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Rethinking family business power dynamics

Author: Nicolas Schwartz


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Mixing family with business is a delicate balancing act—and no more so than during the third generation and beyond. With the family tree growing ever-wider, different personalities begin to have their own ideas, ambitions, and opinions. Arguments about strategic direction are common. Left unresolved, they can quickly undermine the shared sense of identity built by previous generations.  

The family business owners often think they must get everyone to agree on every issue; familial harmony is seen as the bedrock of broader business success. Yet when we partnered with Bocconi University to analyze some of Europe’s most-enduring family businesses, we found that the opposite was actually true.

The businesses we studied have thrived for four generations or more than a century. So, how had they managed to navigate cultural tensions and family dynamics?

We found that they all shared a similar outlook: they recognized that maintaining family unity at all times is an impossible task. So, they don’t strive to build a single collective culture. Nor do they expect everyone in the family to agree on every little issue. Instead, they try to foster a basic level of togetherness that reminds everyone that they are part of a broader family with a shared heritage and that their personal needs need to be balanced against everyone else’s—as well as those of the business. 

Encouraging a sense of belonging

What does this look like in practice? Our study with Bocconi University found that members of Europe’s most successful family business understood two three things:

  1. Focus on agreeing on a few core, business-critical issues, such as the ownership structure, governance issues, or succession pipelines. For everything else, the families forge ahead by agreeing to disagree. As one family business member told us: “We are more than a hundred shareholders from three different generations: How could we meaningfully share a single view on everything?” While one member of Sella, the Italian textile business, said: “Family members must understand that they cannot win on each front; the different needs of family members must be balanced.”
  2. Avoid forcing every member to adopt a shared sense of identity. Instead, the 10 families give each person and family branch the freedom to retain their own identity and goals. Yet by uniting on key business topics, they naturally share a feeling of “psychological ownership”—or as one family put it, the feeling of “being part of an exclusive club”. In turn, this creates bonds between members that are strong enough to keep the family together in business over generations.
  3. Cultivate a core set of expected behaviors. All the firms we analyzed displayed strong family values. Yet they rarely codified them into explicit value statements. Instead, the goal was to set expectations around how members would behave, including their work ethic, personal lifestyle, or a shared commitment to nurturing the next generation. These actions were directly or indirectly encouraged through various activities and initiatives that helped preserve a sense of belonging, even as the family grew bigger over time—whether through a family foundation, a Shareholders Agreement, or annual social events. Whatever option the family business chose, the result was always the same: a sense of cohesion that allowed members to sit around a table, discuss business issues, and make shared decisions that helped the business endure.

Lessons on longevity

Conflicts between individual members are inevitable for every family business. Yet our analysis shows that it is possible to overcome them—with the right approach. Doing so requires owners to turn the conventional wisdom around power dynamics on its head. The goal is not to get every member to fall in line, but to find ways to balance individual and collective needs.

Our advice for younger family businesses is to concentrate on the following to stand the best chance of navigating familial conflicts:

  • Be pragmatic about developing a shared culture and identity. Long-lasting family firms are conscious of the difficulties in reaching broad agreements among members with radically different backgrounds and viewpoints. They are happy with agreements around a few core principles. 
  • Aim to focus shared decision-making towards identifying and supporting “the common good” of the collective family. 
  • Strive to instill joint values and behaviors to prevent any member’s self-interests from undermining family cohesion and welfare. 
  • Perform joint activities to reinforce a core idea of “the family” and its principles, such as a foundation, annual trips, or collective shareholder agreements.





Click here to discover more about how family business owners can navigate other common tensions, including how to choose their next leader and balance cultural challenges.




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