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.”
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:
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.
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:
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.
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