Family businesses have a primal appeal. They’re as old as human history, and people have always worked and lived together in family groups. Why are they so successful? Evolutionary biology can shed some light on the question.
One of the most interesting things about family firms is the way their hierarchies work. Many non-family firms are heavily influenced by the tendency of people – men particularly – to go into a pecking-order mentality and for people to compete for some badge of quality. They then create organisational systems and designs that encourage this. You have competitions at various stages of the business to see who moves up and who doesn’t. This is not a terribly rational way to go about things; it’s a pretty simplistic process.
We like to think that our organisations are rationally structured, but there is a lot more randomness in these things than we like to admit. In hierarchies that are run along these lines you can’t guarantee that the best people will get to the top. What you can be sure of, however, is that those who do will worry excessively about whether they are good enough, and engage in all sorts of dysfunctional behaviours to prove their worth. This is a waste of energy. These sorts of organisations are also very disadvantageous to women, who don’t like playing boys’ games, and are not very good at it.
There are lots of ways of organising, so why are so many structured in this destructive, and counterproductive way? Part of the blame must go to economists who have fostered this quasi-market view that you can evaluate somebody’s worth, and if they compete on the market then the best rise and the worst fall. It’s not really a viable view of human nature, but people are easily taken in by it. Family businesses, though, tend to be less inclined to swallow the pseudo-rationalistic model. Family members know that as a family member you have an advantage, which is that they don’t need to feel that they are better than anybody else. They can just get on and do a good job without getting embroiled in any of these games.
Because the family owns the business the hierarchy is not going to change, and people don’t get as hung up on the cut-throat competition for promotion. This can create a more flexible organisation, which is actually similar in some ways to how the oldest humans organised themselves. The way hunter-gatherer groups work is that if the bloke who throws the spear is under the weather then he’ll give the spear to someone else, and take on another task. People can be very fluid and self-organising when they are free from the assumption that you need to act in a certain role. Humans are good at making blurred hierarchies of the sort that have proved so successful throughout human history. When thinking about how to organise businesses, it’s more profitable to look at evolutionary psychology than economics.
For example, family firms often have a broader value set that is directed at simply doing the best job possible. It would be good if organisations could escape the idea that to be managing people you need to be better than them, but unfortunately it’s built into a lot of human resources management systems because of the way people are paid. Family businesses are well placed to get away from the idea that business life has to be a tough-guy competition, and can dump the destructive notion of “winners” and “losers”. And they can derive competitive advantage from their culture. That’s not to say that family businesses are perfect. Their organisational structure often puts the onus of leadership onto the patriarch, or matriarch, who can take on the role of the wise elder. That can have its own problems.
Adapting to change
There’s another intriguing way evolutionary psychology can shed light on family businesses. They are extremely good at adapting to changing conditions. They can, not to put too fine a point on it, evolve. The received wisdom is that family businesses are old-fashioned, slow-moving and something of a throwback. But that is just not true. Look at the way that good family businesses all bring in non-family managers these days. And in Germany they have responded to challenges from newcomers by developing close links with banks and universities, and strengthened their positions to the stage where they are among the world’s most successful.
In Japan, there is a tradition that if there is a shortage of heirs in a family business, men who marry into family businesses take the family’s name. If these aren’t something like an evolutionary adaptation to a new environment, what are they? Family businesses are an old idea, yes, but they are by no means obsolete. Their fuzziness has served them well for millennia, and their determination to seek our new niches and survival strategies means that they will be around for a while yet.