Competitivity in the family enterprise

*Luis Felipe Torres Gomez is professor of the Department of Administration and Finance from ITESM Campus Queretaro. [email protected]

The integration of knowledge in family enterprises is affected by the family inertia and the inherent feelings in the relationship among the family members. This knowledge integration is essential because it is part of the organizational capacities, which allow companies to adapt themselves to the environmental changes and to develop competences that will distinguish them from their competitors. In other words, it allows them to be more competitive. Some of these competences see results when a new product is developed, when more creative ways to commercialize, distribute and produce products are found.

For outstanding consultants, Peter Drucker and Michael Porter, knowledge is the foundation of the competitive advantage. Knowledge integration in family enterprises is essential, especially when a company faces a situation in which leadership is inherited from one generation to the next one. This process requires good will and closeness from all the participants because knowledge has a tacit and explicit nature. In order to so, interaction between the family members who are participating in the succession process is fundamental. Some factors such as the number of members, the different factors and the alignment of them regarding the family´s vision and mission make the situation quite complex. It is implied that these elements have been previously established.

A factor that limits the integration of knowledge is the dysfunctional conflict. It is the type of conflict between two or more members where none of them is willing to negotiate. Family enterprises are considered to be “fertile context for conflict”. This occurs because there is a “dominant presence of family that establishes the rules and has maximum power. There is also a lack of systems and structures to face the differences and the relationship between the family roles and the enterprise roles”. The context in which a family enterprise takes place has a tendency to provoke marital disagreements, sibling rivalry and the desire of children to distinguish themselves from their parents. To a certain extent, the family itself becomes a prominent factor of conflict.

These situations provoke tension, irritation, mistrust and resentment between the family members. To make it even worse, there is emotional incompatibility between some family members. As a consequence, conflictive relationships eat away any opportunity to generate knowledge between the members of the company and reduce the efficiency of the organization; and this stops the integration of knowledge.

Interpersonal family conflicts feed negative reactions and provoke disagreements between family members and the family group they work with. As a consequence, conflicts in the relationships limit the information exchange and diminish the ability to change when conflict is caused by a lack of mutual understanding between people. In order to develop dynamic organizational competences, it is essential to have new or update knowledge that allows an enterprise to widen, modify or create ordinary abilities. This comes from having access to previous knowledge in order to look for success in the medium and long term.

Among other alternatives, this condition may be improved by creating communication channels and a flexible information exchange between all of the family and organization levels. Participation must be planned and active in order to overcome resistance to new changes. For example, when a previous generation does not allow the new generations to make decisions, change is blocked. As a consequence, older generations must be flexible enough to explore and accept new knowledge and new ways to proceed. New generations must consider knowledge and contributions of previous generations. Mutual respect and interaction must be present at all times between the members of different generations that participate in the process. This permanent and respectful exchange produces intangible resources that lead to higher levels of creations which represents the main source of competitive advantages. There are still some questions: which are the tools that may help to formalize knowledge and family experience regarding the company´s activities? What kinds of family-enterprise entities must be involved? Who should participate in the development of these tools and under which circumstances?