Family Business as a Model for Sustainability and Social Responsibility | Dennis Jaffe | March 14, 2013 | Rethinking Complexity

Should the path to corporate sustainability and CSR be a return to the values in family businesses?  While we could contrast the western style of leadership as different from Chinese (traditional, not contemporary) social practices, I am reminded that I’ve described IBM as the most Chinese business I know, with some uncles that you can trust and some other cousins you can’t.  In recently rereading A Business and its Beliefs by Thomas J. Watson Jr., I was struck as how it was written with the legacy of Watson Sr. (and the description of “respect for the individual” as providing work during the depression) as the major influence.  Dennis Jaffe writes:

The family owners act very differently than the shareholders of a public company (though a family controlled business is often a public company). While as cousins living in different places they are not intimately acquainted with each other, they feel a shared connection to their heritage and share some common values and a shared respect and trust in each other. In many ways, their relationships reflect a Chinese concept of guanxi, a sustained network of respect and obligation, where they are available to help and support each other through ties of tradition, respect and obligation. The family has a set of values they apply to the business that include profitability, but also obligations to employees, suppliers, customers and the community they live and work in. These values go back several generations, and were instilled in them by their great grandparents. Rather than seeking short-term returns, the family sees their investment as also having an obligation to sustain future generations. Their sense of the business is as a trust, of stewardship, responsible not just for today but for many stakeholders, including those of future generations. They govern the business with a sense of balance to all of these stakeholders.

The family owner I interviewed had seen the business evolve over a half century of her engagement. She had been instrumental in creating an educational program to develop financial skills and values in the next two generations of family owners, and seen the business become more meritocratic and democratic to listen and act on the voice of many engaged family owners.

Our study has interviewed family owners of nearly 50 large family enterprises, many of them lasting more than a century so far, who have passed their values and legacy across several generations. They have seen a shift in the past two generations from paternalistic leaders, who ran the business for the family members, to greater engagement and participation by increasing numbers of family owners who are creating an active community of family owners who use the family wealth and enterprise to express shared values and fulfill obligations to current and future generations and communities. They have moved from paternalistic management to a more democratic, engaged and participatory form.

The values and intentions of the owners of these large family businesses present a great contrast to other public companies, which face pressures from shareholders for immediate returns that serve to deplete the long-term capability of the enterprise.

Family Business as a Model for Sustainability and Social Responsibility | Dennis Jaffe | March 14, 2013 | Rethinking Complexity at http://www.saybrook.edu/rethinkingcomplexity/posts/03-14-13/family-business-model-sustainability-and-social-responsibility.

Family Business as a Model for Sustainability and Social Responsibility | Rethinking Complexity

IBM 100 | Icons of Progress | A Business and Its Beliefs at http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/bizbeliefs/ .

A Business and Its Beliefs