Family Leadership
By Carlo Romanelli
Let’s deepen some peculiar characteristics of Italydership illustrated in the previous editorial.
Let’s start from Family Leadership, which certainly represents one of the fundamental ones I have indicated.
“Our national flag should have few big written words:
“I HAVE A FAMILY”
Longanesi (1947)
The reason for the family business
We are selfish, we like things that are just for us but in a form of refined individualism. In fact we are moved by the need to affirm our person, uniqueness and diversity without missing a social dimension made of relational closeness, empathy and sense of responsibility for the group to which we belong (Morace and Lanzone, 2010). In other words we show the tendency to a tension towards ‘mine’ that becomes interest towards the other as long as it is perceived as close to itself, belonging to one’s own ‘tribe’ or to one’s family circle. In economic terms this explains the prevalence of small family businesses (even the medium-sized are few) on the total of our industry (Pratesi, 2010).
The historical-cultural bases of this interest in “mine” and “my little one” are to be found in the long absence and political fragmentation that has led to replacing the centrality of the State (and therefore the interest for the collective good and its development of a civic sense) with the centrality of the family.
“For the family are dedicated commitment, energy and courage and there is very little left for community and the state” (Norberto Bobbio)
The current scenario, some data:
The family-type structure (the one in which control is directly or indirectly exercised by a physical person or a family) can be found in over 70% of industrial companies and services in Italy: this means that 7 out of 10 companies are under a family control. In almost 90% of companies the first member is a physical person or a family, only in 8% of cases it is another company, while the presence at the top of the stock control by banks and public bodies is marginal. It is above all Italian small and medium-sized businesses that are family-run.
From the combined reading of the system of ownership and company size, it appears that these companies are the real engine of the Italian economy, employing 94.9% of the workforce.
The small company in Italy
The spread of small-medium enterprises in the area is affected by the echo of the Renaissance workshop, of which Italian industry represents the natural evolution. The Italian style companies, small or medium-sized, are united by a management attentive to dimensional dynamics: they avoid dimensional leaps, preferring calibrated and progressive growth processes for fear that the exponential growth and the consequent adaptation of the structure can degrade the vocation to quality (in terms of human resources, raw materials, originality in thinking about new products).
The all-Italian strength of family businesses
The family centrality within Italian SMEs (Small Medium Enterprise) is identifiable in four fundamental characteristics:
- • Strong attachment to the product
- • Amplification of business values
- • Relationship capital
- • Resilient capital
Attachment to the Product
A characteristic of family businesses is the strong attachment between first-generation entrepreneurs and products.
- This applies to all family businesses, but takes on a special character in the Italian context where these companies were all built around the product seen as “self-extension”, a projection of their creative drive.
- The entrepreneurs-craftsmen are driven by the desire to give life to their idea of product rather than the simple creation of a business and its economic return.
Amplification of business values
Family and business culture intertwine: knowledge, cultures and dexterity have been handed down for decades between the kitchen and the bathroom, as well as the knowledge of the business, customers, suppliers and competitors.
- Family and corporate culture contribute to creating the history of the family brand and a natural continuity between generations, enriching and reinforcing each other.
The values of Italian family businesses are strongly felt even outside, thanks to a community that focuses on the role of the family. The members of the families of Italian companies have thus received particular media attention, sometimes even by idealizing them.
- Chanel is also a family business, but little or nothing is known about the family. The family events of the Benetton brothers, Versace, Fendi, etc. instead built part of the image of their companies, forming the uniqueness and unrepeatability of values that was reflected on the products.
Relational Capital
«The choice to bet on oneself pays off immediately, going to increase, over the years, the customer base and working on a national scale, while keeping intact the values and the attachment to the company of a family business»
The continuity of family culture in the company is a harbinger of a strong emotional involvement of owners, managers but also of employees, and this often results in a high degree of cohesion and a sense of belonging.
This is how a wealth of “unique” and “hardly imitable” resources is generated, with reference both to relational capital – deriving from the ties between the key players – and above all to human capital, which expresses the complex of knowledge, skills and abilities of individuals within the organizations in which they operate.
Resilient Capital
The combination of family and business culture and emotional involvement have a strong impact on the typicality of financial management.
The imprint of family management, careful to ensure a better future for new generations, leads to careful and prudent management of economic resources.
If the family businesses have shown to have slightly lower gains than those of equal size and different management, they are able to perform better than the latter during periods of crisis.
This is because family-owned companies do not take full advantage of the returns available in positive economic times to increase their chances of survival in less favorable times, earning the title of resilient companies.
The passage of the baton
- It is characterized by teamwork
- Requires targeted preparation, a real workout
- It is based on trust and communication and not on fear and conflict
- It involves different actors and not the single founder, it is a relay
- It’s a process, it’s not a moment.
- • Involves 66,000 family businesses per year (whose entrepreneurs are mostly over sixty)
- • 20,000 companies have been eliminated or sold each year
- • 65,000 jobs at risk each year
- • Only 1/3 of SMEs survive the first generational change
- Less than 1/5 of SMEs survive the second generational change
The measures that have been created so far to help SMEs in the development processes (Small Business Act, Company Statute) have left unanswered a critical question: “How to be able to facilitate the passage of the scepter of a creature so large and soaked of affections but, at the same time, threatened by multiple factors?”
Resistance to changes
Related to the entrepreneur
The prospect of abandoning one’s own creation
Dangers inherent in the choice of the successor
The personality of the entrepreneur
The terror of staying without anything to do
Fear of being financially dependent on the company’s progress
The fear that the company does not survive the succession
Related to children
Difficulties of children to gain full trust in their role (because of their vision or their personal potential)
Related to collaborators
The collaborators are loyal to the entrepreneur and not yet ready to accept the succession
The entrepreneur’s fears: when the company is more “daughter” of the children
In Italian families culturally the father with his status remains so until the end. In family businesses, the founder often remains the father of the company that maintains the tendency to protect / control it even when it officially leaves its mandate.
The fear of Bernardo Caprotti would seem to emerge from his statements to the press “Everyone can inherit a company, which is different from knowing how to manage” preferring not to mention the exclusion of children but a subsequent rethinking “provided for by the contract, done for the good of the company”. The difficulty in abandoning the role is linked – as the daughter herself says – to feeling the company as an “exclusive creature” in which he has invested all his best energies not only for work but also for affective relationships.
The difficulties in affirming children
Although the sons of Caprotti (Esselunga case) have brought innovation and a significant contribution in terms of turnover, it emerges that they have not managed to achieve full paternal trust.
In particular, it seems that the two generations have not found common ground with respect to the way of conceiving the presence in the company.
For Bernardo are fundamental: spirit of sacrifice, total dedication and continuous presence. He states: “Without any comparison, I like what Frederick II of Prussia said about himself:” I am the first servant of the State “. And I have been full-time, so much so that I can not think of myself “half service”.
According to Violetta, instead: “… You can be owners without having direct management tasks …”
The acceptance of those who remain (collaborators)
Considering that Bernardo Caprotti (Esselunga cases), has created a company that strongly follows his own person, it could be expected that most of the group of collaborators may show difficulties in accepting a new leadership and a new management model, different from the previous one.
Prepare people
- Preparing the company’s founding father to cultivate hobbies or activities will help him not to focus excessively on losing the leading role in the company once the successor takes his place
- Mentally prepare the group of collaborators, suppliers, managers to represent a set of resources and not of obstacles to succession.
- Help the new generation build a bridge between the Italian reality and the international context, allowing them to study foreign languages and specialize thanks to periods of work abroad.
- Help successors familiarize themselves with the company through a gradual advancement not only in internal positions but also in the quality of relations with company personnel.
Analyze the context
The astrolabe, an instrument perfected during the Renaissance period, made it possible to calculate the position of the celestial bodies and the local time, knowing the longitude and vice versa. The importance of knowledge of the local context is an issue of absolute importance for a company that wants to find the right moment and the right direction for the succession process.
Internal factors:
- Successor present in the company
- Successor not present in the company
External factors:
- Economic conditions (company, sector, context)
- Investments of the main competitors
Relational factors:
- Trust, pacts and family agreements
- Understand what change means to employees and help them to accept it
Know how to ask for help
In the fifteenth and sixteenth centuries the great Renaissance families (Gonzaga, De’ Medici, Sforza, Malatesta, etc.) used to call in their court artists of great talent in order to commission works that made the city and the courts themselves majestic.
If the entrepreneur does not feel able to manage the gradual process of succession it is desirable to take advantage of help from professionals outside the company.
The latter, as consultants and trainers, can help the entrepreneur to prepare both the successor and his collaborators on a technical and relational level.
Secondly, external personalities have repeatedly proved to be a support to the Board, allowing the company not to get involved in their visions but to know how to observe and open up to the external reality.
The wisdom of the fathers and the courage of the young
As in the myth of Icaro, portrayed by Gowy in 1637, even in Italian companies there are controversies over the use of some strategies and vision rather than others. In particular, the founding fathers, like Dedalo, often build the tools to “fly” through their passion but later use them to “fly low”, while the creativity and innovation found in the young mind of their successors would bring them far more up. In the same way young people, like Icaro, often create or use the tools to explore new horizons without having the tacit knowledge of their predecessors’ business and risk burning their wings by approaching unexpected threats. In both cases the leadership exercised is not sufficient to guarantee the success of the company but it is necessary to integrate both perspectives. On the one hand, the innovative courage of young people who are aiming higher and higher, on the other the wisdom of a life spent in the company and the knowledge of the opportunities and threats towards it.
Is family leadership always beneficial?
1) Family CEO <Non family CEO: big company with dispersed ownership
2) Family CEO = Non-family CEO: small company with dispersed ownership or big company with concentrated ownership
3) Family CEO> Non-family CEO: small company with concentrated ownership
Between vices and virtues: potential virtues
“Virtue is the set of skills that serve the prince to relate to luck, that is, external events. Virtue is therefore a combination of energy and intelligence, the prince must be intelligent but also effective and energetic “(N. Machiavelli).
In conclusion, given that the Italian SMEs often follows the family structure, it brings with it some pros and cons, vices and virtues typical of this organizational structure and its dynamics, among which:
- A concentrated property and management that allows greater speed in decision making
- The work support of wife and classmates
- A more agile comparison between hierarchical levels
- Greater personal consideration regardless of the position occupied
- A collegial leadership
- Commitment and collaboration by management
- High flexibility in meetings and management
- A long-term investment vision
- Fertile and reciprocal contamination between business and family life.
Between vices and virtues: potential vices
- Family relational problems break into the business reality
- There is a strong centralization of responsibilities
- The expansion is difficult due to the high running costs
- Successors are not always present or do not always want to enter the company
- Sometimes there is a forcing in inserting children or relatives into the company without them being necessary and sufficiently competent
- Unanimity as a management rule leads to a crowding and a loss of flexibility
- Managers outside the family are seen as consultants with less attachment to the company
- The refusal of members or third parties sometimes blocks company growth
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