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Helping Family Businesses
Prosper Across Generations®

Leveraging Change to Achieve Continuity

By Stephanie Brun de Pontet, Ph.D.

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“Your life does not get better by chance, it gets better by change.” – Jim Rohn

“When in doubt, choose change.”
– Lily Leung

No matter how many fine platitudes one hears about change, the fact remains that change makes most people uncomfortable. We are creatures of habit and prefer some predictability in almost all aspects of our lives. Even when we can objectively see there is some need for change (you are miserable at work), we will resist taking action (looking for a different job), quoting the mantra: “better the devil you know than the devil you don’t.”

We want to feel a certain amount of mastery in our professional roles; a sense that we know what is expected of us and a belief we have the skills to do the job well. Changes in our work responsibilities or routines provoke anxiety and frustration for many people. In our personal lives, we crave secure attachments — stable and meaningful ties with others who give us a sense of belonging. If a member of your inner circle changes his or her behavior — or their relationship to you — it can feel like the universe has turned on its head.

What does this have to do with family business? A lot, as families who seek continuity in their ownership of businesses or management of wealth and philanthropy, paradoxically, need to actively embrace change. Consider, when success is measured in generations, a business needs to have deep strength in innovation, diversification and other skills that will enable the enterprise to evolve and change in order thrive decade after decade. Likewise, the family needs to be able to keep to its core values while adapting to include new members, growing generations and an increasingly diverse range in age. In fact, the family and business’ capacity to change —while embracing stability and continuity —might even be a good predictor of family business longevity. Yet, change in the context of a family business is particularly hard.

Comfort with Status Quo
Why change when everything is great? It is often the case that the core decision-makers in a family enterprise see little need for change. They are at the top of their game, the business is succeeding and all feels right with the world. If others in the family suggest there may need to be some changes, these leaders will resist as they do not want change to the status quo. In addition, we often find families in business are conflict averse so there may be little voicing of a need for change initially, as all may fear rocking the boat in any meaningful way.

In fact, when things are going well enough in the family enterprise, there is not a lot of will to consider changes — even when all are aware that change is inevitable (i.e., the founder is mortal, so change will come whether we are ready or not). The reality is there often needs to be some pain to motivate change. There must be growing awareness that the company is losing market share or a disruption to family relations before people will start advocating more forcefully for change. However, if a little pain does not motivate needed changes, the risk is the pain will escalate to the point of limiting the opportunities for successful change. If you do not evaluate your business strategy until the competition has stolen half your business, you may not have as many options for how to proceed at that point. Likewise, if family relations become so toxic they lead to a cut-off, there may be little that can be done to rebuild strong family bonds.

Group Dynamics
While going through change as a group can create comfort — a sort of “we'll get through this together” attitude — more often than not, groups generate solidarity against the change, or break into political factions that make achieving the change more difficult. Anyone who has gone through a technology upgrade at work has seen this in action! While we know the new platform is likely to make our lives easier in the long run, we are first confronted with the changes and all we see are the quirks and low-level irritants that suggest this was a terrible idea. In an office, folks will commiserate with one another, potentially escalating resistance to the change that all had wanted to see only months earlier. Alternatively, this change could further divide the “technology types” and the “creative types,” escalating tension that erodes productivity. The instability and anxiety that come with change can be very disruptive to a group.

Family Dynamics
When the group facing change is a family, the underlying relationships may also conspire against the needed change. For example if there is consensus that the accounting firm that has worked with dad for 35 years may no longer be adequate to the challenges confronting the business, the love and respect we hold for dad may make it more difficult to have this conversation, and advocate for this change. Similarly, when Junior takes over the leadership after dad passes and demonstrates that he is not up to the job, his role as an owner — and his relationship to other owners and family — may make it very difficult to address the needed change in leadership.

Group and family dynamics can conspire to prevent needed change at the board of directors. When a business has grown to a scale where it would greatly benefit from a board with more independents, there is often resistance to this change, as it involves family members stepping off the board. This change may be perceived by owners as a threat to their status or voice in the business and is often seen as a threat to their family connection, particularly if the board meetings have historically been the primary glue unifying the family. Further, as there will typically be some family members who remain on the board, jealousy and other family dynamics may make it very challenging to bring about this important change.

Group Complexity
Further complicating the change process in a group is that different people have different levels of tolerance for change, which can often affect their views on the right pace of change. This difference in comfort with change can lead to a lot of tension in a family business. Those who are eager for change are impatient and believe the business or family are stagnating, putting both at risk. Those who resist change feel overwhelmed by all the changes proposed at once (in the market place, in the family system, in the ownership protocols) and may want things to slow down so these important decisions can be made in a reasoned and thoughtful manner. While reconciling these views can be challenging, it turns out the presence of both may be critically important to the long-term sustainability of a family enterprise.

In any group there will be those who are eager to embrace the future, learn new technology, seek to develop additional product extensions, professionalize the board, etc. Why can’t we make our product in Eastern Europe, they ask. Let’s launch a family foundation, they suggest. Let’s empower the next generation with votes at the family council, they propose. These are the “change agents,” individuals who will bring ideas and energy to try new things. While this is an important voice, this impulse should be tempered with reflection on core values, consideration of how a given idea fits into the big picture, full evaluation of risks, etc.

Most families also have individuals who need to think everything through, want to consider every variable before making a decision, and may simply be less keen to go in new directions. If there is a lot of enthusiasm for change in the family, these folks are seen as the naysayers. While sometimes this is true, there are plenty of situations where these individuals are the “voice of continuity”—the reminders of the bigger picture, core values and legacy that the family seeks to perpetuate. However, while their goal of preserving the legacy is important, if they are unable to see any evolution in that legacy (they can tolerate no change), there is risk the business will be eclipsed by market forces and younger family members will either revolt or simply grow disconnected from the enterprise.

Solutions: How to Embrace Change to Secure Your Continuity
As the media reports all the time, the pace of change in the world is an ever-escalating phenomenon. While we need to keep pace as businesses and individuals, we must also think through the changes that we embrace to ensure we are not chasing after fads and are keeping true to our core values. While change is never easy, it is the path to growth and will help your family and business adequately prepare for future challenges and opportunities. The following are a few tips on embracing effective change in your family business:

  1. Invest in a little self-knowledge. How comfortable are you with change? How comfortable is your business? How comfortable is the family? Greater awareness of each one’s change tolerance can help to build mutual understanding.
  2. Find the “change agents” and the “voices of continuity” and encourage dialogue between them to build understanding and to explicitly seek to draw on the wisdom of both perspectives. Encourage high change tolerant and low change tolerant folks to work together on a change project on which they can agree.
  3. Develop processes that push the family and business to actively consider and plan for future changes before these changes become urgent and more difficult to manage.
  4. Seek to exercise your “change muscles” and work to develop more comfort with change among your decision-makers. Practice with small changes, developing processes that evaluate the merit of the proposed change in the context of the long-term goal of continuity.

Change simply for the sake of change consumes a lot of energy for no beneficial reason. Effective change is part of an evolution that fosters the continuity of the vision and purpose of the enterprising family. This is the change that is key to your continuity.

 

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