Maurits Bruel is a family business consultant with GITP International in the Netherlands.
Family firms want to see their values reflected in their business. The 2002 FBN conference addressed how this can be achieved
John is proud of his family business and the values it stands for. Where some businesses provide lip service to their values, he lives them every day. He measures his success not only by the bottom-line results of the business, but also by the goals that go with the company's core values.
Fifteen years ago, for example, the company started a pension fund for its employees. While this is not unusual, what is special is the pride John and his management team get when one of the blue-collar employees decides to join it.
The management will even make a personal effort to convince workers, knowing that many of them do not realise how important it is to take care of their future, and how tempting it is for many of them to maximise their short-term net income. John's heart really goes out to all 1,000 employees who have helped build up this family business with a turnover of almost €1000 million.
Stories like this were abundant during the FBN's 13th annual world conference in Helsinki, the theme of which was 'Values and Social Responsibility'. Although anecdotal evidence is not enough to prove whether family businesses are more or less likely to behave socially responsible, it shows that many family businesses want their family's values to be reflected in the business' behaviour. The main questions during the conference were why family businesses want this, whether they should want it and how they should put it into practice.
One of the more remarkable researches presented was that by Professor Johan Graafland, the director of the Centre for Corporate Social Responsibility at Tilburg University in the Netherlands. His research comparing family businesses and non-family businesses led to a surprising conclusion: large family businesses act in the same way as other large businesses, but small family businesses pay less attention to social responsibility than small non-family businesses. The small family businesses perceived social responsibility as less of a moral obligation and also ranked its positive effects lower.
It thus seemed that statistically, many family businesses behave the way Erkki Liikanen, Finnish European Community Commissioner, suggested, urging families to treat their businesses as nothing more than profit-making entities. He said that demands should not be made on companies other than to behave in the best interest of their shareholders.
Although the conference delegates were impressed by Liikanen's presentation style, few were willing to accept his purely economic definition of a family business. Still, this controversial view challenged people's thoughts. It made some delegates' convictions even stronger, as one put it: "I suddenly realised how much value would be lost if it were not for our family's influence on the company."
Putting values into practice
The concept of values is useless if not put into practice. As one delegate said: "I have more respect for a man who has opposite values to mine than for a man whose behaviour does not match his words."
Each family business is constantly confronted with the challenge to not only talk about values, but to live by them. Only then can family values truly be the force that ties generations together and provide family businesses with a unique position on their marketplace. For values to play an important role in the family business, four distinct criteria must be met, both within the family and within the
- A common view and definition of the values;
- A clear understanding of the reason and importance of the values;
- Experiences that strengthen the values and make them feel authentic;
- Individual personal growth and the internalisation of the values.
Dialogue among all involved parties and role model behavior by senior family and business representatives are essential in achieving success, but are sometimes lacking, even in the best of families. Many delegates have had the experience that in discussing their values with family members, they found themselves arguing about the definition. In such cases, many families end up agreeing to disagree, not realising that this will harm their future communication.
The second aspect is that of grounding the values: working on sharing not only the value itself but also the story behind them. This is important in both family and business settings, because many values will have to be adopted by employees, as well as family members who have may not have been involved in developing the values. An example from a retailing family business present at the conference illustrates this.
A family business with about 100 retail stores has built its reputation on outstanding customer service, tracing back to the personal values of the founder in 1894. Dissatisfied customers get an unrivaled money-back guarantee, no questions asked. One day, the fourth-generation owner hears employees complain about the company's generous policies. Sometimes customers come in without receipts, or even with garments from brands that the chain does not carry, and they feel it is unfair to give refunds in such cases, as they are instructed to do.
The owner realises that they do not see the bigger picture and explains that it would be much costlier to investigate every dubious situation, especially since such occasions are relatively rare. On top of that, the family believes in equal treatment of all customers and leaving too much up to individual judgment would inevitably lead to unequal treatment and loss of reputation. His explanation makes sense to his employees.
The third important aspect of values is authenticity. Clients, employees, family members, society must all be able to see, hear and feel how the values affect the company's behaviour. This aspect is where the family plays the most important role, because they are the living examples who personify the values, even if they do not all run the company. They bring the values to the people and help build a culture in which values give people a sense of direction and trust.
Finally, strong values can find shelter only in strong people. By systematically paying attention to the elements mentioned here, family businesses will help their members and employees realise personal growth. If family businesses are to use their values to strengthen their relationships with all stakeholders of the company, they must aim to become a family business of choice. Not a choice based on coincidence or lack of alternatives, but based on consciousness, strength and shared values.
The future of social responsibility
Family business social responsibility is a result of family business values. But corporate social responsibility is also a global trend, described by Eric Dérobert, Director of the World Business Council for Sustainable Development. He argued that corporate social responsibility has moved to become a mainstream business issue, giving family businesses a unique opportunity to stand out from the crowd.
Many of the family businesses that presented their cases at the conference had indeed included social or environmental responsibilities in their family business values. The Tulikivi family, for example, explicitly described their view on social responsibility:
- We take into consideration the environmental effects of the design and manufacture of our products;
- We try to create jobs in under-developed areas.
The Tulikivi family were only one of the examples that Finland had to offer, as Finnish Prime Minister Paavo Lipponen stated: "Finland has proved that promoting sustainable development does not harm economic competitiveness." He continued to praise family business for its contribution to Finland's success: "Finland would have never become a successful economy without strong entrepreneurs and entrepreneurial families."
That statement could probably have been made by almost any president in the world. The challenge that remains for family businesses around the globe is to make sure the statement will remain to be true for the generations to come.