The Critical Nature of Culture in the Family Enterprise: The Difference Between Ordinary and Extraordinary

By Kent Rhodes, Senior Consultant at the Family Business Consulting Group

According to Edgar Schein – a leading thinker about culture in organizations - culture is the invisible, consistent environment that influences how people think, feel and act. But he also admits that culture in a business is an abstract concept and likens it to what personality or character is to an individual: We can see the behavior that results, but it’s harder to see the largely unconscious norms and thinking underneath that cause those behaviors.

There is much more evidence from research showing a direct link between the culture of an organization and the extent to which it performs well or is effective. This link is even more impactful in a family owned business since part of that culture involves the relationship of owning family members with the business, employees, board members and with each other.

So, while family enterprise culture is certainly unique to the families that own and operate them, it also can be the difference between the ordinary and extraordinary as it relates to excellence, employee engagement, trust within the community and reputation for “doing good”. One way to make a culture’s foundation or source more visible is to identify the values that are widely held and deeply shared by owning family members – including the founders - and long-term non-family managers and employees. These aren’t just the values that show up on a poster in the lobby, but the ones that people working in the place, are actually committed to and live by.

For example, sibling and/or cousin teams working together in a family enterprise can influence the culture of the place just based on their life long habits of interacting with each other. Whether they are combative around decision-making or wind up laughing as much as getting any work done, they influence the overall culture of the enterprise in ways that seem quite natural to them, their employees and even customers.

So, the 100 year-old family owned lumber yard and home improvement store values “customer service”, but what they really mean is that they know that personal relationships with contractors of all sizes keeps them close to the work happening in the community and everyone is committed to building and deepening those kinds of relationships: They can quickly anticipate what contractors need and supply them with high quality goods “just in time” and they do much of that work over a cup of coffee with their customers. This deeply held value of doing things via close relationship with customers may show up as “just the way we are around here”, but it is a culture that means the big box stores in the same city can’t even begin to compete with them.

But like most factors that create or influence culture, the impact of relationship and communication habits among family members on the culture of their business may not be readily obvious – or necessarily helpful.

Take the family that is generally combative in decision-making – or perhaps values avoiding conflict altogether. Within their enterprise, employees and managers are likely to develop attitudes and plans of “workarounds” in order to more efficiently complete work. While this may carry an element of innovation, the price may also include a reduced sense of respect and trust for some owning family members with those workarounds being seen as a necessary way to avoid the family confrontations and complete basic work. The end result may not immediately impact the “success” of the business per se, but it could be impacting the extent of the business success – both in the short and long term - if all that is getting done is the bare minimum. That could have a cascading effect that impacts the company’s ability to retain the very best talent and even the reputation of the family in the community.

Taking time to consider how the family’s influence on the culture of the enterprise is worth a closer look.

About the author: Kent Rhodes is a Senior Consultant with the Family Business Consulting Group and a Clinical Professor with Pepperdine University’s Graziadio School of Business Management in Malibu, CA. He works with some of the most successful family owned companies in the world, helping them plan for change and implement ownership and management continuity strategies.

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