As the majority of private businesses are family businesses, I am always interested in new family business research and, because family businesses tend to exhibit common characteristics around the world, international studies are always interesting, especially when they focus on issues that have not been widely canvassed here.
The 2007 American Family Business Survey is a good example. This study covers many of the same areas as our own surveys but also looks at issues relating to ethical behaviour and social responsibility of family businesses.
It found that 91% of the American family businesses surveyed believed that the owning family’s values are emphasised in the business. In fact, the authors conclude that family orientation does translate into more ethical business behaviour. Around 37% of family businesses surveyed actually had a written code of ethical behaviour, and 60% believed that their ethical standards were more stringent than those of their competitors.
The survey quotes a 2006 study of S&P 500 firms by Dyer and Whetten which found that family firms exhibit more social responsibility than non-family firms. Dyer & Whetten relate such behaviour to the owning families’ concern about image and community reputation. It stands to reason that, if the business carries your name, or is otherwise intrinsically identified with you, you will care as much for the reputation of the business as you would for your personal reputation.
It is no accident that a large proportion (87%) of the respondents to the 2007 American Family Business Survey say that family members share values; interpreted as meaning that there is agreement on values, attitudes and beliefs among family members of the business ownership group. Family unity affects other stakeholders as well; for example unified families are more likely to share their values with employees, with 85% reporting that the family shared values with employees to a large or even a great extent. The study concludes that ‘the overlap between individual and organisational values may result in increased levels of employee loyalty, commitment and organisational citizenship behaviours.’ They also found that 85% of respondents share similar values with their customers and comment that ‘such synchronised values between families in business and their customers may improve relations and foster economic stability’.
I have no doubt that this also occurs here. Family businesses owners I know like to do business with other family businesses which have similar values to their own. And family business owners are usually very certain about their values. When I ask family members, in the course of family business constitution workshops, to list the top 5 values of their family, they are almost always clear and consistent, which is not surprising – after all they have usually grown up in the same environment. The values of the family are often automatically impressed onto the business by family members who interact with employees, suppliers and customers. This is an organic instillation of values and culture from people who live them rather than an idealised statement of values elicited from a selection of employees, often representing the values they think the business should have rather than those that really exist. This is why family business values tend to be more pervasive and entrenched and they remain as long as the family continues to display them in their interaction with the business.
So what values do our family businesses embrace?
A review of the values of families in business that I have worked with shows that popular values include trust, integrity, respect, passion, loyalty and honesty. No surprises there, and not greatly different from the stated values of many non-family businesses.
However a maxim such as ‘all dealings of the business have to be honourable, legal and moral’ is more likely to be vigorously promoted when the family’s own standing in the community would be damaged if it failed to be observed.
Security and stability are also common family business values; one family established a rule that if the business made losses for two consecutive years it would be closed, rather than further deplete the family’s assets.
Humility is another popular family value, sometimes combined with respect and compassion and defined as being respectful of, and compassionate to others, grateful for the opportunities available and sensitive to the needs of other stakeholders. Most people would be glad to work for business owners with this philosophy.
While I’m not saying that family businesses are always more moral or ethical, I think it is true that their values are generally more likely to permeate the business and be shared with employees. People like to deal and work with businesses whose values they share with the result that good values can breed successful businesses. The advantage that family businesses generally have is that, because their values are imbued in, and emanate from, the family, they are more likely to be genuine.Sue Prestney FCA is spokesperson on SMEs for the Institute of Chartered Accountants in Australia.