Managing Change in Family Business

CHAPTER:

INTRODUCTION

There is no doubt that change is an inevitable part of life, whether it is for an individual, a society or a business. The reason for change could vary from situation to situation, business to business. It all depends upon the size and structure of the entity. The reason for change in businesses could be because they are growing, need to diversify or are in need of restructuring.

It is commonly known that most of the family businesses are reluctant to change their way of doing things. These practices are a part of their business as well as family culture. Usually those who started or were part of the initial operations of the business are the ones who are against change. But this reluctance does not help businesses grow.

There are different pressures that force a business to change. Gersick et al (2009) state that "the developmental pressures that accompany families and their businesses are constantly at work" even thought the companies and their owners might not want to change the way things are run but there are factors such as age, family relationships, induction of a younger member into the business and obviously the ever changing economy that either willingly or un-willingly force these businesses to change.

Changes are planned and unplanned both. Two major approaches to change are discussed below:

Emergent Change:

This approach to change suggests that it is continuous and an unpredictable process of aligning and realigning to a turbulent environment (Burnes, 2004). This change can be achieved gradually by carefully working on a process of continuous adjustment, through improvisation and learning (Hayes, 2007).

Planned Change:

Planned change is possible and most of the times necessary especially in the case of long established family businesses. Control and command management may not be the most effective approach to carry out planned change.

There are three main schools of thought related to change management depending upon the nature of change i.e. if it is on the individual, group or organizational level. (Cameron and Green, 2005, and Burnes, 2004). It has been proven that approaching change at a group or team level within an organization is more effective. However when dealing with a change at a group level it is necessary to understand the culture, thought processes, work practices, role complexity of the group.

If a business changes there are a number of benefits associated with it if the growth is well managed. It helps to increase the value of the business; it helps to broaden strategic options including the transfer or part of all the share capital. Also changing companies are better prepared to compete with the competitors.

Family businesses have been largely ignored in the past decades by researchers as a separate category and were always studied in conjunction with non-family businesses. Recent studies that were focused on the fortune 500 companies highlighted that those companies that are under influence of their founding families performed comparatively better than non-family businesses. Anderson et al (2003)

So, what is the best way to manage this change that is necessary to take place? To any change or transformation there are different stages these vary depending upon the situation, culture, company structure where the change is taking place. Generally there would be five stages to managing change, first, would be to disengage from the status quo and accept the fact that it is necessary. Second, would be to consider the different options available to the business to choose from. This is the most difficult part and gets more complex if there are more than one owners of the business say the CEO (father) and his sons who are now grown up and ready to be a part of the company decision-making. There would be a conflict of ideas mainly because of the generation gap and difference of thinking of the older generation from the younger generation. The third step which takes the longest time is the choosing of the final alternative. While this is given the most thought it is just another step to a series of following things that need to be done. Gersick et al (2009) suggest that "These tasks may happen in a direct sequence, and the time span may be relatively short or long. Alternatively, some families move back and forth among tasks. They may announce an impending change, but delay exploring alternatives." The final but not the last step in managing change is to commit to the alternative chosen. This would mean to facilitate the change in every possible way and help everyone deal with the new system. Such a level of commitment and change often results in the key people not cooperating or offering support for the new policies or systems as they consider it to be an invasion of their status quo.

In order to deal with all these issues it is important that prior to the commitment to the change a complete strategy is developed to manage it effectively. Important factors to be considered while planning and devising change strategies that would help the initiative run smoothly include:

Commitment:

As with any firm be it a private company or a family business the commitment of the higher level management to the change initiative is imperative. And it should of the level where it trickles sown to the lower management.

Culture:

One thing that is considered strength of a family business is that the culture is very strong and it is more than likely that all the employees family and non- family will have the same values. This helps develop a shared vision and if the senior management is convinced of the need for a change and is committed to the cause it would help to develop a greater level of commitment from the rest of the employees. This commitment can further be enhanced if all the employees are asked for input and this contribution would lead to creating a positive image for the change.

Schein, (2004) says that " it is both a dynamic phenomenon that surrounds us at all times being constantly enacted and created by our interactions with others and shaped by leadership behavior, and a set of structures, routines, rules and norms that guide and constrain behavior"

Training and Development:

Learning new skills is imperative for any employee's success but when a company is undergoing a change process