Why family communication within business helps

July 27, 2009
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Many family businesses consciously limit the amount of “family communication” within the business as a way to keep the business “professional.”

From a business standpoint, this makes a lot of sense. Family members probably shouldn’t be discussing private matters at the office and employees probably shouldn’t be gossiping about the next generation of ownership, or the perceived nepotism of the current generation.

Even though some family communication should be prevented, a recent study of communication within family-owned businesses has shown that trying to limit all family communication or putting boundaries around who is included in this communication actually makes things worse and increases gossip and the circulation of incorrect information — in one word, conflict.

Earlier this year I led a study of family businesses in Michigan. This study was supported in part by Michigan State University, Grand Valley State University and the Family Business Alliance (of West Michigan). Over the course of three months, this study surveyed 11 family-owned businesses across Michigan. While 11 businesses may not seem like a lot, this study was interested in surveying at least 80 percent of all family members, owners and employees of each family business. The businesses surveyed ranged in size (7-650 employees), generations of ownership (founders to fourth generation) and industry (e.g. agriculture, wholesale distribution, construction and finance). 

While this study produced many interesting and important findings that will be discussed in other mediums, the most surprising finding highlighted the importance of allowing family communication to flow through the business rather than be confined to the family or ownership groups.

For example, in this study we used social network analysis methods to measure and map out how communication flowed throughout the entire business system. These processes enabled us to construct a visual picture of every individual’s role within the overall communication pattern of the business. When family communication was isolated, there was a very clear relationship between limiting family communication and a drastic rise in conflict.

This relationship was apparent no matter the size, industry, or even the number of generations of ownership.

Every time a business limited the flow of family communication, two things happened. First, the employees gossiped about the family and these gossip circles perpetuated half truths and outright lies about the owning family’s character and plans for the business’s future. This phenomenon was termed the “mafia” effect, because the employees tended to view the owning family as underhanded, scheming, conspiring, nepotistic rulers.

What is extremely troubling about this situation is that some of the nicest and most kindhearted owning families inherited these labels simply because they thought they were doing the best thing for their employees. In most of these cases, the owning family thought the employees would resent conversations about the family, while others were trying to avoid the label “family business” because they thought the label minimized the legitimacy of the business.

This phenomenon seems to lead to conflict throughout the family and employees. In all the businesses where this family communication boundary existed, the employees, managers, owners and family members were stressed and constantly battling over strategic goals, direction and the day-to-day operation of the business.

So what’s a business to do? First, recognize that if your business includes at least two family members, you are susceptible to this situation. Businesses that shy away from the label of “family business” are much more likely to develop these results, because the ownership tends to see the business as a “business,” while employees tend to see it as a “family business.”

Next, encourage communication about the family within the business. Just because the ownership doesn’t talk about the family doesn’t mean that the employees will follow their lead. As a matter of fact, if the owners don’t supply the lines of communication to their employees, they will make them up themselves — and more than likely, these will look like the “mafia” phenomenon mentioned above.

The best advice I can give is to look closely at ways to structurally build-in family communication channels. For example, family councils or family meetings can be used to help filter information from the family to the employees. These groups can be extremely effective if there is a function where employees can ask questions or address concerns to the council.

In summary, it is natural to want to create a boundary between the family and the business, but you need to be careful in the construction of this boundary. A strong solid boundary causes as many problems as having no boundary at all. A happy medium seems to be the goal. Building a permeable boundary between the family and business allows information to flow from the employees to the family and from the family to employees, but we should be careful not to let the family and business become overly connected where it is difficult to delineate where the family stops and the business begins.

Brian Distelberg is a family business professor at Loma Linda University in California. He is a trained marriage and family therapist and a published author in family business issues. Correspondence with the author can be directed to bdistelberg@earthlink.net

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