This book reports on research carried out by these members of the staff of Witten Institute of Family Business, Witten/Heidecke University, Germany. The primary aim of this research project was to come up with a business model for how so-called dynasty business families are managed. A dynastic business family is defined as one with at least 50 family business owners. As of today, according to the researchers, there might be relatively fewer such dynastic business families, but, still more than 30 in Germany alone! There are also examples of dynastic business families that are reported to be much larger than the 50-member minimum cut off. The authors cite the French de Wendel family with more than 1000 members, and the Belgian Solvay family with more than 2300 members. In Germany itself, the Henkel Group is owned by more than 450 family members.
Before proceeding further with this review, let me briefly present the three researchers, who authored this book:
Heiko Kleve, a sociologist and the holder of an endowed professorial chair at the Witten/Heidecke University.
Tom A. Rüsen, the managing director of the Witten Institute for Family Business (WIFU), and an honorary professor at Witten/Heidecke University.
Arist von Schlippe, an experienced psychotherapist and professor of leadership and dynamics of family enterprise, also at Witten/Heidecke University.
The study that is reported took place between 2017 and 2019, when 13 persons from seven dynastic families agreed to be interviewed. The methodology was what Jaffe (2020) has labelled narrative sociology. The research methodology is thus sociological, which might not be all that surprising, given the formal backgrounds of the three researchers. The authors also refer to themselves around 60 times, out of a total of some 135 references. This is a typical sociological tradition to providing citations. I would have hoped that more references might have been given to central, non-German scholars. But, let this be as it is! The present study seems both well done and does cast a light on a so far largely unresearched phenomenon, namely, to better understand dynastic business families.
Before specifically reviewing the book’s chapters, let us share the useful distinction that the authors make between these types of family firms.
Nuclear families, classified as (1.0), which relates to the founding families of a privately held business, typically relatively small, in numbers.
Formally organized families (2.0), which relates to the owners of a now slightly larger, typically older family business. Various formal governance structures are typically implemented in such firms.
Dynastic business families (3.0), where the owning family counts at least 50 people, and where various forms of network-like approaches prevail when it comes to regulating relationships among the owners. We have already touched upon this.
Let us now briefly review each of the book’s 9 chapters. The first chapter details the various key aspects regarding the “big family management” research project. I have already mentioned most of the critical issues here when it comes to this.
In the next chapter there is a discussion of how dynastic families are typically discussed. There seem to be three separate “logics” that can be observed here:
Social cohesion, i.e., how a dynastic family holds together.
The formal organizational structure that might have been put in place to regulate relationships among members of a dynastic family.
Networks, typically widely ramified, also for holding together a dynastic family.
Underlying the fact that these three ways of keeping dynastic families together is a strong will to hold the family business together, typically widely shared, i.e., a widely shared belief that key assets are to be handed over from one generation to the next.
In chapter three, the authors review six key issues for effectively managing the branding in dynastic business families. Here there would be a strong belief that “to stick together” is important, in the sense that size leads to significant business opportunities that would not be available for smaller family businesses. And here are the six challenges, all of which, by the way, are discussed in more detail in the next chapters:
To come up with a committee structure which provides widely shared opportunities to participate.
A well-developed approach to internal communication.
The development of relevant business competences for those members of the family that might be selected to serve in management – and/or committee positions.
Dividend policies, so that differentiations might be made depending on size of ownership, as well as degree of active inputs in the running of the family business.
How to resolve specific conflicts. A seemingly quite typical paradox here often seems to be that “troublemakers” tend to own a relatively small share of a given family business only.
To pick up key impulses from society, for instance when it comes to changes in heritage rules, in taxation, and so on. I might add gender and race.
To develop effective committee structures that also open up for wide participation, so as to practice good governance in dynastic families, is discussed in more detail in chapter four. The opening up for individuals to participate in those specific business decisions (say investments, marketing, finance, etc.) where they actually might have the most to contribute does however not seem to be discussed. In my opinion this “competence-driven” mode for selectively involving individuals where they might have the most positive impacts might be quite typical.
Communication is the basis for all social life, also for well-functioning dynastic business families, and is now discussed in more detail (chapter five). The quality must be good, but also “the more the better, as much as possible” seems to be a mantra here. Communication among generations seems to be particularly key, and to be open to communication in a widely understood language is also critical. It is, of course, both business consideration and to maintain widely shared family values that make effective communication so hard to achieve.
When it comes to competence development and assignment of qualified individuals to various tasks, there are useful discussions of requirement profiles for positions to be filled, with factual, social and “time” dimensions of competences; distinguishing between various types of personal commitments – career, private life, role as a shareholder; various forms of motivation – sense of duty; purpose; money; specific criteria for selection – business logic; family logic; political logic, as well as assessment of personality traits – rationality/cognition; emotional profile/empathy; performance/action orientation.
The authors then discuss in detail major challenges in the distribution of assets (dividends). They identify several areas of tension in wealth management of dynastic business families. It all comes down to balancing several forms of caring:
Restrictive: taking care of various family members, who in return are expected to be loyal to the family.
Moral: The calls for individuals to be prudent, with relatively modest lifestyles. Dividend payouts would thus be relatively modest, i.e., a trustee mentality.
Liberal: For shareholders to get access to an abundance of wealth, and thus with relatively large dividend payouts, i.e., an investor mentality.
To cope with conflicts in dynastic business families is fundamental. The authors discuss seven specific causes of conflict:
The overall economic situation, i.e., how to cope with “business crises”.
Transition to next generation.
Selection of individuals to management and/or committee positions.
How to deal with “troublemakers”.
Adjustment in share ownership ratios.
Conflicts between various sides of a dynastic family.
So-called tribal conflicts. This cause of conflict seems to be quite similar to what has been discussed immediately above, in my opinion.
Then in the concluding chapter, the authors provide an overall synthesis for how to create a viable strategy for a dynastic business family. Perhaps most important here is to devise a way to counteract centrifugal dynamics so that the family might continue to dominate the family business. Bonding and motivation are key, and all within a large family network. The authors specifically raise seven (again!) strategic challenges:
To develop a design for how to effectively manage a dynastic family as a network.
To delineate forms of communication that keep the focus on key business decisions.
To select and motivate qualified family members, also so that these are motivated.
To construct a way to make new types of investments for the dynastic business family, i.e., to encourage a move towards a portfolio business strategy. Special committees to assess and implement such diversifications might be established.
To develop a differentiated logic for including a growing variety of family archetypes, so as to preserve family cohesion.
To establish proper IT-processes for making it easier for family members to track the “state” of the family business.
A test regarding whether a dynastic family strategy is working might be to “look at the large group as a whole, bit at the same time keep an eye of each individual member…”.
My overall conclusion is that this book deals with a timely issue, which has not been covered until now, namely, how to run business families in effective ways when the number of owning family members grow. How might this challenge be met in ways that are good, both for the given family business, and keeping the family together as well. The book provides answers to this conundrum, of interest to practitioners and researchers alike. I recommend this book wholeheartedly!
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