It’s all in the family

Mountain path near Ordino, Andorra

In this -slightly longer- post, we will discuss a special type of business: family firms. This blog idea was triggered by a blog posting from David Oxley on business change in family businesses (11th July 2017) and a consequent correspondence we had on this. I would like to build on his thinking on business change and include organisational models as an area where mainstream thinking could be inadequate in different environments, like family businesses.

Organisational Models

Business consultancies often build their business transformation credibility on their ‘methodologies’. Methodologies are, of course, a codification of ways-of-working that have, in one way or another, created successful outcomes in the past. Methodologies, therefore, document experiences in certain areas of work. And, methodologies evolve. They involve with ever-increasing experience and application of these methodologies in real-world environments. They often document the elusive ‘best practice’. Warning: I am not a fan of that term ;-).

One key element of any business transformation methodology is that it is based on ‘organisational models’. Business Models, Target Operating Models, Business Change Models. There is a whole plethora of organisational models available. Models are essential, because we require a language that all players can agree upon to have sensible conversations around what we want to achieve together. Models create a level playing field where, to coin the famous phrase, we compare apples with apples.

Currently popular business programmes tend to be about operating model transformation. To have a coherent organisational model available as an Operating Model that we will change, we need to agree first what the Operation Model (OM) is. For some, the OM is quickly equated to Organisation Design (OD). This ensures we talk about hierarchies, reporting lines, skills, capabilities, job descriptions and so on. For others, including me, it is much more than that. The OM will contain the OD but that is only one part of it.

So, what could be the dimensions of an OM? What are the elements we look at when we want to describe how the business operates? All useful descriptions of OMs I have run into include ‘business process’ as a key dimension. And, amongst others, ‘Data’ and ‘Information Systems, for instance. I would suggest that a useful OM will have 6-10 dimensions, of which OD will be one.

Less than 6 and perhaps the dimensions are too dependent on each other, more than 10 and we easily lose coherence.

Why is that important?

“The map is not the terrain”

Well, for any OM transformation to be successful, we need the dimensions of the OM to be sufficiently independent to be meaningful, and at the same time hang together adequately to ensure we describe a possible stable reality.

For instance, to achieve certain maturity in selected business processes, we will need a corresponding maturity in data and information systems. Otherwise, we either cannot deliver a successful business process or, alternatively, we may have over-invested in data and/or technology. This creates instability, perceived chaos and, understandably, significant stress throughout the organisation.

It is a difficult, but essential, process to decide whether certain available models are suitable for our business or not. Every model and every methodology has an underpinning set of assumptions. These assumptions are sometimes explicit but often implicit. And they change the journey. In metaphorical terms: models and methodologies are like ‘maps’ in the age-old adage: ‘the map is not the terrain’. And reality is the terrain. This may sound trivial, but I have been in countless situations, where actual challenges are being ignored because they ‘fall outside the operating model’. And the distinctive characteristics of family businesses often fall in that category. Because our models, the maps, are mostly implicitly based on non-family businesses, these characteristics are duly ignored. But make no mistake. Yes, they may fall outside the model (the map), but they evidently are a key part of the terrain we are navigating (the complex reality). And, what if those characteristics are essential for the outcome of the change process we have embarked on?

I would like to take only one characteristic element of family-owned organisational model as an example.

Succession Planning

One key business process that expressly distinguishes family businesses from other business is ‘succession planning’. Daughters and/or sons may or may not have the prerequisite skills or interests to successfully succeed the parent(s) and lead the business forward. But they have the inherent power and ‘rights’ that are associated with being the owner’s family member and/or being a co-owner. Many family businesses therefore suffer greatly during and after the generational transition. This because the various possible succession scenarios are not sufficiently understood and acted upon in time because they fall outside the assumptions of the traditional organisational models. Consequently, previous generations often work until much later ages than they originally planned to keep the business thriving.

A great way to explore succession scenarios is to agree how the operating model evolves with the transition of the parental generation to the new generation.

But, how can a more traditional operating model support this essential challenge? How do we include the inherent power differential between family members and non-family members in the OM? Which parts of the ‘map’ that the traditional models help navigate is valid and which are not?

We know that key parts of the traditional models are very useful, but others may need to be viewed in the very specific circumstances of the family business.

A wicked problem

In other words: how to we balance the ‘difference’ and the ‘sameness’ of the models to make sense for the family business’s distinctive characteristics? How do the ‘power dynamics’ show up? How do the (lack of) skills and (lack of) interest required for leading a family business balance with the succession planning requirements linked to a stable operating model?

In the last blog posting on compelling wicked questions, we introduced a way to address this type of wicked problems. One key lesson was that we need to keep the question open. And, typically, models tend to close questions down. So, instead of treating the model as a firm map, we need to keep the conversation open continuously to see how the terrain reshapes the map we are using.

So, to rephrase the question that David Oxley asked in his blog posting re business change in family businesses I extend it here to organisational models in general:

Since family businesses face at least the same challenges as their non-family counterparts in managing their businesses, how do we explore whether there is a more effective organisational model which embraces rather than ignores their distinctive characteristics?

Does this question resonate with you?

Do you have examples where models tend to hinder rather than help change? Are there other, distinctive environments where organisational models require continuous scrutiny?