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Living with paradoxes

Joachim Schwass is director of IMD's Leading the Family Business Programme.
John L Ward is The Wild Group Professor of Family Business at IMD.
Colleen Lief is former project manager of the IMD-LODH Family Business Research Center.

Choosing between tradition and innovation can be difficult for family-owned businesses that want to stay true to their values. John L Ward, Joachim Schwass and Colleen Lief explain that by embracing paradoxes, it is not necessary for firms to make this choice

Family firms often do not feel the typical pressure to choose between two desirable goals. The complicated duality of seemingly opposite concepts – family and business, tradition and innovation – appears to prepare family owners and their non-family managers to embrace paradox. Deftly balancing incongruity becomes second nature and fundamental to success. When an enterprise is in touch with its values and why it exists, a forward-looking determination results that can make it unstoppable – and fun to watch.

Reconsidering strategies and values
The whole world has changed for agriculture, housing rental and investment firm Clinton Devon Estates (the Estate), not only since its founding in England in 1299, but notably in the last decade. A rapidly evolving, competitive environment required the company to reconsider its basic strategies and core values. By the year 2000, the Estate sat on the brink of financial disaster. The looming crisis led the firm to do some soul-searching to clarify purpose and revalidate beliefs. Only then could it enact a robust plan for maintaining internal and external coherence and regaining its financial footing.

The Estate had been in the family for 22 generations and encompassed 25,400 acres, 1,280 buildings and employed about 100 people. The purchase of local properties for vacation villas or telecommuting home bases drove property prices through the roof. The rapid change in the make-up of the local community meant an influx of people unfamiliar with both the rural lifestyle and the role and operations of an estate. The political balance also seemed to shift. Environmental advocates and preservation groups had become vocal participants in a public dialogue with the family business.

The Estate's low-risk legacy had undergone significant change over time. Whereas farm income had long constituted a majority of revenues, that figure had fallen dramatically by 2000. Given the urgency of commercial pressures and the needs of a growing owning family, something had to be done. The family's financial future could be assured by simply selling its landholdings, but the family's strong ties to the land and community precluded this option.

Necessary change
John Varley, the newly arrived manager, seemed an unlikely choice, being neither family member nor traditional land agent. The question was how to modify the Estate's operations in preparation for serious future challenges, while retaining the firm's core values? Change would undoubtedly mean pain. The Estate understood that greater profit opportunities could place it in financial jeopardy. In the end, commercial property development outside of the Estate's own lands, where fewer regulatory limits existed, became the focus of its efforts. In taking this leap of faith, the Estate incurred debt for the first time since 1519. Varley sensed that a closer relationship with the community was essential. A survey of community leaders highlighted the need for greater engagement with constituents and the Estate embarked on a programme to inform stakeholders about its significant preservation work.
 
After five years of fundamental reconsideration of all that the Estate held sacred, very little was new in terms of values and philosophy. Perhaps more important than hiring a new CEO and undertaking a major change programme was the renewed sense of self that this process unleashed.

The company learned several lessons:

- There is not an unbreakable bond between a firm's traditional industry and its culture and purpose.
- Hard decisions are inevitable. But deciding between two desirable choices may not always be necessary. There may be ways to accomplish both.
- Frequent communication with stakeholders is essential. Embark on a long-term relationship with constituents.
- Engaging the workforce may unlock new ideas and potential already in your midst.
- An outsider with fresh views, who shares your philosophy and values, may play a vital role as a change agent.

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