KCFE News

Creating a Culture of Change

by John Ward
Co-Director Center for Family Enterprises

Managing culture is the most essential and valuable role for the successor leader(s) of a family business. The ability to manage culture is even more critical than the ability to develop strategy, as others can help lead strategy, but a family member must lead culture.

Of all the dimensions of culture, probably the most important and difficult is assuring a culture of change. Though change is certainly a requirement for future survival and success, it is also incredibly demanding, requiring of the successor skills and techniques that are typically especially complex and challenging for those from a family business.

Successors face several dilemmas in managing a change-oriented culture. First, there are many reasons why the organization may be particularly change resistant. A central one is that the business has probably been successful and led by a very strong personality for a very long time. Those circumstances breed a climate of comfort with the status quo and a management team committed to the status quo. Further, the company's value system will have very deep roots.

Normally, the first instinct in such a situation is to present an aggressive change agenda. That requires a very confident, headstrong leader. The textbook prescription, in fact, is for the new leader to blame the past for all present problems, to promote new values and practices aggressively, and to remove unceremoniously from management those expressing even the slightest resistance to change.

But this formula is neither appropriate nor effective for family business success. Next-generation family leaders don't want to criticize the past and, if they did, it wouldn't work with a loyal, deeply entrenched management team, nor would it be supported by other family members who are sensitive to the feelings of senior generations and unsure about the business reasons for change. Further, by virtue of following in the footsteps of an entrepreneur, family successors are quite often more consensus-oriented, somewhat unsure of themselves, and conflict-avoidant. In many cases, they just aren't reared to be revolutionary leaders.

The answer, then, is not to lead a cultural revolution, nor to rush in with an agenda of changing long-held practices and policies. Resistance and rejection will be immediate and unbending. Instead, a family business successor must create a culture of change in much more subtle ways. The first step might even seem counterintuitive: beginning a new leadership tenure by promoting what will not change, focusing especially on the company's values. In other words, the successor's earliest pronouncements should be in support of historic values, with clear understanding of what those values are and where they came from.

Once the perceived threat of cultural revolution is put aside, the successor can add or emphasize a value: change. The successor tells stories of past successful changes, of the founder's courage to change things, of the family's and the business's historic successes dealing with change. Such facts are almost always available in an established family business.

So the first step is to reinforce the existing values. The second step is to recount and celebrate the tradition of change by the family and business. The final step is to consistently and carefully examine the fundamental beliefs that underlie any values that are not constructive for the future. Rather than contradict a long-proclaimed value, sell the new beliefs or assumptions. Once ingrained, the values associated with that belief will adapt on their own, without fanfare.

So, as the leader of culture, the successor must be a good salesperson of subtly reinterpreted assumptions, values, and behaviors. It's best to lead by quiet example, patiently. It's effective to solicit others to help lead. It's very valuable to be armed with a five- to seven-minute speech, ready at any and all moments, to tell the story of the company's culture for the future, a culture that draws meaningfully on the past.

Leading culture is an art - an art that few will notice and even fewer will praise. It's not as dramatic and ego-satisfying as trumpeting a new strategic vision. But if the organization embraces the culture of change effectively, many can contribute to strategy more creatively, and the new strategic ideas will be implemented more successfully.