For the collective good

While it may be futile to debate which of the stereotypical  value systems are better, Eastern or Western, there is one value that is essential for the smooth functioning of the family business:  thinking, acting, planning for the collective good.

Acting on behalf of the collective good does not mean downgrading individual concerns. It does not mean repressing individual interests or obliterating individual rights.  It does not mean “condemning young people to slave away in a business which destroys their soul,” as a 20-something, desperately unhappy third-generation scion of a well-known retail family clan puts it.

For how can the good of the whole ever be achieved if individual thoughts, ideas, feelings are not taken into account?

The notion of the collective good is usually thought of as more Eastern rather than Western, which tends to emphasize individualism. Thus, I am glad to note Craig Aronoff and John Ward, two family business gurus in the United States, emphasize this trait in their seminal work “Family Business Values.”

“We have met many families who frequently retell the ancient parable of how a bundle of sticks is stronger than any single twig,” say Aronoff and Ward.

“The attitude this parable teaches, a willingness among family members to place the good of the family as a whole above their individual needs, can be a powerful tool for pursuing shared goals.”

This contention is backed by research.  Family business experts Nicholas Kachaner, George Stalk, Jr., Alain Bloch and Sophie Mignon compared around 150 publicly traded family conglomerates based in the United States, Canada, France, Spain, Portugal, Italy and Mexico that were worth more than $1 billion each to similar-sized firms not predominantly family-owned or controlled.

The researchers did not study Asian firms, because “so many of them are family-controlled that it’s difficult to find a suitable comparison group,” they say in the Harvard Business Review.

The researchers looked at the companies’ performances from 1997 to 2009, and discovered family firms outdid non-family ones, due to factors such as the former’s long-term perspective, frugality, little debt, diversification, strategic acquisitions and so forth.

Another significant factor is the collective attitude and mind-set of successful family businesses, which can lead to better employee retention than nonfamily ones.

“The leaders of family companies extol the benefits of longer employee tenures: higher trust, familiarity with coworkers’ behaviors and decision making, a stronger culture,” say the researchers. “These businesses have a lot in common with what the academics … call ‘high-reliability organizations,’ in which long-serving teams of specialists develop efficient team dynamics and a collective mind-set that helps them achieve goals.

“Says the CEO of a $10-billion diversified group: ‘We don’t have the smartest guys out there, but they know their job like nobody else, and when a problem hits they can act immediately as a team—one that has been there before.’”

The most difficult family business cases I deal with are those whose members prioritize individual benefits above all else.  When everything revolves around the individual self, then rivalry inevitably results, succession becomes a problem, short-term interests prevail (such as pocketing dividends immediately over plowing back profits into the business).

“Healthy families still respect individual needs,” say Aronoff and Ward.  “But family members are clear that, when situations pit the needs of one individual against what’s best for everybody, the collective welfare will prevail.”

How can this be done?  Value formation starts at home.  Parents need to show to their children how to think and act beyond the self, eschewing destructive competition in favor of collaboration, and empathizing by placing oneself in another person’s situation.