Having spent 15+ years conducting research into family business (FB) in both the Australian and international contexts, the University of Wollongong’s Professor Mary Barrett took some time to reflect on the emergence and subsequent trajectory of this field of study as a guest of WOW’s Seminar Series program in August.
Despite its economic importance in all economies, most national governments do not collect data about family business in a systematic way. The Australian government did so for a few iterations of the Business Longitudinal Survey a decade or so ago by asking respondents to indicate with a simple ‘yes or no’ whether they considered their firm to be a family business. Sadly, however, this practice has not continued.
In the academic arena other problems continue to dog the field, including disagreements around the theoretical vs functional contributions of FB research; the paucity of universities which have specialist courses in family business; and the perceived ‘irrational’ elements of running a FB, e.g. secretive and/ or nepotistic practices, contending with family matters and relationships – basically anything that is not ‘related’ to business! Even the definition of a FB continues to stunt the field.
Despite these problems, Professor Barrett (pictured left) highlighted during her seminar that for some time now, FB researchers have recognised the overlap of Family, Ownership and Business elements as a defining element of FBs.
For Mary and her colleague, Emeritus Professor Ken Moores AM (Bond University, retired), the inevitable paradoxes of managing FBs have encouraged further inquiry into this once uncharted territory to reveal a sequence of learning stages that potential family firm leaders must navigate if they are to propel the family legacy. In their book, Learning Family Business: Paradoxes and Pathways (2002, Ashgate), they coined the term, the ‘Four Ls’, to describe these stages.
The first stage requires the family member to learn [about] business generally. This involves working outside of the family firm to build the personal discipline needed to run a business:
“Only if a person can ‘cut the mustard’ in any business context will they have the confidence in themselves, and the legitimacy with family members, to lead the FB”, highlights Professor Barrett.
The second stage is learning our business. As the strategy suggests, this involves the family member obtaining a deep understanding of the values of the family business and how these form the principles by which decisions are made etc.. It is at this stage, notes Mary:
“that any variance [to the accepted operations] of the business by younger generation(s) must respond to changes in the firm and yet still be acceptable to the older generations who are likely still to have an active role in the firm”.
Learning to lead our business is the third step. This stage is usually about formalising a family business. It may involve family employees getting new qualifications, gradually introducing formal human resources techniques such as performance appraisal and recruitment systems, and generally professionalising the firm’s management. Unique to the FB context at this stage though is that the incorporation of the family-member employee here tends to be less transparent than in non-FB firms – change may occur by stealth, or a ‘lead-by-example’ approach may be used to introduce more difficult changes.
The final stage in the FB leadership process is learning to let go of our business. Ideally here a successor is named, and the future role of older generation members will be a major part of the discussion. This can often be the toughest stage for some members of the FB though, says Mary:
“[they] see [that their business is] something that will continue into the future. It gives rise to [considerations then about] how it will be run in the future,” she concluded.
Professors Barrett and Moores have of course expanded upon the research of this first book with enquiries into topics such as women in FB leadership roles, including those entrepreneurs in the family business; FB practices in ‘non-Anglo’ countries; and the use of the ‘Four Ls’ as a pedagogical framing device in tertiary, practitioner, and employer- and industry-representative training applications.