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10.13007/174
Ideas for Leaders #174
Family Business Ownership and the
Next Generation
Key Concept
Most owners of family businesses want to ensure that their firm stays in the
hands of the family for generations to come. This is not impossible to achieve.
In this Idea, some practical steps that senior managers can take to ensure
next-generation members are committed to the family business are outlined.
The key is to develop a sense of “psychological ownership.”
Idea Summary
There is a hotel in Japan — Houshi Ryokan — that has been run by the same
family for approximately 1,300 years. Forty generations have managed to
maintain control of the business, epitomizing what IESE Business School’s
Josep Tàpies and Lucía Ceja refer to as “psychological ownership.” In their
article published in IESE Insight, Tàpies and Ceja suggest that strong
emotional ties that get passed down through subsequent generations, as well
as a shared sense of mission, are the key components that make up
psychological ownership — something that can help members identify more
closely with the business and in turn, give their company a competitive
advantage.
They came to these findings through a qualitative study of various family-
owned firms, narrowing down to three factors that enable the creation of
balanced and positive psychological ownership:
Firsthand knowledge: early exposure to the family business can help next-generation
members acquire firsthand knowledge of operations and activities. On the other hand, a lack of
information can lead to conflict or disaffection — something associated with negative and/or
weak psychological ownership.
Direct involvement: investing time and energy into incorporating next-generation members
into the company, as well as providing them with structure and support aids the development of
strong and positive ownership.
Capacity to control: share ownership can be instrumental in allowing next-generation
members to feel they have decision-making authority and a say over business matters.
Alternatively, having a mentor can also help empower members.
Overall, however, a healthy family climate is what will make a significant
difference as to how the above are delivered; if a family deals with conflicts in
positive and constructive ways, this contributes to a healthier family climate.
Business Application
Senior family members can play an important role in empowering their next
generations. In this respect, Tàpies and Ceja offer advice, which includes the
following:
Generate trust by making yourself accessible to next-generation members, and create an
Authors
Tàpies, Josep
Ceja, Lucía
Institutions
IESE Business School
Source
IESE Insight
Idea conceived
June 2013
Idea posted
July 2013
DOI number
Subject
Sustainability
Family Business
Senior Leaders
Psychology
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open environment in which they feel they are able to express their thoughts and opinions.
Encourage integration by helping next-generation members understand company values.
You can do this by communicating and explaining your company’s history and the benefits of
belonging to the family business.
Teach next-generation members how to address conflict without losing sight of the big
picture. Offer them training in communication techniques, and encourage them to nurture their
own entrepreneurial spirit.
Encourage next-generation members to build projects of their own and feel a sense of
personal fulfilment.
However, it is also up to the next-generation members themselves to develop
the right attitudes and take-up what senior members offer. Thus, everyone
contributes towards creating the type of strong and positive psychological
ownership that ultimately helps family businesses build resilience.
Further Reading
Tips to Foster Ownership in Your Organization, “Tàpies, Josep” and
“Ceja, Lucía”, IESE Insight Issue 17, Second Quarter (2013) p. 52–59
Further Relevant Resources
Josep Tàpies’s profile at IESE Business School
IESE Chair of Family-Owned Business
IESE Business School’s profile at IEDP
© Copyright IEDP Ideas for Leaders 2013
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