For anyone who has worked with (or in) family businesses for any meaningful period of time, especially as it pertains to continuity planning engagements, they would have heard family members say something like:
“I love my brother, but I could never work with him.”
“I believe there needs to be one clear family leader of the business… Not leadership by committee.”
“How can I create an estate and succession plan that is fair to all my children, even though they don’t contribute equally to the family business, or some not at all?”
“My sister’s son is a slacker and he is only in the business because my sister believes she owes it to him.”
“My uncles continue to collect the majority of the profits and are the only ones who have voting shares, yet my generation is in here grinding it out every day.”
There is a famous quote by Peter Drucker that says, “Culture eats strategy for breakfast.” What this quote implies is that the culture of a company will determine its success irrespective of the effectiveness of the company’s strategy.
For the purpose of this article, culture includes what is sometimes referred to as the “Invisible glue” that holds family businesses together (or not). For example, trust, purpose, shared vision and values, effective communication, negotiation and conflict-resolution skills and family dynamics. Regarding strategy, it includes – yes – strategy, but also governance, policies, market analysis, capital and the overall viability of the enterprise.
For a couple of decades, Legacy Capitals has been consulting and coaching many shapes and sizes of family businesses and enterprises. For example, a franchise business that dominated a particular local region that was eventually sold to their rising generation after considerable deliberation; to a multi-billion revenue international company that was family owned and controlled, however, was ran more like a major corporation than a family business; to a billion dollar-plus portfolio largely comprised of real estate and other private investments that was still run like a start-up “Mom and pop shop.”
In our experience, both culture and strategy matter. If a family business fails because its product line became outdated because of a sudden innovation in its respective industry, yet the family maintained a cohesive culture, it was the strategy side of the equation that would get the majority of the credit for the failure of the business. And in other cases, providing clear processes, policies, governance structures, and roles and responsibilities are the very inputs that enhance the culture of the family business, making it easier to plan for succession.
For those working with (or in) family businesses who focus primarily on the strategy side – maybe because they are not quite sure how to assess and/or factor in the “Invisible” cultural aspects of the family business that don’t neatly fit into a spreadsheet or a family constitution – here are a couple of guidelines and discovery questions Legacy Capitals utilises in our work with family enterprises:
It is important to be seen by the whole family as a neutral third party. Therefore, avoiding functioning like an attorney who represents one family member (e.g., the founder) and seeing the whole family as the client (or at least initially those family members involved in the family enterprise).
To help with the aforementioned guidance, at the start of the engagement, conduct one-on-one meetings with each family member gathering their thoughts and perspectives about what it will take for the family and family business to flourish across the generations – making sure all conversations are private and kept anonymous. What is reported back to the family is a summary of what you learned and recommend without referencing or quoting any family members.
Culture discovery questions
1. Does your family enterprise exist to serve your family, or does your family exist to serve your family enterprise?
2. What does your family and family business require to flourish across the generations?
3. Do you believe your family and enterprise can flourish together? If not, why not?
4. What is the purpose of the family business in your life and in the life of the family?
5. What is your role in the business? What role do you hope to have in five to ten years?
6. If you are not working in the family business, do you want to? If yes, in what capacity?
7. Do family members get along well when working together in the business (e.g., high levels of trust, strong communication skills, maintain family and work boundaries etc.)?
8. What are the values shared by those who work in the family business?
9. How would you define the culture of the family business? Or, what three words or phrases would you use to describe the culture?
10. What is your 100-year vision for the family business?
Factoring in our guidelines and the sample of aforementioned culture-oriented questions significantly enhances the odds that you will know what is most important to the success of the family and the family enterprise, thereby setting up greater success for the family businesses you serve.
So does culture really eat strategy?
Thus far, after consulting and coaching a myriad of family enterprises, we have found that culture has more of an impact on success than not. Because, when there isn’t a strong culture, then it is more difficult to have the family gather around the table to productively work out the strategy-related success inputs of the family enterprise.
In summary, culture will not eat strategy every time, however, it has the potential of taking a really big bite out of it.