How Family Cohesion Helps Family Enterprises Succeed

Ramia: Welcome everyone to another conversation on WiFB. We’re super excited to have Claudia Astrachan with us today. Claudia, welcome to the conversation.

Claudia: Thank you. Thanks for having me.

Ramia:. So Claudia you’re long standing committee member WiFB and it has been so fun, having all of these family enterprise related conversations with you over the years, we’ve known each other for quite some time. And I think the topic that we’re going to tackle today is actually a particular interest. And it’s one that is, uh, maybe rarely. Sort of like isolated and looked at, you know, more in depth, even though it is super important, as we know, and that’s the, the, the topic of family cohesion.

And I think maybe to give people some context is like, you know, you’ve been studying family businesses for many years now. Like you’ve been, uh, you know, you’ve been active as a, as an academic in the family enterprise field ,as a consultant. You’ve, you know, you you’ve organized conferences for family enterprises.

It’s your whole life. Why this topic? Why does it attract your attention in particular? Like what about this sort of like over the span of your work has emerged as being of central important to this conversation in your view?

Claudia: At some point I came to realize, you know, that, I mean, every family business researcher basically knows that or will admit at this point that, um, the focus, um, lies squarely, and most of the research lies squarely on the business and not on the family.

But we also understand. We cannot, um, understand or interpret certain business behaviors without knowing the family behind the business and what drives them and what their objectives are and what their dynamics are. And, um, a key force shaping these dynamics, um, is cohesion, but there’s limited research on it.

But the research that, um, is out there is very powerful, that shows that what really differentiates multi-generational families. Um, from. You know, functional high functioning multi-generational families from those that are less functioning or from those that ceased to exist. Um, cause they fell apart is their high level of cohesion and the level of effort they put into nurturing and maintaining this cohesion.

Um, so I think, you know, it was, um, Uh, and another part of it was that, um, uh, a dear colleague and friend of mine has done some amazing research on cohesion. So when we started working on other topics, you know, this, he brought this to my attention and it just clicked for me. It’s like, this is, this makes sense.

This is. A key driver of family connection to one another to the business and really a lever that we should be using also in our, in our advisory practice.

Ramia: from your perspective, like you talk, when you talk about cohesion, To your colleagues, to your academic colleagues, to your families that you, that you consult. W how do you define it? Like, what does that look like for you, family cohesion?

Claudia: I mean on a very basic level, what cohesion means, as you know, you, you imagine a water drop, right? You have, you know, you wash your hands in the bathroom and then, you know, splatter skit on the mirror and you have these little drops. So the molecules of the water stick together because they’re similar to each other, they have an attraction.

Um, so they stick together and not to everything, you know, around it. Um, and it’s the same with families. So, and, and any other group, that’s why we talk about group cohesion. Um, and you can, you can, uh, experience a sense of cohesion, not just with your family, with any group, with your, you know, with your spouse, with, you know, friends, whatever, but what it is in a group is that people feel a sense of connectedness and belonging to that group more than to the outside. Um, and that, um, creates a lot of benefits for the group. So highly cohesive groups, um, have higher levels of trust, and there’s a lot of research on, on group cohesion. So higher levels of trust, mutual support. Um, there, they communicate more effectively.

Um, they are better at solving conflict, which is an interesting one. Um, because if you have high levels of connectedness and trust, you are less afraid to engage in conflict because you know that a conflict doesn’t mean the end of the world, you know, you are so strongly connected, so secure in your attachment to the other person and to the group that you can safely enter a conflict without risking, you know, the very foundation of that relationship.

And that is a super important, um, aspect of cohesion and why we need to nurture it because in every group, I mean, conflict is just a natural by-product of group functioning of you know, the reality of, of groups.

Ramia: What are the contributing factors to family cohesion eroding in the first place?

Claudia: I think we have to differentiate between, you know, um, what you’re describing is, you know, in the first generation you may have a couple, right? And yes, they have they’re cohesive because they are, you know, they are, they chose to be together as a couple and to start a [00:09:00] venture together.

Um, they have children, let’s say death, three children, four children. It doesn’t necessarily mean that there’s cohesion though, because depending on the dynamics that are happening, the family, you know, maybe you have a narcissistic parents, maybe you have, you have substance abuse, you could have anything that’s

Ramia: given.

Claudia: Cohesion naturally, if in a healthy, functional family, yes. You’ll have have cohesion. Um, over time as a family, again, causing consortium people. You know, they move away. So you’re geographically dispersed. Um, if you have a business that’s in one place, people are automatically going to have less exposure to the business.

They’re going to know less of it. They’re going to feel less connected to it unless you specifically counter act and, you know, create opportunities for family members to come in and stay connected to the business. Um, and then another thing that can really harden as our accelerate, this, um, you know, fragmentation and the family drifting apart is, um, when families develop a strong branch mentality.

So when they no longer think about we are one family, but we are a collection of branches. And once you start thinking in branches, each branch has likely to develop their own set of values, their own objectives, their own needs and wants, and these might be different from those of the other branches.

So you’re no longer aligned behind, you know, a strong, shared purpose or a set of objectives that you can all get behind. Um, and that can create conflict.

Ramia: At the beginning, you explained that conflict will obviously always be part of it. Like even in the most, like, you know, the greatest family cohesion, like is part of your culture, you’ll still have conflict, right?

So what are the telltale signs for you?

And secondly, and I think it’s, it’s basically the same question who’s in charge of that? Like, you know, who should take responsibility, who like, you know, who should be advocating the family cohesion the most?

Claudia: First of all, I think, um, you know, conflicts or, I mean, what are conflicts, they’re just disagreements. Right. Um, and I think, I think, when we can see disagreements as disagreements, um, that is a telltale sign of there not being an underlying issue.

So if we talk about something, you know, Um, an issue that we’re observing and in a non-emotional or we can get a little emotional. That’s fine, but we are very, we are very clear in terms of, this is what we observe, you know, what do we do about it? Um, uh, then it’s just that disagreement and we can, we can discuss, we can discuss that if they’re, you know, oftentimes in conversations when other things pop up or the severity of the response doesn’t match the issue. Then that’s a pretty good indicator that there’s something else going on. So we talk about an underlying issue. Oftentimes in families, we have underlying issues that go way back, you know, oh, mom and dad always liked you more than me, you know

esentments that we’ve harbored for sometimes decades, they come out side ways.

Ramia: I think that’s such a key message, but I also think that that applies to a family regardless whether they have an enterprise together. Right? Like, I mean, that’s just, something has to be set here. I think this family cohesion is something that we seek to foster anyways, or we should be seeking to foster anyways.

But you lay on top of that, the complexity of running an enterprise or managing a collective wealth. Right. And I think that this is, this is what makes this situation kind of that special situation where. It’s a lot to ask from a family really, to like, honestly, address all of these things. So very concretely here, Claudia.

We’re asking for advice, like, you know, what is your advice to sort of like really stimulate, like, you know, family cohesion almost make it part, I guess, of like a culture where it comes naturally where it doesn’t maybe feel so artificial.

Claudia: I think, um, yes, I fully agree. It needs to be authentic. It needs to work for your family. Some families are never going to be, you know, super tight-knit, super comfortable and they’re all best friends. That’s okay. What we want is for families to be able to make decisions together – when things go south, those in charge need to be able to, to quickly make a decision and act on it. Um, and when the family’s fragmented not united, when there’s, you know, disagreements, that slows down the decision making process, and then you endanger the thousands and thousands of stakeholders that depend on your business. So it’s a huge responsibility. So cohesion work is not, you know, a feel good exercise for the family.

Cohesion work os something that you do to ensure the continuity and the wellbeing and the prosperity of your business and the wellbeing of your, of your constituent  constituencies. Um, this is not, you know, again, not a feel good exercise, it is something that you should be doing as a family the way in which you do it can look very, very different in many families.

So an easy way to start is just to look at how often do we talk? And who talks to whom? So the first thing we want to do is encourage people to talk more, um, talk more frequently, um, talk longer, talk more than. In depth because the more people know about each other, um, they know about, you know, what drives you?

What needs do you have? What wants do you have? That creates a mutual understanding and mutual respect for one another. So more interaction, more communication, always better. Um, and then, you know, the, the other part, once you get a little deeper. Really trying to figure out, is there anything that stands on the way of us feeling connected to one another? Are there any underlying issues that at some level we need to address? And that can be down the road that doesn’t need to be rushed.

Um, it should probably be facilitated that usually helps, especially if it’s a, you know, a deep seated, um, family conflict that is highly emotional for everyone involved. And it helps to have a really skilled facilitator that can navigate these rocky, rocky water waters. A sensible governance system, um, always helps with cohesion because it can provide this frame of both formal and informal, um, you know, means of managing, coordinating the family.

So, you know, informal means of governance being, you know, storytelling, you know, what story do you tell about, you know, the beginnings of the business or the, you know, the, the roots of your family, whatever. So this creates a shared, a shared values space, um, and then share it, um, even though not, you know, direct experiences, but indirect experiences that that can connect people.

And then more formal means of governance. You know, you may have. Um, a family council that organizes family retreats or, you know, things like that. I do want to say something about cohesion that comes out of the research. That’s really important.

Um, so cohesion is, you know, it’s not one single thing. It’s not unidimensional, um, it’s multifaceted. So cohesion, um, the way in which people feel connected to one another and to the business can happen in, in a multitude of ways. So people can primarily be, feel connected to let’s call it the family enterprise system through the business, or they can feel primarily connected through the family.

And then on top of that, they can primarily feel connected through emotional, um, you know, mechanisms or through financial mechanisms. So I’ll give you an example. Um, so business financial is easy dividends, right? Um, people who are primarily driven by the physicians by the business, financial cohesion mechanisms.

Um, they are happy when they receive dividends and they are not so happy when they don’t. Um, and then people, for example, who are mainly, um, who feel connected to the family enterprise system, through the family, emotional, they just want to spend together, spend time together. They want to hang out. They want to know, you know, know who the other people are.

And, um, And that fulfills their, their, their connection needs now. Um, so take the pandemic, right? So you have an economic downturn for some businesses, so, oh, let’s, let’s not pay dividends this year, right? Oh, well that will disgruntle all those, um, family members that are exclusively connected through that business financial dimension.

So that is one enormous piece of advice, um, for families that, you know, have a slightly more sophisticated approach to, to this cohesion work, you need to work all four mechanisms to create cohesion simultaneously because every person connects to your family and your business differently. So you want to offer dividends. You want to offer education opportunities. You want to offer, you know, um, uh, platforms to meet and interact. You want to maybe set up a family archive that would be business emotional. Um, so you want to play all those four dimensions. So everybody has, ideally, multiple mechanisms through which they can connect to the family and the business, because if one of them falls away and people only connect to one, then that can cause them to disengage.

Ramia: There’s another big paradigm shift that we know that is. And it’s just a fact that even a few decades ago, there just weren’t as many women involved, actively, in recognized roles in the family enterprise or around family wealth as there are today.

We’re talking a few decades that we’ve seen that uptick. I’m one of those people who really resents the implication, that just because you’re a woman, you have higher emotional intelligence and you should be the chief emotional officer.

But on the other hand, does having more women or having rather more diversity in your family enterprise in terms of talent, of course changes the paradigm as well again, right? Like, so do you feel that’s another factor that might influence in future like, you know, how we approach, how we talk about family cohesion, et cetera? Do you think it will be more enabling or like less enabling or do you think it’s going to be always the same challenge for families to have this conversation?

Claudia:  I wholeheartedly agree with you. Um, and I, I reject that notion just as strongly that just, you know, just because you’re a woman, you’re, you know, you’re, you’re more, um, fit, um, you know, to, um, to communicate, to interact, to, um, you know, respond to people’s emotional needs, also because it puts the, that burden squarely on women again, right.

That’s something to be super mindful off. Right. Who, um, just like in any relationship or in an, in any household, who does the invisible work? Um, and that I think is something that, um, families that do this really well, they acknowledge, um, people and those are often women, um, that are maybe not operationally involved in the business, but that are, you know, just family members. Um, they value these women’s, or men, you know, these people’s contribution for what they do behind the scenes in terms of keeping the family together. Because again, dveryone has a responsibility to create the nurture, um, uh, cohesion, but some will do it better than others.

And I would say, you know, oftentimes yes, women are pushed into that role or they take it on, but there’s also, there’s also men.

The only thing that in terms of the gender, I would say, you know, just be mindful that, um, that women are not tasked with, you know, doing this work just because they’re women. But what I do want to say is that, um, so I do a lot of governance work in the consulting practice. Right. And we often come across, you know, these governance documents where, um, you know, like guidelines for the family, let’s say for employment or for participation in a family council or whatever.

And, um, oftentimes you have these, you know, qualification criteria. So, you know, you’ll have, uh, you know, only people who are direct descendants of the founders are allowed to XYZ. Um, So I’m going a little bit on a tangent here, but I think it’s important. Um, so things like that you need to, as a family, you need to think carefully about what that signals and what that does, because if you are you, it goes, it goes back to the question of who is part of the family?

Um, are spouse’s part of the family, are adopted children, part of the family? That going forward, it’s going to be huge because you have these various. You know, we went from having these homogeneous family structures to, you know, family … and family businesses that don’t recognize the potential that resides in spouses and, you know, and, and people in the periphery of the family could be, you know, um, It’s not necessarily just married spouses, but a lot of people are not going to get married anymore in the future, but they’re gonna, they’re going to live with a committed life part, maybe a same-sex life partner.

Um, you know, how are you going to deal with that as a family? Are you going to accept them as a spouse, even though they’re not married on paper? Um, and if you don’t, what does that signal to the other parts and what does it signal to their children? Because that, for sure, it’s going to disenfranchise the children, the next generation of that couple, if you don’t accept mom or dad as a part of the family.

So all these, you know, all these considerations that, and that plays squarely into cohesion, right. That question of who is part of the family and who is allowed to be part of our group and whom do we exclude? And acknowledging that this will have consequences and figuring out how to deal with these consequences.

That is an exercise that every family should do.

Ramia: I think you’re touching upon something that I find is so key though. It’s like, and whether it’s a governance document or anything else in relation to the family enterprise, whether it’s you telling the story, whether you’re making a film about it, whether you’re recording the history, the language that’s being used for that I agree with you is totally key because that makes it either inclusive or not, right?

Like it makes it, it either marginalizes certain people or doesn’t, but most of all, it glorifies certain people. Over others. Right?

We also know that one of the biggest sort of like family and And a lot of family businesses is just the story of the founder. And when that right, like when, when you, the more you get away from that in terms of time, you know, it, I guess like it becomes harder also to relate to that. And I agree with you wholeheartedly families need to find other ways to relate to each other and sort of like become more flexible in, in, in that term of inclusion.

Claudia: You know, that’s, that’s one thing with, uh, you know, everyone glorifies storytelling, right. Then researchers love storytelling. Oh, it’s so wonderful.

Sure. That’s fine. Um, but let’s talk about the stories that are not being told, right? Why are we telling the stories, the same stories over and over and over again about certain people in our ancestry? Emitting, you know, maybe less favorable, um, outcomes of our history because those stories would be important to tell.

How have we grown? How have we evolved through our missteps? But oftentimes these stories are swept under the rug.

Ramia: I’m sorry. I’m sorry to put it that way, but that’s also kind of like, I guess the, the patriarchy and research, if we want to talk about that.

Right. Like, because I actually think like a lot and that’s, I think where the emergence of women in more active and more visible roles is an interesting phenomenon in the family enterprise. And again, I think it, within the family, enterprises it’s not so much a feminism discussion or a glass ceiling discussion as you’re born into a family enterprise, it’s a circumstance of birth, right? Like, it’s not like you chose that. That just happens to you, right? Like now, but what happens next is really instrumental, right? Like, because I always say there are so many women. I’ve met and actually any family member, any number of family members, who’ve done extraordinary things for their family enterprises.

Who’ve made huge sacrifices. And as you say, rhey went to site and graves, and now they might’ve preferred it that way. They might’ve wanted it, but they might’ve also never known that they actually had something to share. And I agree with you, there’s this culture around the personality cult, like the most charismatic family member gets the most attention or like, you know, the most vocal one gets the most attention.

And if you want to work as a system though, I guess like, like shining that spotlight really on everyone. That’s there, like in, in whichever capacity [00:37:00] becomes almost like a, an imperative, right? Like if you don’t want to create that type of resentment over the long run.

Claudia: Yeah. I love that. And, you know, um, in, in conjunction with that, you know, so you say they go to a silent grave, but what happens to their offspring?

Because they know they have their own narratives and they’re like, how does nobody talk about what, you know, what they did, you know? Yeah. Um, and that creates resentment and that’s, that’s what, um, that can be the root of a super negative branch dynamic that just creates that ends up in the courtroom, essentially.

Ramia: Yeah, that splits things out. Like it splits things off of each other. So, I mean, a, I think we could go on a very long time. Thank you so much for coming on the conversation, WiFB. Thanks for, thanks for joining us today.

Claudia: Thanks for having me.