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Next generation
January 24, 2022
13 mins

Building family unity: An essential element of multigenerational success

January 24, 2022
13 mins
Cambridge Institute for Family Enterprise
SUMMARY

Family unity is easy to neglect as it is invisible and hard to measure. However, it is critical to deliberately build family unity so it does not impede relationships, decisions, or momentum.


The multigenerational success of an owning-family rests on three pillars:

  • Adequate growth of a family’s assets,
  • Placing capable family and non-family talent in key roles in the family enterprise, plus
  • Having unity in the family, the ownership group, and in the family enterprise.

Each of these pillars supports the other two.

Weakness in any of these three pillars should be corrected. Serious weakness in two of these three areas for a long period of time will greatly reduce performance and endanger a family’s long-term success. In today’s quickly changing environment—when family enterprises need to be agile, decisive, and occasionally make bold changes—lasting weakness in all three areas can be fatal.

The connection between success and unity

 
 
 
Image describes the Family Enterprise <q>Portfolio</q> of Assets and Activities. The family enterprise, its mission, vision and values is at the center of all other aspects of the family. It is represented as a circle. Surrounding the family enterprise is all other aspects of the family: Family Company, Non-core businesses, Financial/Liquid Assets (Family Office), Family Assets (homes, art), Philanthropy/Social Impact Activities, Family Community Activities, Family Unity & Family Life, Family Talent. These assets and activities intersect with one another and the main family enterprise at the center. This image was developed by John A. Davis in 2013.
 
 

People tend to see a direct and rather immediate connection between long-term success and the first two pillars: growth of assets (especially financial assets) and having capable talent in key roles. Human beings tend to pay much more attention to direct and immediate connections. The connection between unity and long-term success, however, seems less direct and less immediately impactful than the other two factors, at first glance.

Unity has to do with the alignment or agreement by members of a group on their (1) mission, purpose, or key goals, and (2) the important values or approaches for doing the work of the group.

Critically, unity is not synonymous with harmony (we always agree and we always get along). To advocate for unity is not to say harmony is expected at all times. Given competing agendas and emotions in a family, consistent peace is rarely attainable and would be an impossible standard. Unity in a group doesn’t require that group members agree on everything related to their group. In fact, you need enough different views, constructively expressed, to be able to solve complicated problems and set the right direction for a group.

Family unity is pivotal to the multigenerational success of a family enterprise. Being united facilitates members’ commitment to the family and company, trust among members, timely decision making, constructive problem solving, prudent risk taking, and other things that support the group’s long-term success.

Why unity-building is often neglected

Despite its role in fostering long-term success, many families and business leaders neglect building unity. There are a few reasons for this. First, because it is out of sight, hard to measure, and not an obvious or immediate factor in day-to-day life, unity is easily overlooked. Being united as a group is like good design, which is said to be invisible, operating in the background, and creating the conditions for other factors to be present.

Being an invisible factor allows unity to be taken for granted, and signs of disunity to be ignored or downplayed. Unity tends to be seen as important when it is needed for a consequential decision or special event. Even when disunity in the group is spotted, leaders can blame it on certain people being difficult, rather than seeing unity itself as lacking systemically, which is the leaders’ responsibility to nurture in their group.

Second, disunity is mistakenly thought to be easily repaired and unity quickly restored, so why invest a lot of time in building unity? Besides, aren’t families supposed to hang together? When disunity is spotted, we might be able to encourage, cajole, negotiate or force some people to agree or some dissenters to go along with a proposal, but these actions rarely build authentic unity in any group. Real unity requires a deep alignment among members, which can only be nurtured over time, like with an orchard that produces fruit only when it is well-tended over years.

This brings us to our third reason why building unity is neglected, especially in families: building unity typically requires some uncomfortable conversations (like about what to invest in, who to hire or promote, what to change in the business) that can disturb family harmony. Being successful family owners of an enterprise requires making wise decisions that can disappoint some family members from time to time and could alienate some family members who especially disagree with these decisions. Most families fear these outcomes and avoid disturbing family relationships.

Ironically, family members who are strongly united (aligned with the family on purpose and approach) are much less likely to be alienated and much more likely to remain in the group if their personal interests are not all met. Too many families, fearing conflict among the members, suppress the dialogue and problem solving needed for authentic unity and settle for a pretense of peace, among members.

In this state, family members still feel tension among them and know they don’t have actual harmony. Plus, they miss the opportunity to build real consensus on their direction and approach. It’s a double loss.

The mandate for an enterprising family is to think deeply about what it means to build and maintain unity in their system, and take action proactively to strengthen it, while quickly and unflinchingly addressing issues of disunity when they arise.

So how does a family go about building unity? Let’s begin by understanding the components of unity.

Ingredients of family unity

  1. Respect, trust and fairness. As you might guess based on the above argument, unity in a family group depends a great deal on having respectful and trusting relationships among the members and especially between family members and their leaders. To build unity, business and family leaders need to manage relationships and make key decisions in a respectful way to reduce the likelihood of alienating others and weakening their commitment to the family enterprise. A respectful decision-making process acknowledges members’ different interests and opinions, while subordinating members’ self-interest to the goals of the group. Nurturing a respectful family culture with a trustworthy and respectful decision-making process and respectful leaders helps enormously to build and maintain family unity.
Respect, trust and fairness also needs to be baked into the governance system and enterprise organization structure to support family unity. Having clear decision rights and decision rules for various roles, not only builds trust in the decisions of the group and its leaders, it is a sign of respect to the members. They should know how decisions are made and be able to trust that they are made fairly and favor the group over individual interests.
Fairness, an overriding concern within families, is supported with transparency, managed expectations of owners and family members, and managed status and power discrepancies between family members so they do not grow too wide or become very visible in public. When family members can qualify for key roles, and receive opportunities based on merit rather than favoritism or politics, there is greater interest in remaining a part of the group.
Strong levels of trust in the family and between the family and its enterprise should be built through strong performance (by the family and the organization), trustworthy and respectful leadership and governance, clear and effective shareholder agreements, transparency and inclusion in key discussions, fair and respectful treatment of members, and demonstrated caring for family members and key stakeholders.
Unity is supported by having respectful and trusting relationships among group members who are comfortable disagreeing. You can’t achieve unity if you can’t discuss, debate, and disagree to authentically align the views of the members. One can properly say that if members of a group are uncomfortable disagreeing, it is unlikely they are united—they just don’t know it. While members of a group don’t have to be harmonious or close friends to achieve unity, being supportive friends who trust each other and can disagree to solve a problem does support unity.

2. A compelling and achievable family mission, vision, and values provide an inspiring sense of what the family wants to achieve together and what it stands for. These statements create an understanding within the family that ‘we are part of something bigger than any of us’ and that together we will build more value of various kinds than we can individually. It is important for these statements to list the key types of value that the family hopes to create, so that various parts of the family can feel the family’s mission speaks to their interests.

3. Likewise, having an engaging family enterprise organization that encourages broad family involvement and contributions also builds family unity and commitment. The family’s total enterprise includes its core business and other business ventures, financial investments, philanthropic and community activities, common family homes and other lifestyle assets, and family activities (including family governance).

While few family members typically can be family company employees or board members, many can have a role in the other activities of the family. The more a person contributes to an organization, generally the greater is his or her commitment to the organization. Recognizing family members who contribute to different parts of the family enterprise helps to bind them to one another and reinforce the whole purpose of the family.

 
 
 
Sustaining family success requires the family to be focused on a mission and guided by values. This is at the heart of all other activities. Utilizing that focus allows the family to GROW family assets, develop family and non-family TALENT, and create/maintain family and organizational UNITY.
 
 
  1. Strong performance of the family enterprise (e.g., the company, family office, family philanthropy, etc.) builds confidence and trust in leaders’ judgment, reflects well on the family, and generally rewards family members economically for remaining jointly invested. Strong performance also builds pride in one’s family, its shared history, and its contributions. In addition to strengthening commitment to the family and its enterprise, it gives family members more reasons to work together.
  2. Family unity also needs agreements and discussion processes among family members and among family owners. These agreements (often contained in the family constitution and shareholder agreements) should state what behaviors and standards are expected from family members and owners, explain how they will perform their responsibilities, manage their relationships and resolve their differences.

A vital aspect of shareholder agreements allows owners to change the ownership group (buying and selling shares) under certain circumstances and following specific rules. Sometimes, some owners need to leave for family unity to be preserved. Plus, family ownership groups tend to build greater unity when owners know there is an escape hatch. Processes also need to be in place for family members to discuss their interests and concerns, set goals and make plans, talk through differences, and address issues of disunity.

Manage disunity, not just conflict

Families, of course, are complex groups. Owning families have certain qualities that make them breeding grounds for intense feelings and relationship conflicts. But families that survive in business together manage disunity rigorously. They watch for it, measure it, and address it before it grows so divisions do not to impede relationships, decisions, or momentum.

While a well-run family enterprise can, for a time, remain insulated from disunity or weak unity among family owners, deep fractures within a family will eventually—inevitably—create problems throughout the enterprise. And no family enterprise will endure for very long with it.

Disunity comes in different forms. It can appear as family conflict where members are engaged in visible disagreements that often become heated. It can also appear without conflict, but instead as family members who are drifting apart and disengaged from one another.

Family Disunity Type 1: Disengagement

When disunity appears as disengagement, family members experience disconnectedness. They are withdrawn from the family enterprise and detached from one another. Family members favor individualism rather than collectiveness; they have independent goals and a greater interest in pursuing them. On display is an overwhelming sense of passivity about joint activities and assets. Over time, family members drift apart from one another and from the enterprise. Relationships may be respectful and even affectionate, with no visible strife, but there is no common purpose or force of gravity pulling the family together.

Disengagement in an owning family can occur for any number of reasons: the family enterprise underperforms financially; the company diversifies into industries that are uninteresting to the family or in opposition of its values; philanthropy drifts into areas that are uninspiring to the family; the family does not have senior talent at the owner level, and loses its voice in strategic matters, opting out of active ownership; the family delegates important decisions about its company, portfolio, and family enterprise to non-family executives or trustees; and it is no longer in charge of its destiny as an enterprising family.

Any number of these can lead the family to drift toward individual interests and to disengage from joint family assets and activities.

This type of disunity slows a family enterprise down, making it harder to convene people, make collective decisions, and agree on strategies to move forward. With family members moving in separate directions, the family enterprise will not survive long. Typically the best outcome is a sale of the company, allowing individual family members to live independent lives with independent assets.

Family Disunity Type 2: Conflict

On the other side of the disunity spectrum is an environment where the family is not unified because there is friction and division. Here, the presence of visible conflict, hostility, or passive/aggressive antagonism prevails. In this climate, there is guardedness, mistrust, and political maneuvering among family members. There is little cooperation. Problems grow, unattended to, and relationships deteriorate. The fabric of the family erodes and agreement on important matters is hard to achieve.

This typically occurs when family injuries go unaddressed and unresolved; when rivalries, conflicts, and divisive communication becomes the pattern of family interactions; when real leadership in the family is absent; and when the family escalates the conflict rather than manages it, even passing down divisiveness to the next generation. (More on this type of serious, persistent conflict can be found in the article, The Origin of Persistent Family Conflict.)

Conflicts like this slow a family enterprise, stall momentum, distract from important work, embarrass the family, and fatigue people. Not only are relationships harmed, but agreements and solutions to problems are hard to put in place.

Building and maintaining unity

Absent intervention, family unity naturally declines with each generation. There are a number of ways families can splinter. Family members become more diverse and dispersed, geographically and socially. Ownership diffuses. Lifestyles diverge. Individual interests eclipse collective goals.

Fairness issues cause disagreements. Some disagreements do not reach common ground, and some fragmenting is permanent. Unity is such an important ingredient in sustaining long-term success that, in these permanent cases, families are wise to resort to exits—either buying out minority members who consistently disagree with the majority, or dividing assets to allow a dissenting family member to depart. These are extreme cases, but they are cases for which families must prepare.

Counteracting the natural decline of unity requires actively pushing against the currents that drive families to fragment. Maintaining unity in the family over generations requires doing something unnatural. But the families that survive in business do this—they deliberately build unity.

They understand the ingredients of family unity, the sources of disunity, and they track, monitor, and manage them. For example, family leadership is aware of past grievances that remain unaddressed, as well as contemporary issues that are germinating.

They pay close attention to the predictable, once-in-a-generation issues that can trigger disunity (such as a succession transition or the sale of a business); these big issues can create factions, and need to be monitored. Family leadership remains informed, shows concern, and intervenes to manage conversations. They talk with and survey the family to make sure family behavior and relationships overall tilt favorably toward unity. (In addition to the recommendations in this article, see Staying United When Geographically Distant for 10 ways to strengthen family unity when geographically separated.)

In closing

There are many reasons why enterprising family members elect to remain connected throughout their lifetime. Typically, a shared sense of heritage, appreciation for the legacy, a sense of duty, and a desire to continue to build value together (among other reasons) encourage a family to remain jointly invested—particularly in early generations. But over time and through the generations, these are rarely enough to sustain strong alignment of mission and values as the family grows, becomes more diverse, and more dispersed. This means that family unity must be built and maintained purposefully.

A family, after all, is more assured of success if it has greater unity.

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