Multi-generational family business transitions are critically dependent on leadership dynamics between the the incumbent generation (aka: “now gen”) and the next gen to ensure the long-haul survival of both the business and the family. On the surface transitions appear logical and straightforward but, the heart of the issue lies below the surface at the irrational and emotional levels where families must nurture socioemotional wealth (SEW; Gomez-Mejia, 2007). So, what exactly is SEW?
Definition: Gomez-Mejia (2007) coined the term socioemotional wealth to reflect the non-economic attributes lending strength and competitive advantage to the family and its business.
SEW is the intangible energy flowing through the hearts, minds, and interactions of family members creating and strengthening bonds.
When SEW is low the family experiences more destructive forms of conflict that inevitably erode business performance.
When SEW is strong and family business dynamics are constructive, family business leaders are empowered to drive results efficiently and effectively for both business and family interests through:
Recognizing family members as emotional beings with differing personality needs all subject to hidden internal forces shaping behavor
Providing opportunity to explore and reconcile thoughts, feelings, and emotions that drive behavior
Fostering a loving, values-based environment with clear expectations
Prioritizing both family relationships and business outcomes
Maintaining governance processes in the family-business system
Curating a business culture that supports both organizational strategy and family legacy
Ensuring long-term strategic business endeavors promote the family’s interests.
Pseudo (or false) SEW occurs when families prioritize relationships over results. In these situations symptoms such as: non-productive conflict; power, authority, control, and influence (PACI) issues; low or ineffective accountability; and enabling dysfunctional behavior pervades. Pseudo-SEW can be difficult to detect as love among family members often runs as strong and as deep as their resentment. Common signs include:
Artificial harmony
Compromise or avoidance that enables dysfunctional behavior
Hiring for relationship over competency (eg. nepotism or cronyism)
An organizational structure that does not reflect reality and/or is undermined by a culture fraught with PACI issues
Non-family managers inability (or unwillingness) to challenge family members
Successful family businesses focus on 5 attributes for reinforcing constructive forms of SEW:
Values Alignment
Family Narratives
Productive Conflict
Creating Clarity
Transformational Leadership
The fruit of this labor creates an environment allowing business leaders to continually break through barriers, conquer obstacles, and maximize opportunities.
Family Business: Below the Surface explore these and other areas that will lay the ground work for effective multigenerational family leadership transitions.