult financial times (Stavrou, Kassinis, & Filotheou, 2007). By demonstrating social ties and support for the community and their stakeholders, family firms sustain their businesses and preserve their accumulated social and emotional capital for future generations. These social-emotional priorities may vary across the life cycle of a family or among family members (Le Breton-Miller & Miller, 2013). The new consultant needs to assess each family member’s goals, strengths, and motivations; the life stages of the leader and the organization; and the goals and vision of the generation currently in charge to be able to navigate the firm’s culture and provide guidance to the family enterprise.

 ong-Term Planning and Investment, Risk, L and Compensation Long-term Planning and Investment Nonfamily business leaders are motivated and expected to demonstrate financial success. Most nonfamily businesses, especially publicly held companies, need to be able to show profit within short timeframes, sometimes every 3 months. Such time pressures impact their ability to invest for the long term. By contrast, the longer tenure of family firm CEOs and their desire to transfer their enterprise to future generations enable them to develop long-term investment strategies, minimize risk by diversifying less, and keep their businesses in close geographical proximity, as compared to nonfamily firms (Gomez-Mejia, Makri, & Kintana, 2010). Access to financial capital is necessary for all businesses. Founders, both in family and nonfamily firms, initially do not have the resources needed to build their business. Because of their social emotional wealth, family business members rely on one another to pitch in during difficult times (family’s human capital) and rely on

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their personal social networks when they need additional money for the firm, enabling them to be more independent of financial markets than are nonfamily firms (Kempers, Leitterstorf, & Kammerlander, 2017). In terms of financial success, globally and across business sectors, family businesses are found to usually outperform nonfamily firms (Credit-Suisse Research Institute, 2018). In terms of their noneconomic wealth, family firms measure their success in terms of the commitment to the family’s values and traditions and continuity of the enterprise.

Decision-Making The leaders’ decisions reflect the values, priorities, resource allocation, and goals and objectives of the organizations. Nonfamily firms focus primarily on financial indicators such as maximizing profits; family businesses have a broader emphasis that includes social-emotional considerations that influence their business decisions such as providing jobs for the family. In the earliest stages of a family firm’s existence, informal communications occur. Family members who live and work together may discuss some business matters in an impromptu manner when they are in their hallways of their house, over dinner, or in a private setting. This is true especially during the Generation 1 stage when the family’s focus is on creating the firm and time, energy, and money are limited. During the firm’s start-up stage, structure and systems are usually created based on immediate need, and decisions are made to implement procedures and processes as needed. Also, during the early stages, the family business founders tend to turn to people whom they trust for advice, usually their spouses or other family members as informal advisors. Generation 1 leaders, especially when there is one owner, depend on these advisors for social-emotional support, to promote family harmony and to manage conflict (Sorenson, 2013). Family factors influence important decisions later in the firm’s development, such as about issues effecting governance when they are ready to add nonfamily shareholders. Generally, especially in the early stages, when they do select outside board members, they tend to favor people with whom they have close social ties. Often some individuals or the family as a whole are unable to discuss and reach consensus on important issues due to unresolved conflicts between them, the lack of understanding of business needs, etc. Family members working in the business, compared to those who are not, may have a deeper understanding of the firm’s long-­term needs, such as those regarding capital investment. Others may have personal or career wants and needs that diverge. The consultant needs to evaluate the gaps, differences, or misunderstandings among family members in order to guide them to develop effective conflict resolution and decision-making strategies in a supportive environment (Chap. 6). Having a family systems perspective enables the consultant to guide the family toward having a healthy, respectful discourse prior to making decisions and creating processes and procedures (Aronoff & Ward, 2011).

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Tenure and Financial Compensation Long-term tenure implies stability and a sense of security in business. The average tenure of a family business CEO is much longer (20–25 years) than the tenure of nonfamily CEOs of publicly owned firms which is 6 years (Stalk Jr. & Foley, 2012). The longer tenure of family business CEOs contributes to the longer-term planning and investment perspectives characteristic of family businesses. Companies pay significant salaries (and perhaps bonuses) to hire and retain top talent (Tabor & Vardaman, 2020). Family business executives tend to be paid less than nonfamily, yet nonfamily executives are attracted to work for family firms because of the social-emotional benefits.

Innovation With their long-term time horizons and their conservative spending styles, one might think that family firms are the less innovative. Yet, family businesses are more efficient and effective in innovating. In fact, typically, for every dollar invested in R&D (Research & Development), family firms have more patents, number of new products, and more revenue generated by these new products (Kammerlander & van Essen, 2017).

Resilience Resilience – the ability, determination, and agility to survive and then thrive after adversity – is important to all firms, especially family businesses because an inherent part of their raison d’etre is to pass the enterprise to future generations. Organizations, like individuals, can better manage adverse conditions when reminded of their prior history of getting through difficult times. We find founders typically do not talk about their negative experiences and how they worked through them. By encouraging founders to recount how they triumphed through difficult times, younger family members will be being educated by their role modeling and inspired by their resilience. Clients have described feeling empowered when this consultant (LF) has asked them to remember their personal history or their family’s, or the firm’s, in overcoming hurdles and what they have learned. When the consultant requests the spouse or long-­time employees to recount some of these difficult events, what was learned, and how it contributed to later success, these stories of resilience contribute to the family legacy of surviving and thriving. Family firms have been found to be more resilient than nonfamily firms during difficult economic times and afterwards (Amman & Jaussaud, 2012).

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Mission, Vision, Values, Goals, and Culture of the Business Mission Statement Business mission statements are aspirational and describe why the organization exists, i.e., what the firm defines as its purpose. This reflects what is valued by the organization. The business’s mission statement is sometimes described as the “feel good” motto that is placed over the institution’s front door. Different than nonfamily business mission statements, those of family firms include the family’s commitment to their stakeholders – employees, vendors, and the larger community, as well as to the extended family. Successful family enterprises typically have mission statements that reflect the founding leaders’ desired legacy and the values they wish to pass on to future generations. Discussing the mission statement can be a starting point for the family business consultant to ascertain whether the family members share the purpose of continuing their legacy. Family members voicing different perceptions of the mission statement may indicate a lack of commitment or trust among them about continuing together in the family enterprise.

Vision Statements Business vision statements are inspirational; they reflect what the leadership wants to achieve in the long term and typically describe measurements and timeframes for the desired outcomes. Nonfamily businesses draw up vision statements that define their success in economic terms and may include the desired impact on clients or stakeholders. Family businesses’ vision statements tend to include similar descriptions of financial success, plus a greater emphasis on the impact of their enterprise; for example, it may include making contributions to the local community.

Values Values define acceptable and desirable beliefs and actions by the organization. They underlie the social behaviors and, when shared, often undergird effective organizational performance (Baumgarten, 2020). Some companies’ leaders do “not walk as they talk,” and the proclaimed values are therefore not relevant. However, when employees perceive their leaders and top managers as being trustworthy and ethical, the firm’s performance is enhanced (Guiso, Sapienza, & Zingales, 2015). Many family businesses stress ethics related to their values, religion, and spiritual beliefs (Astrachan, Binz-Astrachan, Campopiano, & Bau, 2020).

Mission, Vision, Values, Goals, and Culture of the Business

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In nonfamily businesses, the mission and corporate culture shape the firm’s values. In a family business, nonfinancial variables such as shared traditions and history, as well as financial considerations, circumscribe the firm’s culture and values. Family firm values tend to have originated with the founder, yet for the enterprise to survive, they need to be dynamic and change over time – with the shared values adopted and adapted by the members of succeeding generations. Frequently the family business consultant needs to help family members clarify important core values. Family firms that make their values explicit and measurable and incorporate them into their strategic plans report better returns and greater longevity than other firms do (PwC’s Family Business Survey, 2019). The family’s roots undergird their values that arose out of their shared history and culture (Jaffe, Lescent-Tiles, & Traeger-Muney, 2019).

Culture “The way things are done here” is a common way of describing corporate culture. The firm’s culture reflects the unwritten group customs and shared beliefs of the community in the workplace. There may be a few “old timers” in the business who have the institutional knowledge of how the organization’s informal customs and culture developed and they can transmit this. A firm’s written formal rules and procedures have clear consequences. However, the actual culture of the business is often difficult to measure and define; it is revealed in the unspoken words and actions, shared norms, and social patterns that guide the individuals in the organization. These norms and beliefs are informal yet impactful. Many corporate executives perceive culture as very influential in effecting ethical choices, innovation, and value creation (Graham, Campbell, Popadak, & Rajgopal, 2017). Nationality, birth order, generation, regional, social class, religious, language, and gender factors influence the culture of an organization. In addition, the family firm’s culture typically reflects the values of the founders’ and the emotional processes preferred in the family (such as closeness vs. separation and independence vs. dependence). This blending of the founding family’s culture into that of the firm’s modus operandi impacts the decisions, roles, norms, and rules of the firm.

Goals and Strategies Both family and nonfamily firms have goals (objective and key results (OKR)) and strategies intended to help them achieve the firm’s vision. These goals are typically measurable and reflect the priority of issues, resource allocation, and time frames. Family firms, in addition to having quantifiable objectives demonstrating profit and

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financial success, also prioritize their purpose of providing for family members and assuring the continuity of the enterprise. Communicating and educating family members about the short- and long-term strategies for the business requires collaboration and acceptance and support for its goals. Do the owners understand the needs and goals of the firm? Are the firm’s and family’s most immediate goals aligned with their purpose? The consultant will find that helping the family align their short-term goals, such as obtaining money for digitizing the business, with their mission of passing the business on to their relatives, will likely enable them more readily to work together toward fulfilling the enterprise’s vision.

Diversity The term diversity can refer to various factors – including gender, ethnicity, nationality, religion, age, disability, political viewpoints – and each of these has differential impacts on organizations, depending upon context, time, productivity, and decisions (Kochan et al., 2003). Nonetheless, today diversity is both a labor-market imperative and a societal expectation. Although not all firms welcome diversification, business advisors need to be sensitive to diversity and cultural issues when engaging with individuals and groups that differ from than their own background (Jaffe & Grubman, 2016).

Gender Businesses in general have found gender diversity and inclusiveness improve their financial performance, leverage talent, reflect the current market place, strengthen their reputation, and increase innovation and group performance. When companies have a critical mass of women (30%), they outperform on ROE (return on equity). A greater number of women in management and senior leadership typify better performing organizations, more innovation, greater employee retention, increased corporate social responsibility, and more ethical behavior (Catalyst, 2020a). Even though women executives score higher than men on most leadership skills, it is the improved financial returns that seem to motivate more businesses today to consider hiring more female executives (Offerman & Foley, 2020). Though gender bias has been getting more attention recently, women still only hold 26.5% of all management positions in the S&P (Standard & Poor’s) 500 and only 5% of CEO positions (Catalyst, 2020b). There is some evidence of a recent more favorable bias toward women in leadership (Kaiser & Wallace, 2016). Traditionally, in family firms the women, whether spouses or daughters, were not considered for top leadership positions. This phenomenon has been changing significantly in recent years. Currently, family firms have an average of 1.14

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female family members and 3.5 female nonfamily members in C-level (i.e., top executives such as CEO, CFO) positions and 4 women (1 family, 3 nonfamily) being groomed for promotions  – significantly more than nonfamily businesses (Hall, 2014). The American Family Business Survey reported 24% of family firms have women CEOs or presidents, 55% have at least one female on their Board, and 70% are considering women as their next CEO (MassMutual, Kennesaw State University, & FFI, 2007). Successful family businesses provide a milieu and culture that is favorable to female leaders  – role models, inclusive environment, and long-term thinking. During discussions of leadership development, transitions, and appointments, consultants can promote the idea of empowering the women in the family business to assume leadership positions, if they have the desire and necessary capabilities.

Ethnicity All companies in the top quarter of those having ethnic, racial, and gender diversity in corporate leadership show greater profit than those in the lower quartile (Dixon-­ Fyle, Dolan, Hunt, & Prince, 2020). Whereas many nonfamily businesses seek to become more inclusive and diverse, such a goal can pose a dilemma to the family business, especially if they require their corporate leadership to be “family members only” which for many is part of the essence of a family enterprise. To make meaningful interventions, the family business consultant needs to ask questions that will elicit crucial values or patterns of expected behavior, such as about immigration/migration, religion, class, marriage, sibling patterns, conflicts, alliances, and cutoffs (McGoldrick & Troast, 1993). There may be quandaries for the family when they face diversity  – for example, if a family member marries someone from another ethnic group or has converted to a religion different from that of the family. Even if the family is open-minded and wants to have diversity among its employees, vendors, or customers, biases may exist, and they may be unable to accept greater inclusiveness within their own family because some may view this action as a betrayal of family values. Family business ownership is less frequent among Black and Hispanic entrepreneurs than among Asian and White ones. This lower rate of Black and Hispanic family firm ownership may be due to such facts that these entrepreneurs have had lower educational levels, have fewer years of managerial experience, and have less money available to start a business and access to credit, than Asian and White entrepreneurs. Minority owned businesses are disproportionately concentrated in urban areas and serve ethnic retail markets (Ewing Marion Kaufmann Foundation Compilation, 2016). Family involvement and influence and community norms and cultural attitudes impact ethnic entrepreneurship more than they do nonethnic. Research indicates that structured practices such as human resource management become more similar to those of nonethnic family firms as the ethnic firms become better established (Kidwell, Hoy, & Ibarreche, 2012).

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Defining the Family Business It is hard to define and compare family and nonfamily businesses, as these terms can refer to a one- or two-person storefront operation or to firms employing thousands located in various countries. What defines a family business? There is no commonly accepted definition of “family” in business/management research. Some people dichotomize the differences between family and nonfamily firms. Others consider it to be more accurate to consider gradations or degrees of the family’s influence on the firm in the areas of ownership, management and governance, transgenerational intent, generational involvement, and perceived identity (Salvato, Chirico, Melin, & Seidl, 2019). Though there are many family business definitions, we favor the broadest definition – family firms are those that choose to identify themselves as such by virtue of ownership or management and by their desire to pass on the enterprise to future generations. Most non-US research considers family firms to be those that are owned by the family, whether or not a family member was the founder. This is relevant for those consulting internationally as the dynamics and processes may be quite different (Kaslow, 2006; Villalonga & Amit, 2010). Though family business is the oldest and most prevalent type of business in the world, systematic research in the field is still in its early years. As the field emerged research largely focused on the business side of the family businesses and did not take into account the families who owned the business. Tagiuri and Davis (1996) formulated the three-circle model to more accurately account for the uniqueness of family firms by including perspectives of the business (family and nonfamily employees), the family, and the owners. Each circle as seen in the graph at the top of p. 35 is separate and also overlaps the other areas, reflecting that individuals may have multiple, sometimes competing, motivations, and roles and identities that impact them and influence their decisions and actions: that is, individuals can be owners, work in the company, as well as be members of the family. The three-circle model was developed to portray the overlap among the several systems in which family business consultants operate. The three circles are dynamic impacting one another constantly (Tagiuri & Davis, 1996) (Fig. 3.1). Habbershom, Williams, and MacMillan (2003) suggested that a family business can be understood as a “metasystem” comprised of three broad subsystem components: 1. The controlling family unit – representing the history, traditions, and life cycle of the firm 2. The business entity  – representing the strategies and structures to generate wealth 3. The individual family members representing the interests, skills, and life stage of the participant family owners/managers

Role of the Family Business Consultant

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Ownership

Non-family Non-manager owners

Family Owners

Family members

Non-family Owner Employees

Family Owner Employees

Family Employees

Non-family members Business

Family Fig. 3.1  Three-circle model. (Tagiuri & Davis, 1996. Reprinted with permission)

Family members have multiple roles, depending upon whether they own or hold management/leadership positions in the business, plus their roles in the family. When potential clients identify themselves as part of a family business, consultants need to inquire what constitutes the “family” in their family business – do all members or only certain members of the entire family own the business and manage the firm, or does this refer to members who are employed in the firm? To understand the owner family in family business, it is essential for the advisor to start with the family itself – its history, values and traditions, interactions, perceptions of others, and commitment to continuity – to guide the consultation. With the maturation and increasing complexity of some of the families and their enterprises, there are different types of consultants engaged to work with the different interlocking systems. The role of the family business consultant was designed to reflect the different training and foci of the various advisors.

Role of the Family Business Consultant (Fig. 3.2) Stewardship Because of the long-term perspective and the desire to transfer their values and the actual enterprise to future generations, leaders in family firms need to behave as stewards or designate a few ranking members of the firm to serve in this capacity, so they can provide for the education and training of younger family members. Those entrusted with responsibility need to maintain and transmit the influence of the

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3  Similarities and Differences Between Family and Nonfamily Business Enterprises

Ownership/Governance System Lawyers Accountants Estate Planners

Family Business Consultants Business System

Family System Family Therapists

Business/OD Consultants

Fig. 3.2  Elaborated three-circle model. (Hilburt-Davis & Dyer, 2003 Reprinted with permission)

founders’ values yet enable succeeding generations to shape and adapt the enterprise as they take on leadership roles. In sum, there are many similarities between family and nonfamily businesses. There are also unique differences in that family firms exhibit a value-driven culture, emphasize social-emotional wealth, have longer-term investment horizons, provide greater opportunities for women, maintain lower investment costs which are a more successful innovation, and make close connections with their communities and loyal stakeholders. These characteristics impact the business and the family members.

References Amman, B., & Jaussaud, J. (2012). Family and non-family business resilience in an economic downturn. Asia Pacific Business Review, 18(2), 203–223. https://doi.org/10.1080/1360238 1.2010.537057. Aronoff, W.  J., & Ward, J.  L. (2011). Family business governance: Maximizing the family and business potential. New York: Palgrave. Astrachan, J. H., Binz-Astrachan, C., Campopiano, G., & Bau, M. (2020). Values, spirituality and religion: Family business and the roots of sustainable ethical behavior. Journal of Business Ethics, 163, 637–645. https://doi.org/10.1007/s10551-­019-­04392-­5.

References

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Baumgarten, N. (2020). Build a company that aligns with people’s values. Harvard Business Review. Retrieved 4/23/2020 from https://hbr.org/2020/04/ build-­a-­culture-­that-­aligns-­with-­peoples-­values Catalyst. (2020a). Why diversity and inclusion matter: Quick take. Retrieved 4/25/20 from https:// www.catalyst.org/research/why-­diversity-­and-­inclusion-­matter/ Catalyst. (2020b). Pyramid: Women in S&P 500 companies. Retrieved 4/25/20 from https://www. catalyst.org/research/women-­in-­sp-­500-­companies/ Credit-Suisse Research Institute. (2018). The CS family 1000 in 2018. Retrieved 10/20/19 from file:///Users/lillifriedland/Downloads/the-cs-family-1000-in-2018%20(2).pdf Danes, S. M., Stafford, K., Haynes, G., & Amarapurkar, S. S. (2009). Family capital of family firms: Bridging human, social and financial capital. Family Business Review, 22(3), 199–215. https://doi.org/10.1177/0894486509333424. Dixon-Fyle, S., Dolan, K., Hunt, V., & Prince, S. (2020). Diversity wins: How inclusion matters. McKinsey & Co. https://www.mckinsey.com/featured-­insights/diversity-­and-­inclusion/ diversity-­wins-­how-­inclusion-­matters# Ewing Marion Kauffman Foundation. (2016). Kauffman compilation: Research on race and entrepreneurship. Retrieved 10/21/19 from https://www.kauffman.org/wp-­content/ uploads/2019/12/kauffman_compilation_race_entrepreneurship.pdf Gomez-Mejia, L.  R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms. The Academy of Management Annals, 5(1), 653–707. https://doi.org/10.1080/19416520.2011.593320. Gomez-Mejia, L.  R., Makri, M., & Kintana, M.  L. (2010). Diversification decisions in familycontrolled firms. Journal of Management Studies, 47(2), 223–252. https://doi. org/10.1111/j.1467-6486.2009.00889.x. Graham, J. R., Campbell, C. R., Popadak, J., & Rajgopal, S. (2017). Corporate culture: Evidence from the field, NBER 23255. The National Bureau of Economic Research. https://www.nber. org/papers/w23255.pdf Guiso, L., Sapienza, P., & Zingales, L. (2015). The value of corporate culture. Journal of Financial Economics, 117(1), 60–76. https://doi.org/10.1016/j.jfineco.2014.05.010. Habbershom, T. G., Williams, M., & MacMillan, I. C. (2003). A unified systems perspective of family firm performance. Journal of Business Venturing, 18(4), 451–465. https://doi. org/10.1016/S0883-­9026(03)00053-­3. Hall, C. (2014). Women in leadership: The family business advantage. EY Global and Kennesaw State University. Retrieved 11/15/2014 from file:///Users/lillifriedland/Downloads/eywomen-­in-leadership-the-family-business-advantage.pdf Hernandez-Linares, R., Kellermanns, F.  W., Lopez-Fernandez, M.  C., & Sarkar, S. (2019). The effect of socialemotional wealth on the relationship between entrepreneurial orientation and family business performance. Business Research Quarterly, 124, 1–17. https:// doi.org/10.1016/j.brq.2019.03.002. Hilburt-Davis, J., & Dyer, W.  G., Jr. (2003). Consulting to family businesses. San Francisco: Jossey-Bass/Pfeiffer. Jaffe, D. T., & Grubman, J. (2016). Cross cultures: How global family negotiate change across generations. Calif, San Francisco: Family Wealth Consulting. Jaffe, D. T., Lescent-Tiles, I., & Traeger-Muney, J. (2019). Social impact in hundred-year family businesses: How family values drive sustainability through philanthropy, impact investing, and csr. Milton, MA: Wise Counsel Research. Kaiser, R.  B., & Wallace, W.  T. (2016). Gender bias and substantive differences in ratings of leadership behavior: Toward a new narrative. Consulting Psychology Journal: Practice and Research, 68(1), 72–98. https://doi.org/10.1037/cpb0000059. Kammerlander, N., & van Essen, M. (2017). Research: Family firms are more innovative than other forms. Harvard Business Review. Retrieved 8/30/2018 from https://hbr.org/2017/01/ research-­family-­firms-­are-­more-­innovative-­than-­other-­companies Kaslow, F. (2006). The handbook of family business and family business consultation: A global perspective. New York: Routledge.

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Kempers, M., Leitterstorf, M., & Kammerlander, N. (2017). Risk behavior of family firms: A literature review, framework, and research agenda. In E.  Memili & C.  Dibrell (Eds.), The Palgrave handbook of heterogeneity among family firms. New York: Palgrave Books. https:// doi.org/10.1007/978-­3-­319-­77676-­7_16. Kidwell, R. E., Hoy, F., & Ibarreche, S. (2012). “Ethnic” family business or just family business. Journal of Family Business Strategy, 3(1), 12–17. https://doi.org/10.1016/j.jfbs.2012.01.004. Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, A., Jehn, K., et al. (2003). The effects of diversity on business performance: Report of the diversity research network. Human Resource Management, 42(1), 3–21. https://doi.org/10.1002/hrm.10061. Le Breton-Miller, I., & Miller, D. (2013). Socioemotional wealth across the family firm life cycle: A commentary on “Family business survival and the role of boards”. Entrepreneurship: Theory and Practice, 37(6), 1391–1397. https://doi.org/10.1111/etap.12072. Lindquist, M.  J., Sol, J., & van Praag, M. (2015). Why do entrepreneurial parents raise entrepreneurial children? Journal of Labor Economics, 33(2), 269–296. https://doi.org/10.2139/ ssrn.2101543. Retrieved 4/3/2015 from http://www.jstor.org/stable/10.1086/678493 Marshall, M., & Valdivia, C. (2019). NC:1030: Sustainable families, firms and communities in times of change. National Management and Support System. https://www.nimss.org/projects/ view/mrp/outline/17996 MassMutual, Kennesaw State University, & Family Firm Institute. (2007). American family business survey. Retrieved 2/8/2008 from https://www.massmutual.com/mmfg/pdf/afbs.pdf McGoldrick, M., & Troast, J.  G. (1993). Ethnicity, families, and family business: Implications for practitioners. Family Business Review, 6(3), 283–300. https://doi.org/10.1111/j.1741-­624 8.1993.00283.x. Offerman, L., & Foley, K. (2020). Is there a female leadership advantage? In Oxford research encyclopedia of business and management: Human resource management, organizational behavior, social issues. https://doi.org/10.1093/acrefore/9780190224851.013.61. Retrieved 2/23/2020 from https://www.researchgate.net/publication/339697667 PwC. (2019). U.S. family business survey. Retrieved 8/2019 from https://www.pwc.com/us/en/ industries/private-­company-­services/library/family-­business-­survey.html Salvato, C., Chirico, F., Melin, L., & Seidl, D. (2019). Coupling family business research with organization studies: Interpretations, issues and insights. Organization Studies, 40(6), 775–791. https://doi.org/10.1177/0170840619841402. Sorenson, R. L. (2013). In R. L. Sorenson, A. Yu, K. H. Brigham, & G. T. Lumpkin (Eds.), The landscape of family business. Cheltenham, UK: Edward Elgar. Stalk, G., Jr., & Foley, H. (2012). Avoid the traps that can destroy family businesses. Harvard Business Review. https://hbr.org/2012/01/avoid-­the-­traps-­that-­can-­destroy-­family-­businesses Stavrou, E., Kassinis, G., & Filotheou, A. (2007). Downsizing and stakeholder orientation among the fortune 500: Does family ownership matter? Journal of Business Ethics, 72, 149–162. https://doi.org/10.1007/s10551-­006-­9162-­x. Tabor, J., & Vardaman, W. (2020). How family business can attract non-family talent. Harvard Business Review. https://hbr.org/2020/02/how-­family-­businesses-­can-­attract-­non-­family-­talent Tagiuri, R., & Davis, J. (1996). Bivalent attributes of the family firm. Family Business Review, 9(2), 199–208. https://doi.org/10.1111/j.1741-­6248.1996.00199.x. Van Gils, A., Dibrell, C., Neubaum, D. O., & Craig, J. B. (2014). Social issues in the family enterprise. Family Business Review, 27(3), 193–205. https://doi.org/10.1177/0894486514542398. Villalonga, B., & Amit, R. H. (2010). Family control of firms and industries. Financial Management, 39(3), 863–904. https://doi.org/10.1111/j.1755-­053X.2010.01098.x.

Chapter 4

Evaluation and Assessment in Family Business Consulting

Abstract  This chapter describes what transpires in the initial assessment phase on which some of the consultant’s later suggestions and interventions may be predicated. It discusses and critiques various evaluation and assessment instruments utilized in consulting with the family businesses as an organization and the specific individuals and family members involved. The effective use of the assessment information in family consultation is described. Such relevant factors as educational and cultural background and language(s) spoken by those being assessed are to be considered when selecting the assessment instruments that will provide the data being sought by the consultant.

Case #3: Designating the Founder’s Successor An 80-year-old founder of a very successful family business called the consultant, (LF) he was concerned that his three sons who worked in the business with him had developed such conflict that they no longer would come together to family dinners or celebrations. The sons ranged in age from 42 to 50 years. The eldest son was the successor-designate, yet the father had not relinquished any power to him. He had “borrowed” money from his father and made his own personal investments in apartment units that were doing quite well. His brothers knew he managed his own real estate on “company time,” but when they complained, they felt their father did not want to listen nor take any action against this brother. The youngest son had moved back from the East Coast, where he had a successful career, at the request of the father who told him he needed him to get involved in the business. The fourth sibling, a sister, did not work in the company; however, she brought the family together for the holidays and traditional dinners. The father told the consultant he wanted to have the sons speak to one another and collaborate so that he could “think” about retiring slowly, similar to what other founders do Campbell et al. (2019). He was still working 6 days a week. The founder’s wife had died five years earlier.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_4

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The consultant chose assessment tools to assess family cohesiveness and family adaptability, motivations and potential derailers (i.e., characteristic that can limit progress or be seen as an individual’s weakness), communication patterns, thinking styles, emotional intelligence, and leadership skills. After conducting individual, dyadic, and family interviews, and administering the assessments instruments, the consultant and father together developed a plan outlining the consultation goals and monitoring to be done (i.e., measuring progress), and then, she signed the contract. These steps constituted the first phase of the consultation – the assessment phase. After the assessment phase, the actual consultation began. The first few weeks progressed well, and then, the father did not come to several meetings in a row, ostensibly because he had “urgent” business meetings. New consultants will find this deliberate lack of participation is not uncommon – the father wanted the consultant to “fix this problem.” The consultant informed the father that bringing about the transformation he desired required his active leadership and involvement in establishing a new direction of collaboration and conflict resolution (Schein, 1995). Begrudgingly at first he acceded and then started seeing the lessening of the stridency and avoidant behaviors among his sons. About 8 months later, a family business retreat took place; its agenda was to plan for the upcoming year and determine future directions. At the retreat the youngest brother realized that his father would not promote him into the leadership position promised prior to his moving back, so he returned back East with his family (Lambrecht & Lievens, 2008). The youngest son and daughter, as owners, attended the 3-day family business meetings held once a year. The other two sons had developed a working relationship, and their father started giving more authority and power to them, especially the eldest son. They still bring in the consultant periodically to guide their discussions and facilitate the family business retreats.

Takeaway from Case #3 Whether it be a nonfamily or family business, consultants need to ask themselves how they can create a safe space for individuals to open up and examine their values, emotions, and motivations so that they can understand themselves better and be open to taking new actions (Edmondson, 2019). Keeping in mind that businesses often reach out to consultants during times of crises or conflict, it may be hard not to rush in and try to start the consultation process at once (Mowday, Steers, & Porter, 1979). Fast doesn’t work. Evaluating individuals, teams, and organizations is more complicated in a family business than in a nonfamily firm, as individuals tend to be more reactive and not necessarily self-reflective when interacting with family members than they are with others. Because many hurts, grudges, disappointments, and mixed emotions may affect the family members, they may feel vulnerable. It is by building a psychologically safe space that the consultant nurtures the “sacred” trust individuals, families, and firms place in them by sharing their secrets and histories. It is important to act deliberately to ensure the family’s sense of trust, engagement, and attentiveness.

Organizational Stages

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Consultants need to manage their own feelings, so they can hear and guide, and not give the family “answers.” Ultimately, the family needs to realize the process is theirs, and thus they can take “ownership.” With the multitude of variables and individuals involved in family business consultation, we suggest using a two-step process when warranted; first, an evaluation of the situation and individuals involved, developing consultation goals with the family, a plan for monitoring and, at the completion of this step, a determination of the costs for the consultation. Then, the second step involves the actual consultation. Therefore, there are two costs using this procedure: one for the evaluation and the second for the consultation. The evaluation phase enables the consultant to gather the essential information on the family’s strengths and vulnerabilities, resources, support systems, and capacities of the family and its members (Stanley et al. 2019). Measurement includes individuals, relationships between dyads or more members, the whole family, and/ or the interface between family and extrafamilial environment. Individual information is garnered through interviews, assessments of strengths and limitations, attitudes, and preferences. Family assessments can add information about the marital, parent-­child, and sibling relationships, as well as about shared values, conflict management, and communication processes (Pieper et al. 2019). Relationship assessments provide information about dyadic and multiple person status and functioning, whether gathered from an individual’s reports or from observation of ongoing interactions between family members (Rieg et al. 2015). Determining the lifecycle stage of the business is important because it also interacts with the family dynamics.

Organizational Stages Businesses evolve through stages, just as people do (Adizes, 1988). The consulting needed by family businesses is distinctive and differs depending upon their generational phases of existence (Strike, 2012). Gersick, Lansberg, Desjardins, and Dunn (1999) provided a thoughtful perspective of how the business consulting and advising process is affected by the developmental stages of the firm also: • In the early stages, owners benefit most from having a personal relationship with a trusted advisor. The advisor often remains behind the scenes, supporting and challenging the owner, offering a broader perspective, and making referrals to experts, where necessary. • In the second generation, issues center on family interrelationships. Understanding the relationship between the family’s dynamics and the firm and securing the trust of all the family members are vital. In addition, experts on wealth management and estate planning are often required. • Once the firm creates a more complex structure, such as a cousin consortium, it begins to resemble a nonfamily firm, and formal structures, policies, and procedures become more salient (see Chap. 5). At this stage, a team of multidisciplinary advisors may be advisable.

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From the interviews and assessments, the consultant obtains the insiders’ viewpoints and learns the nature and meaning of events and experiences to each individual and the family. Following this process enhances the consultant’s effectiveness because it promotes objectivity and a deeper perspective of the overall dynamics prior to determining the consultation goals. Obtaining historical information from each member reveals their perceptions and attitudes of the larger family system as well as their insights into the operations of the business that provides critical information to the consultant. A deep understanding of the family’s dynamics is needed to understand why this family firm operates the way it does: how the family influences the firm and the firm influences the family, and how these interactive influences in turn impact their business decisions. Interviews should be done thoughtfully so the consultant can become aware of how their own culture and background may impact their interview style so they can be sensitive to the norms and culture of the family (Gersick, 1992). Background and demographic information is garnered by asking about the family history and early development of the firm. If the family indicates they are descendants of immigrants, it is wise to inquire about the country of origin as it contributes to information about decision-­making preferences, such as for male succession, collectivist vs. individualist orientation, mixed diversity if married into other cultures, etc. Asking about each individual’s background contributes to understanding whether education was encouraged and if training and experience in family business roles was provided (Le Breton-Miller & Miller, 2015). Such information is supported by organizational learning theory that indicates that the longer a business leader has to develop organizational specific skills, the more the firm’s performance will be enhanced (Rowe, Cannella Jr., Rankin, & Gorman, 2005). Interviewing family members individually elicits valuable information about their self-perceptions, expectations and disappointments, perceptions of others in the family, and behaviors they perceived have been rewarded – or penalized. An effective way of building the needed knowledge base is to first inquire about the family’s history and that of the firm. This storytelling process (McGoldrick & Shibusawa, 2012) has a positive impact on the family in terms of reminding them of their collective history, shared values (Konopaski, Jack, & Hamilton, 2015), and commitment to perpetuating the family enterprise for future generations. Asking a family member to write down the chronology and some highlights further lends visual support to these commonalities. The recounting of the family’s history may calm some members’ anxieties and yield a long-time perspective to the presenting problem, which in this case was the transfer of power. Seeking to determine alignment of purpose and values of current family members with the firm’s mission may indicate culture changes that could impact employee retention or family members’ thoughts about continuing or selling the business (Ward, 1997). Learning whether the members come together for shared traditions and festivities and, if so, who brings them together gives an indication of each individual’s commitment to the family and who has been the “emotional glue” holding them together. Many family firms rely on a different CEO, who is much less visible, and who serves as the “Chief Emotional Officer” to do this.

Key Information from Observation, Interviews with Individual Members…

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After administering and compiling the information from the assessments, the consultant posed questions to individual family members as to whether they perceived the assessment results as accurately reflecting their self-perceptions and consistent with their observations of their family. Compiling this information from the members and then corroborating it with the individual enables the consultant to guide individuals and the family as a whole to focus on their contribution to family business issues, rather than concentrating on personality issues or historical hurts and grudges. By using a family system’s approach, the consultant will be able to gain insight into each family member’s reality that is exhibited in their interactions with one another and the environments in which they participate (McNamee, 2020). Communication skills training can enhance the expression and listening skills of family members (Epstein & Falconier, 2017). By the recounting of their family’s history and that of the firm, members become clearer about the impact of prior generations on them, especially relating to stress and resilience (Walsh, 2016). As with transgenerational family therapy, by increasing their self-awareness of personal and family flexibility during difficult times and their own strengths, the consultant can guide members to see themselves as co-creators of the current family firm dynamics and enhance collaborative decision-making for the enterprise (Levin, Bozer, & Charmine, 2008).

 ey Information from Observation, Interviews K with Individual Members, and Attendance at Family Meetings Much of the essential information is gathered by interviewing the family members, and thus, consultants should always try to interview all family members (Holt, Pearson, Carr, & Barnett, 2017). These interviews yield factual data and subjective information as to how each member views themselves, the family, other members, and their interactions (Campopiano, De Massis, & Chirico, 2014; Chirico, Sirmon, Siascan & Mazzole, 2011). Part of the inquiry should include seeking relevant information about the business and external factors such as the community networks and their involvement and the industry at large. Below is a list of assessment tools that have been used by family business consultants. There are brief descriptions and an indication whether we were able to ascertain whether the specific tool met professional standards of research design and peer review for this population. Although they may not meet these standards, some consultants have used them effectively by asking whether the results were compatible with the individual’s or the family’s perceptions. Similar to other businesses, this firm may have had other consultants who have given their “expert” opinion about what the firm should do. Psychologist family business consultants aim not to be experts by proscription but rather by being guides to opening the members up to deeper self-understanding and learning how their emotions, values, and actions impact others and the decisions about their business.

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Family Involvement An effective family assessment needs to be completed in partnership with the family. Their inclusion fosters engagement by discussing the issues the family business is experiencing, what is identified as needed or requiring change, expectations of roles and responsibilities of individuals, time frames, voices and choices of the family, and what additional resources might exist within the extended family and social network to address the well-being of the family enterprise. Using assessment information can be significant when the skillful consultant summarizes it to open a discussion. By using this information, the consultant guides the family to deliberately and thoughtfully discuss the values, purposes, and interpersonal interactions rather than emphasize personal issues such as resentments and disappointments.

Family Business Assessment Tools Below is an alphabetical listing of the assessment tools used with family firms. We attempted to determine whether each was used in peer-reviewed family business research. A sample of peer-reviewed research using any instrument is noted, when applicable. APGAR (Danes, Zuiker, & Arbuthnot, 1999)  This tool identifies on whom the individual relies for assistance and support. The functional integrity scores on the APGAR have been found to be a good predictor of family achievement of goals when there are business tensions. The items are scored on a three-point scale. This tool measures the following areas: adaptation (can you turn to your family or someone you live with when something is bothering you?); partnership (are you satisfied with the way your family talks things over with you?); growth (are you satisfied that your family accepts and supports your wishes to take on new activities or directions?); affection (are you satisfied with the way your family expresses affect and responds to your emotions?); and resolve (are you satisfied with the way your family shares time together with you?). Circumplex Model (Lee, 2006; Olson, Waldvogel, & Schlieff, 2019)  This tool describes three major dimensions (cohesion, flexibility, and communication) to view how family systems change over time. The cohesion and flexibility dimensions are curvilinear (moderate scores indicating balance and functioning), and the third, communication, facilitates the first two dimensions (scored on a straight line). Cohesion refers to how systems balance separateness and togetherness and are scored from too much consensus and emotional closeness to disengagement. Flexibility refers to how systems balance stability with change: scored from chaotic to rigid. Communication refers to listening skills (empathy and active listening), speaking skills (speaking for oneself, not for others), self-disclosure (sharing

Family Business Assessment Tools

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feelings about oneself and the relationship), and tracking (staying on topic and respect and regard to affective parts of communication). Clinical Rating Scale (CRS) (Thomas & Olson, 1993)  This instrument is designed for assessing family functioning in terms of flexibility (change) and cohesion (closeness). Data is obtained from interviews and behavioral observations. The communication scale indicates listening, self-disclosure, and respect tendencies. When a family overall impression is derived, it is used to improve interpersonal and group communications in the family. It distinguishes families with clinical issues; single-parent, blended, and traditional two-parent families are more frequently scored as extreme on both ends of the family cohesion and adaptability dimensions (supporting the Circumplex Model). Corporate Culture Mapping Tool (Meyer, 2014)  This instrument measure or maps characteristics by country, personal leadership, teams, and corporate culture. It allows comparison between trust-building, acceptable feedback, decision-­making, power orientation, and business practices among two or more cultures. The individual profile shows cognitive, relational, and behavioral differences along eight dimensions. The team mapping tool enables comparisons among team members and comparison with others in the various cultures where they work. This mapping tool enables development of a firm’s culture through discussion. We are unaware if this instrument is being used in peer-reviewed family business research. Denison Organizational Culture Survey (Denison, Lief, & Ward, 2004)  This is a 48-item instrument measuring four traits needing mastery for an effective organization: mission (do the firm’s members have a sense of purpose and direction?), consistency (are the systems and processes in place that enable leverage and agreement on core values?), involvement (are the firm’s members involved and engaged?), and adaptation (does the firm respond to the marketplace and external environment?) Profiles are described from internal/external and stable/flexible perspectives. This is used for organizational culture and leadership development. Dominance, Influence, Steadiness, and Conscientiousness (DiSC)  This personality test is based upon William M. Marston’s theory (2015) that people’s emotions and behavior result from their interaction with their environment. The behavioral tendencies fall into four areas: dominance, influence, steadiness, and conscientiousness. By indicating the motivators, stressors, and tendencies to react to others, it is used to promote self-awareness and understanding of others. Multiple companies score the DiSC.  We are unaware of this instrument being used in peer-­reviewed family business research. Draw A Family Test (DRAFT)  This projective test is used to describe the child’s feelings about their family. It may help nonverbal or reticent individuals to indicate their feelings. It can be administered to individuals or to the family together (Policarpio-Gutierrez, 2018). We are unaware of this instrument being used in peerreviewed family business research.

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Eco Map (Bennett & Grant, 2016)  This tool shows a pictorial representation of the family’s current connections to people or systems in their environment. It offers a perspective from the clients’ point of view of their relationships to external systems and people. Clients’ connections to the systems on an eco map may be positive or negative, nurturing or damaging, and secure or plagued by conflict and stress. Relationships may be depicted as close or distant, strong or weak, and one-sided or mutual. The quality of the relationship is measured from stressful to not stressful and as weak, tenuous, and strong. The impact of the connection is measured as none, as draining resources or energy, to providing resources or energy. The impact of connection also shows the direction of impact – whether giving or receiving – from individual to family system and/or family to the individual or in both directions. This tool is used to create a family’s shared awareness of their significant connections and constructive influences on those connections. We are unaware of this instrument being used in peer-reviewed family business research. EQ Leader Program 2.0  This program has 186 exercises to building emotional intelligence (EQ) skills in leaders. It includes program design principles, introductory workshops, assessment guidelines and tools, development planning, and 25 coaching tools. We are unaware of this instrument being used in peer-reviewed family business research. Family Adaptability and Cohesion Evaluation Scale (FACES IV) (Watson, 2020)  This scale has 30 items on a 1–5 scale measuring adaptability and cohesion of a family based on Olson’s circumplex model. It is used to indicate cohesion (disengaged and enmeshed) and flexibility (rigid and chaotic). This tool has also been used to assess leadership styles (i.e., balanced, permissive, micromanaging, controlling, and uninvolved). It has been found to have high levels of validity and reliability. Family Balance Sheet  This tool measures five qualitative capitals: human capital (members’ ability to develop character and skills); financial-education capital (members’ ability to make financial decisions); relationship capital (members’ ability to forge caring and productive relationships within the family); social capital (doing good for others in the community or world); and legacy capital (the vision and values that guide the family’s long-term decisions). Individual and group profiles are given. Although a family business researcher developed this tool, we are unaware of this instrument being used in peer-reviewed family business research. Family Business Values Questionnaire  This questionnaire is designed to measure the (a) goals for the business, (b) willingness to accept risk, and (c) keys to business success. This tool has been used to discuss with the individual how their goals and attitudes toward risk can influence decisions about the business. It can be used with the family as a whole to promote discussion and collaboration. Though a family business researcher developed this tool, we are unaware of this instrument being used in peer-reviewed family business research.

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FB-BRAG (Wiatt & Marshall, 2017)  This tool assesses the functionality of the family firm. The 5-min assessment has four questions that focus on functionality and satisfaction people gain from the intersection of the family and the business. Scoring is on a five-point scale [0–4, 0=never, 1=hardly ever, 2=some of the time, 3=most of the time, and 4=all the time]. Used to give families active “talking points” and ways to discuss differences and strengths, rather than passively waiting for other members to initiate discussion on issues. Family Climate Scale (FCS) (Bjornberg & Nigel, 2007; Miller, 2014)  This scale measures normal family functioning where the family is part of an organization that is owned and/or run by the family itself. There are 48 items divided in 6 scales: open communication, adaptability, intergenerational authority, intergenerational attention to needs, emotional cohesion, and cognitive cohesion. This scale is used to describe the infusion of family values into the business culture. Family Enterprise Assessment Test (FEAT)  This 50-question assessment (25 statements on family dynamics and 25 statements on family enterprise) is to be filled out by each member in multigenerational families to identify their own strengths, differences among members, and opportunities for growth. Each member receives a score on family climate measured on the following dimensions: purpose and family connection, trust and fairness, communication and conflict resolution, flexibility and resiliency, and preparing the next generation. Each member obtains another score on enterprise climate derived on the following scales: direction and development, transparency and collaboration, policies for family involvement, wealth and ownership, and continuity and succession. Discussions are encouraged based upon the similarities and difference among members’ scores in order to promote family understanding and collaboration. Although a family business researcher developed this tool, we are unaware of it being used in peer-reviewed family business research. Family Environment Scale (FES)  This measure is one of the 10 social climate scales. The scale consists of 90 true-false items and was designed to assess 3 dimensions of family environment – a relationship dimension, a personal growth dimension, and a system maintenance dimension. We are unaware of this instrument being used in peer-reviewed family business research. Family Influence Familiness Scale (FIFS) (Frank, Kessler, Rusch, SuessReyes, & Weismeier-Sammer, 2016)  This scale assesses family influence on future decisions affecting the business by measuring “familiness” on six dimensions: (1) ownership, management, and control; (2) proficiency level of active family members; (3) sharing of information between active family members; (4) transgenerational orientation; (5) family-employee bonds; and (6) family business identity.

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Family Lifeline  This tool summarizes the history of the family, particularly the significant experiences over time (chronologically sequenced), and how the family coped. Interpretations are used primarily to discuss health issues and how they affected each family member or influenced the perception of health-seeking behavior of individuals or the family. It indicates the family’s flexibility managing health issues. We are unaware of this instrument being used in peer-reviewed family business research. Family FIRO (Fundamental Interpersonal Relation Orientation) (Danes, Rueter, Kwon, & Doherty, 2002; Haberman & Danes, 2007)  This instrument is used to measure family dynamics and change. It distinguishes the expressed and desired dimensions of inclusion, control, and affection and identifies both a sense of inclusion (roles, decision involvement) in a family business and the manner in which control issues (power and conflict management) are managed and, in that order, have important influences on family business integration (goal achievement, trust, and fellowship). Family Map (Whiteside-Mansell, Bradley, Conners, & Bokony, 2007)  This tool reflects the interaction patterns, decision-making, and communication in families with small children (3–5  years). It can show clarity of boundaries, coalitions, or alliances between people. We are unaware of this instrument being used in peer-­ reviewed family business research. FIBER  This instrument is used to measure family’s social emotional wealth (Berrone, Cruz, & Gomez-Mejia, 2012). Five dimensions are assessed: (1) family control and influence; (2) identification of family members with the firm; (3) binding social ties; (4) emotional attachment of family members; and (5) renewal of family bonds to the firm through dynastic succession. F-PEC Scale of Family Influence (Alves & Gama, 2020; Carr, DeMassis, & Pearson, 2018; Holt, Rutherford, & Kuratko, 2010; Rau, Astrachan, & Smyrnios, 2005).  This scale is used to measure degree to which the family is involved and influences the firm along three different continuous dimensions: (a) role of power (whether ownership, governance, and management), (b) role of experience (the generational characteristics associated with the firm, and (c) role of culture (family and firm value systems permeate and anchor the business). The family business’s “effectiveness” is measured by the relationship among power, experience, and culture. Genogram (McGoldrick, Gerson, & Shellenberger, 1999)  This diagram, drawn by the client, presents a graphic overview of family members and their relationships. It shows multigenerational relationships. It is important to ask each member to draw their own genogram as their subjective perspectives of individuals is depicted. It is recommended that this tool be used with each member to give the consultant a broad view of the dynamics and perceptions of the relational system by each family member (Kaslow, 1995). Each genogram should list the age, gender, marriages, type of

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relationship (separations, divorced, non-married partners), and children. Events such as births, deaths, and other significant dates should be included. The genogram may also include illnesses and inheritance patterns. There are also ways to describe the type of relationship such as emotionally close, distant, and conflicted. This is a useful instrument on which to have clients graph salient family information. Hogan Personality Inventory Assessment  This is a personality test developed in the 1980’s based on socio-analytic theory. The HPI captures key behavioral tendencies relevant to one’s life themes and is based on the five-factor model of personality. Hogan development survey (HDS) describes the dark side of personality – the part that emerges in times of increased strain and can disrupt relationships, damage reputations, and derail a person’s chances of success. The motives, values, preference inventory (MVPI) describes personality from the inside – core goals, values, drivers, and interests that determine what one desires and strives to attain. There is also a Hogan judgment assessment that indicates how noncognitive attributes influence how an individual approaches decisions and post-­ ­ decision reactions (including responses to negative feedback). We are unaware of this instrument being used in peer-reviewed family business research. Occupational Personality Questionnaire (OPQ Version 32i) (Kelleci, Lambrechts, Voordeckers, & Huybrechts, 2018)  This instrument identifies 32 personality traits (416 items) of particular relevance to an occupational setting. It has been translated into 28 languages. The relationships with people category indicates how an individual relates to others (e.g., independent minded, controlling). Thinking styles category refers to how an individual typically thinks (e.g., detail conscious, data rational). Feelings and emotions category represents how an individual emotionally relates to a situation (e.g., worrying, trusting). Organizational Commitment Questionnaire (OCR) (Lee, 2006)  This questionnaire measures a worker’s commitment to the work organization. This 15-item questionnaire requires the respondent to answer each item on a 7-point rating scale ranging from strongly disagree to strongly agree. There is some research that shows that the OCR is a better predictor of workplace turnover than of commitment (Porter, Steers, Mowday, & Boulian, 1974). Organizational Commitment Measurement Scale (Allen & Meyer, 1990)  This 18-item scale assesses the employee’s commitment to an organization and aims to identify the degree to which the identity of the individual’s goals and the organizations are aligned. The items describe various dimensions of the individual’s commitment to the firm  – affective commitment scale (ACS) (emotional ties), continuance commitment scale (CCS) (“sunk costs” or effort already expended, tendency to persist in an existing action), and normative commitment scale (NCS) (perceived obligation). It has been used cross-culturally (Kanning & Hill, 2013) and on nonfamily firms. We are unaware of this instrument being used in peer-reviewed family business research.

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SCREEM (Social, Cultural, Religious, Economic, Educational, and Medical)  This instrument measures a family’s ability to provide care or cope with crisis. It has ratings on a 1–4 scale, as to whether family is considered functional, somewhat dysfunctional, or very dysfunctional to cope with stressful situations. It measures functioning in the following areas: social, cultural, religious, economic, educational, and medical. It has been used with the APGAR. Though the APGAR has been used in family business research, we are unaware how SCREEM has been used in peer-reviewed family business research. Six Team Conditions  This tool measures six conditions characteristic of effective teams: real team (team is defined, stable, and interdependent), compelling purpose (team has clear purpose that is genuinely challenging and that is consequential for others), right people (team has good mix of perspectives and abilities, and, all have high teamwork skills), sound structure (team is a good size, perform a motivating team task, and has explicit norms of conduct), supportive context (team receives information and training if needed and is rewarded for team excellence), and team coaching (expert team coaching is readily available). The three essentials are the real team, made up of the right people with a compelling purpose. The three enabling factors that promote great collaboration are a sound structure with a supportive context and team coaching. We are unaware of this instrument being used in peer-­ reviewed family business research. Stewardship Climate Map (Craig, Dibrell, Neubaum, & Thomas, 2017)  Stewardship is used to explain the noneconomic factors that contribute to success and longevity of family business. Three psychological factors are associated with stewardship climate: (1) intrinsic motivation, (2) identification with the organization, and (3) use of power. Stewardship climate is associated with (1) involvement orientation; (2) the extent to which the organization values individualism versus collectivism; and (3) the level of power distance accepted within the ranks of employees. A stewardship climate is said to promote and facilitate multiple channels of communication, decentralized and informal decision-making, and flexible job descriptions, processes, and procedures (Nason & Habberson, 2006). Thinking Pattern Profile  The Axiometrics thinking pattern style is based upon Robert S. Hartman’s (2011) theory of measuring individuals’ values, which in turn influences their perceptions, decisions, and action. Three dimensions of values are measured – intuitive (feeling), practical (thinking), and action (doing). It is approved by EEOC as the norms are inclusive and this instrument is used globally. It measures strengths and vulnerabilities of decision-making: focus, interpretation, and conclusions that are then turned into action. This tool indicates the individual’s selfdirection and awareness, empathy for self and others, management competencies, and other personal and business skills. It also measures ethical climate. We are unaware of this instrument being used in peer-reviewed family business research.

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Values Edge Process  The values discovery process assesses seven value categories: mastery, self-expression, tradition, relationship, inner development, lifestyle, and Intrinsic. Using the value cards, the individuals choose their hierarchy of values. By knowing their own hierarchy of values, they can better understand their personal motivations and drivers. Individuals can identify their values in relation to their personal motivations and life choices. Additionally, they can compare their values to those of others in their family and/or team. This instrument can be used to define team or family values, build career development plans, and uncover differences among family members. Though a family business researcher developed this tool, we are unaware of it being used in peer-reviewed family business research. Values in Action (VIA) (Gray, 2020)  The VIA tool measures six virtues (characteristics valued over time): wisdom, courage, humanity, justice, temperance, and transcendence, as well as 24-character traits (positive traits or competencies identified as good for ourselves and others). This tool is used to measure the strengths of the family business and how to leverage these to perpetuate the enterprise legacy. We are unaware of this instrument being used in peer-reviewed family business research.

Summary The assessment phase sets the stage for the consultant. It should include the following information: (a) Family and firm history, which reflect their values, culture, and goals as well as their communication processes, conflict management style, and formality of processes (b) Firm’s generation of existence and governance structure (c) Current CEO’s age and generation (d) Individual family member’s perception of self and others in the family and firm, motivators, and strengths (e) Current needs and priorities of the firm and family With this information, the consultant is prepared to develop meaningful objectives with the family concerning what they want to accomplish during the consultation process (Carlock & Ward, 2010). Consulting with a family enterprise can be a rewarding and meaningful experience. It is a truly wonderful feeling to be able to guide individuals and the family to develop deeper self-awareness and understanding of others and their roles in the family, as well as in the firm, and to work together to continue their legacy.

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Rowe, W.  G., Cannella, A.  A., Jr., Rankin, D., & Gorman, D. (2005). Leader succession and organizational performance: Integrating the common-sense, ritual scapegoating, and vicious-­ circle succession theories. The Leadership Quarterly, 16, 197–219. https://doi.org/10.1016/j. leaqua.2005.01.001. Salvato, S., Chirico, F., Melin, L., & Seidl, D. (2019). Coupling family business research and organizational studies. Organization Studies, 36(9), 775–791. https://doi. org/10.1177/0170840619841402. Schein, E. (1995). The role of the founder in creating organizational culture. Family Business Review, 8(3), 221–238. https://doi.org/10.1111/j.1741-­6248.1995.00221.x. Stanley, L. J., Hernández-Linares, R., Concepción López-Fernández, M., & Kellermanns, F. (2019). A typology of family firms: An investigation of entrepreneurial orientation and performance. Family Business Review, 32(2), 174–194. https://doi.org/10.1177/0894486519838120. Strike, V. M. (2012). Advising the family firm. Family Business Review, 25(2), 156–177. https:// doi.org/10.1177/0894486511431257. Thomas, V., & Olson, D. H. (1993). Problem families and the circumplex model: Observational assessment using the clinical rating scale (CRS). Journal of Marital and Family Therapy, 19(2), 159–175. https://doi.org/10.1111/j.1752-­0606.1993.tb00975.x. Walsh, F. (2016). Family resilience: Developmental systems framework. European Journal of Developmental Psychology, 13(3), 313–324. https://doi.org/10.1080/17405629.2016.1154035. Ward, J. (1997). Growing the family business: Special challenges and best practices. Family Business Review, 10, 323–337. https://doi.org/10.1111/j.1741-­6248.1997.00323.x. Watson, R. (2020). In: D. Olson, L. Waldvogel, & M. Schlieff. Circumplex model of marital and family systems: An update. Journal of Family Theory & Review, 1–13. https://doi.org/10.1111/ jftr.12331 Whiteside-Mansell, L., Bradley, R., Conners, N., & Bokony, P. (2007). The family map: Structure family interview to identify risks and strengths in head start families. NHSA Dialog, 10(3–4), 189–209. https://doi.org/10.1080/15240750701742239. Wiatt, R., & Marshall, M. (2017). FB-BRAG: A tool for assessing family business functioning. Journal Editorial Office, [email protected](5)

Chapter 5

Governance Structures and Documents

Abstract  This chapter describes the various governance structures and documents usually established by family business enterprises, once the initial business is moving along well. The structures included herein are management or executive team, board of directors, family council or forum, family business meeting and retreat planning committee, family offices, and family philanthropy. The documents highlighted herein are family constitutions, charters and protocols, codes of ethics, family mission statement, policies and procedures manual, shareholder and owner agreements, buy/sell agreements, and legal and ethical wills. As family firms continue to grow, most of them will need these structures and documents. The consultant may want to recommend these and be available to help formulate them and put them into effect or rewrite them, if the need arises. I. Structures Part A  1.  Management or Executive Team 2.  Board of Directors 3.  Family Council or Forum 4.  Family Business Meetings and Retreat Planning Committee 5.  Special Event Planning Committee 6.  Family Offices 7.  Family Philanthropy II. Documents Part B  1.  Family Business Constitutions, Charters, and Protocols 2.  Codes of Ethics and Codes of Conduct 3.  Family Mission Statement 4.  Policies and Procedures Manual 5. Shareholder Agreements, Owner Agreements and add, Buy-Sell Agreements 6.  Legal and Ethical Wills

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_5

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Introduction Ultimately all family enterprises, small, mid-size, and large, need to have relevant structures and documents in place to guide and govern their day-by-day operations. Our discussion of each of these is more extensive than most others appearing in the literature because we have included additional categories based upon what we have frequently found to be missing. Also, what is needed to function maximally at any given time will differ according to the generation of leadership that the specific firm you are dealing with is currently in, the size of the firm, and whether it is a local business, a national enterprise, or an international one. It is important to keep in mind that periodically the corporate governance structures and its documents may need to be revised and updated to be more relevant to the current circumstances and functioning of the firm and the changing economic context. Vainrub (2020) stressed in his article in the FFI Practitioner that effective corporate and family governance “can help clarify decision-making protocols in family enterprise,” a point we have underscored here. If the firm has a consultant when the revising and updating are due or transpiring, he or she may be asked to take an active role in the rethinking and revision process.

I. 

Structures

A 1.  Management or Executive Team From the time of the inception of the family business, someone has to manage its dayby-day operation, assigning responsibility and monitoring how well the tasks are being done. As the business grows, the role of the management or executive team needs to be explicated as they are responsible for the day-to-day decisions and the running of the firm. Early on a decision needs to be made as to whether the management team is to be comprised solely of family members or if nonfamily members working in the firm are eligible to serve. Provisions need to be made for this group to meet periodically to discuss and review decisions. When the policies and procedures manual is developed, the role and authority of the management team need to be reexamined and, if necessary, reformulated in detail based on their current responsibilities.

A 2.  Board of Directors All businesses, including family businesses comprised of more than a few people, need some form of governance to define and enforce “the rights and responsibilities of the business and its various participants” (Jaffe, 2014), including owners, managers, shareholders, and family members. This governance body is designated the Board of Directors. Such a board is legally required in all corporate structures. Such boards are charged with various legal responsibilities and duties, such as holding

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management accountable for their decisions and actions (Family Firm Institute and 2086 Society, 2019, Appendix G, p.81.). During the first stage of the existence of many family firms, a fledgling board may function quite informally and be comprised solely of family members. As many companies expand to G2 and beyond, as discussed in Case 2 of Chap. 1, they are more receptive to adding directors from outside of the corporation. The main functions of the board are to hold the CEO and top management team accountable for the success of the business and to represent the interests of the stakeholders by insuring they will receive a good return on their investments. In addition, a well-­ functioning board participates with the management team in setting long-range policies and goals and establishing compensation scales for top management. Sometimes when principals in a company are stuck in serious family conflict and the firm is dysfunctional, the independent outside board members may be the ones capable of taking “a very active role in reorganizing the company around (clearly) defined areas of responsibility” (Poza & Daugherty, 2010). Once this type of reorganization has occurred, each person can be held individually accountable for his/ her functional responsibilities by the CEO and the board. This intervention can shift the emphasis from any family conflict (to be discussed in Chap. 6) to focusing on the tasks at hand and to servicing the firm’s clients/customers. Other major responsibilities of the board of directors may include (Poza & Daugherty, 2010, #1–7 below): 1 . Reviewing the financial status of the firm 2. Ensuring the ethical management of the enterprise and building in adequate internal controls 3. Asking thoughtful questions of management when more information is needed 4. Assisting in the recruitment, selection, and election of future board members 5. Performance assessment of the CEO and top management team members (perhaps with assistance from the consultant) 6. Providing advice to the CEO on such financial matters as acquisitions, divestitures, risk management, executive compensation, and human resource concerns 7. Helping with multiyear succession and continuity planning 8. Developing a strategic wealth management framework with guideposts for implementation 9. Emphasizing the incorporation of individual and family values in effective wealth management and strategic philanthropy planning. Much of the literature stresses the advisability of having a sufficient number of independent, outside board members, particularly when family members are major shareholders. Some studies have indicated that when the number of family members on the board exceeds that of the outsider members, the performance of the enterprise is “significantly worse” (Anderson & Reeb, 2014) than might be expected. Yet many family enterprises resist having outside board members. They express similar concerns and excuses to justify their objections. Ward and Aronoff (2010) debunk 10 myths about having outside board members. Just the headings of each of the items should suffice to reveal the most frequent objections, many of which we have also heard:

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1. No one that good would serve on my board. 2. I don’t even know people who would serve. 3. The current family and employee directors will feel hurt. 4. I can’t keep meetings interesting enough. 5. I might need to remove a director. 6. Boards are too much work. 7. We’re growing too fast. A board will slow us down. 8. Director liability insurance is too much hassle and expense. 9. Outside directors don’t want to be drawn into resolving family conflicts. 10. I don’t want to give up control. Some of these reasons contain justifiable concerns – like the last one – we don’t want to give up control. Realistically they may have to give up some control, but it might be more than worth it to gain what the outsiders would be able to offer to the firm. Our experiences support Spector’s statement (Spector, September/October, 2019) that “The most effective independent board members are truly independent – not the CEO’s cronies or people who provide professional services to the company. They should have the right skills and provide strategic oversight…and importantly, they must understand and fit in with the family culture.” To bring this discourse to a close, we quote the introduction to Chap. 7 (Ward & Aronoff, 2010) entitled board of directors in the family firm, which encapsulates the dilemmas of adding outsiders to the board as well as the benefits over the long term. “Owners of family businesses usually cherish their independence. Often, the last thing they want to do is share information with outsiders or justify the company and decisions. Yet to improve a family business’s chances for survival and success, creating a meaningful board of directors containing respected outsiders is a widely offered prescription by those who work extensively with family businesses.” According to Family Business Magazine, publicity for their Generational Wealth Conference (September 29–October 1, 2020, p. 2), “adding independent directors takes your board to a new level” and extends management capabilities as well as the confidence of shareholders. The planning essential for the long-term success of an enterprise can be stimulated and guided by outsiders selected for their particular expertise and overall business acumen. They can also provide invaluable contacts. Perhaps most importantly, the board helps with thorny questions related to succession (for a more in-depth discussion, see Cloyd’s What is a Board’s Role in a Family Business, (2014)).

A 3.  Family Council or Forum It is important for the family council to balance three different dimensions, as (1) family; (2) employees; and (3) owners. The council is often comprised of all family members 18 years of age or older. Their major raisons d’etre are to provide a safe forum for communication between family members and develop healthy and strong family relationships (Jaffee, 2014), between both those who are involved in the family business and those who are not, and resolution of conflicts. A council that

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includes adults in Gen. 1 and Gen. 2 assumes different tasks than a council serving second and third generation members (Eckrich & McClure, 2012). Some family councils also take on the function of educating the next generation of family members about the business and the family dynamics and may be responsible for appointing someone to take on a stewardship role with the younger members. Many family councils are responsible for selecting one or two members to communicate the interests of the nonbusiness family members to members of the executive/management team and/or to the board of directors. They may also recommend a family employment policy (see Section B 4 on Policies and Procedures) and participate (with a special planning committee) in organizing and co-hosting family meetings or forums – which may have an educational focus and thus devote time to leadership development for younger family members, part of the stewardship function, and planning other family events they would like to see eventuate (Jaffee & Herz Brown, 2009). These meetings can provide a safe space to discuss unmet expectations about finances, such as dividends received and dividend policies, and other dissatisfactions about the lack of inclusion in discussions of business matters. Such meetings may also serve as a vehicle for family members to question how other governance bodies work and to push for maximum transparency in communications (Lank & Ward, 2002) between all governance groups and the larger family system through such channels as members publishing articles in a family newsletter, which the council can sponsor, and arranging to have minutes of the meetings of various bodies sent to everyone electronically. Some councils spearhead the formation of family offices and/or family philanthropies and then may work with them collaboratively. (These are dealt with in sections A 6 and B 6 of this chapter). They may also engage in attempting to resolve conflicts between family members, facilitating generational transition and education of members on legal matters and estate planning (Eckrich & McClure, 2012). We sometimes recommend that family councils consider appointing a family historian who will chronicle the history of the family business up to the present time. This particular role can be passed on about every 5 years; the material written up can be distributed to all members of the family and also stored in the family business archives. Having a strong, active, well-respected family council tends to contribute to the longevity of the family business and strengthens the identification with and commitment of members to the family and to the enterprise.

A 4.  Family Business Meetings and Retreat Planning Committee Such a committee might be needed when a business grows beyond the point where all of the issues that arise in running the business and in considering possible expansion plans to recommend to the board of directors can no longer be handled in the time allotted for management team meetings. A special joint committee can be appointed of several people from the business management team and the family council to plan for two meetings a year – first, an all-day meeting and second, a weekend in a retreat setting. A

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“safe” environment should be established in which members feel free to ask questions and express opinions. The number and length of meetings should vary according to the perceived need. Everyone should agree to hold a meeting and be clear about the agenda that is set. Besides affording time to recapitulate the current state of affairs, it should also build in time for advanced planning and for family business members and family council members to become better acquainted and develop more fruitful working relationships. It is important that the person leading the meeting, whether the consultant and/or a family member, be attuned to both the process of what is being transacted between the attendees and the content of what is actually being discussed and handle everything as tactfully and sensitively as possible. Jaffee (2018) suggests the following may be some of the goals of a meeting and recommends ground rules should be set. He elucidates some topics they may want to discuss at a family meeting: 1. What is our wealth for, what does it mean in this family, and how should it be used? These choices should be predicated on a discussion of their shared core values. 2. What is needed to be prepared to use your inheritance wisely? 3. “What is fair” pointing out, as is done in Chap. 6, Case 4 that there is distinction between fairness and financial equality. 4. How are we a family? Do we have to be partners together? If a family is forced to remain in partnership together, the potential for conflict is increased. It is about more than making an estate plan. It is important that they discuss and decide if they want to remain partners and what this will mean to each of them. Sometimes the issues to be resolved may be perplexing and controversial. 5. How does “family systems theory illuminate successful intergenerational wealth transitions?” (S. Legler, FFI Practitioner, August 21, 2019). In preparing for a panel discussion at a family meeting on interpersonal, perplexing family issues, the consultant may want to be sure that some of the following items are on the agenda for inclusion: 1. What points would you like to include in a summary of issues to be addressed for the forthcoming family meeting? 2. What deeper issues might be expected to surface? 3. Which, if any, would you choose to ignore and why? 4. How might you suggest handling them instead? 5. Which ones would you emphasize that would have (a) the most impact on the business issues, (b) on family relationships, and (c) on understanding family business finances and intergenerational wealth transitions? 6. How would you point toward future issues they may want to tackle on the path forward? 7. Would you try to deal with both business and family issues? If not, how would you separate and channel them for handling? Might it be appropriate to decide on dates and places meetings will be held? We believe that it is essential that the person leading the meeting, whether the consultant and/or a family member, be attuned to both the process of what is being transacted between the attendees and the content of what is actually being discussed and handle everything as tactfully and sensitively as possible (see Case #4 for an illustration).

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A 5.  Special Event Planning Committee Often we find that there is no one designated to arrange celebrations for important events that would provide a time and place for employees and members of the family business to relax and have fun together. Such a committee can be established to arrange various holiday celebrations for the entire firm like a Chanukah and/or Christmas party, an Easter celebration and/or a Passover Seder, and luncheons for special 5-year birthdays of all those employed in the firm. They can also be responsible for arranging family reunions, family holiday vacations, or other kinds of outings for both family business and nonfamily business members. As the number of family members grows over time, these gatherings can provide an opportunity for all to work and play together and for the children of all ages to get to know their cousins from other branches of the family tree and to learn about family history, values, and traditions.

A 6.  Family Offices As family businesses become more successful and move into Gen. 2, 3, and beyond, they often consider setting up a family office. By so doing, they strive to maintain shared family control of what usually have become highly diversified financial and business assets (Jaffee & Lane, 2004). As they accrue more wealth and expand their business(es) and investments in a complex, interlocking network of structures across different branches of the growing family, and perhaps into other cities and countries, they face many new and unanticipated challenges and may realize it is time to expand their governance infrastructure. The family may first establish their own family office, with a family firm member in charge of overseeing their investments. Eventually they may decide to hire a professional manager to help grow the assets and, depending on that person’s education and work background, to also offer tax and legal advice, prepare tax returns, and even administer the family’s recreational assets (if they have acquired any), like a cottage on a lake. In addition, the chief officer of a family office may provide information to the board of directors and other key groups about their assets and about fair and equitable distribution of shareholder and family member benefits, including funds from family foundations or family trusts (Poza & Daugherty, 2010) earmarked for educational purposes. The family office manager may assist or guide the members of the firm in establishing a family philanthropy, help plan, and carry out family assemblies, shareholders’ meetings (Poza & Daugherty, 2010), and family council meetings or forums. They may collaborate with the family council on some of their educational programs and stewardship activities for younger family members and in producing a periodic family newsletter. Since having a single-family office (SFO) with enough staff for just one family business can become quite expensive, various family business firms sometimes join together and establish a multiple family office (MFO) or join an existing one. Family

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offices serve several to many family firms and can sometimes hire a more experienced, talented staff than a single-family office can afford. Often, they are able to provide investment and tax advice, wealth administration, philanthropic planning, and other financial services, such as drafting shareholder agreements (buy/sell options) and preparing complex tax returns. They may also participate in the succession planning process and in the successful transmission of assets. According to Jaffe and Lane (2004), multifamily offices “often assume management functions primarily in the financial area…and are not involved in family governance.” Many family business members handle their own investments or collaborate with their family offices to do so. Multifamily offices may have a wider network for placing these investments with financial consultants as well as with established brokerage houses. It is our understanding from talking to several such financial consultants that when an account goes over the ten million mark, they may turn to a trust firm such as Northern Trust or Wilmington Trust and collaborate in handling the portfolio. A recent quote from the Family Wealth Report entitled “The Family Office Landscape: A view from Northern Trust” (Burroughs, 2002) magnifies how they safeguard client assets and security. “Family offices have their vulnerabilities around physical and digital security.” They must consider how serious the issue of cybersecurity is, given the often-large sums that FOs oversee. Cyber threats and fraud are two of the most significant risks to family and private investment offices. And threats are constantly evolving. Offices are evaluating their risks, performing gap analyses, and implementing added controls to mitigate risks. The report warns that holistic (physical, travel, cyber) security reviews are becoming more common. This is a critical component of safeguarding client assets.

A 7.  Family Philanthropy The consultant should ascertain if the business has set up its own philanthropy. If they haven’t, do they desire to create one? Usually by the time a firm is in Gen. 2, if being charitable is one of the core family values, they will have established a family philanthropy or be interested in doing so. If they have one, who administers it? How do they choose which charities they will support? Have they given thought to how their contributions might enhance their relationship with and stature in the community? Can junior members of the family, who may still be too young to be part of the business, serve on a philanthropy committee as one of the ways they can learn about both the business and the importance of being charitable? If so, might they be encouraged to do some research on an organization they are interested in, like a local community center, little league program, or daycare program, and then write and submit a report containing their findings and perhaps make a recommendation for funding to the philanthropy board. Encouraging this kind of an activity is an

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excellent way for the family council or family office, if either of these have assumed an educational function, to contribute to the children’s learning and help groom them for future possible participation in the family firm. It can also be perceived as an aspect of stewardship. Sometimes a family member who has no specific function in the business is put in charge of the family’s philanthropic activities to justify their salary and provide them with some stature in the firm. Unless they have some special training in this arena or some prior experience in working in this sector of society, this may not be a good choice. Other times, the task of heading up the family philanthropy falls under the aegis of the family office staff. The consultant may be asked to work with the philanthropy office and perhaps a philanthropy committee, if there is or should be one, and help them develop guidelines for selecting to which organizations they will contribute. All involved need to become cognizant of the amount of money the firm is willing to allocate for giving to philanthropies each year. Regardless in which office the family philanthropy is lodged, the person in charge can also identify leadership service opportunities in the community at charitable and other nonprofit organizations and find out who in the firm might be interested in donating time to serve on an agency board or committee and recommend them when they are aware of openings. In so doing, they would be making a contribution to the larger world in which they live, make the family firm more visible (de Visscher, 2006), and hopefully derive a sense of satisfaction for contributing to the well-being of others.

II. 

Documents

B 1.  Family Business Constitutions, Charters, and Protocols A family constitution, family charter, or protocol (a term used in other countries) is usually a document that contains a statement of the family’s history, its’ commitment to the family business, and the “desired relationship between the company and the ownership family” (Poza & Daugherty, 2010). Typically, a constitution is not drafted until the family business reaches Gen. 3 or beyond and the family has expanded to being a large, multigenerational family. Prior to writing a family constitution or charter, many firms realize their need to formulate and circulate the policies and procedures manual that governs the running of their business (see section B 4). We found few references on this topic and yet have occasionally consulted to a family that has a constitution or charter. Some of what might be contained in a constitution is discussed in the before section B 3, The Family Mission Statement, as this articulates their values and objectives. Different firms utilize different documents to explicate the principles, values, beliefs, and objectives which motivate their family enterprises and contain their guidelines.

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B 2.  Codes of Ethics and Codes of Conduct This topic is extremely complex because often the various consultants to the same family business enterprise may be governed by different codes of ethics. Part of the complexity comes from the fact that there are various kinds of codes of ethics that one may encounter when working in this context. Anyone involved in consultation may be bound to honor one, two, or three of these codes of ethics. Sometimes there may be conflicts between (1) one’s specific professional code of ethics, (2) the separate and different code of ethics of a professional consulting organization to which they also belong, and (3) a code of ethics or conduct that promulgates the expectations of the company to which they are consulting. In addition, (4) definitions of ethics may vary from country to country, so before one embarks on family enterprise consultation in another country, it is advisable to explore what their ethics codes and expectations of consultant’s behaviors are in the host country. To further complicate this variegated scenario, if a psychologist consultant is working for a company that also utilizes consultants from other professional fields such as accounting, finance, and/or law, there may be times when it is important to (5) collaborate in overlapping areas with individuals who are governed by their own profession’s code  – which means there can be four or even five codes of ethics intermingling or overlapping. Each profession’s code of ethics may view areas like confidentiality and privilege, the role of the consultant, or seeing clients outside of the business setting very differently. We have never seen the ethical issues addressed in this way and hope this section will offer some guidelines for thinking about and addressing these complicated, challenging issues. See, for example, American Psychological Association’s (APA) lengthy Ethical Principles of Psychology and Code of Conduct (2017) which mandate there be strict compliance and The Family Firm Institute’s Best Practices (2019) which states in its Introduction that “Members of FFI (an interdisciplinary organization) are encouraged to maintain the highest standards of professionalism” (whatever their own professional background may be) and then goes on to describe recommendations for members in conducting their practices. They emphasize their commitment to clients – particularly establishing realistic expectations, stating in writing whose interests they are representing and the definition of “client,” and accurately representing their own education, training, experience and professional credentials, commitment to FFI, and their status as an FFI-certified graduate and to support FFI’s mission to be the “most influential global network of thought leaders in the family enterprise field.” Practitioners who are aligned with other professions but also are involved in FFI may feel that they should retain their primary identity and organizational affiliations when they are consulting, yet others may not perceive any conflict in maintaining both allegiances. 1. Company’s Code of Ethics In their research, Adams, Taschian, and Shore (1996) compared the ethical practices of family and nonfamily businesses and found that often family businesses did not have a formal code of ethics but were more apt to model ethical behavior through

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their actions. We found little else on the specific topic and what we have said in the foregoing and elaborate further in the following is an attempt to shed light on why. We reiterate this subject is a complicated one because of the different and sometimes competing codes and their requirements. 2. Consultant’s Code of Ethics “In the field of family business consulting, various professional viewpoints and ethical codes interfere and sometimes clash” (McClendon & Kadis, 2012, p. 244). Each consultant should deliberate what the overriding questions are in situations in which intrinsic values may diverge. In any specific situation, who determines what is right or wrong? This particular concern was also addressed by Vago (2006) who stated “U.S. based family business consultants whose discipline of origin frowns on dual relationships, such as…psychology, must use great care and caution when they join clients in social activities.” She emphasized that “trying to avoid dual relationships puts many transactional family business consultants in a bind. If they decline social invitations….in other countries, clients may feel insulted and the consultant’s efficacy in working with international clients may suffer. If they accept, they may run afoul of their profession’s code of ethics.” Socializing can “speed establishing rapport” building trust and a strong working alliance, all of which are essential; and since a visit abroad is rarely lengthy, time is of the essence. This extremely cogent description of the problem is also illustrative of my (FK) experiences abroad. The level of attachment a family business consultant may come to feel toward the clients they work which transnationally may surprise them. Because of the time constraints, they work with families intensively, putting in long hours each day with little time for external stimulation or relaxation. They may be expected to join their hosts for meal breaks. This all tends to increase the emotional intensity of the relationships. Yet, the APA Code of Ethics alluded to earlier (2017) might consider this a “boundary violation” as any psychologist might be perceived of entering into a “multiple relationship” (APA, 2017, Section 3.05) which is not acceptable. This creates quite a conundrum for the psychologist functioning in this type of consultation role. Each profession can vary substantially, particularly regarding such issues as: 1 . Who is the client? 2. How does the consultant maintain confidentiality? Neutrality? 3. Privileged communication? 4. When is a collaborative team approach appropriate? 5. Who decides who chairs the group? 6. What can they share? 7. What is to be kept confidential and from whom? 8. Guidelines on socializing with clients and/or seeing them outside of the specific designated consulting role. A brief mention of some of the codes of ethics or conduct of several of the other professions from which family consultants are drawn should bring to the forefront why such collaborations can be difficult and why consultants from the various fields may give different and sometimes conflicting advice to the firm. And just as

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psychologists are obligated to follow our code of ethics (2017) as well as the ethical rules and regulations of the state in which we are licensed, so too are consultants drawn from other professions. The American Bar Association (ABA) has a code of ethics as well as model rules of professional responsibilities and legal ethics. All attorneys must practice in accordance with the guidelines set forth in these documents plus any applicable rules promulgated by the states in which they are a member of the bar, which is a requirement to practice there. Attorneys who practice corporate law and/or family law and who focus on setting up trusts and writing wills are among those most likely to become engaged with family business consulting. Certified public accountant (CPA) is the title used to designate qualified accountants in many English-speaking countries, including the United States. This title implies the person has acquired the requisite education and degree to be licensed as a CPA. It maintains a professional code of ethics which elucidates and regulates the actions of accounting professionals. Their roles in consulting to family business firms may include filing corporate tax returns and/or tax returns for the officers of the firm, advising on many financial issues that enterprises face regarding taxes on investments, and/or working with a family office in these matters. Currently, financial advisers and the wealth management firms are governed by FINRA (The Financial Industry Regulating Authority) which is the largest selfregulatory organization (SRO) in the United States. FINRA is a not-for-­profit and nongovernmental, national securities organization. It writes and enforces rules governing the securities industry. FINRA has jurisdiction over all broker-­dealers and registered representatives (now called financial advisers) and operates the largest securities resolution forum in the United States. It is dedicated to protecting investors and safeguarding market integrity and ensuring the nation’s financial markets are fair and honest. Financial advisors employed by reputable Wall Street firms must abide by their code of ethics and sign an agreement annually that they will continue to do so. Among the roles a family wealth advisor may fulfill as a consultant to a family enterprise are advising on their investment portfolios, on what and when to buy and sell, and on shareholders’ and owners’ agreements. Hopefully the foregoing discussion of the essential role codes of ethics play in each profession and the importance of members adhering to these highlights why collaboration and building consensus may be so difficult to achieve and the topic is so complex to tease apart. It may be that various professional organizations may become willing to rethink their codes of ethics as they apply to members working in collaborative teams in the United States and consulting in other countries and include an addendum that takes into account the ethical principles, practice expectations, and customs in other countries and how professionals can adapt to these without being in violation of their own professional code. As early as 2010, two well-known psychologists, Behnke and Bullock, addressed this issue of “Ethics Within, Across, and Beyond Borders: A Community” in a special issue of ethics and behavior. All of the articles in the issue stressed the idea that in our increasingly global world, psychologists should take a “global perspective in their understanding of ethics in their work.” In this issue, Gauthier, et al. (2010) described the first set of universal ethical norms for

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psychologists entitled “The Universal Declaration of Ethical Principles for Psychologists: A Culture-Sensitive Model for Creating and Reviewing a Code of Ethics.” They emphasized that various national codes of ethics should “promote global understanding and cooperation while respecting cultural differences.” Such a mammoth development in all of the professions from which family business consultants are drawn would mitigate many of the ethical challenges we face when consulting in countries other than our home country. We hope this sentiment will finally gain momentum and eventuate in meaningful documents across the globe in the 2020 decade.

B 3.  Family Mission Statement This document explicates the reasons the family business was founded by focusing on one of the major goals – the dream of having a business in which the family can be and work together. It may contain principles that might be in a board mission statement, if one exists. It spells out the benefits of being a member of a family enterprise and pledges the family to devote itself to making the dreams of the founder came true (Ward & Sorenson, 2002). Preferably all family members involved should make a commitment to upholding this statement and to fulfilling the mission articulated, which incorporates the family’s values. By so doing they enhance their chances of resolving disputes in the future and encourage finding solutions to perplexing issues (see Chap. 6). Preparing such a mission statement requires all involved in the discussion to really be a part of the enterprise and to uphold the family’s articulated values and objectives and to indicate what their expectations are in return, as well as what hesitancies or fears they harbor. Disagreements across generations may get played out by younger members who refuse to take the actions required of them (Frankenberg, 1999) or to sign on. It may take several meetings in a relaxed atmosphere away from business headquarters, such as a retreat weekend, to formulate a document they can agree to that includes a section about hoping for the long-range continuity of the family business and passing on the revered legacy to the next generation. Some families, such as that of Joseph P.  Kennedy, sometimes expect extreme sacrifices from the children and grandchildren to fulfill their mission. For example, Frankenberg (1999) described how Mr. (Joseph) Kennedy, Sr., inculcated his personal ambition to his children for (at least) one of his sons to become president of the United States to fulfill the “family mission,” which must have been his dream. He repeatedly conveyed this aspiration. Often family mission statements convey “the internalized voice of a powerful parent or grandparent” (Frankenberg, 1999) and become a beacon lighting the way. This may or may not be put in writing but tends to be inculcated into their family members’ everyday living. When family firm members come together to write a list of their shared values in their mission and vision statement (Spector, September/October, 2019), it tends to reinforce positive attachment feelings toward other family members and emphasize the importance of family pride and unity.

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B 4.  Policies and Procedures Manual Such a manual is a necessity. It contains the policies and procedures of the company. We enumerate some of the major areas that should be covered. It is recommended that consultants suggest that the owners of the business become familiar with the manuals of other successful family businesses to derive some ideas before endeavoring to write their own: (a) Employment policies – These should cover the levels of education and experience necessary for employment with the firm. It is important that these be predicated on merit and company needs and “not on membership” in the business family (Poza & Daugherty, 2010) or on being the favorite child. Ideally it should include the promotion policies also (although sometimes these are written as a separate document), with clear job descriptions and both education and experience requirements. (b) A policy providing criteria for selection of family members to serve on the board of directors as members at large representing the owner family. (c) A policy regarding hiring of subcontractors indicating that bids (RFPs) are welcome from outside contractors (nonfamily) as well as from relatives. (d) Salary scales – These should be part of both the employment and promotion policies section on the manual. (e) Organizational structure chart – This should clearly depict the structure in graphic form. For example: those at the C-level, like the CEO, CFO, and COO, in a large firm would be across the top of the chart. The next line down would show those who are responsible to each member of the executive management team and so on through the various levels of the organization – also showing who is accountable to whom and preferably, who is responsible for supervising whom.

B 5. Shareholder Agreements, Owner Agreements, and Buy-Sell Agreements According to Poza & Daugherty (2010, 3rd Ed.), “the interaction between ownership, family and management is the source of what may constitute a competitive advantage.” However, the effective governance of the shareholder-firm relationship “may simultaneously be the source of the biggest challenge faced by family firms.” He also posits that “most of the essential communication, education and sharing of financial and strategic information” occurs at regularly scheduled shareholders meetings. In this way the shareholders are kept involved and informed, and these meetings “fulfill the legal requirement to recognize the rights of minority shareholders.” By the time ownership of the family business is in its third generation and beyond, with numerous branches and family member who are shareholders, family council representatives may be able to convey information back and forth between the various bodies, thus maintaining a healthy overlap between ownership and management. These documents may include buy/sell agreements, a statement of the fiduciary duties of shareholders (Murdock & Murdock, 2002) with a large controlling interest,

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corporate taxation, dissolution (selling) of one’s shares as an exit strategy, veto power of shareholders and board members, and the expected duty of loyalty in the family plus much more on the interface of the financial, emotional, and legal issues pertaining to the business enterprise and its reciprocal relationship to shareholders. The documents alluded to above, plus the tax codes governing taxation of corporations and their shareholders (Zwick, 2002) may be unfamiliar to family business consultants who are psychologists by training. The same may be true about dividend distributions and other financial facets of a business’s complex functioning. Therefore, we recommend that psychologists doing family business consultation, which may involve dealing with shareholder and owner agreements plus myriad other financial documents, such as generation skipping transfers and employee stock ownership plans (which are encompassed under the document title of shareholder and owner agreements), should inform the CEO and management team that this is outside of their realm of competence (if it is). If the person wants to become better informed about these integral aspects of the family business functioning, they can explore outside routes for doing so and pursue acquiring the necessary expertise over time. Status of In-Law Members of the Business Family To the extent possible, the status of in-law members and remarriage members in the business family should be specified and differentiated from that of direct blood line members. The firm’s leaders should address such issues as: (1) Can they become members of the firm? (2) Are they permitted to become shareholders? (3) What happens if there is a divorce from a spouse who is a family business member? It is definitely advisable to have legally sanctioned documents which explicate their rights and privileges to be signed by potential mates before joining the family, i.e., before a marriage occurs. It is recommended that the family generates some paragraphs to be included in any prenuptial and postnuptial agreement, signed by both parties and notarized (Kaslow, 1991, 2000). Such agreements can enable those marrying to share provisos with intended future in-law family members later and those divorcing members to avoid misunderstandings and nasty arguments later. Such signed agreements can also help the company avoid enormous difficulties if and when a CEO dies without leaving a will or a succession plan and his or her remarriage spouse quickly decides to take over the firm – as was described earlier in Case #3.

B 6.  Legal and Ethical Wills (a) Legal Wills Most wills are written following legal guidelines and are quite formal and devoid of expression of much feeling. They deal primarily with the distribution of financial assets and possessions of value, such as houses, cars, furniture, art collections, and jewelry. Rarely do they encompass emotional concerns, such as the desire for those who will be recipients of the person’s largesse to continue the person’s tradition of

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being philanthropic, including his or her favorite charities, or contain anything about upholding the family values and remaining close to and loyal to one another and honoring family traditions. The will that a CEO of a family enterprise leaves is likely to be focused mostly on his or her wishes about the continuity of the business and its legacy, plus the importance of upholding family values. (b) Ethical Wills The first reference which we found to ethical wills was an article by Reimer and Stampfler (1991) entitled “So that your values live on: Ethical wills and how to prepare them.” In 2002 there was a brief discussion alluding to this article that was reprinted with permission from the family business advisor in November 1992. Aronoff, Astrachan, and Ward (2002) quoted from the original article above which stated that the ethical will embodies what we want to highlight. “Here we take inventory of precept instead of property, of concern instead of cash, of love in lieu of legacy.” They state that the ethical will is usually done as a letter or a codicil to someone’s legal will and is intended to bequeath a spiritual legacy. Rabbi Jack Riemer, co-author of the original article, had written “ethical wills are windows into the souls of those who write them.” The article indicates that sometimes the ethical will is shared with the children during one’s lifetime or that it may be read at the funeral and then become a cherished family possession that is passed down and is reread on special family occasions through successive generations. I (FK) became intrigued with the idea and read whatever I could find on the topic and realized this document could be valuable for many families, not just those in family businesses. In 2012 I wrote “Important Reasons for Writing an Ethical Will” in response to a request from a locally revered clergyman friend and his wife who were not satisfied with the format and usual contents of a legal will and were ready to have their wills written. This list, which I put together and have since given to friends, therapy clients, and consultees, includes: • We all want to be remembered, and we all will leave a legacy – emotional as well as financial, intentional, or unintentional. The ethical will helps shape one’s emotional and intergenerational legacy. • If we do not tell our own stories and the narrative about from where and from whom we come, no one else will. These stories will be lost forever, and part of the family history will vanish. • One discovers a great deal about himself/herself in the process of writing an ethical will! It is often a heart- and soul-searching process. • It helps the progenitor to identify what they value most, what they stand for, and what they want to insure will be fostered and carried on when they are gone. • It helps us to come to terms with our own mortality when we create something tangible of meaning to us that will live on after we are gone. • It provides a sense of fulfillment and closure to our life journey. • To articulate what we value while we are living, to ensure the continuation of these values for and in our future family generations, and to ensure that our values are linked into how and for what and whom the financial assets are to be disbursed.

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Numerous people from different religious, ethnic, and cultural backgrounds have indicated they have found these ideas enlightening and compatible with their intentions and so decided to write or have their attorney write an ethical will for them. In 2015 I co-authored “Ethical Wills: The Positives and the Perils for the Family” (Kaslow & Benjamin, 2015). Whenever we have co-presented on this topic, the ideas stimulated heated discussions pro and con. This is still a relatively new subject, and many people do not want to risk telling others what they will or won’t be receiving. The following is a summation and elaboration of the points made in the abstract and introduction to this article: An ethical will is written as a missive to convey the testator’s values, beliefs, and lessons learned in living to one’s relatives, particularly one’s beneficiaries. It addresses how the ethical will may become an addendum or codicil to one’s legal/financial will or be crafted as a separate document. When beneficiaries (and would-be beneficiaries) first learn the contents of a recently deceased person’s will when it is read at probate, surprise can lead to negative consequences such as turning them against one another. An ethical will can temper the surprise and remind the beneficiaries of the testator’s values, beliefs, and lessons which they have tried to impart (p. 2). An alternative is for the person who has written the will to call family members together and read it to them so there will be no surprises after his or her death, to answer questions from the beneficiaries, and ask if they want any changes made and, if so, to indicate if the author will consider doing so. Doing this manifests great integrity and willingness to explain the reasons behind the bequests, if asked to do so. “Crafting an ethical will enables the progenitor/author to clearly and cogently summarize and communicate his or her beliefs, values, dreams for his/her family’s future, love, and affection, and lessons he or she wishes to transmit. It affords an opportunity to propagate the emotional legacy, rooted in their integrity, and in their way of being in the world that they want to bequeath to the family and perhaps their larger community in terms of philanthropic largesse and concerns for the wider world in which they have lived. Formulating such a document enables a person to achieve a sense of fulfillment and closure on issues and values that are salient to him or her. In articulating these values and letting one’s heart speak through the document, steps are taken to try to ensure the perpetuation of one’s values in future generations of the family and may provide a transcendent aspect to ongoing interfamilial connectedness across time and space” (p. 9). I (LF) sometimes recommend to someone who has written a more traditional legal will that they read it to their heirs so they can ask questions or, if they do not want to do this face to face, that they make a videotape and have it accessible for heirs to view, take a few days to think about, and then call with questions and comments. An ethical will is certainly not the kind of a document everyone will want to write as many prefer to keep their distribution of assets secret and have what has been decreed read at probate. That way they avoid dealing with any negative fallout and family dissension they may have caused and may be able to rest in peace more

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easily. With some family businesses, an ethical will written by or for the CEO can be quite compatible with what is expressed in the family mission and vision statement document. For other families, it would be incompatible with their particular family and family business relational systems and therefore suggesting one would be inadvisable.

References Anderson, R., & Reeb, D. (2014) Board composition: Balancing family influence in S & P 500 firms. Administrative Science Quarterly, 49, 209–237. Aronoff, C., Astrachan, J. H., Ward, J.L. (2002) Family Business Sourcebook (2nd Ed.). Family Enterprise Publishers: Marietta, Georgia. Behnke, S., & Bullock, M. (2010). Ethics within and beyond borders: A commentary. Ethics and Behavior, 20, 3–4. Burroughs, T. (2002). (Group Editor) The family office landscape: A view from Northern Trust. April 14, 2020. http://www.fwrsport.com/article.php?id=187003+page Eckrich, C., & McClure, S. (2012). The family council handbook. New York: Palgrove, MacMillan. Family Firm Institute & 2086 Society. (2019). (Appendix G), 81. Frankenberg, E. (1999). Your family, Inc: Practical tips for building a healthy family business. Psychology Press. Gauthier, J., Pettifor, J., & Ferrari, A. (2010). The universal declaration ethical principals for psychologists. Ethics & Behavior, 20, 179–196. https://doi.org/10.1080/10508421003799115. Jaffe, D., & Herz Brown, F. (2009). The Journal of Wealth Management, 1–18. Jaffe, D., & Lane, S. (2004). Sustaining a family dynasty: Key issues facing complex multigenerational business and investment owning dynasties. Family Business Review, 17(1), 81–96. Kaslow, F. W., & Benjamin, G. A. H. (2015). Ethical Wills: The positives and the Perils for the family. Journal of Family Psychotherapy, 26(3), 163–177. Lank, A.G., & Ward, J.L. (2002). Governing the business owning family. In C. F. Aronoff, J. H. Astrachan, & J. L. Ward (Eds.), Family business sourcebook. (3rd ed., pp. 462–469). Legler, S. (2019, August 21). Interdependent wealth: Family systems theory illuminates successful intergeneratonsl wealth transitions. FFI Practitioner, (pp. 1–12). McClendon, R., & Kadis, L. B. (2012). Reconciling relationships and preserving the family business: Tools for success. Routledge. Murdock, M. & Murdock, C. M. (2002). A legal perspective in shareholder relationships in family business: The scope of fiduciary duties. In C. E. Aronoff, J. H. Astrachan, & J. L. Ward (Eds.), Family business sourcebook (3rd ed., pp. 146–148). Marietta, GA.: Family Enterprise. Poza, E. J. & Dougherty, M.S. (2010). Part 1: The family business: What makes it unique. Family Business (3rd Edition). South Western: Cengage Learning. Spector, B. (2020, June 29). Family owned retail chain stays strong during pandemic. Family Business Magazine (pp. 1–5). Retrieved from https://www.familybusinessmagazine.com/ family-­owned-­retail-­chain-­stays-­strong-­during-­pandemic Vago, M. (2006). International expansion of family business consultation: Consulting in different countries. In F. Kaslow (Ed.), Handbook of family business & family business consultation: A global perspective, (pp. 5–44). New York: Haworth Press. Vainrub, R. (2020, July 29). How corporate governance helps in decision making: A case study. Retrieved from https://digital.ffi.org/editions/how-­corporate-­governance-­helps-­in-­decision-­making-­a-­ case-­study/ Zwick, G.A. (2002) Planning around the problems of transactions involving family members. Family Business Sourcebook. (3rd ed.). Marietta, GA: Family Enterprise Publishing.

Chapter 6

Pathways to Becoming a Family Enterprise Consultant

Abstract  In this chapter we highlight the various routes to becoming a family enterprise/industrial consultant, the kind of education and training needed and that should be continuous, and the various titles, roles, and responsibilities subsumed under the titles family business or enterprise consultant or advisor. There are various pathways that may lead someone in the direction of becoming a family business consultant. In their doctoral program, they may have concentrated on organizational consultation or family psychology. Or they may have grown up in a family business family and enjoyed being a member of one and therefore became interested in pursuing consulting to family businesses as a serious career choice. In addition, some doctoral candidates may do an internship and/or residency in family psychology and be intrigued by the problems they hear client families who are engaged in a family business discuss and want their supervisor (or therapist) to help them understand and deal with better. Another group of psychologists who venture in this direction have had careers in many different psychological settings, including being a professor in a graduate school, and now want to pursue a different direction in their career and family business consultation sounds challenging and interesting. They may have attended some meetings of APA Division 13 (Society of Consulting Psychology), Division 14 (Industrial/Organization Psychology), or of the Family Firm Institute or Coach Institute and decided to switch the direction of their career, at least in part. They may have begun letting friends and colleagues know they are thinking of becoming or have become a family business consultant. One day the person receives a phone call, letter, or e-mail based on a recommendation from a friend and/or colleague, inviting her/him to come for an interview for a position as a family business consultant to a small firm of 20 people. He or she is delighted at the prospect and eager to undertake the challenge. He or she accepts the invitation and the appointment is set for a week later.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_6

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Preparing for the Interview We consider it imperative to learn as much as possible about the particular company you will be visiting. See what you can find on the Internet about the company and its leaders. If they are a publicly traded company, see if you can get any financial reports. If they are located in the same community as you are and you know anyone in the same industry or service business, ask if they would share their knowledge. Use some of your time to read a recent book on the subject and perhaps a few current issues of the Family Business Review or the Family Business Magazine. This will help you learn or refresh your vocabulary and provide an update on what is happening in the field. If you can contact a former professor who taught you a course in family business, ask if he or she might be available to consult with you now and be a mentor in the future or someone who is currently functioning in this capacity that might be willing to be your consultant and/or to co-consult with you, if that would be acceptable to the firm. If so, be willing to pay a consultation fee, as they will be helping you to increase your competence, plus investing time and expertise, and deserve to be compensated, just as you will expect to be, if and when you consult. If some of your former classmates or colleagues are already actively engaged in family business consultation, it might prove expedient to contact them and ask about their experiences and if they have any “tips” or suggestions to offer. As you are gathering and absorbing information from various sources, assess if you think you are sufficiently trained, knowledgeable, and skilled to undertake this particular consultation. If so, call and accept the invitation. Make sure you leave enough time to get to your destination about 15 minutes early to allow for heavy traffic and time to freshen up when you get there. Perhaps this sounds too obvious and simplistic, but if you arrive late, flustered, or disheveled, you might not make a very good first impression. Another aspect of creating a good first impression is how you are dressed. Decide what is appropriate to wear for the type of firm considering engaging you. If it is in the fashion industry, being dressed in fashionable good taste is warranted. Conversely, if it is an air-conditioning firm or a plumbing supply and installation business, dressing casually would show better “discretion.”

The First Interview No doubt one member of the executive or management team will lead the discussion and tell you why they now want to hire a consultant and what the responsibilities and expectations are. The candidate will want to inquire about the family’s core values, expectations, and rules and if these are codified in a document such as a policies and procedures manual. In future sessions you will want to discern some of their core beliefs about fairness, gender issues (equality or male supremacy), authority; their values including norms, slogans, loyalty, and family legacy; and important rites and rituals, such as family myths and legends, celebrating family traditions, and special occasions. Much of this won’t be possible until subsequent meetings.

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If they offer a contract at the end of the interview, quickly process for yourself if this is a firm whose goals and values you respect and to which you would like to be a consultant. Do you think you can guide them in finding the “best possible solutions” to the problems they have told you they want to address and resolve and that you have (tentatively) realized are perplexing to them? Do you think you will be compatible with their CEO and leadership team? Some companies will request a proposal (RFP) from the candidate at the end of the session. At that juncture it is advisable to ask what they want in the proposal, how detailed, and how long it should be. Also, you might want to ask how many others they are considering for the position so you can guesstimate what your chances are of being the one selected. Usually one is not paid for time expended in writing a proposal. And a word of caution, we have both had the experience of writing and submitting a proposal, not being the candidate selected, and later learning that they gave the proposal we submitted to someone already working in or for the company or to a different candidate who they preferred, even though they thought our proposal was better. This is certainly not ethical, but we do not know any way to prevent this from happening as proposals are not the type of item one would copyright. If no RFP is requested and you would like time to think this over, there rarely is a reason companies will object to giving a candidate a few days to mull over the job offer and the specific contract. If you do ask for and get some time to weigh the pros and cons of accepting, you might want to call and ask others in the field for their input. And then, if the pluses exceed the minuses, sign the contract, and call to let the CEO (or whoever is your contact) that you are pleased to accept their offer.

Starting in Your New Position Once you begin the consultation, continue to learn more about the firm, the key employees, their job responsibilities, the relationship system, and their goals for the enterprise as a whole and individually. Be as responsive as possible to their questions, requests, and expectations of you. Some consultants prefer to do their contracting in two stages. In stage one they have a preliminary meeting and then contract for the assessment phase, which may take three or four sessions (see Chap. 4). They often provide feedback at a special feedback session, and then the CEO and others on the executive or management team decide if they want to proceed with the consultant and vice versa. If yes, then in stage two, the consultation phase, commences. In the following segment of this chapter, we present a summation divided into two interconnected lists of some of the most salient information a consultant may need to ascertain over time as he/she consults with a specific enterprise, depending on what is relevant to be informed about for the particular issues about which you have been asked to consult and advise.

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Part I. Information to Acquire/Learn About This Specific Family Business A. Explore members’ sense of closeness, distance, enmeshment, or disengagement: 1. How involved is each family member in the business, i.e., in its ownership, management, and leadership? 2. What generation of family ownership is currently at the helm? 3. How and when did the firm start? B. Legacy and tradition: What was the vision and legacy of the founders, particularly in the earliest generations, that the current generation is expected to perpetuate? 1. How does this family maintain and transfer their values and legacy within the company? 2. Are there written traditions or storytelling accounts passed down from generation to generation? 3. Have they designated a specific family steward and/or an historian? C. What is the business culture, the way things are done (Schein, 1995)? What is: 1. Their ethnicity/cultural background (Gersick, 2002). 2. The country of origin of the founders. (Western cultures tend to cultivate individualism, whereas Eastern cultures tend to promote interdependence and the importance of the collective). 3. The religion of their founders (Pieper, Williams Jr., Manley, & Matthews, 2019). 4. The impact of gender – such as the law of primogeniture favoring the eldest son to assume leadership. 5. The role of in-laws, former spouses, etc. working in family business. D. Family characteristics that interface with the business: 1. Ages/life stages of people who work in the company and/or exert the most power. 2. What generation is currently governing the family business? 3. Is the family’s commitment to long-term, committed ownership (Poza, 2010)? E. Family business climate – is it primarily positive or negative: 1 . Is there a shared vision (Ward, 1997)? 2. Is leadership development of the next generation emphasized (Miller, 2014)? 3. Performance is heightened when there is generational involvement, an entrepreneurial orientation, and a participative strategy is utilized (Chirico, Sirmon, Sciascia, & Mazzola, 2011). Are these processes present? 4. Do nonfamily members hold executive positions in the business? If so, how does the family react?

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F. Stage of organization: 1 . Existence (start-up, launch, or early-stage development) 2. Survival (growth) 3. Success (maturity) 4. Renewal (lean organization) 5. Decline (regeneration) G. Governance characteristics – see Chap. 5: 1. Does the firm have an independent board of directors? How are they selected? 2. Does the family have family meetings? If so, how often? 3. Do they have rituals/traditions supporting their values that are incorporated into the business? H. “Family business” means different things to different families? What does it mean to the leaders of the firm you have been engaged by? In the following portion of this chapter, we delineate two lists of some of the most important information to be obtained.

Part II.  Relevant Family Information A. What are the basic family roles and functions and who fulfills each? 1 . Is there flexibility in determining and carrying out these roles/functions ? 2. Are there specific roles ascribed to family members not employed in the business? B. What are the rules that govern the conduct of the enterprise family members? 1 . Who enforces them? How? 2. What are the expectations regarding autonomy and independence for each family member? 3. Are there grandparents, uncles, and aunts of the younger generation family members also involved in the business? What are their roles and do they support the parent generation? C. Family relationship history: 1. What is each member’s history of relationships? For whom is this a first marriage? Are there children from prior marriage(s)? In-laws currently involved in the firm (see Chap. 5 on documents about who can become a member of the family business)? D. Does the family provide the context for each individual’s development of a sense of competency?

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1. How does the family identify and support developmental transitions for each individual? 2. How do they promote independence and interdependence? 3. Do parents recognize and nurture unique talents and desires of each of their children and, if so, how? 4. Characteristics of various family member’s (are they gifted, ambitious, substance abusers, lazy, pampered?) Is it important to observe the unique characteristics of each person involved as well as their strengths and vulnerabilities and expectations related to these (e.g., chronic illnesses) or potential personality problems (argumentative, ingratiating, deceptive, unfair)? E. Structure: boundaries, alliances, coalitions: 1. Who participates in making important decisions? Who has the power to make “final decisions”? 2. Who typically agrees with whom? Who is left out? 3. Are there intergenerational coalitions? Sibling alliances? Triangulations? F. Emotional/financial support: How do members support one another? 1 . Does one governing member or the firm favor certain individuals over others? 2. What are the traditions and expectations of emotional, financial, and social support of the family? For example, has money been appropriated for a special- needs child, and, if so, what form will it take and for how long? G. Level of conflict. Destructive conflict can inhibit the healthy discussion of ideas, values, and decisions in the family enterprise. Frequently the conflict within the family carries over into the business environment and the firm’s decisions and can escalate tensions and interfere with the company’s day-to-day operations: 1 . How does each member respond to disagreement and conflict? 2. Who is the arbiter of conflict? Do you sense much covert upset and anger? How do they deal with smoldering conflicts? 3. Does each member attend family events (how often and for what occasions)? Who brings them together for family events? 4. Is there a specific amount of family involvement required if one is to be heard at family business meetings and/or vote on family business issues? H. Change: Managing change is a major challenge to all businesses. In family business, change is influenced by many variables (both internal and external) as well as by the family, such as: 1. Attitudes toward change. Is the family as a whole open to change? Which members are not? And why? 2. How does the family respond to anticipated changes (e.g., a youngster going to college, retirement of a key staff member) and unanticipated changes (e.g., a coronary, onset of Parkinson’s) and stressors both within the business and in family members not in the business? 3. Do members expect change from others, but not in themselves?

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4 . How do business members promote and manage change? 5. Are new business ideas and suggestions welcome from family members? From employees? 6. Do the leaders actively solicit advice from professionals outside of the family business? Over time consultants become more adept at ascertaining data about the company and the relationship system and siphoning out what parts of it are most relevant through observation, clinical assessment, reading the firm’s various documents, and meeting with family business members individually and in groups.

Seeking Additional Training and New Knowledge On your own time it is often advisable to join a national professional organization that focuses on family enterprises, their composition, frequent challenges and issues that confront them, being financially profitable and making wise investments, dynamics of the family system, short- and long-term goals, longevity, and legacies. The Family Firm Institute (FFI), headquartered in Boston, Massachusetts, is considered one of the best and main organization devoted to family enterprises. It holds annual conferences, both in the United States and in other countries. Its’ refereed Journal, Family Business Review, has been in existence since 1987 (Spector, 2019). In addition to the annual conference, FFI runs training institutes, and after the successful completion of several years of course work (and time), one can graduate and get a certificate. The training is by an interdisciplinary faculty and attracts participants from many fields and backgrounds including psychology, family therapy, and social work, plus law, finance, accounting, and owning or working in a family business. The Society of Consulting Psychology (Division 13 of APA) focuses on consulting to organizations. In the past few years, some of their members have expressed growing interest in family business consultation, and there have recently been an increasing number of presentations on this broad subject at its annual meetings. Both the Academy of Management (AoM) and Association for Psychological Science (APS) also offer some training in family business consultation, with perhaps more emphasis on research than on practice. A resource, particularly for articles featuring and often written by owners of family businesses, is Family Business: The Guide for Family Companies. It carries diverse short articles such as Does your Board of Directors have an Old Boys’/Girls’ Club Problem? (Goodspeed, 2020); Gender Parity in Family Business: How Long ‘Til We Get There (Spector, 2020); and The Family That Bakes Together (Hall, 2020). Each issue carries a family business directory of advisers, comprised of paid ads placed by various consultants, family offices, and academic family business programs in universities that are actually quite informative. They list upcoming conferences focused on various aspects of family business, primarily geared to members of family enterprises and offices, which is quite a different focus than that of the FFI conferences.

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Reading the other chapters in this volume will immerse you more deeply in the core knowledge base needed by family business consultants. This includes becoming familiar with the types of structures and documents many firms will have and others will need to generate, the importance of stewardship, mentoring and educating the next generation, how to collaborate with other consultants to the firm from different professional backgrounds, the importance of knowing what evaluation and assessment tools to use, developing skill in helping members of the firm to resolve interpersonal conflicts that may impede working well together within the family business system, the importance of succession planning, and the many other issues addressed in this and other current books in the field.

Conclusions As we bring this chapter to a close, we reemphasize that consulting to family enterprises is a challenging, multifaceted field that continues changing and expanding. There are variations across countries and types of business, and this professional role appeals to those who are interested in lifelong learning. The perks and pleasures are many, if one is competent and adaptable and likes working with many smart, innovative, and highly motivated individuals in their family enterprises, with an awareness of the larger family and business context.

References Chirico, F., Sirmon, D.  G., Sciascia, S., & Mazzola, P. (2011). Entreprenurial orientation, generational involvement and participative strategy in family firms. Academy of Management Proceedings, 2011(1). https://doi.org/10.5465/ambpp.2011.65870630. Gersick, K. (2002). Staying connected while growing apart. Families in Business, 1(3), 68–70. Goodspeed, W. (2020, March/April). Does your board of directors have an old boys’/girls’ club problem? Family Business Magazine. Hall, A. (2020, March/April). The family that bakes together. Family Business Magazine, p. 37. Miller, S.  P. (2014). Next-generation leadership development in family businesses: The critical roles of shared vision and family climate. Frontiers in Psychology, 14, 1–14. https://doi. org/10.3389/fpsyg.2014.01335. Pieper, T.  M., Williams, R.  I., Jr., Manley, S.  C., & Matthews, L.  M. (2019). What time may tell: An exploratory study of the relationship between religiosity, temporal orientation, and goals in family business. Journal of Business Ethics, 163, 759–773. https://doi.org/10.1007/ s10551-­019-­04386-­3. Poza, E. J. (2010). Part 1: The family business: What makes it unique. In Family Business (3rd ed.). Cengage Learning: South Western. Schein, E. (1995). The role of the founder in creating organizational culture. Family Business Review, 8(3), 221–238. https://doi.org/10.1111/j.1741-­6248.1995.00221.x. Spector, B. (2019, September/October). Family business truths. Family Business, pp.  54–57. Retrieved from www.familybusinessmagazine.com Spector, B. (2020, March/April). Gender parity in family business: How long ‘till we get there? Family Business Magazine, pp. 38–40. Ward, J. (1997). Growing the family business: Special challenges and best practices. Family Business Review, (10), 323–337. https://doi.org/10.1111/j.1741-­6248.1997.00323.x.

Chapter 7

Untangling and Dealing with Serious Family Conflicts Within the Family Enterprise

Abstract  It is not unusual for long-standing, submerged conflicts to exist and erupt in family firms. This chapter presents an illustrative case example of such a family conflict and how the consultant intervened to help them resolve it. Other problems a consultant may need to address that are not part of the case described are also noted. One of the most significant differences between family and nonfamily enterprises is that in family businesses, the family members have dual relationships with one another. They are part of the same family outside of the business, often sharing their lives in a multiplicity of ways, and they have usually lived some parts of their lives together in the same household. Like most other families, their children grew up living through ups and downs in their parent’s relationship to one another, their relationship to each parent and/or stepparent, and their own individual relationship to each sibling, which evolve and change over time. Often the order of birth and the gender of the child contribute to how the parents treat them and what expectations one or both parents have for them and communicate to them directly and indirectly. The oldest children may be raised more strictly, perhaps with more discipline and “you should” or “you will do this or that” admonishments, indicating they expect high academic achievement in school, sports, the arts, or school leadership. If the children respond well by wanting to please their parents, they receive praise or other positive reinforcement and may continue to develop in accordance with the role or script assigned. A specific child, often the eldest, and if a male, is scripted to become the future CEO in the family firm, in accordance with the long existing law of primogeniture, discussed elsewhere in this book. (In today’s world, oldest female children are a little more likely to be the designated child than formerly, if the family does not adhere to the law of primogeniture). Other children can be scripted to be the “rescuer” child, who tries to smooth things out, help any family members who needs it, and puts others before him or herself. They tend to be conflict avoidant. A third script may be to become the “fun loving child” who provides distraction when necessary and is playful, humorous, and affectionate. Some families skillfully designate a “scapegoat” child who tends

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to be blamed when anything goes wrong, and he or she may be bullied and become reticent or belligerent. Or if the parents co-exist with a perpetual schism between them, one child can be anointed the family “peacemaker.” There are other scripts, or those alluded to above may be known by other names, but these are the main ones we find surface most often in the family business context. Family business members frequently deal with complex relational conflicts that may have built up over years, whereas this type of conflict does not exist in nonfamily firms. As early as 1971, one of the giants in the field of industrial/organization psychology, Harry Levinson, wrote about “Conflicts That Plague Family Businesses” (1971). His illuminating of this special area of concern predated the formation of the organizations devoted specifically to studying and consulting to family businesses by at least a decade and a half. Here we will highlight some of the major points he emphasized then that still have relevance to the following discussion on family conflicts in the family business. Levinson uses “he” in denoting the entrepreneur, as at that time a male was almost always at the helm. He asserted that “the difficulties begin with the founder,” usually an entrepreneur for whom the business has at least three important meanings: 1. He has unresolved conflicts with his father and is uncomfortable being supervised. Thus, he begins his own business in order to exceed his father and “to escape the rivalry and authority of more powerful figures.” 2. The business becomes his “baby” and his “mistress.” Those working for him are regarded as “instruments” in shaping the firm. Anyone seeking to acquire power for himself is soon ousted. 3. The business is perceived as an extension of himself and as a “medium for selfgratification and achievement.” His concerns about the future of the business are focused on it being a “monument” to himself that he is leaving behind, which we perceive as a part of the legacy he wanted to bequeath. Levinson conveyed that “the founders behavior makes certain he will never have a rival.” Now almost 50 years later, we do not often see the rivalries as still being that extreme, perhaps because the concepts of stewardship (educating and training younger members of the family to move into leadership roles) and drawing up succession plans have become important tasks for many family enterprises to undertake. The main rivalries Levinson zeroed in on were those between father and son and brother and brother, stressing that “the son’s” feelings of rivalry are a reflection of his father’s (to his own father) and his resentment of being kept in an infantile role. In the case which appears later, the brother-brother rivalry had long been severe. He indicated that nonetheless the oldest son ordinarily succeeds the father and the younger brother keeps trying to compensate for being kept in a subordinate role. In the case presented in this chapter, the consultant was able to prevent such strife from continuing and to create what Levinson called a “fraternal spirit.”

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The Reconciliation Model McClendon and Kadis, who were experienced individual, family, and group therapists as well as family business consultants (2004), developed a model which they designated redecision relationship therapy out of their vast experiences working separately and together, in each of these fields. It is entitled the reconciliation model, which is used to help family members in a business cope with the real and imagined insults, hurts, beratings, schisms, and arguments that erupted between them years earlier so they will be able to work on healing the wounds and “resolving” the deep-­ seated hostilities that plague their (inter)personal and business relationships (Kaslow, 2006). As a psychologist, I (FK) share a similar background with McClendon and Kadis and over the years have continued to use, modify, and adapt their reconciliation model, which I still find to be brilliant and adaptable for working with complex, conflicted, and tumultuous families as well as with families who deny their interpersonal, internecine warfare. I have not found any other model that specifically chronicles how to deal with conflicts, including overly enmeshed relationships, in the family system within the business. The consultant skilled in using the reconciliation model will attempt to establish trust, rapport, and mutual respect with the community of owners and nonowner family members, and through their observations and interactions develop an understanding of the interpersonal alliances and conflicts (see also Case #4, Chap.  8). They may suggest that the best atmosphere in which to try to resolve these underlying grievances is at a family retreat held in a relaxing retreat setting, and not in the business environment. Retreats are often scheduled for anywhere from 2 to 5 days, and like McClendon and Kadis’ preference, ours is to have these co-led by a malefemale team if the family is over eight people. This leadership arrangement over the course of the retreat can model a healthy style of male-female collaboration, of working conjointly with mutual respect, and usually also how to resolve disagreements. However, when the family is in Gen. 1 or Gen. 2 of its history and is small, one leader is ample, as in the following case. The leader(s) might open a first retreat, hopefully asking everyone to be seated around a round table with the leader at one end or the co-leaders at opposite ends. They can suggest people sit wherever they choose to, which often provides information about who aligns with whom spontaneously. If the retreat has more than six or eight family members in attendance, they can ask them to go around the circle and introduce themselves as they identify in the here and now, to possibly include (1) their role in the firm, (2) how long they have been in the business, (3) a brief job description, and (4) their interests and hobbies. Thus, at the beginning the leaders are focusing on who the person is in the present, and perhaps this will help to set the tone for the end goal – moving the attendees from stuck places when relationships were bogged down by competitiveness, conflicts, arguments, rivalries, and contentiousness toward resolution. Once everyone has had a chance to speak and perhaps share their current self-image, leaders might follow up by asking participants what

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new they may have learned from the introductions about anyone present or if they have any responses to each other’s questions and remarks. Hopefully, these interchanges will set a positive tone and diminish some of the anxiety. Next the leaders might query – what are the two issues in the relationship system you would like to personally resolve or see others resolve while you are here? Take as much time as you need and be as explicit as possible. Usually for this type of more probing question, it is not advisable to assign the order for responding (like going around the table) as much can be gleaned about the relational systems by who spontaneously goes first and how revealing it is and who might jump in and contradict or agree with the speaker. Then the leaders can observe who else comes to the fore to speak and follow the trend of what is being said, amplified, or agreed to by others or if an argument erupts and/or yelling occurs. They will no doubt also observe who does not voluntarily participate.

Case #4 We have purposely selected a small family I (FK) worked with recently to illustrate the points being made and also because a small family is probably the best kind for a relatively new consultant to lead early in their career. It is presented in depth focusing on both “content and process” which can be done most effectively by discussing one case almost in its entirety rather than snippets from several cases. The retreat was planned for a small Gen. 2 family alone. The business had been started by Dan’s father, Bill, 30  years earlier, when Dan was taking his Masters in Fine Arts degree in a University in a different state than where his parents resided. Dan had met his future wife, Andrea, at college, and she had become an artist. When they graduated, both accepted jobs at the same art gallery in their sophisticated college town and got married 6 months later (All identities and locations are disguised).

Brief History In the interim, Bill’s gallery had expanded and prospered, and Dan’s older brother, Tim, had joined the firm. Since its inception, the business had kept growing; they had added additional showrooms and were featuring sculpture as well as paintings. A few years later, Dan’s father had urged him to come home and join the firm, which he had done long before the consultant became involved. One of Dan’s sisters, Sandy, who had not been invited to come aboard, had felt excluded. At that time, she was told by Dad that she would no doubt probably become pregnant soon and have several children, and he did not want to train an employee who would leave the firm in the next few years. Sandy and her husband relocated out of state and did extremely well in the PR and advertising business they created. They were financially quite

Case #4

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self-sufficient by the time the retreat was held. Bill and Peggy’s fourth and youngest child, Jean, had always had difficulty at school and had been diagnosed with attention deficit disorder (ADD). When I began consulting to the family, Jean was 25 years old, married, with one child. Her husband also had learning problems and was a low-paid, unskilled worker. Her parents had been supplementing their income for several years and expected to continue doing so. Bill, then in his early 60’s, was referred to me by a friend of his for whose family business I had consulted. I had several sessions with Bill, and his wife Peggy, and he voiced that there were two major concerns: 1. He was contemplating who he wanted to name as his successor, Tim or Dan, and beginning to write a succession plan that could be put into effect gradually. He realized making this choice would disappoint and antagonize the son not chosen. 2. Writing his will. He had discussed the will with his attorney and had been advised to treat the four children all equally. He and his wife were surprised when I asked, “Do you think equal may not be the fairest way to go in your situation?”. This got a nod from both, but they said they hadn’t known how to conceptualize their doubts and tell them to the attorney. They decided to give this more thought before either of them finalized their wills. I suggested that a family retreat be held that could piggyback on a 1-day family reunion to which their children, their spouses, and grandchildren would all come. Their youngest daughter, Jean, could bring a baby sitter to take care of their children when she and her husband, Jerry, attended the retreat. This idea appealed to them; quickly Bill and Peggy arranged it for 6 weeks later. Everyone agreed to come.

Two-Day Family Retreat The consultant arrived the end of the first day. The reunion day had been set aside just for the family to enjoy. The first day of the retreat, to which the parents had invited the children’s spouses to attend and participate, I introduced myself and interpreted my role as the consultant. Then I asked Dad to explain why they were having the retreat. He related that they were hoping to retire in a few years. (His wife, their mother Peggy, managed the office of the firm so it was “we”). They had begun talking about their succession plans and their wills and wanted to get input from the family. Tim and Dan both expressed that they wanted to become the next CEO. Tim said “I expect and deserve to be selected as I am the eldest, have been in the business the longest, and am very committed to keeping the business profitable and carrying on the family legacy.” His wife concurred, making it sound like it was obligatory to name the eldest son, especially since he was interested and qualified. Angrily, Dan retorted that he was tired of playing second fiddle to Tim because he was the firstborn son and that he (Dan) was better qualified because “I graduated from a Fine Arts College” – which gives me more stature in the art world and more

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theoretical knowledge, and then he sarcastically emphasized that “Tim had dropped out after two years, saying he “was bored,” but more likely because his grades were not good.” Everyone was aghast at this outburst; it violated the unspoken family rule that everyone keep the family interactions harmonious. At that point Sandy blurted out, “it’s time you all knew how I felt not being invited to join the family firm because I am female. That’s old fashioned and I expected more from you, Dad and Mom. When this became so apparent, my husband and I decided to leave town and we have built our own successful business. We are raising our children well and have proven ourselves independently. I also want to be considered for the upcoming CEO position. If I am selected, we would move back and my husband would run our business from here and take on a partner if he needs one.” Everyone was shocked by her outburst – both by the content and the assertive, belligerent way she yelled it! All were speechless. The consultant commented that as unexpected and as painful as her remarks and Dan’s had been to everyone, it was best that these long-withheld thoughts and emotions be expressed so they could try to deal with them and resolve the underlying animosity and conflicts. The youngest daughter, Jean, interrupted the consultant and queried of her father, “will you make sure that whoever you appoint the next CEO makes a commitment to continuing to help support my family so that our income is always enough”? Again, there was a gasp as the older three siblings were unaware that this had been going on since Jean had gotten married. They did not object to her being supported as they realized she and her family were struggling financially, but they resented their parents’ continuing secrecy about this. (Family secrets often are blurted out at family meetings or retreats and need to be dealt with when this occurs, which was done later in the session). By this point the tension had mounted considerably, so the consultant suggested they take a short coffee break and give everyone a chance to collect their thoughts. When we reconvened 30  min later, everyone was a little calmer and more coherent again. The consultant, wanting to embark on fostering the healing of the various long existing fractured parts of the relational system, underscored how important it was that they were able to tell each other their major concerns, fears, resentments, and what they each hoped for in the future. She underscored that it was obvious that they each cared deeply about the family as a unit and wanted the family business to thrive and continue into future generations, but at the same time, there were some deep-­ seated interpersonal tensions and rivalries that needed to be heard, faced, and preferably resolved. I suggested we take a half hour break, and they each make a list of the issues that had already surfaced and any others they wanted to bring to the fore. The combined list that emerged from their feedback was: 1. Wanting their parents to be more open and honest with them and less secretive about important matters. 2. For everyone to agree that they no longer had to pretend to be a “picture-perfect family” so they could raise concerns, express differing opinions, and try to reach agreement, when this was needed, before moving forward.

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3. That their parents solicit input from their now-adult children on important matters and seriously consider it in making their own major decisions. 4. That the parents (together) meet with each of the three children (separately) who had indicated their interest in becoming CEO and explore what they each saw as being entailed in the position, what they believed they specifically had to offer, and what was best for the family enterprise. 5. That Tim and Dan spend time together and try to rework their childhood relationship and the animosity remaining into a mutually respectful and even enjoyable adult relationship. All agreed. In the rest of that afternoon’s and the next morning’s session, as well as at dinner and throughout the evening, various combinations of family members worked on the issues listed above. The next day they all reported back that their new commitment to openness, honesty, integrity, and healing troubling aspects of their relationships was progressing and “felt wonderful.” Toward the end of the next morning session, Dad decided it was time to talk about the second topic; some of the provisions in his will that he had been discussing with his lawyer. They had tentatively agreed, at the lawyer’s suggestion, that in his case, leaving each child an equal amount of his personal wealth (separate from their equal shares in the business) was not fair and that the youngest “needed” to inherit more and since Sandy (and her husband) was doing well financially, she did not need the same amount. Instead, she would receive one-half the amount the others did and what would have been her other half should go instead to Jean. Sandy said in disbelief, “why are you punishing me for being successful?” and irately blurted out “are you going to disown me too?”. Then she and her husband ran out of the room. Her parents were flabbergasted. They had thought their lawyer’s advice was probably appropriate, and had no idea how rejecting it would seem to Sandy, i.e., how it would appear to devalue her importance to them and alienate her. They were surprised when both sons agreed with Sandy. The consultant realized they may partially have sided with her because they understood their inheritances could easily be cut for the same reason. (They had not told the consultant about this recommendation from their attorney). The consultant called for a recess so she could try to find Sandy and Paul (her husband) and convince them not to leave the retreat but to return in an hour, thus giving her father some time to rethink and possibly reverse the decision he had (tentatively) made. After the consultant’s attempt at reasoning and persuading, they said they would return after lunch but, first, they wanted to be alone together for a while and calm down. Next, I conferred with Bill and Peggy only and they indicated it had been a wise decision to hold the retreat and hear what their adult children thought and felt. They also said they now understood why Sandy believed she had been treated unfairly because she was successful, and they were very distressed by this realization. Everyone returned to the conference table after lunch. Dad opened by saying he realized they really didn’t “know” their adult children very well and were glad they had decided to hold the retreat, get reacquainted, and start to truly talk to each other

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more honestly, and they hoped it would occur more often. Dan and Tim said they recognized they needed to “let bygones be bygones” and see and treat each other as colleagues for their own well-being, to keep the business profitable, and to make it a happier place to work. The parents told Sandy they decided they would designate the same inheritance to her that was being allocated to her siblings in each of their wills, and the meeting concluded on a high note, with everyone embracing everyone else. Over the next 2 months, the consultant met with Bill and Peggy weekly and with the attorney once to go over with all three together the detrimental impact of the will as originally written – emphasizing that in this situation, “equal” was what would be most “fair” and that this particular provision of the will as finally written could either help unify the family or tear part of it asunder, if unequal was selected. He said he wrote wills to satisfy the wishes of the progenitor and had rarely taken into account their impact on the benefactors – but he made the changes requested by Bill and Peggy. (He later thanked the consultant for introducing this different way of thinking to him). They also continued working with the consultant about the succession plan. They came to the decision that it would be wisest to appoint their sons co-CEO’s with different responsibilities as they had different strengths and skills. They also realized that now, before their retirement, it was time to establish a board of directors and to hold board meetings quarterly. Further, they decided to ask Sandy to serve as chairperson of the board as a tangible sign of their respect for her proven abilities and managerial strength, to pay for her expenses to fly back and forth for board meetings, and to keep in closer contact with all of the children, plus to make a concerted effort to get to know their grandchildren better. An all-day meeting was scheduled for 3 months after the retreat. In the interim, the siblings had had increased and better, more open contact with one another. Dan and Tim had become “buddies,” playing golf together as adult equals, and each called their sisters more often than they ever had. At the retreat Bill told them they wanted to appoint their two sons as co-CEO’s starting 3 or 4 years later and about their decision to establish a board of directors in the interim and that they hoped Sandy would chair it. They added that they intended to ask all of them to propose members for the board. All responded positively to this plan. Dan and Tim agreed that as co-CEOs they would continue sending a monthly sum to Jean, and Sandy gladly accepted the appointment as chair of the board. This case is presented to illustrate how reconciliation therapy can help free people from childhood rivalries, feuds, and competition to be “the favorite,” the chosen one, to create better, more satisfying relationships in the present, help everyone be more open and honest, and feel free to ask questions and make suggestions as adult children. It also is meant to convey how a retreat can get so much accomplished in the short span of a few days, with good preplanning and post-retreat follow-up. It was also selected because it involved an originally unanticipated successful collaboration between a female psychologist consultant and a male legal consultant. In the literature, there are other conflicts alluded to between family members in family businesses that were not discussed in this case or elsewhere in the book. Some of these are:

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1. The CEO decides on his or her own where company charitable contributions should go, without concern for other’s preferences. 2. Some family members get: (a) To fly and vacation first class – others don’t. (b) All the tickets to special sporting events or top shows at the theatre. (c) Sometimes salary scales are not published, and salaries remain secretive, causing distrust about possible differential compensation for similar work contributions and length of time in the firm. (d) The amount of end-of-the-year bonuses seem to be based primarily on favoritism. (e) The resources available are not distributed equally. 3. The CEO adds personal friends to the board of directors rather than the board electing its members based on their special competencies and anticipated contributions. 4. Children and grandchildren who do not follow the CEO’s dictates and expectations and who do not concur with everything he says often are fired from the business and/or disinherited in his changing of his will (Trump, 2020). By way of contrast, fairness, objectivity, consideration, loyalty, mentioning shared family values, taking pride in the family story, resilience in weathering setbacks and impactful external events like a pandemic or periods of economic crisis, stewardship, and trying to consider everyone’s best interests are some of the principles applied by family business CEOs (and management teams) that are able to foster harmonious interpersonal relationships within the family enterprise.

Positive Conflict Engagement and Conflict Transformation According to Lederach (2003), positive conflict engagement is based on the recognition that conflict naturally occurs, is continuous, and reflects perceived differences, alternatives, or discrepancies either within ourselves (felt when we harbor various views, feelings, or opinions on a subject) and/or between people (when there are incompatibilities in beliefs, interests, desires, or values with one another). Many people are uncomfortable when they sense discord: It is much easier when they have one perspective or one “right” answer. Internal distress is experienced when one is aware of their own conflicting opinions, emotions, perspectives, or values on a subject. When conflict is relational (among people), it is more complex and occurs when someone perceives an incompatibility in beliefs, interests, desires, or values with others. The key issue is how individuals and groups cope with and respond to conflict, which is experienced cognitively (perception), emotionally (feeling), and behaviorally (action).

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The core to many interpersonal conflicts is that one feels a threat to their sense of identity and their desire to survive. All individuals have constantly evolving needs embedded in various contexts that impact their responses and reactions to conflict (Mayer, 2012). Though people handle conflict in their own idiosyncratic way in various contexts or at different times, they tend to develop a pattern of conflict interaction in their relationships and groups. The transformational approach seeks to understand a specific episode of conflict, not in isolation but as embedded in a greater pattern (Lederach, 2003). Keeping in mind that disputants can experience a conflict differently and at various levels of intensity, the consultant needs to ask each person (in the family to which they are consulting) to describe their unique feelings and experiences in order to understand what is transpiring. In Case #3, the “perfect family” erupted when the family members reacted to their parents’ decision about a successor-CEO and to their notion of “fairness” in the division of family assets. Focus on process and context, rather than on the specific event, is key to conflict transformation (Lederach, 2003). Conflict is viewed as embedded in a web of relational patterns which provide the context for the specific presenting issue. Individuals need to feel encouraged to speak up and discuss ideas safely. When everyone’s goals are aligned, they can move in the same direction while considering different ways to get there – using open discussions of divergent views, thus discouraging personal attacks. There is no one correct response to conflict, yet the strength and success of individuals and family systems are related to how serious negative conflict is prevented and how they individually respond to discord and differences, while maintaining the integrity and health of each individual and the system. Because family system dynamics can be more powerful than individual traits in determining how people respond to conflict, which is influenced by what they have previously learned and experienced about conflict, personality, culture, roles, and context, intense emotional reactivity is not uncommon (Mayer, 2012), such as when family members in Case #4 felt their needs had not been met historically. By reframing conflict as natural and reflecting back their differences, an opportunity for constructive change and decision making is created. Then the consultant can guide the family leaders in creating a safe, respectful environment that welcomes the expression and discussion of various viewpoints. Conflict is necessary for the growth and development of individuals, families, and organizations. To make wise decisions, they need to consider the choices they have among conflicting ideas. Intentional change theory suggests that developing a shared vision among the members can serve as a motivator for intentional change within the group (Boyatzis & Akrivou, 2006). By focusing on the common vision and creating a safe, supportive environment (Edmondson, 2019), the family members can consider various alternatives, with the potential for positive action. Sometimes the consultant is asked to guide resolution of a specific conflict, but not everyone involved wants to understand and change the interpersonal processes. For those who do choose to understand the relational and historical patterns of their relationships and create new ways of interacting, as well as to envision a common future, they can develop effective change processes. To them, transformation conflict is seen as positive.

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The case selected herein does not resemble nor typify those high-profile business families that have been extremely well presented in the book Family Wars (Gordon & Nicolson, 2008). We choose to present a family conflict case with which a relatively new or intermediate level consultant might be called upon to help resolve. By contrast, Family Wars is fascinating reading as it takes the reader “behind the scenes on a rollercoaster ride through the ups and downs of some of the biggest family run companies in the world.” It shows how family in-fighting has threatened to bring about their downfall and reveals the origins, the extent, and the final resolution of some of the most famous family (business) feuds in recent history. It offers insight into issues such as Boardroom power struggles, family succession battles and the consequences – good and bad – of “nepotism.” In some of the families, Gordon and Nicholson (2008) chronicle, including the Koch’s, the Gucci’s, and the Bronfman’s, continuing major schisms, played out in family dramas and family conflagrations, explode periodically. Participants in these hostile eruptions often are nursing long-­ held grudges against other family members with whom they are incompatible and/ or with whom they continue to battle for supremacy. In family business meetings, enormous maliciousness and distrust are often expressed. A consultant working with this genre of family business family will need consummate skill and patience in trying to help them resolve such thorny interpersonal relational difficulties. When it becomes obvious that after successive attempts to resolve the conflicts have failed, the CEO and management team need to decide whether to terminate the employment of some of the warring family members, to dissolve the business, or to try to sell it. And the consultant has to be careful not to blame him or herself for failing to resolve deep-rooted, long-standing animosities and warfare. Sometimes I will interject in an explosive session that feelings are not in themselves fatal or permanent. They can be worked through, resolved, and let go of. By encouraging and carefully enabling people to externalize their simmering anger and fury, one may eventually be enabled to release and decrease the depression and fear that underlies the original trauma. This must be done with extreme sensitivity and caring, especially in a group context (Eger, 2017). More advanced family business consultants drawn from any of the professional fields mentioned in Chap. 5 would probably find Family Wars extremely informative yet often disturbing. It recounts the real-life dramatic stories of the selfishness and stupidity played out in the type of family feuds just described. Fortunately, sometimes resolution is achieved, and the firm continues to exist and thrive into the next generation.

Conclusions As has been elucidated in the foregoing, many family conflict situations are encountered when one is consulting with family enterprises, particularly in large, multigenerational firms, which are ongoing and much more complex. Unless these get dealt

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with and resolved, they can cause much dissatisfaction, many split loyalties, continuation of vying for favoritism, and disruption in the family enterprise and in the family nonbusiness relationship system, and sometimes to families splitting asunder and/or to disinheriting some members. Knowing how to deal with and help one’s clients mitigate and resolve such conflicts when serving as a consultant is a crucial skill to have or acquire over time and being able to do this is very gratifying for the consultant.

References Boyatzis, R. E., & Akrivou, K. (2006). The ideal self as a motivator for intentional change. Journal of Management Development, 25(7), 624–642. https://doi.org/10.1108/02621710610678454. Edmondson, A. (2019). The fearless organization: Creating psychological safety in the workplace for learning, innovation, and growth. Hoboken, NJ: Wiley. Eger, E.  E. (2017). The choice: Embrace the possible. New  York/London/Toronto, Canada: Scribner. Gordon, G., & Nicholson, N. (2008). Family wars. London: Kogan Page. Lederach, J. P. (2003). The little book on conflict transformation. New York: Good Books. Levinson, H. (1971, March). Retrieved from https://hbr.org/1971/03/conflicts-­that-­plague-­family­businesses Levinson, H. (2006). Harry Levinson on the psychology of leadership. Boston: Harvard Business School Publishing Co. Mayer, B. (2012). The dynamics of conflict. San Francisco: Jossey-Bass. McClendon, R., & Kadis, L. R. (2004). Reconciling relationships and preserving the family business: Tools for success. New York: Haworth (now Routledge. Trump, M. L. (2020). Too much is never enough: How my family created the world’s most dangerous man. New York: Simon & Schuster.

Chapter 8

Succession Planning

Abstract  This chapter emphasizes the importance of every firm putting a succession planning process into place and undertaking it prior to the resignation, retirement, or death of the reigning CEO. It details various factors to be considered in the selection process so that the selection committee can choose the best-qualified candidate to serve as the current and future leader of the family firm, carrying on its values and continuing to extend its legacy into future generations. Succession planning is vitally important to every business, as it is a pivotal transition that directly impacts the continuity of the organization – both the leadership and the entrepreneurial culture. The process embodies or should be predicated upon, the CEOs’ long-term view of their firm, including when they no longer will be at the helm. A poor choice or no choice of successor can threaten the firm’s survival, as sometimes the need for immediate succession is not planned, as when the CEO dies suddenly. At its core, effective transgenerational succession planning minimizes the survival risk of the organization. Often consultants are brought in to guide a business regarding succession, and they are told the presenting issue is that no successor has been selected. Many people think succession is about the individual, the successor, or an event that marks the transfer of power. However, succession is much more than choosing a successorleader or handing over power. Succession planning is a continual process of motivating and developing potential future leaders and building an entrepreneurial culture that is adaptable to and receptive to change (Charan, Drotter, & Noel, 2011). Business consultants know successful firms need to plan, execute, and evaluate their strategies for reaching their goals, including developing a plan for the process of selecting a successor. Yet 60% of nonfamily businesses do not have a succession plan (Bower, 2007) nor do 70% of family firms (Calabro & Valentino, 2019b). Where there is no succession selection process in place, conveying knowledge about

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leading the organization to potential future leaders does not occur (Rowe, Cannella Jr., Rankin, & Gorman, 2005). Business founders are closely identified with their firms. As these businesses evolve over time, many founders bring in various family members; thus they became family firms. The very characteristics that enable entrepreneurs to found their firms, which include – creativity and strong emotional determination – often are barriers to motivating and training potential leaders, including family members who work in the business (Kets de Vries & Carlock, 2007). Frequently there is a reluctance to name a successor by many CEO founders, perhaps due to their perception that their leaving the business symbolically represents their dying, as their identity and vitality have been very bound up in their firm and their activities as CEO. Succession can become complicated because some founders may have included some family members in the business and not others. Some have made no retirement plans, possibly because they have not wanted to choose a successor from among their children, grandchildren, or other relatives as designating a successor may give the appearance of favoritism or they may not think anyone can fill their shoes. Some family members may not be motivated or interested in becoming leaders in the firm (Rastogi & Agrawal, 2010) or want to become involved in this critical transition of power and the psychological dynamics it often involves. In fact, 25% of potential successors of family businesses choose to start their own business instead, possibly because it is too formidable to follow in the footsteps of a successful founder (PwC Family Business Survey, 2019).

Succession Process Typically, business founders do not have prior succession planning experiences, role models, or an opportunity to discuss succession experiences with others. It is helpful for the business consultant to generalize the common tendencies of founders when it involves succession planning and selection and when speaking with other stakeholders, including family members, so that they do not misinterpret the founders’ actions or lack of action. Effective leadership transfer in business requires succession planning and leadership development (Conger & Fulmer, 2003), and as firms and owners mature, structures and processes should be instituted to promote effective leadership development and ultimately transitions. When these processes are not in place, the organizational knowledge which the new CEO should possess or acquire, including the needed perspective to build knowledge and adaptability, is compromised (Rowe, Cannella, Rankin & Gorman, 2005). Effective succession planning consists of continually identifying and developing potential leaders and a comprehensive plan for a smooth transition of leadership, ownership, governance, and family assets. Tabor and Vardaman (2020) encourage using nonfamily employees to do training and leadership development and posit it nurtures more of a “buy in” from them into the firm. However, we believe this can be an important part of the stewardship function

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delegated to family members working in the business or to the family office staff. The consultant should inform the family of the benefits of doing so. Consultants can raise the importance of succession planning periodically by reminding those currently in charge that developing future leadership is similar to estate planning. Both writing one’s will and estate planning need to be done when one is young, and they are not fearful of impending illness or retirement and there is ample time for various options to be considered (see Chap. 5 – Governance). Once these documents are completed, they can be reviewed and revised as necessary. The consultant (and perhaps members of the board of directors) can recommend to the CEO that a wellthought-out succession plan, however defined by the firm’s leaders, should be drawn up and shared with the firm’s owners and other key leadership personnel for input before it is finalized. Consultants need to consider factors that can influence succession for this particular family business – such as family inclusion based on age, birth order, gender, ethnicity, religion, and national or regional influences. The consultant needs to inquire about the following: Who are the family members included in the family enterprise (and who are not, if any)? What motivates the current leaders? What is driving the concern for succession planning at this time? What holds this family together? What is their long-term vision? (See Chap. 2 for more specifics.) What is the process for identifying and developing future leaders in this family and this firm?

Factors Influencing Business Succession CEO’s Age and Health As CEOs age, the ultimate need for a successor will be inevitable, yet the majority of family and nonfamily businesses do not prepare for the process. Expectations, anxieties, and uncertainties exist among those directly and indirectly involved because future leadership has not been identified. Other stakeholders may be insecure about the firm’s future, which may make retention of key talent precarious. The local community, if it becomes aware of the indecisiveness, may feel they cannot rely on unknown future leaders to continue in the same direction for the business’s growth and commitment to the local area.

Generational Factors New business leaders want to help shape the direction for their enterprises, whether in family or nonfamily firms. Family businesses tend to thrive when they continue their founder’s core legacy, yet succeeding generations also need to be able to shape the company and its future direction. For these organizational adaptations to

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be effective, Craig and Moores (2017) recommend that new leaders make sure that the changes encompass the following areas: (a) Values (continuing yet evolving) (b) Knowledge (theoretical to practical) (c) Relationship networks (d) Management (micro to macro) (e) Authority (cost/revenue center to profit center) (f) Operational management to include or be based on strategic insight) (g) Ownership (technical and emotional) Families may wonder what the “best” method is for selecting their firm’s leaders. No single succession model works for all family businesses. Glikin (2020) describes different generational transfer models that have the following characteristics. (These are not direct quotes – the wording is amplified). (a) Integrative Model  – Biological family members are the heirs to the family’s capital, and it differentiates those who work in the family firm from those who do not but are shareholders. Focus is on growing economically as a family group strengthening emotional and economic ties and creating a family enterprise that will transcend the generations. (b) Representative Model  – Ownership is due to family lineage, yet not all the shareholders directly participate in making corporate decisions. They elect representatives, usually based on their technical or academic background and commitment to family values. This model is implemented when the family has grown (older and) larger, such that it is now in its third generation (or beyond). (c) Selective Model – The owner chooses his or her successor, not necessarily from the next generation, picking someone who seems to be capable of promoting the firm’s continuity. The success of the family business is thought to result from the combined effort of a specific successor or a group. The dominant value is the company’s continuity (Glikin, 2020, p.6). (d) Refoundation Model – The next generation, whether through blood or marriage, takes charge of leadership and ownership. This often occurs at a time of crisis, such as a fire at the firm or a sudden illness of the CEO or a time of severe internal conflict or dramatic growth. Then whoever takes over the leadership role may need to reunify everyone around a shared past vision. (e) Transactional Model – The senior generation sells all or part of their stake to the next generation; they are often motivated by a desire for economic tranquility and the belief that the buyers will responsibly give the company continuity. Not only are there different models of generational succession, there are also generational differences in family business retirement planning. The 2019 Global STEP Report (Successful Transgenerational Entrepreneurship Practices) multiyear study describes such generational distinctions: for example, 40% of current North American family business leaders plan on retiring at age 70 years, yet 50% do not have a specific

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retirement plan. On the other hand, Gen X members (born 1965–1980) and Millennials (born after 1981) are less likely to choose a family member as the next CEO and are less emotionally attached to the family business. These younger cohorts indicate they plan to retire earlier, around age 50. Whether the retirement hopes for the two younger groups are realized or not, at this time these are partially a reflection of their youthful exuberant goals, and only the future will tell if these materialize.

Diversity Factors Diversity refers to multiple factors that are not uniform in their impact and appear to be influenced by context and national/regional culture. Some factors are visible, like age, gender, disability, race, and ethnicity, but other considerations may require gaining more familiarity with the individual, such as their religion and education. Research on the impact of diversity on organizations has usually been conducted based on a single factor (e.g., gender) and often in one country only, such as the United States, so that findings are limited in their generalizability. The importance of being knowledgeable about the context and cultural norms of the company is necessary when consulting internationally. An example of the significance of such differences is seen in a 35 country multinational study of 26 industries in which Zhang (2020) found that the positive impact on productivity of increased gender diversity in leadership exists only in countries in which there is a widespread belief that this is important. This research refers to productivity among all businesses, and did not isolate findings for family businesses.

Gender Diversity Gender bias has often influenced succession, as it was customary that females were not given positions of power unless there were no sons or a crisis occurred and only a female was available (Wang, 2010). Sons have typically been socialized to expect to assume the leadership in the family firm, and the daughters have not. Previously when women perceived this gender bias, they often opted out by looking for jobs outside the family firm (Soost & Moog, 2019). Recently this phenomenon has changed significantly, and currently family firms are hiring an increasing number of women in executive positions. Predictions are that they are planning to hire even more in the future. Currently, women are being accepted into more executive positions: globally, 18% of current family businesses’ CEOs are female, yet in North America they number only 7% (Calabro & Valentino, 2019a). Gender differences in leadership styles show women are less autocratic (until age 68), encourage more participation, plan to retire earlier, and contribute

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to the likelihood of more future female leaders (Calabro & Valentino, 2019b). Female family firm owners tend to focus more on succession planning. Interestingly, females tend to have more difficulty doing their job when they succeed their mother, rather than their father (Vera & Dean, 2005). Women’s continuing role in many firms of providing the “invisible,” emotional leadership, promoting family harmony, transmitting family traditions, and giving emotional support is still very important to family continuity and commitment (Jimenez, 2009).

Religious and Ethnic Diversity The influence of the family’s religious, ethnic, and/or behavioral values and practices on the family firm can be profound. For example, Confucian ideology teaches a collectivist perspective in which the family unit is the basic unit and more important than any individual; harmony is the most important family value; children are expected to treat parents with respect; younger siblings are taught to be loyal and respective of older ones; and, even inheritance is not equal (Yan & Sorenson, 2006). The family’s religious identification and traditions can be a dominant force in shaping the values, practices, and taboos adopted by the firm (Kavas, Jarzabkowski, & Nigam, 2020). Religious differences impact not only the individuals from different backgrounds, but also their children and the extended family. Attitudes or actions responding to these differences can be overt or covert, yet they need to be considered as they present challenges within the f­ amily system.

National, Regional, or Cultural Diversity These may also influence the selection of leaders. For instance, the tendency toward male leadership in business firms in the Far East is quite visible. The likelihood that a family business will be transferred to the next generation is currently higher in the Middle East and African countries, Latin America, the Caribbean, Asia, and the Pacific (Calabro, 2019) than in North America.

Birth Order Birth order preference, at one time meant that the eldest child, usually a son, would be chosen as successor. Although this is declining as a practice, currently 45% of family firm CEOs are firstborn, 27% are second born. Business performance with firstborn successors is usually lower than for CEOs who are second born or later. Additionally, when the second or later child is chosen as successor, the firm is more successful than with a nonfamily CEO (Calabro & Valentino, 2019a, 2019b). Knowing these characteristics is useful for consultants so they can

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share this information with the family, thus supporting the selection of the next successor to be based on the most experienced and well-trained person for the position.

The Successor Nonfamily businesses may choose a successor either from inside or outside the organization, based upon determining who is the “best fit” and who meets the requirements for the position. In a family firm, especially in a firm’s early years, the successor is typically chosen from within the family, a much more limited applicant pool that may or may not have someone who meets the formal job requirements. On the other hand, there may be several possible successors identified in the next generation. When there is acceptance and support from siblings and other owners of the firm of who is selected, succession is apt to be more successful. But this does not often occur, and consultants may be called upon to guide the selection process. It has been suggested that prior to determining the intervention with a family firm, it is prudent for the consultant to converse with the other siblings (and perhaps their spouses) to facilitate the succession planning and selection and enable them to acknowledge their bonds, manage conflict, define their family and business roles in relation to one another, and collaborate with each other (Swogger, 1991). Readiness to retire requires long-term thoughtful planning. It is frequently emotionally difficult for the CEO to consider retiring unless he or she has meaningful alternatives that they are looking forward to. Though 40% of the current North American family business leaders plan on retiring at age 70, 50% have no specific retirement plan. When they do have such a plan, the successor is likely to be happier with the succession process (STEP, 2019). We find that inquiring about the incumbents’ plans for retirement is essential and that if there are not any, to encourage that they formulate them so that a smooth succession transition can later occur. Commitment to family and continuity of the firm are critical in choosing the next CEO, especially of many young family businesses. In later generations, after formal governance structures have been developed, a nonfamily CEO selection may occur, if he or she appears to be the most qualified candidate. The successor’s motivation significantly plays into the viability of the process. Some potential successors may not be motivated to come or stay in the family firm. Self-determination theory holds that the potential successor’s intrinsic motivation to accept the firm’s leadership position is enhanced by a sense of autonomy and competence – psychological factors that develop over time and with support from the existing organization (Gagne, Marwick, Pontet, & Wrosch, 2019). The consultant can explain these motivations to the family and guide their strengthening of the procedures leading to the development and selection of future leaders and acceptance by other stakeholders.

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Though 40% of the current North American family business leaders plan on retiring at age 70, 50% have no specific retirement plan. When he or she does have such a plan, the successor is likely to be happier with the succession process (STEP, 2019).

Stages of Family Business Succession Tensions are usually visible among family business members during the transitions through any one of the three major stages of family business leadership transfer: (a) Entrepreneurial stage, Generation 1, when the founders focus on creating the business and figuring out what works for the new firm while the family tends to be in the background. (b) Early generations and smaller families, Generation 2, when the firm focuses on preserving the wealth, and there may be conflict over ownership and leadership, and some members are striving for their own autonomy. (c) Later generations and larger families, when many have inherited ownership shares and decisions need to be reached about whether to continue the same “legacy” business, diversify or sell the business, and go into new financial ventures. Throughout the enterprise’s existence, wealth disparity between (2020) siblings periodically may need to be handled proactively. Sometimes there are valid reasons for it, including differences in length of time of service in the firm, level of responsibility, and salary attached to a specific position. If this issue is not handled when it arises, damage to the relationship system and heightened dissension regarding feelings of unfairness, entitlement, and who is included or excluded may smolder. These are issues the current CEO and all future CEOs should be cognizant of and willing to deal with, as necessary (Family Business Consulting Blog, 2020). When appropriate consultant(s) “should” encourage developing avenues for wealth preservation that may include estate planning, wise investments, and adequate insurance (in addition to many other financial planning strategies alluded to throughout this book). The family also needs to deal with the diversity of individuals in the firm, including those who were not born into the family (Gersick, Davis, Hampton, & Lansberg 1997) (see Chap. 5). Understanding their own family, who is defined as comprising the ownership, and the firm’s life stage transitions enables the family to think systemically, rather than locating problems as coming from within any individual. Let’s look at the next case below. Though this family business had grown significantly under the father’s leadership and family member connectedness was strong while mother was still alive (Jimenez, 2009), succession had not been faced, and over time the family bonds had weakened.

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Case #5 The consultant (LF) was called by a second generation family business that had suddenly faced the major issue of needing to choose a successor CEO quickly. The father, Generation 1, had founded and built this successful firm over a 35-year period. No longer in the start-up phase, the firm was now in its growth stage, yet Generation 1 had not implemented governance structures or processes that would would have enabled them to manage the disruption caused by the father’s death 2 years earlier. There had been no succession planning nor had a successor been designated (Dibrell, Craig & Hansen, 2011). By default, Mom had become the family business leader upon his death. She died 2 months prior to the youngest son calling in the consultant. There were six children. The eldest son had chosen years earlier not to work for the family firm, where the remaining three brothers and two sisters worked (Kammerlander & Leitner, 2018; Schenkel, Sehyun, & Kim, 2016). There was such acrimony between the two older brothers who worked in the business that they were no longer speaking to one another (Gordon & Nicholson, 2008). Each wanted to be the boss and declared the CEO. The two sisters worked in administration – one as head of HR and administration and the other as comptroller. The family was committed to providing an ongoing position to the youngest brother who had learning difficulties. [It is interesting that it was he who thought of hiring a consultant and did the homework to find someone highly recommended by business executives and professionals.] The presenting problem was to guide the family to designate a single firm leader. Initially, the consultant had to get support from the warring factions to accept a moratorium while the issues were examined and an assessment conducted. This consultant typically has one-to-one interviews with each family member as part of the assessment phase and then chooses the assessment instruments that yield the desired information. This was done in this case. From the interviews, it became clear that their father had ruled with an iron hand, which the other siblings thought was the reason that the eldest son chose not to remain in the business. The two older brothers each had an area of the business for which they were responsible, yet did not have a global picture of the company or its future direction. Additionally, Mom had given the sons money secretly whenever they asked for it, not an uncommon practice, yet neither daughter ever received money furtively. The parents assumed their daughters’ husbands would take care of them. The eldest daughter actually had the broadest and deepest perspective about the firm. This phenomenon reflects that despite the fact that there was a family member knowledgeable about the company, the culture was one that favored leaders only from the male family members to hold executive positions, and it was assumed that one of the sons would be appointed CEO (Nelson & Constantinidis, 2017). Prior to the interviews, the consultant determined what information was needed, such as what does the family perceive as its purpose and values, and were these the

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same as those of the firm (PWC US Family Business Survey, 2019); what type of communication existed (open and active listening); are some members “heard” more than others; who has influence with other family members, staff, and the outside community; how have conflicts been managed; had anyone been “pruned from the family tree” (Poza, 1997); and, did the members come together for shared traditions and activities, and if so, who brought them together? Are there ways to manage the tensions and use them productively? Many businesses have transmitted their values through the use of a “rhetorical history” – by reinterpreting the firm’s history to motivate and promote the adoption of current actions both in and outside the organizations. How can reinterpretation of history and patterns be helpful to business families? Suddaby and Jaskiewicz (2020) assert that traditions are the foundational element of successful family business and by reinterpreting the traditions to be flexible enough to allow for current situations and the changing needs of next generations, the successful intergenerational transfer of traditions can occur. Take the example of Case #3 in Chap. 7. If there had been a purposeful desire to transmit the knowledge and values to the next generation, the father, likely with the mother’s assistance, could have described his challenges, learning, and values to their children during their childhood. If he had chosen to work closely with his children as they grew into adults, communicating openly and discussing their business ideas with them, the divisiveness among his sons may have been reduced and their collaboration strengthened, enabling individuals, the family, and the business to thrive. What were his motivations and elements of personal history that could be drawn upon to facilitate a more harmonious leadership transfer? What traditions did this family follow? The consultant suggested modifications in the after- dinner session that might include the open discussion of new ideas for the business and establishing quarterly or semiannual family meetings to discuss the business? Yet, given that neither parent had already developed a transgenerational succession process, the consultant talked with all the family members currently working or wanting to work in the business in order to promote individual, family, and business thriving. Building on family science and family systems theory, she systematically focused on positively impacting the decisions and actions of the family enterprise leaders. After clarifying the family’s definition of success – their long-term goals and vision  – the consultant sought more family and individual information. The consultant chose assessment instruments that would indicate the values, strengths, stressors and potential derailers, motivations, communication style, leadership skills, thinking styles, and interpersonal competencies for individuals and the family (see Chap. 3). After choosing the instruments, with the awareness that some tests have not been standardized on family businesses, she carefully used the assessment results to pose questions to individual family members as to whether they perceived the resulting data as accurately reflecting their self-perceptions and consistent with their observations of their family members. Analyzing the alignment of the information enabled the consultant to clarify issues that could impact the business. Additionally, the consultant used family assessment instruments with the

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family together. By using assessment data in this manner, the consultant can guide individuals and the family to focus on their values, mission, communication, strategies, or other family business issues, rather than focusing on personality or historical hurts and grudges. Though there had been a tumultuous beginning, with the help of the youngest sister, the chief emotional officer who brought the family together to celebrate holidays and traditions, the consultant guided the family to collaboratively choose their new CEO. The older sister became the head of the family business; then together they all started having regular family meetings, established a family council, and gradually built an independent board of directors.

Distinctive Definition Succession is often considered a landmark process in a family enterprise as it is necessary for the perpetuation of the business. Yet what does succession mean to the specific family one is consulting to? Is survival of the founders’ business the goal (Josefy, Harrison, Sirmon, & Carnes, 2017)? Does it only apply if the same concept of a “legacy” business is transferred only within the family? Does it apply if the family continues to own the firm and nonfamily professionals manage the business? Does it mean that if the family chooses to sell the business and go into another one that the transfer from one type of business to another can be considered a succession? If the family decides to branch out the business, will the branches be considered part of this business? This redefining is crucial as it clarifies how the family collectively and its members separately view such a change – as a failure or as an evolution. Only 30% of family firms survive to the second generation, and then 70% fail. The numbers depend upon the definition of succession. There is not only one definition of family business succession, and individuals or different generations may disagree. Consultants can guide the family to discuss these differences among themselves during family meetings or retreats (see Chap. 7). By inquiring about the meaning of succession to the specific family they are working with, consultants are then in a position to recommend not only corporate governance practices but also the importance of family governance practices, including having an active family council to enable the family to meet its needs and achieve its goals (Family Business Magazine Video Webinar, 10/30/20) (see Chap. 5).

Best Practices The latest research and current well-regarded thought leaders recommend the focus needs to be at least originally on the family itself, more than the specific activity of the firm or of an individual entrepreneur (Family Firm Institute, 2014). Emphasis on the family’s values and the transmission of these values are considered to be among

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the “best practices” of successful multigenerational family enterprises. Integrity and commitment to the firm have been found to be important attributes for a successor to have (Sharma & Rao, 2000) combined with the person’s perception that he/she has the support and trust of the current leadership team. By consciously sharing family values and history and carefully identifying and developing talent of family members, leaders serve in the very significant role of being stewards to their future generations (Le Breton-Miller & Miller, 2015; Founder Institute 2020). The idea of continuity has been called “entrepreneurial legacy” whereby younger generations develop a deep sense of involvement in the family firm by interacting repeatedly and being “imprinted” with stories of the family business history by senior family members (Barbera, Stamm, & DeWitt, 2018; Kammerlander, Dessì, Bird, Floris, & Murru, 2015). This family business storytelling activity serves two functions: (a) it reinforces the values and culture of the family and (b) identifies the resilience the family and the firm exhibited during hard times to young family members. Storytelling about the family and the business transmits the value system that unites members and provides a moral compass in face of challenges. Thought leaders periodically expand the definition of the family business; for example, Davis (2013) Jaffe (2020) use the term “family enterprise” to include succession in a broad way – as more than just succession of the business, but also as an expression of the intention, identity, and legacy of the families that own and operate the business. This family commitment and continuity toward a shared future are based upon transmitting the family’s historical values. Hopefully, the next generation will appreciate how fortunate they are. There are additional qualities and personality traits, aspects of leadership style and specific skills, that we believe bode well for a person’s success in the role of a CEO of a family enterprise and recommend these be included, as appropriate, in the profile of attributes to be considered when you are consulting on the selection of a CEO. No one can have all of them. It is of course important to tailor or match these qualities to tasks that may be essential for the CEO of one kind of firm and not necessary for the person in the highest position in another kind of company. 1. Good public speaking skills for occasions like addressing others in the same or related industries. 2. Tact and diplomacy in dealing with both family and nonfamily members of the firm. Good interpersonal skills. 3. Good social, communication, and public relations skills – especially if the person is to be involved in meeting with members of charitable organizations the company may be contributing to or making speeches to potential (or already involved) consumer or supplier or distribution groups. 4. Knowing how to dress appropriately for various negotiations or activities he or she may participate in when representing the firm and also to serve as an example to other members of the business on how important this can be. This point was emphasized at the recent Academy of Management Annual Conference (2020) presentation. Manseur Javidan of the Thunderbird School of Global Management reported in his presentation that in Latin America, the

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Middle East, as well as Eastern and Southern Europe, first impressions gleaned from appearance and style are a most important variable. 5. Empathy, compassion and kindness. 6. The ability to provide feedback in a manner that will improve performances. “The Max Planck Institute for Human Development investigated how different types of feedback influence future conduct” and found “the best impact on teamwork occurred when participants were given feedback reflecting the performance of the group as a whole” rather than information about a specific individual’s personal performance in comparison to other participants (Max Planck Research, 2020, 01). 7. Willingness to delegate responsibility, whenever appropriate. 8. Ability to listen to colleagues and employees and synthesize good ideas into his or her modus operandi. 9. Assertiveness – this is one of the sixteen skills measured by the EQ – i2.0 that has been found to be important. Assertiveness skills training and help in reducing resistance to being assertive may become part of the consultant’s task. 10. Be knowledgeable about chaos theory, and be able to handle unpredictable disruptions in the firm, the economy, and the larger world scene. 11. Be a good role model for everyone in the firm and inspire them to do the best job of which they are capable. This too is part of stewardship. 12. The valuing of and ability to generate family trust as well as an atmosphere that fosters transparency and open communication. 13. Skill in resolving intrafamilial relationship conflict and recognizing when to ask a family business consultant to intervene and help resolve these conflicts. 14. Good impulse control. 15. Clearsighted. Does not engage in self-deception to see what he or she wants to see (Ricks, 2017). 16. Capable of multitasking and prioritizing. 17. Seek and value cross-generational engagement and input and sustaining the “family identity” and transmitting the “family narrative”. 18. Resilience and perseverance (Luck, 2020) – particularly in times of social and economic crises – such as the 2020 COVID-19 pandemic and being willing to reiterate to firm members the knowledge that family enterprises weather these crises better than other kinds of businesses and perhaps draw examples from their own firms’ history and ability to survive. 19. Capable of “leading through pain, pandemic, protests and personal loss” (Ruiz, 2020, blog), including managing the risks and stressors, particularly in difficult times. There is some difference of opinion in the field about the importance of the CEO (and other top management personnel) having a high IQ in addition to the other qualities/assets alluded to above. In an article about what determines whether a new entrepreneur will succeed or fail entitled “Underrated Traits that Boost Your Entrepreneurial IQ,” emanating from the Australian Institute of Business (2018) (11/30/18), it is posited that many variables go into the mix, but when it comes to

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innate characteristics, researchers are trying to narrow down the list of qualities that are helpful. They state that although one might assume that IQ is a major predictor of success, research from The Founders Institute (founded in Palo Alto, California in 2008; Wikipedia, The Founders Institute, 8/26/20) suggests that “IQ is…. poorly correlated with entrepreneurial success.” This institute was established to train would-be founders of new organizations and takes candidates into training who meet their entrance requirements. After the institute spent a decade trying to develop a test to determine if someone would become a successful entrepreneur, they decided to go in a different direction to make this assessment. Instead, they developed a list of four traits which they found consistently pointed to potential success of would-be business founders. They posited that when these traits are found in combination in a person, they are more determinative of success than specific skill sets, relationships or intellect. They amplify the four traits: 1. Ample Professional Experience There is a prevailing narrative that the most successful startup founders are young (and usually male). They cite Mark Zuckerberg and Steve Jobs as examples. Such individuals drop out of college to start their own businesses and are well on their way to becoming multimillionaires before they have reached their 25th birthday. Nonetheless, the average age of successful founders is older. Most entrepreneurs who grew their company to the point of being ready to hire an employee average 41.9 years, and those who created a high growth company have an average age of 45 years. Founders in their early 20s had the lowest chance of success. In entrepreneurship, having some real-life experience is a valuable asset. 2. High Fluid Intelligence This is the ability to generate, transform, and manipulate new information in real time. People with this trait are good at recognizing patterns, abstract thinking, and adapting to new situations and opportunities quickly. This makes them excellent problem solvers and entrepreneurs. When developing a new business idea, the “ability to manipulate” new information is a valuable asset. The context can change quickly between developing one’s original idea and bringing it to market and then being able to adapt to such changes is urgent. Fluid intelligence enables people to learn new skills easily, a handy ability for anyone forging their own pathway. At the startup stage, entrepreneurs often find themselves taking on every role at once, from idea generation to marketing, human resources, to finances, so being a jack-of-all-­ trades is very useful. 3. Open-Minded and Optimistic People who welcome new ideas and are open to change have a trait know as high openness. For entrepreneurs, willingness to think outside the paradigm and “embrace new things” is a key to success. Sometimes one’s initial business idea just won’t work in its original form, but an offshoot of that idea may turn out to be significant.

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Being open to other ideas may enable one to move forward. Implicit in high openness is a level of optimistic thinking. Successful entrepreneurs maintain optimism that there are solutions to long-standing problems. If one believes that a problem can be solved, they will be more motivated to solve it, which is central to the entrepreneurship mindset. 4. Moderate Agreeableness Founders who do well long-term are those who are trustworthy and can form and sustain relationships while also being comfortable being firm when need be. Approaching people in “good faith” helps rather than hinders. The ability to collaborate and network adds value and skills to one’s fledgling business that can help it grow. And if one needs to call in a favor, being liked helps! Despite accentuating the positives, The Founders Institute also addressed behaviors that interfere with one’s success, such as excuse-making, aggressiveness, deceitfulness, emotional instability, and narcissism. We concur that these four traits constitute important components of a (fledgling) entrepreneur’s personality pattern as well as that the behaviors they mention that are likely to interfere with one’s success are valid. In addition, we believe they should be taken into consideration by any committee engaged in selecting a CEO at any time in the history of a company. However, we do not think the profile they present invalidates the importance of a CEO having at least an above average IQ in addition to a high entrepreneurial IQ to be able to master and juggle all of the elements and aspects of his/her multifaceted job and position responsibilities. Continuity of the family enterprise needs deliberate and ongoing efforts within the family and the business. To create a lasting and profitable family business legacy (in the United States), four steps have been suggested as necessary: (a) Codify and measure values and purpose. (b) Ensure the next generations’ involvement. (c) Raise the digital IQ of the business. (d) Professionalize the board (PWC, 2019). Araoz (2015) conveyed that multigenerational success of family firms can only be achieved when the families follow four rules: 1. 2. 3. 4.

Maintain good governance. Identify and develop both family and non-family talent. Pursue disciplined succession. Preserve “family gravity” (defined as a value system that unites and provides a moral compass in the face of challenges throughout the reigns of various successors).

These enterprises need a clear vision, continued family involvement. and defined responsibilities for each person in order to be able to engage in healthy exchanges of ideas, maintain good family governance to manage conflict and make wise

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decisions, and have a commitment to identify and develop superior talent and clearly define and develop leadership principles and roles for all executives. In bringing this chapter to a close, we reiterate the importance of each firm developing and implementing in a timely fashion a well-thought-out succession planning process, which articulates the skills, talents, and kind of personality they believe the CEO (leader) of their family enterprise should have.

References Academy of Management Annual Conference. (2020). Presentation. Australian Institute of Business. (2018, November 13). Four underrated traits that boost your entrepreneurial IQ. Retrieved from www.aib.edu.au.blog.entreprenurship/4-­underrated-­ traits-­that-­boost-­your-­entrepreneurial-­IQ/ Barbera, F., Stamm, I., & DeWitt, R.-L. (2018). The development of an entrepreneurial legacy: exploring the role of anticipated futures in transgenerational entrepreneurship. Family Business Review, 31(3), 352–378. https://doi.org/10.1177/0894486518780795. Bower, J. L. (2007). Solve the succession crisis by growing inside-out leaders. Harvard Business Review. https://hbr.org/2007/11/solve-the-succession-crisis-by-growing-inside-outside-leaders Calabro, A., & Valentino, A. (2019a). STEP global family business survey, the impact of changing demographics on family business succession planning and governance. ­file:///Users/lillifriedland/Downloads/STEP2019_GlobalFamBizSurvey-REPORT%20(2).pdf Calabro, A., & Valentino, A. (2019b). Global STEP Project Benchmarking Report. STEPresearch. org, Retrieved December, 20, 2019, from https://cdm16793.contentdm.oclc.org/digital/ collection/stepsumrep/id/31/rec/1 Charan, R., Drotter, S., & Noel, J. (2011). Leadership pipeline: How to build the leadership powered company (2nd ed.). Jossey-Bass. Conger, J. A., & Fulmer, R. M. (2003). Developing your leadership pipeline, Harvard Business Review. Retrieved May 25, 2005, from https://hbr.org/2003/12/developing-­your-­leadershippipeline Craig, J. B., & Moores, K. (2017). Leading a family business. Praeger. Dibrell, C., Craig, J., & Hansen, E. (2011). Natural environment, market orientation, and firm innovativeness: An organizational life cycle perspective. Journal of Small Business Management, 49(3), 467–489. https://doi.org/10.1111/j.1540-­627X.2011.00333.x. Family Business Magazine Video Webinar. (2020, October 20). The essentials of family governance: What every family business owner should know. Family Firm Institute. (2014). Family enterprise: Understanding families in business and families in wealth. Wiley. https://doi.org/10.1002/9781118731291.ch1 Feedback DR. (2020, January). Max Planck Research Science Magazine. mpg.de. Gagne, M., Marwick, C., Pontet, S., & Wrosch, C. (2019). Family business succession: What’s motivation got to do with it? Family Business Review, 32(1), 1–14. https://doi. org/10.1177/0894486519894759. Gersick, K. E., Davis, J. A., Hampton, M. M., & Lansberg, I. (1997). Generation to generation. Boston: Harvard Business School Press. Glikin, L. (2020). Generational transfer models. Family Firm Institute Practitioner. Retrieved April, 15, 2020, from https://ffipractitioner.org/7696-­2/ Gordon, G., & Nicholson, N. (2008). Family wars. London: Kogan Page. Jaffe, D. (2020). Borrowed from your grandchildren: The evolution of 100-year family enterprises. Hoboken, NJ: Wiley. Jimenez, R. M. (2009). Research on women in family firms: Current status and future directions. Family Business Review, 22(1), 53–64. https://doi.org/10.1177/0894486508328813.

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Wang, C. (2010). Daughter exclusion in family business succession: A review of the literature. Journal of Family and Economic Issues, 31(4), 475–484. https://doi.org/10.1007/ s10834-­010-­9230-­3. Wealth Disparity. (2020, November 20). Continuing Family Business Consulting Blog. Yan, J., & Sorenson, R. (2006). The effect of confucian values on succession in family business. Family Business Review, 19(3), 235–250. https://doi.org/10.1111/j.1741-­6248.2006.00072.x. Zhang, L. (2020). An institutional approach to gender diversity and firm performance. Organization Science, 31(2), 439–457. https://www.hbs.edu/faculty/Publication%20Files/ An%20Institutional%20Approach%20to%20Gender%20Diversity%20and%20Firm%20 Performance_4c0479f3-­9d13-­4af8-­82da-­7f1713af940d.pdf.

Chapter 9

The Dynamic Interactive Multifactorial Family Enterprise Ecosystem Model

Abstract  This chapter describes a new model which portrays the multiple changing factors, environments, and systems that influence the family enterprise. The constantly evolving domains impacting the family enterprise that are described are the individual, family, family owners, family enterprise, social-cultural and political factors, community factors, economic and financial factors, and institutional factors. Each individual has distinct experiences and psychosocial perceptions of these events and interactions that influence their decisions and actions within the family and the firm. This model was developed to promote a deeper knowledge of and understanding about these decisions and the intertwined factors that influence the actions of family enterprises.

A New Dynamic Eight-Factor Ecosystem Model The Dynamic Interactive Multifactorial Model of the Family Enterprise Ecosystem evolved from a historical stream of theory and research. Previous research acknowledged the domains of the family and the business and their reciprocal influence. However, many family business characteristics could not be explained. Tagiuri and Davis (1996) altered the perspective of the field with their foundational article, the three-circle model, in which they recognized and differentiated the ownership family members – those who worked in the business from those who did not  – and the business. Similar to the manner in which Kahneman and Twersky introduced behavioral economics recognizing the significance of the psychological aspects of human behavior in decision-making, the three-circle model recognized the uniquely familial factors in family business, such as the existence of multiple simultaneous roles, shared identity, lifelong common history, strong emotions, private language among relatives, mutual awareness and privacy, and the meaning of the business to the family.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_9

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One of the original designers of the three-circle model, John Davis, who with Gersick, McCollom, and Lansberg extended the model to include the perspective that each subsystem undergoes developmentally predictable stages (Gersick, Davis, Hampton, & Lansberg, 1997). This expanded model describes the different purposes and characteristics of the family and the firm’s leadership as they mature and go through generational stages. Transitions between the developmental stages are critical, as these are frequently times of uncertainty as well as opportunities for growth. Developmental stages can be anticipated as they follow a proscribed order, and prudent planning can help manage the ambiguity that is triggered during the transitions. However, there are changes that are not always predictable, and some are unanticipated and triggered by events, such as a health crisis, or time requirements, such as mandatory retirement (Gersick, Lansberg, Desjardins, & Dunn, 1999).

Expansion of the Field When results of broader research and theories are brought into the family business field, perspectives also expand; for example, Noam Wasserman (2008) reported when a business is 3 years old, 50% of the founder CEOs no longer are in their positions, by year 4 only 40% maintain their CEO positions, and four out of five of the founders were forced to step down from their CEO posts. When this general business data is compared to that accrued in family business research, it is amazing how long many family firm founders continue in their positions and often are the ones who decide when they will relinquish their position. Psychosocial influences on family firms’ actions were introduced as a salient issue by early family business theorists such as Levinson (1971), who wrote about unresolved conflicts and rivalries in the family business; Gersick et  al. (1997) explaining generational lifecycle; and Kets de Vries (1993) describing the “leadership shadow,” the dark side of entrepreneurship, and possible advantages of family business over nonfamily businesses such as long-term orientation, shared culture, resilience, common knowledge, and flexibility, as well as potential disadvantages, such as nepotism and paternalism (see Chapter 3). Family business research grew to include unique characteristics and priorities of families such as noneconomic wealth in the form of socioemotional wealth (SEW); intentional pursuit of noneconomic goals such as reputation and transgenerational succession of the firm (Gomez-Mejia, Cruz, Berrone, & De Castro, 2011); community socioemotional wealth, nonfinancial goals such as commitment to the local community (Kurland & McCaffrey, 2020); and “familiness” or “family influence,” “unique bundle of resources” of a specific firm that explains their competitive advantage (Habbershon & Williams, 1999). As the field expanded, its foci on the factors and processes that develop unique family business characteristics became more apparent. The definition of “family capital”  – used to describe the unique characteristics of family relationships that

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influence the business (Hoffman, Hoelscher, & Sorenson, 2006) – was broadened to include human, social, and financial capital. Psychosocial outcomes important to the family were measured at the individual (e.g., job performance, commitment, job satisfaction, family satisfaction), interpersonal (e.g., support, relationship quality), and organizational (e.g., organizational culture and climate, business unit profit) levels that contribute to organizational effectiveness and sustainability (Danes, Stafford, Haynes, & Amarapurkar, 2009; Pieper & Klein, 2007; Zellweger & Nason, 2008). By studying intentional influences on the next generation, researchers discerned the vital processes, such as the continuing commitment to the family and the enterprise that are required to sustain the family business. When reviewing research about multigenerational continuity, the question is raised whether defining themselves as a family business rather than a business family would determine whether their vision would rest on continuing the “legacy” business or whether to diversify (Munoz-Bullon, Sanchez-Bueno, & Suarez-Gonzalez, 2018; Combs, Shanine, Burrows, Allen, & Pounds 2020). We conclude that a necessary key construct of the family enterprise ecosystem model is the premise that to understanding a specific family business it is the family’s self-definition that is critical: The family defines its own vision and commitment to continuity and financial value. The family decides whether success is to be defined by continuity of the “legacy” or “heritage” business, by investments in diversified or related businesses, or by investing together as a family enterprise. Definitions cannot be superimposed upon any specific family business from the outside as the results would be invalid. Success always needs to be evaluated in terms of the specific family’s goals and vision.

Family Enterprise Ecosystem Model (FEEM) The basis of the family enterprise ecosystem model, FEEM, conceptualizes the family enterprise as a dynamic ecosystem in which the family, its members, and their business continually interact and evolve throughout their lifespans, across generations, impacted by their past in multiple changing environments, contexts, reciprocal interactions. The distinct psychological perceptions of each family member about themselves and relationships (within and between family members), the business, other stakeholders, and the larger society are shaped by these dynamic interactive factors. The family enterprise ecosystem model uses general systems theory and an ecological model to focus on the evolving factors, their synchronous influences on one another, and the multiple interacting environments. Each component of the family enterprise has different, sometimes competing, priorities. Assessment is complicated as many of the processes are unseen and their influence is cumulative, evolving over time. To understand the dynamics of family enterprises, FEEM holds that consideration of the dynamics and interactions of each dynamic factor is necessary.

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Fig. 9.1  The multifactorial dynamic interactive family enterprise ecosystem model

Intersection of the Multiple Factors (Fig. 9.1) 1. 2. 3. 4. 5. 6. 7. 8.

Individual Family Members Family Family Owners Family Business Enterprise Community Factors Sociocultural, Religious, and Political Factors Economic Factors Institutional Factors

To exemplify the usefulness of the family enterprise ecosystem model, we will apply it to Case #5 which was discussed in Chapter 8. In this case this consultant (LF) was brought in to facilitate CEO succession by the five siblings (i.e., owner managers) who worked in the firm, shortly after their mother’s death, which occurred 2 years after the death of their father, the founder CEO. There were six owner ­siblings – four sons and two daughters. The eldest son, Max, 52 years, though he owned a share, did not work in the business and had started his own firm. The other siblings – Carl, 48 years; Josh, 46; Charlotte, 44 years; Paul, 40 years; and Sarah, 37 years – were executives in the business.

1.  Individual Family Members Early family business studies focused primarily on single characteristics such as the CEO’s age and generation or generational differences showing varying strengths of commitment to the organization (Sharma & Irving, 2005). Some of these studies

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indicated influences between family and business, yet they focused on one-time measured characteristics. Understanding of the individual family members deepened when psychologists such as Levinson (1971) noted the intense emotional identification founders had with their firms and the likelihood the founders’ strong persistence in creating the firm contributed to their characteristic holding on to the reins of their CEO position and their often reluctance (may be perceived as stubbornness) to transfer leadership or even plan for succession. FEEM is significantly influenced by the Bronfenbrenner and Miller’s (2006) bioecological model as a framework to study the dynamic interactive family enterprise. Brofenbrenner developed his model to study the functional interdependence of individuals and their environment similar to the way we hope to show that FEEM can enable the functional interdependence of individuals, families, and firms. The ecological environment of the FEEM is conceptualized as factors, nested at least partially within one another and mutually interacting and continually evolving, such as within the social-cultural and political environment. The individual develops while embedded and interacting with their family and social networks. In addition to typical developmental life stages, the personal social and historical cumulative experiences and cultural context are distinctive for each individual, each of whom is influenced by their family members and vice versa. To understand an individual, it is essential to learn about their perceptions and interpretations of these experiences. A person’s identity, motivations, understanding of self and others, competencies and strengths, interests, conflict, and leadership styles are shaped over time through interactions with others in various contexts and environments. These characteristics contribute to the individual’s attitudes, behaviors, and decisions in the family firm. The individual’s conduct, values, role expectations (realistic and not), responsibilities (in the family and in the firm), and relationship styles develop as they mature.

Case #5 Application (Continued) Information garnered from individual interviews with the adult children in Case #5 reflected their unanimous view that their father made decisions in an authoritarian and arbitrary manner, and he would not listen to different points of view – similar to founder CEOs in general (Bingham, Hendricks, & Howell, 2020). They brought up the example that though he had built the firm to over $300 million, because he wanted to retain control, their father had turned down offers to expand the company as it would require him to reduce his equity (Wasserman, 2012). Their mother held the role of bringing together the family for dinners and the holidays yet clearly was unable to develop collaborative decision-making or play among the children. Growing up in the household that “talked shop” contributed to his entrepreneurial mindset (Soleimanof, Rutherford, & Webb, 2018). The eldest son, Max, chose not to join the family business and founded his own firm when he was in his early

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20s. All his life, Max had felt criticized and judged by his father (“I could never meet his expectations”) and was determined to make his own way. He and his family moved out of state, away from his family, so he could establish their own separate identity. Max did not experience his mother’s full attention and attachment during his formative years as she had a miscarriage when she was 8 1/2 months pregnant and Max was 2 years old. She had become very depressed. Young Max learned to do things by himself. As he grew up, Max did not see himself as a leader among his siblings, and he felt himself an “outsider” from the group of younger siblings.

2. 

Family

The family is the earliest and primary group in which the members develop and learn the values, norms, and acceptable behavior. Its culture, common family history, parenting practices, sibling rivalries, alliances, communication and conflict management styles, commitment to family continuity, and resilience shape the individual’s and family’s values, attitudes, priorities, and behaviors. This system influences how family members view and meet challenges, interact with others, understand themselves and others as a consequence of these interactions, and respond to stressors which in turn are reflected in the actions and decisions in the family and the business. Certain factors positively influence next generation members toward commitment and engagement in the family business, such as intergenerational storytelling about the family’s and the firm’s history, practicing family rituals and traditions (Pieper, Williams, Manley & Matthews, 2019), discussion of business, and promoting a work ethic from the time the children are young. Such practices encourage the individual’s developing an entrepreneurship orientation, though not always to participate in the family business. Some adult children are concerned that working with their parent as the boss can be difficult and inhibit their emotional expression, yet others choose to work in the family’s firm. [This is an example of psychological perceptions influencing business decisions.] Parents and caretakers exercise the primary influence on their children when they are very young, and their impact changes over time. Parenting styles vary with the age, gender, perceived abilities, and contexts and may differ with each child. Reciprocally the developing child influences the parents’ behaviors and attitudes (Bronfenbrenner, 2005). Siblings, marital dyads, and intergenerational experiences influence the development of the family member’s identity, attitudes, and actions. Siblings develop their sense of self in relation to others (comparison and ability to accept differences). In sibling relationships, a person can learn to collaborate, cooperate, negotiate, and manage competitive feelings. These skills are desirable both within the family and the business, as when there are harmonious sibling relationships, the firm functions better, and there is greater firm growth (Farrington, Venter, & Boshoff, 2010) (see Chapter 7).

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Actions, motivations, and decisions can only be understood through the lens of the individual’s multiple interactions and their perceptions of these experiences. To discern the impacts of family dynamics, societal, institutional, and enterprise factors require consideration of multiple factors mutually interacting and assessed over time and context (Habbershon, Williams, & MacMillan, 2003; Kaslow, 2006).

Case #5 Application (Continued) Understanding of their mother’s long-term depression and concomitant emotional withdrawal and the siblings’ psychological reactions and perceptions of their father’s total commitment to work and his authoritarian parenting style contribute to realizing why they felt they could not bring up the need for a succession plan to their parents. Their mother coped with her depression and guilt for “not being there as much as she should” with the boys by giving them money on the side whenever they asked for it, thus giving them mixed messages about getting paid for “merit.” Max did not ask for additional money from her, although his brothers did, even to buy big purchases such as cars and their homes. His brothers were emotionally and financially dependent on their parents and thus felt they could not work elsewhere. The family dynamics likely affected the sons’ feelings, e.g., the three younger sons’ lack of self-efficacy (Garcia, Sharma, De Massis, Wright, & Scholes, 2018) and self-esteem. Family factors influence the professional and personal choices of family members (Wielsma & Brunninge, 2019) and are reflected in the choices all of the sons made. Assessments of the members showed strong, yet stressful family relationships. The results indicated the individuals demonstrated differing leadership styles and strengths and together they would need to develop a trusting environment that would promote respect and discussion of different points of view and agreement. [Follow-up measures 2 years later showed more balanced and mutually supportive actions both in the family and in the firm.] Each family member has evolving expectations, perceptions of themselves and others, various contexts, and prior emotional history that influence their motivations, roles, and relationships, and these in turn impact their decisions and involvement with the business.

3. 

Family Owners

Family owners have the responsibility of maintaining and growing the business. Their business decisions and actions are influenced by characteristics such as family’s traditions, values, culture, governance and structures, generation of ownership, number of family owners, interface with nonfamily owners (if any), education, and communication sharing and conflict management practices.

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Family business research expanded to study the family’s influence on individual members toward developing organization-desired characteristics such entrepreneurial orientation and leadership. Sustaining the family’s ownership depends upon the intergenerational continued commitment to their family’s values and the enterprise. In addition to emotional bonds to the business, the ability to sustain and grow the business requires knowledge of the business and the ability to take risks – to develop an entrepreneurial orientation in next generations. Transgenerational entrepreneurship – the processes used to develop entrepreneurial mindsets across generations  – is nurtured through discussing business and the risks associated and recounting the history of the firm (Zellweger, Nason, & Nordqvist, 2011). Commitment and continuity require ongoing family processes to nurture respect and loyalty to the family and developing a culture of entrepreneurship engagement (Kellermanns, Eddleston, Barnett, & Pearson, 2008) and entrepreneurial orientation. Relationships within the family significantly impact the member’s motivation on whether to participate in the family and the firm. By maintaining family traditions and recounting family history, family members are encouraged to identify with the family. Family members can possess an emotional attachment beyond the financial benefits of ownership called “emotional ownership” (Bjornberg & Nigel, 2012). Family members feel greater emotional attachment and commitment to the organization when they perceive and feel empowered by the family system enabling adaptability of roles and relationships due to changing situations (Lee, 2006).

Case #5 Application (Continued) The siblings who worked in the firm had a commitment to the business and therefore to one another, almost by default. Other than the eldest son, Max who had started his own business, none of the others, whose ages ranged from 37 to 48 years, had ever worked for another firm. The siblings that had children said they assumed their children would join the firm eventually. The family business seemed to be perceived and function as a “safety net” or as job security by and for the adult children. Because the family environment they had experienced in childhood had not permitted the discussion of various viewpoints, the consultant suggested an interactive project, recommending they work collaboratively writing a memorial service for their parents. Starting with this “positive” project (none dare bicker about honoring their parents), they began to cooperate with each other. They acknowledged that the sharing of stories about their parents made them feel closer. They decided to make a collage of their parents’ “sayings.” While working on this project, they included a part “what would mother have wanted from me and from us” and, in so doing, started forging bridges to discuss common family issues and goals for the business. They also chose to be involved with a nonprofit to which their mother had contributed for years. [This process laid the framework for promoting a stronger family identity and encouraged collective action (Uhlaner, Kellermanns, Eddleston, & Hoy, 2012).

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Together they slowly established regular family business meetings, appointed a head of human resources, and created a governance structure.] To attain continuity of the family enterprise requires recognition that family firms are concerned with both family and business economic and noneconomic outcomes. Stimulating the next generations’ involvement with the firm includes learning about the business, as well as family priorities. Effective entrepreneurship requires understanding the family’s resources – financial, knowledge base, and social wealth – as well as the nurturing members’ attachment and commitment to the family.

4.  Family Business Enterprise Family business founders create organizations with the purpose of creating enduring family legacies and financial value. Family businesses evaluate and make choices differently than nonfamily firms. The overlapping simultaneous roles held by family members influence their decisions and behaviors. The term “familiness” or family influence has been used to describe the unique grouping of resources and capabilities arising from the interactions of the family and the family firm (Habbershon et al., 2003). Among the distinctive features of a family firm is their culture that has been shaped by the founder and which continues to influence the members’ entrepreneurial activities through their values, traditions, communication, and conflict-­ management processes and goals, as well as their involvement and ownership in the firm. The business culture evolves from the founders’ beliefs and biases and the subsequent experiences of the group, becoming part of its informal and acceptable norms and underlying assumptions (Schein, 1995). The founder’s influence lessens with each succeeding generations of leaders and members, adapting to next generations’ leadership. Over time, family cultures adapt due to internal (such as intermarriage or divorce) and external (such as natural disasters or political prohibition of certain practices) factors that can impact their business decisions. Early in the twenty-first century, family business researchers recommended integrating psychological and family science (Jaskiewicz, Neubaum, De Massis, & Holt, 2020) to deepen the knowledge base of family business research. Psychosocial factors such as “emotional ownership” describing the social identity and attachment of the next generation (Bjornberg & Nigel, 2012) and “emotional climate” (factors promoting effective succession and characteristics of future leaders) were introduced into family business research (Bjornberg & Nigel, 2007).

Case #5 Application (Continued) This family’s culture promoted a strong work ethic: the children were brought to the business from an early age to perform age-appropriate tasks. Their father’s authoritarian, male-dominant parenting style demonstrated power dynamics, and the male

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siblings’ behaviors reflected his role modeling – they fought constantly to “be the boss.” When their mother passed, the culture no longer had a veneer of civility that they had tried to maintain in her presence: outside of work the family no longer gathered together. The lack of positive interactions among the siblings spilled over into the workplace, and some valued staff had started to leave. [The siblings needed to reengage in a constructive manner to sustain the business. The next step would be to develop a safe environment that promoted discussions with differing viewpoints and learn how to be collaborative, thus fostering a more cohesive culture (Edmondson, 2019; Olson, Waldvogel, & Schlieff, 2019).] The values and leadership styles of family leaders influence the culture, priorities, and behavioral norms of both the family and the business (Basco & Rodriguez, 2009; Björnberg & Nicholson, 2007; Schein, 1995). The founder’s imprint is the strongest in the first generation and less so over time and needs to be adapted or modified by succeeding generations to sustain the business. The challenge for family business is to enable the enterprise to evolve while instilling a commitment to its continuity in the family. With the precedent of their father’s unwillingness to take on equity partners or borrow significant amounts of money, the sibling owners faced a dilemma regarding a major decision facing them about growing the business. At the consultant’s recommendation, an industry expert was brought in to assess the company. The owners were told additional new equipment and adding new locations would build their capacity significantly. Such steps would require the agreement of the sibling owners, and though future earnings were anticipated to be significant, they would need to expect dramatically reduced dividends for the first few years. The firm’s long-­ term accountant and financial advisor, chosen years earlier by their father, established a basic training for them and their children. Educating owners about basic business concepts such as long-term reinvestment in the firm is essential to get their emotional and financial “buy in.” The siblings’ history of conflict needed to be bridged in order to discuss the future of the firm. Thus, to bring the family together to consider such an alternative, the consultant asked each to individually write their perceptions of the firm’s history (especially the stressors and resilience experienced) and their father’s future priorities for the firm. They were asked to include and prioritize their own desired goals. After combining their historical perspectives, thus reminding them of their common history, values, and vision, the siblings were guided to discuss their ideas. They eventually concurred to take the business to the next level. A positive family group identity had been ignited and an effective group communication process created. Consultants are frequently called upon to facilitate resolution of sibling conflicts and use strategies such as creating understanding of one another and of the fact that sibling rivalry and competitiveness are normal and common; facilitating recognizing each other’s needs and interests; identifying mutual needs; and finding new ways to resolve issues (Friedman, 1991). Managing conflicts and building a safe, respectful environment in which to discuss diverse views is a critical first step. Building a common vision based upon

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kinship and transmitting traditions and values to future owners requires building a structure and creating policies which are implemented over time (see Chapter 5). Bringing this family together to shape and share a future vision and create a family talent development program enables current leaders to shepherd the business to their children and create a positive commitment to the future (Garcia et al., 2018). Two siblings brought in two members of the third generation to work together to formulate a talent development process for the firm – identifying and nurturing the motivations, interests, and abilities of family members. By then utilizing this process, the new leadership demonstrated their commitment to future generations. When leaders demonstrate stewardship behavior with a common vision, they promote the development of leadership styles and behaviors that create a financially competitive advantage for their family firm (Fries, Kammerlander, & Leitterstorf, 2020).

5. 

Community Factors

The family’s or individual member’s support networks and interaction with their local communities, such as emotional commitment to the neighborhood or local institutions. Many family businesses are embedded in their communities, relying on their social networks to enhance their human capital, as well as to raise or extend financial credit if needed (Seaman, McQuaid, & Pearson, 2017). Sometimes called community social economic wealth, family business owners may prioritize such things as preservation of fertile farmland or maintaining vineyards for the local community, superseding firm or familial interests (Kurland & McCaffrey, 2020). Family firms benefit more than other businesses from local embeddedness, especially in rural areas, which are particularly dependent upon family businesses, likely due to the family firms’ long-term organizational vision and emphasis on preserving durable relationships with local stakeholders (Bau, Pittino, Sieger, & Eddleston, 2020). Longitudinal studies by the national family business panel describe seven distinct types of family business capital – natural, cultural, human, social, political, financial, and built  – each type of capital contributing to community economic development and forming resources useful to family firm survival in rural communities (Wilcox, 2016). Part of the community social wealth can be seen by the number of nonfamily stakeholders who are attracted to family businesses: Nonfamily executives are willing to work in family firms for lower pay, and then they would receive in other places of employment (Bau et al., 2020). Stakeholders behave differently with family firms – they act more honestly toward family vs. nonfamily managers, and this effect may be even stronger when the family manager is religious (von Bieberstein, Crede, Essl, & Hack, 2020).

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Case #5 Application (Continued) When creating the memorial to their parents, the adult children learned more about their mother’s involvement and commitment to a local church. She had become involved with the church by joining one of their bereavement groups when her parents had passed away. Their mother continued to support the church financially, and when the firm needed temporary or permanent employees, the business turned to the church as the source of their staff. When the family decided to continue their social and financial involvement with the church, they did so as a group, also encouraging their children’s participation – a transgenerational continuity of values. The active involvement of being engaged in a “larger purpose” – the church (beyond personal or firm goals) – had a positive emotional impact on the siblings and strengthened their newly developing collaborative capabilities. Family businesses have sometimes described their local communities as “extended families,” and their communities have a concomitant pride and identity with “their” local firms. This closely identified dynamic interaction is particularly evident in rural communities.

6.  Sociocultural, Religious, and Political Factors National, regional, religious, and larger societal values often proscribe “acceptable” practices for families and firms. For example, whether the society’s culture is individualistic vs. communal shapes practices such as succession, strength of family ties, and leadership styles. National culture influences family firms, for instance, by providing differential protections for minority shareholders against expropriations (Watkins-Fassler, Fernandez-Perez, & Rodriguez-Ariza, 2017). The tendency to focus primarily on the individual or the group is influenced by the society’s culture. Countries and regions that have a collectivistic culture focus on control and a dominant leadership figure, often resulting in leadership that is more paternalistic and shows autocratic and referent leadership styles. In individualistic culture, family businesses typically use participative and transformational leadership styles (Fries et al., 2020). Culture also influences the “way things are done” in the business environment, the typical norms and practices that are learned informally through observation or from advisors. Business associations or groups serve as informal learning networks.

Case # 5 Application (Continued) The influences of sociocultural norms permeated the business through the informal network of advisors that their father had gathered during the firm’s early years. The siblings continued using these advisors until the youngest son, Paul, joined a local

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business group and learned about the practices other businesses employ. Through his involvement in these groups, he learned about impending legislation that would significantly affect the family business, and he became motivated to meet with his legislators, inform them of his concerns, and contribute to the campaigns of those who supported a position favorable to the firm.

7. 

Economic Factors

There are economic/financial factors that are integral to the daily operations of the firm, as it must be profitable to survive. Firms need to produce, or have their accountant periodically produce, profit and loss statements and balance sheets so they keep abreast of their financial and tax status. The executive leadership team members should all have “wealth literacy” (Family Business Magazine, 2020), which concerns the impact of wealth on each member of the family and on the family relationship system. Their wealth literacy includes their knowledge of how they raise their children, who grow up in a successful, wealthy family business environment, to become knowledgeable about saving, spending, and investing wisely and ultimately perhaps to be able to take over leadership in the firm. They should be “capable of managing the assets they will be expected to manage” and to continue building the family’s wealth (digital.ffiorg., 2019). The financial/economic resources of the business impact on its standing in the community and its ability to be philanthropic – a practice imbedded in the transmission of core family values and the total family legacy. It also is integral in making decisions about expansion or contraction of the business and the nature of its investments Industry-specific factors, such as increased competition, can impact the family firm just as they can any business. So can changes in interest rates, natural and man-­ made disasters (such as the huge fires on the West Coast or hurricanes in the Atlantic, Gulf Coast, and the East Coast of the United States) or the worldwide COVID-19 pandemic which spread rapidly during 2020.

8. 

Institutional Factors

Institutional factors such as the laws, governmental policies, and regulation practices are frequently not considered as factors which influence individuals, families, and businesses, yet they do. The society’s laws and regulations control the formal rules and boundaries that govern businesses on such matters as bankruptcy, zoning, building requirements, tax laws, and administrative regulations. The legal system directly impacts families by defining who constitutes a family, rules about inheritance and gifts, and about marriage and divorce.

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By directly impacting the current and intergenerational transfer of family assets, family firms may become involved in lobbying, giving political contributions, or influencing their institutional environments. In some parts of the world, especially those with weak shareholder protection, family firms influence and benefit from their political connectedness. Some family firms engage in corporate socially responsible actions to enhance their reputations (Combs, Gentry, Lux, Jaskiewicz, & Crook, 2020) in the community and are viewed positively by politicians. There is a bidirectional impact and coevolution of both society’s institutions and family businesses (Soleimanof et al., 2018).

Case #5 Application (Continued) The father had built the firm after acquiring two patents for a process he had developed that required special zoning and factories to attain the necessary permits and licenses. Interfacing with governmental bureaucracies had been extremely frustrating and time-consuming, so the father turned to his son, Paul, to handle this. Paul developed contacts and alliances with staff in the bureaucracies and also became a financial supporter of some local officials. His involvement with local politicians and relationships with regulation agencies facilitated the expansion plans for business the siblings collaboratively had decided to make. [These relationships constitute social-emotional capital built in the community by and for the firm.] Divorce and inheritance laws affect the decisions of some family owners. The elder of the sisters, Charlotte, felt she had been “taken to the cleaners” by her former husband and chose not to marry the man with whom she was living, as she doubted the strength of prenuptials, even after she was given an explanation by her attorney that some states recognize cohabitation and these laws might apply to her.

The Multifactorial Dynamic Interactive Family Enterprise Ecosystem Model Many believe family business success is influenced more by family factors than business factors (Olson, Zuiker, Danes, & Stafford, 2003). Business survival and continuity are determined by family decisions, life events, and owner resiliency (Wilson, Wright, & Scholes, 2013). Ultimately, to survive and thrive and sustain the family business requires the commitment to the continuity of the family’s values and the enterprise by the next generation.

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Future In this model we offer the visual depiction of the dynamic multifactorial model of family enterprise ecosystems which can be extremely useful to those consulting to family enterprises. FEEM aims to provide a framework that permits the scientific study of the multiple, continually evolving dynamic interactive processes, contexts, and time perspectives that impact the family enterprise. These multifactor studies are challenging and complicated, yet critical to establishing validity of linkages in the family enterprise ecosystem. Utilizing this perspective will enable deeper understanding and identification of ways to curate practices that contribute to family enterprise continuity and organizational performance. We believe our family enterprise ecosystem model offers a roadmap to incorporate these dynamic, coevolutionary interactive factors and view them through an integrated lens for advancing study, informing broader discussions, and stimulating further theory development.

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Chapter 10

Whither Research

Abstract  In this chapter some of the major developments in research about family business enterprises are chronicled, and the importance of continuing research targeting areas about which more information is needed is stressed. Suggestions are offered as to what some of the directions might be for exploration in the near future.

The Importance of Research Although family business is the oldest and most prevalent type of business, it has only been in the last 40 years that research in this arena has become recognized and established as a distinct domain of study, separate from general business and management. Originally the research was aimed at differentiating family from nonfamily businesses (see Chap. 3). Then family business studies began identifying some of the complexities and intricacies of the owner family’s impact and degree of involvement on and with the business and the firm’s impact on the family (noted in Chap. 2). Until recently family business research focused on the individual, the family, and the firm from largely an economic perspective and measured in business/financial metrics (e.g., productivity, risk assessment, innovation) of the business. This research evaluated “success” of family firms using the continued survival of the business as the ultimate criterion. Subsequent studies indicated that many family businesses are not primarily financially motivated (Holt, Pearson, Carr, & Barnett, 2017). Sustainability (i.e., transgenerational transfer) of the original business may not be the chief goal for these families; instead they may choose to diversify, sell, and invest elsewhere. Studies of how families make their business decisions revealed various different motivations among business families. Research indicated that the primacy for some families is the family’s social-emotional wealth (SEW) and reputation; for others, it is community social-emotional wealth (Kurland & McCaffrey, 2020); and for a third group, family harmony and connectedness were found to be more

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3_10

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important than solely financial goals. Consequently, family business scholars broadened their studies. Studying other domains added to their knowledge base. International studies found that a society’s institutions affect businesses in many ways. Salvador Minuchin recommended that consultants become familiar with the various institutions that impinge on the family (Lansberg, 1992) and that this might be particularly relevant to families owning businesses as they are affected by institutional variables such as societal laws and regulations that govern inheritance, death, and divorce (Soleimanof, Rutherford, & Webb, 2018). It was recognized that some legal experts are able to contribute to enabling families to determine how to manage the constraints of such events prior to their occurrence (Chap. 6). Psychosocial factors influencing the family firms’ actions were introduced as a salient issue all into the dialogues by early family business theorists like Levinson (2006) (interpersonal conflict in the family business); Gersick, Davis, Hampton, and Lansberg (1997) (generational life-cycles); and Kets de Vries and Carlock (2007) (who described possible advantages of family business such as long-term orientation, culture, resilience, knowledge, and flexibility, as well as potential disadvantages such as nepotism and paternalism). Decision-making became a growing area of interest and study for family business researchers who sought to determine the numerous variables that contribute to owner-families’ decisions and actions. Studies show multiple factors directly and indirectly impact family business, each of which are affected by time, macro and micro forces, and their discontinuous interactions. Research has identified various domains impacting the business family (Also see Chap. 9 on the FEEM model to which this refers): (a) Individual factors such as personal strengths, personality, leadership ability, life stage, generation, transitions, roles, entrepreneurial orientation, education and training, birth order, and personal history. (b) Family factors such as parenting practices, sibling rivalry, communication style, conflict management, cohesion, governance, emotional attachment, commitment, family history, values, and traditions. (c) Community orientation such as emotional commitment to the neighborhood or local institutions. (d) Sociocultural factors such as religious and ethnic beliefs and practices, politics, government stability, geopolitical forces, cultural orientation, and emphasis on individualism vs. collectivism. Ogihara (2020) reported an example of sociocultural differences in various regions of Japan. Differences among the regions on five indicators of individualism-collectivism culture are directly impacted by the psychological structure of the family: 1. Divorce rate. 2. Percentage of people living alone. 3. Percentage of elderly people (over 65) living alone. 4. Percentage of nuclear family households. 5. Percentage of three-generation households.

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(e) Institutional factors, such as laws and regulations that impact many family changes and transitions, such as divorce and the laws of inheritance. (f) Economic and industry-specific factors, such as monetary changes, interest rates, recession, inflation, consumer behavior, unemployment, and competition from similar businesses. Family business scholars developed theories to explain these results. Combs, Shanine, Burrows, Allen, and Pounds (2020) noted that in some cases family business researchers built new theories to explain their findings in areas already well defined by existing family science theory and research. These authors strongly recommended the bringing together of family science and family business research, building on the existing significant family business theories and study. Such an intertwining could possibly provide a significant broadening of the knowledge base by offering well-developed theoretical constructs about the psychosocial aspects and variables involved. Other scholars noted that by including a family science perspective, a deeper understanding of the underlying processes, dynamics, and interaction of factors could be developed (Jaskiewicz, Neubaum, De Massis, & Holt, 2020). Sometimes owner families chose to change, diversify, or create new businesses, thus deciding to be an entrepreneurial family, perhaps more than a family business. These decisions can be better understood when the focus of research expands more to the family, instead of being mainly on the business (Zellweger, Nason, & Nordqvist, 2011). We strongly support this integration of family science knowledge with the data base on family enterprises. Taking the succession process as an example, it is well-known that when families transmit their history and values  – often emanating from the founder through storytelling and traditions – a stronger transgenerational commitment and resilience are fostered than in families when this is not done. If the family leader’s goals are to promote sustainability and pass the business to future generations, consultants can guide the communication and value transference processes. Successful examples of fostering these transgenerational processes are the training given to farm families in developing succession plans, creating written goals and objectives, and procedures for managing conflict (Marshall & Valdivia, 2019). Yet, little is known as to what factors influence families to decide to develop practices to promote family business continuity. Each member has their own needs and wants, as well as different perceptions and understandings of events, people, and the history of the family and business. The consultant is brought into this dynamic, multilayered, multi-person, ever-changing context. What factors would a consultant want to know to foster the desired result of succession (see Chap. 8)? What are one or both of the parents’ aspirational goals for the business and each member of the family and the family as a whole? Are there characteristics of the next generation that impact their commitment to and adoption of the values which guide the business? Are the goals idealistic or realistic? What are the perceptions of each member of their “place” in the family and of the interpersonal interactions? It is essential for the consultant to have an understanding of each individual’s, as well as the family’s motivations and perceptions. We have found that by asking

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individuals to put down their thoughts about what is to be discussed prior to our meetings with the family, they are able to listen with more openness and explain their positions more clearly than when asked their thoughts about what is to be discussed in a group setting. Tomaselli (2019) encourages family members to each write their own thoughts independently about how they perceive each member’s present and future role in the business; what the business requires from the family; whether members are happy being part of the family business (both in terms of financial and nonfinancial benefits); how they care for and strengthen family relations; and the pains and gains that can affect each member or family segment (alliances, coalitions) and then compare and discuss these together. He remarks that families engage readily with the visual graphic, The Family-in-Business Canvas, and have productive discussions of the similarities, differences, and complementarities of their perceptions. Using tools such as this, the consultant can guide leaders in managing and understanding the interpersonal and intergenerational tensions as they jointly determine the family’s vision and values. Are there ways to manage the tensions and use them productively? Many businesses have transmitted their values through the use of a “rhetorical history” – by reinterpreting the firm’s history to motivate and promote the adoption of current actions both in and outside the organizations. How can reinterpretation of history and patterns be helpful to business families? Suddaby and Jaskiewicz (2020) assert that traditions are the foundational element of successful family business and by reinterpreting the traditions to be flexible enough to allow for current situations and the changing needs of next generations, the successful intergenerational transfer of traditions can occur. Take the example of Case #3 in Chap. 7. If there had been a purposeful desire to transmit the knowledge and values to the next generation, the father, likely with the mother’s assistance, could have described his challenges, learning, and values to their children during their childhood. If he had chosen to work closely with his children as they grew into adults, communicating openly and discussing their business ideas with them, the divisiveness among his sons may have been reduced and their collaboration strengthened, enabling individuals, the family, and the business to thrive. What were his motivations and elements of personal history that could be drawn upon to facilitate a more harmonious leadership transfer? What traditions did this family follow? The consultant suggested modifications in the after- dinner session that might include the open discussion of new ideas for the business and establishing quarterly or semiannual family meetings to discuss the business? Yet, given that neither parent had already developed a transgenerational succession process, the consultant talked with all the family members currently working or wanting to work in the business in order to promote individual, family, and business thriving. Building on family science and family systems theory, she systematically focused on positively impacting the decisions and actions of the family enterprise leaders. After clarifying the family’s definition of success – their long-term goals and vision  – the consultant sought more family and individual information.

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Future Theoretical and Research Dimensions Assumptions Underlying Research Many family business theoretical concepts have been researched taking an “allor-­nothing” perspective – for example, family firms demonstrate lower risk-taking than do nonfamily firms. Additional research questions might include – do the age of the family members, the generation in charge, and the context for the risk-taking influence the degree of risk taken for a specific decision? Is a family firm proactive in terms of innovativeness as a quasi-permanent style, or does the firm demonstrate innovativeness and take risks only under certain circumstances (such as long- or short-term orientation or availability of resources)? How do assumptions made about similarity of values, such as a “safe space” to show feelings and commitment among family members, impact decisions involving risk? Do these assumptions impact certain types of decisions more than others, or do they pertain to certain members more than others (such as differences in roles or generations)? Overgeneralized assumptions are found when gender, ethnicity, and national culture have been studied. It is frequently assumed that all women lead similarly, regardless of the stage of the organization, culture, generation, or age of the leader. There are other assumptions such as that all Mexicans or all adherents to Confucianism respond similarly or have the same characteristic traits. Clearly, they do not, and each group exhibits differences among its members. In addition, the interaction between variables needs to be studied – for example, do particular styles of “female” leadership have a positive effect during certain stages of an organization? Does “female” leadership impact social emotional wealth more strongly than male leadership? If yes, and SEW is one of the most important criteria for success in a particular family, then should a person’s gender be more strongly considered for leadership positions at a time of familial reduced cohesiveness? If the family determines social responsibility to the community as the most important criterion in the selection of future leaders, what characteristics need to be sought to maximize the viability and longevity of the firm and the adoption of these values? (See Chap. 8 on Succession Planning). It is important for researchers to collect data that is relevant to the long-term goals and intricacies of family firms [realizing that there is rarely a single goal for a firm and organizational goals change over time as do those for individuals and family involved], to study the psychosocial antecedents of the relevant factors and determine which factors need to be measured over time.

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Metrics and Research Snapshot Data Most prior research has offered “snapshots” of family businesses – a particular factor has been measured at a given point in time by surveys, interviews, or data extrapolated from studies done on college students.

Research Complexity and Attention to Multiple Variables While some variables are stable (e.g., being the founder of the business does not change), most variables are not static and change over time – for example, values change as do individual’s needs, capabilities, desires, family dynamics, and the firm’s needs and goals. In the past, the variables that have been studied have often been seen as dichotomous. However, they are more likely to be on a continuum, and the shape of the data may well be curvilinear, W, U, or S shaped. A family business member has multiple roles (parent, leader, young adult member, member of the community), and the boundaries between these roles are permeable and not rigid. Time impacts each factor differently, and this impact needs to be considered in future research. Each individual’s roles, expectations, competencies, and values change over time and in different contexts. Longitudinal studies will need to be conducted in order to attribute any particular practice or characteristic to the family business, keeping in mind that values, needs, individuals’ and family goals, and life stages of the organization are continually changing, and evolving, often unpredictably. A few examples of current knowledge and the type of questions family scientists can research to put together an enriched and broadened knowledge base might include: (a) The success of transgenerational entrepreneurship (two or more generations of family members spearheading new business activities and innovation) occurs when the firm demonstrates entrepreneurial orientation, familiness, and cultural contexts, thus resulting in positive economic and social performance (Basco, Calabro, & Campopiano, 2019). What are these cultural factors, and how do they influence entrepreneurship in family firms? Are these factors the same for different generations of the family? (b) A minority of offspring are interested in taking over or participating in the family business (Serna, Nakandala, Bowyer, & Nonato, 2020). What are the individual and family antecedent factors that contribute to this lack of desire? Does participation in and adoption of family traditions – such as family informal gettogethers and collaborative discussions, that have been found to promote transference of values, norms, and shared visions (“family embeddedness” (Soleimanof et al., 2018) – moderate this lack of desire to enter or remain in the

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family firm? Does a specific family consider “success” as including the entrepreneurship of their children in a new business, instead of remaining in the existing family firm? (c) The success of family businesses has been measured in terms of its longevity/ survival. Family cohesion and commitment are critical to sustaining the family business in both individualistic and collectivist cultures (Davis & Chrisman, 2020). The continuity of the family unit  – and its foundational structure for family business – has stronger survival rates in regions where arranged marriages exist than in regions where they do not (Mehrotra, Morck, Shim, & Wiwattanakantang, 2011). How will the decline in the institution of marriage, or marrying for “love,” impact the future of family business? (d) The history of a family and its values are intertwined with their enterprise and reflected in the firm’s culture, goals, and practices. Traditions are foundational to the family identity and their firm’s decisions, creating links between the firm’s history, their present traditions, and future aspirations (De Massis, Frattini, Kotlar, Petruzzelli, & Wright, 2016). Traditions are consciously transmitted. Both “what” gets transmitted and “how” are significant. Family businesses use “rhetorical history” in terms of interpreting the past and may use “strategic forgetting” (minimizing prior mistakes) to maintain consistent identity (Suddaby & Jaskiewicz, 2020). Important questions for future research might include: 1. Are there different types of family traditions practiced that promote SEW compared to others that may foster entrepreneurship? 2. Are there types of traditions that promote greater commitment to the continuity of the enterprise? 3. What are an individual’s characteristics that influence the desire to and perpetuation of traditions? (e) Trust is an important factor in almost all cultures, promoting individual and organizational wellbeing, employee retention, and productivity. Galford and Drapeau (2003) describe three types of organizational trust: strategic trust (when employees trust leaders to set the right course); personal trust (when employees trust their bosses to treat them fairly and put the firm’s needs above their own); and organizational trust (when employees can trust the business’s processes to be fair and consistent). Do family firms have a competitive advantage over nonfamily firms because of the intertwining of family managers and practices that contribute to their strategic, personal, and organizational trust? How, if at all, does familial trust influence the longevity of or conflict management in family firms? Do national, cultural or leadership role models influence interpersonal trust? Are there certain factors that contribute to the difference in familial trust from interpersonal trust, and if so, how do these factors impact business family’s decisions? (f) The role of the cultural values of one’s society (as shown in the interactive multifactorial model in Chap. 9) is significant. Previous research has focused on the role of cultural values (such as those about willingness to manage uncertainty

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and individual competitiveness) that were thought to promote entrepreneurship. Yet, more recent studies indicate psychosocial dimensions have a greater impact in the creation of new firms. The multinational GLOBE study of 500,000 people in 42 countries endorses “charismatic and self-protective leadership ideals have higher rates of entrepreneurship” (2020) and indicates socially supportive cultures promote entrepreneurship more than performance-based cultures do, and cultural leadership ideals impact business initiatives more than cultural values do (Stephan & Pathak, 2016). (g) Entrepreneurship is essential to expanding the business and introducing innovations. Children who work in the family business are usually more entrepreneurial than those who do not. By studying familial factors and dynamics, we may be able to identify the individual and family factors that promote entrepreneurship – such as role models and open communication processes. (h) Considering psychosocial variables such as family conflict, a commonly cited family business phenomenon in family business research, might provide a deeper understanding of this multifaceted construct. Conflict is typically regarded as negative, yet recent research reflects that there can be beneficial effects of family-related conflict. Kellermanns and Eddleston (2007) studied the impact of cognitive conflict (disagreements about the work that needed to be done and the strategies to do so) and process conflict (disagreements about who is responsible for the specific tasks) with family moderators (such as reciprocity  – the individual’s perceptions of family’s willingness to share ideas, feedback, and expectations with one another). Their research found the highest levels of performance occurred when the family had high reciprocity and process conflict. The authors reported cognitive conflict is most beneficial when family firm ownership is within a single generation and the reciprocity is low, suggesting cognitive conflict may be misperceived as self-interest when ownership is dispersed over multiple generations. Kubicek and Machek (2020) suggest that factors such as conversation orientation or conformity orientation may moderate the effect of different types of conflict. Noting that conflict is not a static phenomenon, what might be the individual, interpersonal, and contextual antecedents? Do the different types of conflict in families have similar results or impacts depending on whether the enterprise has sibling ownership, cousin ownership, or mixed family and nonfamily ownership? (i) There are different types of conflict: (1) relationship process is related to personal concerns over personality differences; (2) task conflict related to differences of opinion or viewpoints regarding a task to be performed; (3) process conflict related to the awareness of controversies about aspects of how task accomplishment should or will proceed. Some factors do not necessarily have rigid borders: for instance, a family member has multiple roles (such as parent, leader, young adult member of the community). The boundaries between these roles are permeable and not inflexible. The variables are in a constant process of fluctuation. Family scientists have generated theories based on their research that can add to the understanding of these

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dynamics. Using longitudinal studies, multivariate analysis, factorial impact (may not be additive), and artificial intelligence and with the expectation of dynamic interactions and sporadic time effects, the multiple factors can be better understood. We now shift to a different voice and body of knowledge that we think could be an arena for future productive and relevant research: appreciative inquiry. In a definitive book on the topic, The Power of Positive Inquiry: A Practical Guide to Positive Change (Whitney & Trosten-Bloom, 2003), they indicate that the thesis of their book is that appreciative inquiry transforms organizations into places that are free and alive, where people are eager and filled with positive power and where the creativity of the whole never ceases to amaze, surprise, and ascend. It enhances the organizations’ capacity for positive change (pp. vii-viii). AI (as it is abbreviated) is the exploration and study of “what gives life to human systems to help them function optimally.” It is predicated on “the assumption that questions” and discussions about such positive topics as values, hopes, dreams, values, and successes can be transformational. AI highlights belief that the “human organizing and changing,” at their best, are relational processes of inquiry, grounded in affirmation and appreciation. This sounds very similar to a popular song of decades ago “You’ve got to accentuate the positive, eliminate the negative, and latch on to the affirmative” (Mercer & Arlen, 1944). Yet how much does this really happen when disagreements, discontents, and conflicts are the focus of attention of a consultant to business organizations? Appreciation and inquiry are the two hallmarks of this approach. Some basic tenets are (Whitney & Trosten-Bloom, 2003, p 2): (a) People individually and collectively have unique gifts, skills, and contribution to bring to life. (b) Organizations are human social systems, sources of unlimited relational capacity, created and lived in language. (c) The images we hold of the future are socially created and, once articulated, serve to guide individual and collective actions. (d) Through human communication (inquiry and dialogue), people can shift their attention and action away from problem analysis to lift up worthy ideals and productive possibilities for the future. Appreciation has to do with recognition, with valuing and with gratitude. The word appreciate is a verb that carries a double meaning. It refers to the act of recognition and the act of enhancing value: 1 . To recognize the best in people and the world around us. 2. To affirm past and present strengths, successes, assets, and potentials. 3. To increase in value (i.e., the investment as appreciated in value). The theory and practice of AI are quite consistent with many of the principles, practices, and recommendations of positive psychology. Positive psychology is actively being applied to executive and personal coaching; early reports from practitioners are that it is being done quite effectively (Foster & Auerbach, 2015). Like appreciative inquiry, it incorporates motivational interviewing techniques (Marshall & Nielsen, 2020) especially focusing on a balanced view of strengths,

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including self-control and willpower (Baumeister & Tice, 2015). It stresses the importance of the coach being knowledgeable about cross-cultural similarities and differences and being (or becoming) a “culturally competent” coach (Rosinski, p 256; El-Asiwal, p 257 in Foster & Auerbach, 2015). Just as we have recommended researchers look into studying the possible impact of utilizing appreciative inquiry questions with family business families, we suggest extending the research on the motivational interviewing approaches which incorporate the broad philosophy of positive psychology to family enterprise consultation methodologies. Thomas (2007) underscores the importance of focusing on an organization’s positive core and emphasizing something about its past that can add value (continuity), honor, and the search for newness to motivate embracing movement toward future transitions. Other factors he elucidates, which comprise AI’s positive core are technical assets, positive emotions, financial assets, cooperative moments and values, social capital, and the business’s ecosystems (Chap. 9), including its customers, partners, and suppliers. In light of the above description of the philosophy, principles, and emphases of appreciative inquiry, we think that a fruitful research area would be to investigate the application of the appreciative inquiry approach to family businesses and family enterprise consultation and see how and when this positive approach might be incorporated into our consultation practices. Hopefully our newly developed dynamic interactive multifactorial model of family enterprise ecosystems (Chap. 9) will prompt scholars in the field to conduct research on the efficacy of this model and then to publish their findings in the next few years, We bring this chapter to a close with an optimistic view of the possibilities which lie ahead in the research areas pertaining to family enterprise consultation.

References Basco, R., Calabro, A., & Campopiano, G. (2019). Transgenerational entrepreneurship around the world: Implications for family business research and practice. Journal of Family Business Strategy, 10(4), 100313. https://doi.org/10.1016/j.jfbs.2018.03.004. Baumeister, R. F., & Tice, D. M. (2015). Trait self-control and the avoidance of temptation. Personality and Individual Difference, 74, 12–15. Combs, J.  G., Shanine, K.  K., Burrows, S., Allen, J.  S., & Pounds, T.  W. (2020). What do we know about business families? Setting the stage for leveraging family science theories. Family Business Review, 33(1), 38–63. https://doi.org/10.1177/0894486519863508. Davis, S., & Chrisman, J. J. (2020, August 7–11). Examining family firm succession from a cultural perspective. Academy of Management Annual Conference. De Massis, A., Frattini, F., Kotlar, J., Petruzzelli, A. M., & Wright, M. (2016). Innovation through tradition: Lessons from innovative family businesses and directions for future research. Academy of Management Perspectives, 30(1), 93–116. https://doi.org/10.5465/amp.2015.0017. Foster, S.  L., & Auerbach, J.  E. (2015). Positive psychology in coaching: Applying science to executive and personal coaching. Pismo Beach, CA: Executive College Press.

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Galford, R. M., & Drapeau, A. S. (2003). The enemies of trust. Harvard Business Review. https:// hbr.org/2003/02/the-­enemies-­of-­trust Gersick, K. E., Davis, J. A., Hampton, M. M., & Lansberg, I. (1997). Generation to generation. Harvard Business School Press. Holt, D.  T., Pearson, A.  W., Carr, J.  C., & Barnett, T. (2017). Family firm(s) outcomes model: Structuring financial and nonfinancial outcomes across the family and firm. Family Business Review, 30(2), 182–202. https://doi.org/10.1177/0894486516680930. Jaskiewicz, P., Neubaum, D. O., De Massis, A., & Holt, D. T. (2020). The adulthood of family business research through inbound and outbound theorizing. Family Business Review, 33(1), 10–17. https://doi.org/10.1177/0894486520904461. Kellermanns, F.  W., & Eddleston, K.  A. (2007). A family perspective on when conflict benefits family firm performance. Journal of Business Research, 60(10), 1048–1057. https://doi. org/10.1016/j.jbusres.2006.12.018. Kets de Vries, M., & Carlock, R. (2007). Family business on the couch. Wiley. Kubicek, A., & Machek, O. (2020). Intrafamily conflicts in family businesses: A systemic review of the literature and agenda for future research. Family Business Review, 33(2), 194–227. https://doi.org/10.1177/0894486519899573. Kurland, N.  B., & McCaffrey, S.  J. (2020). Community socioemotional wealth: Preservation, succession, and farming in Lancaster County, Pennsylvania. Family Business Review, 33(3), 244–264. https://doi.org/10.1177/0894486520910876. Lansberg, I. (1992). The family side of family business. Family Business Review, 5(3), 309–321. https://doi.org/10.1111/j.1741-­6248.1992.00309.x. Levinson, H. (2006). Harry Levinson on the psychology of leadership. Harvard Business School Publishing. Marshall, C., & Nielsen, A. S. (2020). Motivational interviewing for leaders in helping professions. Guilford. Marshall, M., & Valdivia, C. (2019). NC:1030: Sustainable families, firms and communities in times of change. U.S.  Dept. of Agriculture (USDA), Research Education and Economics. https://www.nimss.org/projects/view/mrp/outline/17996 Mehrotra, V., Morck, R., Shim, J., & Wiwattanakantang, Y. (2011). Must love kill the family firm? Some exploratory evidence. Entrepreneurship, Theory and Practice, 35(6), 1121–1148. https:// doi.org/10.1111/j.1540-­6520.2011.00494.x. Mercer, J., & Arlen, H. (1944). Ac-cent-Tchu-ate the positive. Ogihara, Y. (2020). Regional differences in individualism in Japan: Scoring based on family structure. Frontiers in Psychology, 11, 1677. Serna, L. R., Nakandala, D., Bowyer, D., & Nonato, N. (2020, August 7–11). Why eligible successors withdraw from the succession process? Academy of Management Annual Conference. Soleimanof, S., Rutherford, M. W., & Webb, J. W. (2018). The intersection of family firms and institutional contexts: A review and agenda for future research. Family Business Review, 31(1), 32–53. https://doi.org/10.1177/0894486517736446. Stephan, U., & Pathak, S. (2016). Beyond cultural values? Cultural leadership ideals and entrepreneurship. Journal of Business Venturing, 31(5), 505–523. https://doi.org/10.1016/j. jbusven.2016.07.003. Suddaby, R., & Jaskiewicz, P. (2020). Managing traditions: A critical capability for family business success. Family Business Review, 33(3), 234–243. https://doi.org/10.1177/0894486520942611. Thomas, E. C. (2007). Appreciative inquiry: A positive approach to change. Appreciative Inquiry Commons Website. https://appreciativeinquiry.case.edu/ Tomaselli, S. (2019). The family in business model canvas, Family Firm Institute Practioner. https://digital.ffi.org/editions/an-­interview-­with-­dr-­salvatore-­tomaselli-­the-­family-­in-­business-­ model-­canvas/ Whitney, D., & Trosten-Bloom, A. (2003). The power of appreciative inquiry: A practical guide to positive change. San Francisco: Berrett-Koehler Publishers, Inc. Zellweger, T. M., Nason, R. S., & Nordqvist, M. (2011). From longevity of firms to Transgenera­ tional entrepreneurship of families: Introducing family entrepreneurial orientation. Family Business Review, 25(2), 136–155. https://doi.org/10.1177/0894486511423531.

Chapter 11

Summarization and a Glance into the Future

Abstract  Throughout this book, we discuss the manifold roles undertaken by family enterprise consultants from various professional backgrounds and in different locales. We highlight the special features of family companies and the emphasis on upholding family values, being financially profitable and building an enterprise worthy of transmission, with a proud legacy, to succeeding generations.

Recapitulating the Major Themes and Highlights From the introduction overview (Chap. 1) onward throughout these chapters, we describe and discuss the manifold roles of the family enterprise consultant to and with local, national, and international firms from a variety of angles and perspectives that they may be expected to undertake. We have elucidated that there are variations in the approaches of different consultants attributable not only to their own unique personalities but also to their discipline of professional origin, the country in which they reside and with the specific family business consultation training they have received, plus what they have learned from their ongoing continuing education, their prior consultation experiences, and what the contract they have signed with the specific firm denotes as their responsibilities. The descriptions, analyses, and conclusions have been written from a psychological and family systems perspective combined with an industrial-organizational foundation and consultation approach. This book also incorporates an historical approach to undergird the emergence and continued evolution of this rapidly expanding field. Actual cases have been interspersed throughout to illustrate the role of family dynamics, ranging from pride and loyalty to severe conflict and destructive discussions within the family business and how the relationship system can be conducive to or disruptive of the members working together for the benefit of the enterprise and on another. The importance of firms and their members being aware that they exist in cyberspace and need to be vigilant in keeping the enterprise cybersecure are emphasized in the opening chapter (Aikin, 2016). In the pandemic era of 2020 and other crises

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situations in the future when many employees are and will be working outside of the office environment, where their at-home network may not be as secure as in a business setting, this becomes even more urgent. Chapter 2 indicates that family businesses constitute the largest percentage of businesses in the world and of most countries, which when combined makes them essential contributors to their country’s economic life. It describes many of the characteristics and attributes that successful family enterprises exhibit, including the desire and drive to be financially successful and to be faithful to the family’s values and the traditions to be transmitted across generations, to build and maintain an excellent reputation in the various communities of which they are a part, and to build a business and legacy that will be passed on to successive generations. The continued commitment of the firms’ leaders to the enterprise contributes to the wellbeing of both the family and the family business members. The members of the majority of family firms have a strong desire to remain in business together. We cited Hamilton Jewelers, a fourth generation family jewelry firm with retail stores in Princeton, New Jersey, Palm Beach, and Palm Beach Gardens, Florida, in Chap. 2. They, like many other family enterprises, have historically emphasized and transmitted such core values as loyalty, integrity, and the importance of upholding their traditions and of passing their legacy on to future generations. Commitment to their customers and the communities they serve is another abiding principle. In writing this closing chapter, 15 months into the advent of the COVID-19 pandemic of 2020, it seems fitting to illustrate one way this broadly shared commitment was demonstrated during the pandemic by a family business previously mentioned as an example of the kind of extraordinary contributions family businesses make to their surrounding community world. According to owner Hank Siegel, and his son, Andrew, Hamilton created, funded, and managed an online auction initiative to raise funds to disperse to help independent businesses in the Princeton community. In mounting this endeavor, they received support from the mayor, the Princeton Merchant’s Association, and the regional Chamber of Commerce and solicited donations and support from everyone in the community in the form of donating any of a variety of products and services, fun experiences, gift cards, virtual technology support services, video fitness classes, etc. The auction itself ran from April 20 through May 20, 2020, and then the monies collected were distributed among eligible local businesses, their employees, and their laid off workers. This event raised approximately $40,000 that they dispersed among local businesses to provide them with the financial resources they needed to survive while awaiting government funding (Hamilton Accent Magazine, Fall issue, 2020). A phenomenon not mentioned earlier in this book has become an increasingly frequent occurrence. More and more firms have been naming their businesses after their founder(s) to convey the family element of the business. Three prominent examples are Estee Lauder (a company that manufactures and sells cosmetics under a variety of brand names), Walmart named after founder Sam Walton, and Forbes after B. C. Forbes. This seems to have a positive impact on performance of firm employees and family members and creates greater incentive for them to work

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together. The use of the family name as part of the business’s title also tends to increase consumer confidence and lead to an increase in sales. The family business consultant (if they have one) can try to keep the family attuned to the external view of the business as cohesive or combative, as well as to the fallout and consequences for all involved if there are ongoing family wars (Gordon & Nicholson, 2008), especially when they are made public. When a wellknown family business is marked by visible dissension, including lawsuits and/or if it disintegrates entirely, the scandal may reverberate for many years and negatively impact the reputations of many family members. Next, the similarities and differences between family and nonfamily firms have been elucidated (Chap. 3) as has the fact that a family business can be sold and become a nonfamily business or a sale can go in the opposite direction and a nonfamily business may be bought and transformed by the buyers into a family enterprise. In a family business, the selection process of the next CEO usually takes into consideration how much importance he or she places on family values, traditions, objectives, and continuance of the family legacy. The transformation of a business either from family to nonfamily or in the opposite direction will have an enormous impact on the firm, not only for its present but also for its future management and survival. We have found and so indicated herein (Chap. 4) that many of the assessment and evaluation tests, tools, and procedures used with family businesses have not yet been standardized. Looking into the future, we recommend and foresee this as an important area for research and development and hope that those engaged in this aspect of family enterprise consulting will encourage the standardization and peer review of such instruments for the field. In light of the internationalization of many companies, plus the fact that some consultants take assignments in other countries besides their home country, we urge that tests not only be translated into other languages where family business advising is occurring but that they be standardized separately on the populations in those regions or countries in which they will be utilized, and hopefully, these and other instruments will be developed and standardized in other languages. Except perhaps in the early years of their existence, as real growth occurs, every business enterprise needs to create governance structures and formulate documents (Chap. 5) that provide protocols and guidelines for development of appropriate boards, councils, committees, and offices. These structures should explicate who can comprise their membership, and the documents should enumerate what their functions are to be. As businesses grow, running them without such structures as a board of directors and a management or executive team is likely to lead to duplication, conflict, and too many spur-of-the moment decisions. Clearly defined family governance is a key structural element in successful family enterprises. Various other documents need to be created and promulgated, such as a family constitution or charter, a family mission statement, a policies and procedures manual which should contain an elaboration of policies on shareholders and owners’ agreements in light of the investment policies of the company if this is not incorporated elsewhere, and a statement defining who can be considered as a “family member” of the

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family business and entitled to all the rights, privileges, and responsibilities bestowed on “family members” only. In the section on ethics, we point out that since family enterprise consultants may be drawn from a variety of different disciplines, each with its own specific code of ethics, and the particular family business one is consulting to also may have its own code of ethics or conduct that is not fully compatible, each advisor will need to determine how to collaborate with the other advisors in the best interest of the unique firm to which they are consulting, without violating their own or the firm’s code of ethics. Such collaboration may be further complicated if the various advisors have different levels of expertise and collaboration skills or are unaccustomed or unwilling to collaborate. A complementary pair of documents that ultimately comes to the fore for attention are the succession plans and the will of the CEO regarding who he or she wants to appoint or have designated as his/her successor. It is important to reiterate here, as done in Chap. 8 also, that many CEOs are reluctant to develop succession plans because (1) they do not want to retire; the business is the center of their life and there is nothing they would rather do, (2) they do not think anyone else is as capable of running the firm as well as they are, and (3) such a plan symbolizes that, like everyone else, they eventually will die. Yet formulating such a plan is essential to the continuance of the firm, and in the event that the CEO’s death is sudden and a succession plan has not been developed, a crisis can occur because of the absence of a CEO designee. In Chap. 5 in the section on wills, we also highlight the existence and purpose of ethical wills, as codicils to or separate from the usual legal will. Such wills can be compatible with the ideals and values of some family business firms and can be shared with the family while the progenitor is still alive. They can become documents cherished by the family as part of their continuing legacy. However, preparing and sharing one’s ethical will is contraindicated for many families that are unaccustomed to and/or uncomfortable with such honest disclosure of each other’s thoughts and intentions. Chapter 6 is focused on the orientation of aspiring and novice family business consultants emphasizing what they need to know, what they can do to continue acquiring knowledge and skills in this vast and expanding field of organizational consultation, and how to negotiate and handle their early consultations, including the contracting process and the questions to ask about the firm and its family members. This chapter may contain some gems of wisdom that also might be illuminating to or a good refresher course for experienced consultants. Unfortunately, serious family conflicts, rivalries, and jealousies are often manifested in the family relational system within the business and can be very detrimental to its functioning Chapter 7 focuses on various types of frequent conflicts that exist and erupt in family firms, small and large. We chronicle an example of dealing with the intense problems and cross currents in a small family enterprise at a 2-day business retreat, emphasizing both process and content and the importance of balancing the independence and interdependence of the family members in the business. One case is presented in depth. It highlights what some of the major effects

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intrafamily conflicts can have on a family enterprise. Some frequently encountered conflicts not evident in the specific family discussed are also touched upon. The genre of extreme internecine family conflicts that erupt into family wars and may eventuate in the break up and/or selling of the firm are also touched upon. Consultation to such family enterprises is extremely challenging, and regrettably, healing and resolution are not always feasible. But sometimes, fortunately we can enable someone to stop living “in the prison of their personal or situational relational past” (Eger, 2017) and coach them on how to create the life they want in the future with and within their family and the family enterprise. For this to occur, all family members of the enterprise should have a voice and a vote (Change, DNA & Family Legacy, 2020). The succession planning process and the many considerations that go into it are the cornerstone of Chap. 8. This process is integral to the perpetuation of the family enterprise into successive generations. It heralds a pivotal and crucial transition event in the history of the enterprise and is based upon continued commitment to the family’s mission statement and to family values, traditions, and goals as well as harmonious relationships, so that the overall weltanschauung of the family business remains significant. Many CEOs are reluctant to implement the succession planning process for reasons explained earlier. Until the past 20 years, most succession choices followed the traditional, often unwritten law of primogeniture, and the oldest son was expected to be selected as the next CEO. In the past few decades, this has begun to change, and some women are being appointed as CEOs. If the eldest child is a daughter and is a graduate of an MBA College business program, or some similar educational program, it increases the likelihood of her being selected. Or, if the firstborn son is not interested in the position or qualified to handle it, a daughter (in some firms in some countries) or the second or third son may be chosen, if he (or she) is regarded as being the best person to lead the business in the next stage of its existence. Clearly there is more latitude in many firms now than there was prior to the dawning of the twenty-first century. Our recently conceptualized “dynamic interactive multifactorial family enterprise ecosystemic model” (FEEM) is introduced and described in Chap. 9. This model includes and depicts the eight components that overlap and interface to comprise the inner workings of many family enterprises. We posit herein that consultants (and advisors) to family enterprises, regardless of the professional discipline in which they were originally trained, need to be cognizant of these multiple intertwined factors when working with and for family businesses. In Chap. 10, we have presented some of the areas of concern and interest that we believe should be the foci of research in the near future, such as how family decisions are made by and in family firms; the impact of specific sociocultural, ethnic, and religious factors on the enterprise; changing role of female members of the family in the running of the business; the different kinds of intrafamilial conflict within the firm; and developing additional techniques for effective resolution to accompany the ones elucidated throughout the book. Research into the possible application of

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the positive approach of appreciative inquiry to family business consultation have also been recommended for consideration. Hopefully by summarizing chapter by chapter in this final Chap. 11, we have brought the numerous parts of the family enterprise composite into a more holistic perspective. We continue here urging the field to take the kind of glance into the future, described in Chap. 10 on considering both the practice of family enterprise consultation in the 2020’s decade and beyond and commenting on problems and issues we hope family business scholars and researchers will study in order to illuminate future directions the field may take, such as whether trends such as professional management, called professionalizing the family business (FFI, 2/24/20), will become more frequent as expansion into regional, national, and international markets increases and the number of family owned enterprises continues to escalate. This is an exciting time in the fields of family enterprise consultation and family business research. Building on the existing research base and opening up and integrating existing knowledge from other domains will promote a much deeper understanding of modern family enterprises and how to consult wisely to them.

References Aikin, M. (2016). The cyber effect: A pioneering cyber-psychologist explains how human behavior changes online. Spiegel & Grau. Change, DNA and family legacy. (2020). Retrieved 2020, from www.ffi.org/editions/change/dna and family legacy. Eger, E. E. (2017). The choice: Embrace the possible. New York/London/Toronto, ON: Scribner. Gordon, G., & Nicholson, N. (2008). Family wars: The real story behind the most famous family business feuds. Kogan Page, Ltd. Hamilton Jeweler’s Accent Magazine. (Fall 2020). Wainscot Media LLC. Professionalizing the Business Family: A research report sponsored by the FFI 2086 Society. (2020, 2 26). FFI, pp. 1–10.

Index

A Aiken, M., 5, 144 America Psychological Association (APA), 4, 66, 67, 75, 81 Aronoff, N., 59, 72 Assessments, 4, 18, 39–51, 59, 77, 81, 82, 103–105, 108, 115, 119, 131, 145 Astrachan, J.H., 18, 30, 48, 72 B Behnke, S., 68 Bioecological, 117 Birth Order, Cultural, 25, 31, 97, 101, 132 Bjornberg, A., 47, 120–122 Brand, 17, 19, 144 Brofenbrenner, U., 117 Bullock, M., 68 C Capital, 25–28, 46, 98, 114, 123, 126 Chief Executive Officer (CEO), 9, 10, 15–17, 19, 23–25, 29, 32, 33, 51, 58, 59, 70, 71, 74, 77, 83, 87–89, 91, 93, 95–99, 101–105, 107–110, 114, 116, 145–147 Chief Financial Officer (CFO), 33, 70 Chua, J., 2, 3 Climate, 47, 50, 78, 114, 121 Codes of Ethics and Conduct, 65–68 Cohesion, 44–47, 132, 135, 137 Collective culture, 78

Commitment, 5, 10, 18–20, 25, 28, 30, 35, 42, 49, 61, 65, 66, 69, 78, 88, 89, 97, 98, 100, 102, 106, 110, 114–116, 118–124, 126, 132, 133, 135, 137, 144, 147 Communication training, 43 Community economic wealth, 123 Community factors, 123–124 Community involvement, 27, 33, 43 Conflicts, 3, 10–13, 24, 26, 28, 33, 39–41, 46–48, 51, 58–61, 65, 66, 80, 82–94, 98, 101, 102, 104, 108, 110, 114, 117–119, 122, 132, 133, 137–139, 143, 145–147 Continuity, 3, 18, 25, 27, 28, 32, 35, 47, 59, 69, 72, 95, 98, 100, 102, 106, 110, 115, 118, 120, 122, 124, 126, 127, 133, 137, 140 Cultures, 5, 6, 17, 18, 20, 24, 25, 27, 30–33, 36, 42, 45, 47, 48, 51, 59, 78, 92, 95, 99, 104, 106, 114, 118–122, 124, 132, 135, 137, 138 Cyberspace Cyber awareness, 5 Cyber protection, 5, 6 Cybersecurity, 5, 6 D Davis, J.A., 103, 132 Decision-making, 5, 18, 20, 26, 28, 42, 43, 48, 50, 57, 92, 113, 117, 132 Developmental stages, 41, 114 Diversity, 32–33, 42, 99–103

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 F. W. Kaslow, L. Friedland, Consultation to Family Business Enterprises, https://doi.org/10.1007/978-3-030-72022-3

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Index

150 Divorce impact on business, 14, 71, 121, 125, 132 impact on family members, 25, 48, 71 Dyer, W.G., 36 Dynamic Interactive Multifactorial Family Enterprise Ecosystems Model, 5, 113–127, 140, 147 E Economic factors, 125 Ecosystems, 113–127, 140 Eger, E.E., 93, 147 Employment policies, 60, 69 Entrepreneurial legacy, 106 Entrepreneurial orientation, 78, 119, 120, 132, 136 Ethical wills, 71–74, 146 Ethnicity, 24, 32, 33, 78, 97, 99, 135 Evaluations, 4, 39–51, 82, 145 F Familiness, 47, 48, 114, 121, 136 Family family assessments, 41, 44, 105 family Business Magazine, 20, 60, 76, 106, 125 family capital, 114 family definition of “success”, 26–28 Family Enterprise Ecosystem Model (FEEM), 115–117, 126, 147 family enterprises, 1–3, 6, 10, 15, 19, 20, 24, 25, 27, 30, 33, 42, 44, 47, 51, 57, 59, 65, 66, 68, 69, 71, 75–94, 97, 98, 105–108, 110, 113–127, 133, 134, 140, 143–148 Family Firm Institute (FFI), 2, 17, 18, 33, 57, 58, 66, 75, 81, 98, 106, 148 Family gravity, 110 family history, 42, 62, 72, 118, 120, 132 family identity, 3, 120, 137 family influences, 42, 47, 48, 121 family legacy, 29, 76, 87, 121, 125, 145, 147 family managers, 137 family members, 3, 4, 6, 13–20, 25–28, 30–36, 40–43, 47, 48, 51, 58–64, 69–71, 73, 78–81, 83, 85, 89–93, 96–99, 103–106, 113, 115–121, 123, 134–136, 138, 144–146 family offices, 4, 63, 81, 97

family owners, 34, 119, 120, 126 family philanthropies, 5, 20, 63–65 family reputation, 3, 27, 114, 126, 131, 144, 145 family traditions, 1, 71, 76, 100, 120, 136, 137 family values, 3, 24, 27, 33, 47, 51, 59, 64, 71, 91, 98, 100, 106, 125, 145, 147 Family wars financial, 59, 63, 68, 73, 125 Financial literacy, 125 Firm reputation, 14, 26, 114 Founders, 1, 3, 17, 18, 24–25, 27–29, 31, 34, 36, 39–40, 69, 78, 84, 96, 97, 102, 105, 108, 109, 114, 116, 117, 121, 122, 133, 136, 144 Founder’s legacy, 2, 78, 97, 105 Frankenberg, E., 13 G Gender, 4, 23, 25, 31–33, 48, 76, 78, 81, 83, 97, 99–100, 118, 135 Generational stages, 114 Generational transfer of power, 42, 95 Generation, generational, 1, 9, 25, 41, 57, 78, 88, 97, 114, 132, 144 Genogram, 48, 49 Gersick, K.E., 2, 41, 78, 103, 113, 114, 132 Governance structures, 15, 24, 51, 57–74, 102, 103, 120, 145 Government impact, 125, 126, 132 H Habbershom, T.G., 34 Hilburt-Davis, J., 36 Human capital impact of family members, 27, 46 impact on business, 123 individuals, 46 I Individualistic culture, 124 Inheritances, 49, 61, 89, 90, 100, 125, 126, 132, 133 Innovations, 29, 31, 32, 36, 131, 136, 138 Institutional factors, 125–127, 133 Interactive factors, 115, 127 Interpersonal skills, 10, 107

Index

151

J Jaffe, D., 2, 10, 19, 58, 60, 61, 63, 106

Psychologically ‘safe’ space, 26, 40, 60, 135 Psychological perceptions, 115, 118

K Kadis, L.R., 3, 66, 85 Kammerlander, N., 29, 103, 106 Kaslow, F.W., 2, 14, 34, 48, 71, 73, 85, 119

R Racial, 33, 100 Reconciliation model, 85, 86 Relationship assessment, 41 Relationships, 3–5, 12, 13, 16, 24, 25, 40, 41, 45–49, 60–62, 64–67, 70, 77, 79, 81, 83, 85, 86, 89–92, 94, 98, 102, 108, 109, 114, 115, 117–120, 123, 125, 126, 138, 143, 147 Religious, 1, 19, 31, 50, 73, 100, 123–125, 132, 147 Religious factors, 19, 147 Resilience, 29, 43, 91, 106, 108, 114, 118, 122, 132, 133 Retirement readiness, 101 Rural, 27, 123, 124

L Lansberg, I., 2, 41, 103, 113, 132 Law of primogeniture, 78, 83, 100, 147 Laws leader/leadership, 78 Leadership development, 23, 33, 45, 60, 78, 96 transfer, 96, 102, 134 Levinson, H., 84, 114, 116, 132 M Management team, 58, 59, 71, 91, 93 Manual of operations, 4, 14, 16, 58, 65, 69, 70, 76, 145 McClendon, R., 3, 66, 85 Measurements, 30, 41, 49 Multifactor, multifactorial, 5, 113–127, 137, 140, 147 Multigenerational, 9, 10, 20, 47, 48, 65, 93, 106, 110, 115 N National, 5, 57, 68, 81, 97, 99, 101, 102, 124, 135, 137, 143, 148 Networks, 2, 28, 43, 44, 63, 66, 98, 109, 117, 123, 124, 144 O Olson, D.H., 44–46, 122, 126 P Philanthropies, 20, 27, 59, 64 Political factors, 124, 125 Post-nuptial agreements, 71 Poza, E., 58, 63, 65, 69, 70, 78, 104 Pre-nuptial agreements, 71 Primogeniture, Law of, 78, 83, 100, 147

S Schein, E., 78, 121, 122 Self-awareness, 43, 45, 51 Sharma, P., 2, 106, 116 Siblings, 33, 39, 41, 80, 83, 88, 90, 100–102, 104, 116, 118–124, 126, 132, 138 Sirkin, M., 6 Social social capital, 26, 46, 140 Social Economic Wealth (SEW), 27, 135 Social support, 80 Society, 58, 64, 75, 81, 115, 124–126, 132, 137 Socio-cultural, 124, 125, 132, 147 Spector, B., 59, 69, 81 Stages of family business succession, 102, 103 Stakeholders, 27, 30, 36, 58, 96, 97, 102, 115, 123 Stewardship, 5, 10, 19, 20, 35–36, 50, 60, 63, 64, 82, 84, 91, 96, 107, 123 Story-telling, 78, 106 Structures, 3, 4, 13, 15–17, 23–25, 28, 34, 41, 50, 57–65, 70, 80, 82, 96, 119, 123, 132, 137, 145 Succession selection process, 95, 101, 145 succession planning process, 24, 63, 110, 147 successors, 87, 95, 96, 101–103, 146 Survival of firm, 123 Sustainability, 25, 115, 131, 133

Index

152 T Tagiuri, R., 34, 35, 113 Three Circle Model, 34–36, 113 Transgenerational, 34, 43, 47, 95, 98, 114, 120, 124, 131, 133, 134, 136 V Values, 1, 3, 5, 6, 9, 11, 15, 17–20, 24, 25, 28, 30–33, 35, 36, 40–46, 48–51, 61, 62, 65, 66, 69, 71–73, 76–80, 91, 98, 100,

104–106, 108–110, 115, 117–124, 126, 132–140, 144, 146 W Ward, J., 18, 45, 59, 60, 69, 72, 78 Wealth literacy, 20, 125 Wealth management, 41, 59 Z Zellweger, T.M., 3, 115, 120, 133