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Leadership in family business – the what, who and how

Nigel Nicholson is Professor of Organisational Behaviour at London Business School.

The leader of a family business can define the identity of the business. Nigel Nicholson guides any potential or actual leaders with the what, who and how of smart leadership

Leadership is perplexing. Each of us think we know what it means yet our ideas about it often do not match. One person's image is heroic – another's focuses on stewardship. And things become no clearer when we consult the hundreds of volumes on the subject. They just add to the confusion, and few have anything to say about family business and its special issues and demands. Yet this is what family business owners and managers want to know about. Is there a special way of leading the family firm? Are there particular traps to watch out for? Is there a special advantage to be secured by smart leadership? The answer to all these questions is yes, but they require a deeper understanding.
 
Three questions should guide this. What is it that needs to be led in the family firm? Who are the leaders, actual and potential? How do family business leaders need to lead to be most effective? These three questions are interconnected, as we shall see.

The 'what' of leadership is the role and tasks of the leader. In non-family firms these parameters are often set, and the business searches for the right person to fill them. This is not always that straightforward, since the incoming leader is quite likely to change the rules of the game to suit him or herself better, within often quite heavy constraints. In the family firm this plays out differently. The 'what' of leadership is more free to be determined by the leader and other interested parties, especially if the incoming boss is a family member. This is one of the keys to comparative advantage of family firms – defining the key contribution of the leader. There are three key elements to this.

First and foremast is what is the business about – what are its goals. This is a matter of mission and vision. It is the special attachment that family firms often generate towards what they produce or do – an identity with the business. The role of the leader is to help create the powerful commitment to quality and service delivery, from the top team down.

Second are values. This is the leader's role in culture building. The best family firms score highly in the way they relate to their stakeholders – employees, suppliers and customers principally. Integrity, responsiveness and standards need to infuse all levels. The leader has a special responsibility as the chief standard bearer, to walk the talk.

Third the leader can determine the leadership model itself.  Should there be a co-leader model? What form of top team should operate? What kinds of liaison with other bodies, such as boards and family councils should operate? The use of advisors is a critical element here – who they are, how much they are to be used and, crucially, when is the best time to use them.

The 'who' of leadership is the tough call around succession. This should not be viewed as a singular challenge. We think too much in terms of the lone leader. It is a matter of building a winning team. In choosing a family member the question becomes not just who, but what is their profile and how can it be most effectively augmented by teaming with others. At London Business School we are doing psychological profiling with the leadership groups of family businesses to help them make smarter decisions in this area, and to help them understand what unseen biases might be operating among leadership teams with varying styles, goals and interests.

The 'how' of leadership is about how leaders can best deploy leadership skills and still be themselves. This is the more familiar territory of management textbooks about the classic skills of communicating, teambuilding, giving feedback, delegating, coaching and influencing. But individuals differ in their need for these skills, according to the 'what' and the 'who' of leadership.

The challenge of diagnosing the essence of the what, who and how, and their interrelatedness, is not unique to family business. It should happen in all firms, but it often doesn't. Family firms are typically less inclined to take leadership for granted, so are already one step on the way to wisdom. Facing up to the challenging questions we have highlighted here is the rest of the journey to effectiveness. 

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