CLASSICS
Bivalent Attributes of the Family Firm
Renato Tagiuri, John Davis
Although family-owned and managed firms are the predominant form of
business organization in the world today, little systematic research exists on
these companies. This paper builds upon insights found in the emerging literature on these enterprises and upon our own observations to provide a conceptual framework to better understand these complex organizations. We
introduce the concept of the Bivalent Attributes—a unique, inherent feature
of an organization that is the source of both advantages and disadvantages—
to explain the dynamics of the family firm.
Introduction
Most firms in the United States are family businesses—organizations where
two or more extended family members influence the direction of the business
through the exercise of kinship ties, management roles, or ownership rights.
While most family companies are small, some are relatively large and several
are giants in their respective industries. Taken together, they contribute about
40 percent of the gross national product and over half of our national employment (Beckhard and Dyer, 1983). It is vital, given the prevalence and importance of family-controlled organizations in our society, that we understand the
characteristic behavior of the family members who influence these firms.
Most writings on these organizations appear in the business and trade
press, and generally focus either on a particular family or on a specific issue,
such as the son’s entry into the company or the rivalry between relatives who
work together (Altman, 1971; Business Week, 1966, 1967: Loving, 1975; Martin, 1975). As it stands today, the family business has not been extensively researched or described. Some systematic study has been done, however, on the
social structure and the particular strengths and weaknesses of family companies (Barry, 1975; Davis, P. and Stern, 1980; Miller and Rice, 1973), on the
psychology of the owner-manager (Day, 1980; Schein, 1983; Zaleznik and Kets
de Vries, 1975), on nepotism (Cambreleng, 1969; Ewing, 1965; Gaffey, 1966),
and on management succession in these firms (Barnes and Hershon, 1968;
Beckhard and Dyer, 1983; Davis, S., 1968; Hershon, 1975).
This paper builds upon insights found in the above writings, and it also
FAMILY BUSINESS REVIEW, vol. 9, no. 2, Summer 1996 © Family Firm Institute, Inc.
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incorporates observations from our ongoing study of family firms. In this discussion we deal only with those family-controlled companies where two or
more individuals are simultaneously members of the owning family, owners,
and managers. More specifically, this includes any company that is a) ownership controlled by one family, b) includes at least two family members in its
management, and c) also has nonfamily employees. For most smaller companies, ownership control means having at least a fifty percent ownership, but
for larger companies, it is possible to own less than a majority of the shares and
elect a board of directors that will support the controlling family’s goals. While
the firms discussed here are a subset of all companies which are ownership
controlled by one family, most writing on family business deals with the type
of situation we are describing.
The graphic representation of this set of relationships is displayed in Figure 1.
Figure 1. Overlap of Family, Ownership,
and Management Groups
Owners
Managers &
Employees
Family
Members
Our purpose in this paper is to show that the family company has
several unique, inherent attributes, and each of these key attributes is a source of
benefits and disadvantages for owning families, nonfamily employees, and family employees. As a result of their latent negative and positive potential, we call
these inherent features Bivalent Attributes. When one considers that only 30%
of family firms survive to the second generation (Poe, 1980), and that their
average life span is only 24 years (Danco, 1977), the concept of Bivalent Attributes is a reminder that the success or failure of any family firm will depend
on how well these inherent features are managed. Their successful manage-
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ment will also affect the well-being of the family and the family’s relationship
with employees and with the greater community.
We propose a theory here which will conceptually account for many
important behavioral characteristics of the family company, and which will
incorporate and build upon previous descriptive and conceptual work done
on family businesses. Hence, our major contribution in this work is a conceptual one.
The Bivalent Attributes of the family company are the unique, inherent
features of these firms and are the source of advantages and disadvantages of
this type of organization. Bivalent Attributes derive directly from the overlap
of family, ownership and management memberships. Figure 1 displays this
overlap. It shows, for example, that father and son are both members of the
same family, are both members of the owning group, and are both members of
the management group. The overlap of these membership groups generates
the many distinguishing features of family companies. In what follows, we
describe the most important Bivalent Attributes of the family firm and discuss
their bivalent qualities.
Simultaneous Roles
Because of their overlapping memberships, family members working in the
family firm can have three simultaneous roles: as relatives, as owners, and as
managers. As family members they are concerned primarily with the welfare
and the unity of the family; as owners they are interested in return on investment and in the viability of the firm; as managers, they work toward the firm’s
operational effectiveness.
Relatives’ simultaneous obligations to the family, company, and shareholders, and to each other as relatives, managers, and owners, can serve to bond
them loyally to each other and to the business. The loyalty can involve standing behind one another’s decisions, making personal contributions for each
other, the family, and the firm. It can reduce struggling for power in the company, give rise to great cooperation and trust, and create a sympathetic understanding of one another’s shortcomings, along with pride in one another’s
strengths.
When one or more relatives have simultaneous roles (e.g., owner-fatherpresident) decision-making can become centralized. In turn, the efficiency,
effectiveness, and privacy of the decision-making process are increased. Because of the immediate availability of ownership, business, and family information, decision-makers can quickly and discretely act in the best interest of
both the business and the family. When the goals of the family, management,
and ownership groups are compatible, family managers can act decisively,
making the firm a formidable competitor.
While decision-making can be especially efficient in family firms and loy-
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alty high and cooperation abundant, there can also be negative outcomes that
flow from simultaneous roles. In general, norms about behavior in business
and norms about behavior within families are opposed. Families traditionally
seek internal unity and try to repress or deny rivalry among members, whereas
businesses often strive for a healthy level of internal competition. In this framework of double-norms, either competitiveness within the firm, or family unity
may be sacrificed to protect the company or the family. Even in the best of
cases we find the owner-manager-relative periodically suffering from the anxiety that results from what we call “norm confusion.”
Because of simultaneous roles, family considerations can easily intrude on
business decisions, and vise versa. Family, ownership, and business issues can
get mixed up; business discussions may be transformed into highly charged
arguments about family issues, while family decisions may be made on the
basis of company needs. Consequently, companies can suffer from a lack of
marketplace objectivity and poor profit discipline, and families from a feeling
that relatives are sacrificed for the good of the firm.
Because of the overlap in social systems, relatives can retreat into whatever roles give them the greatest power in conflict situations. An owner-father-president can retreat into his role as father, and treat his son-subordinate
like a child, for example, to maintain his position or power. The movement in
and out of roles can obscure the reasons underlying disagreement and prolong
and inhibit the resolution of conflicts. Nonrelatives doing business together
are less able to retreat into nonbusiness roles and more likely to handle business decisions objectively.
Complicating the situation further is the possibility that family members,
regardless of their positions in the family or business, may each consider themselves as spokespersons for the business. When this is compounded by rivalry
that is carried from the family setting into the business it can lead to conflicting orders being given to the company, family members trying to undermine
each other’s authority in the company, and a general lack of clarity about responsibilities.
Shared Identity
Relatives who work together share a sense of identity. While this Bivalent
Attribute may seem obvious, it is nevertheless a meaningful and important
influence on relatives’ behavior both on and off the job. Since work and family
domains are intertwined in family firms—a result of the overlap—each action
of every employee-relative carries both business and family meaning.
The family name, for example, is an identity for family members and has
a meaning to people inside and outside the family. Family ties define a bond
and rules of behavior for relatives. Outsiders come to associate certain traits
with the family and expect to see that behavior. If one or more family members
are loud, unruly, bossy, the whole family may be suspected of having potential
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for the same behavior. The same could also be true for good, constructive
behavior. One relative’s behavior can influence the reputation of others in the
family and the reputation of the business as well.
Both on the job and off, the family polices the behavior of its members to
insure that they are acting in an acceptable manner toward friends of the family, customers, suppliers, and employees. This concern with image and the
consequent policing may do much to increase awareness of family standards
and a mission around which relatives can rally and find a reason for mutual
loyalty.
Yet such policing may be stifling to some family members. Even very creative expression may be discouraged if it does not fit the family mold. Family
members may feel that they are being watched in and out of the company and
resent their lack of freedom. At the same time, family members who try to
maintain the family image may be angered by relatives who do not.
The pressure to act in ways that enhance the reputation of the business
can offset the influence of the family in the management of the company and
restore some objectivity to decision-making. Still, that reputation may add to
the pressure to conform to roles more tightly prescribed than ordinary executive roles, and foster resentment toward family and business authority.
A Lifelong Common History
The behavior of blood relatives working together is influenced, in part, by the
fact that they lived with one another all the life of one of them. Out of this
common history emerges a considerable amount of shared experience, even
though each family member has his or her own recollections of that experience.
From their time together, relatives learn a great deal about each other’s
strengths and weaknesses. They can use this knowledge, when working together, for constructive or destructive purposes. They can try to draw on one
another’s strengths and work to complement one another’s weaknesses or they
can point out their relative’s weaknesses to undermine his or her standing in
the firm.
The relationship’s history includes a mixture of happy and disappointing
experiences and these do much to shape the pair’s expectations concerning working together. A strong foundation for the relationship (where the two have learned
both how to support and how to be in conflict with one another) can mean that
the two will endure considerable adversity and remain loyal to one another.
Early disappointments, in contrast, can reduce trust between the relatives and
complicate work interactions. One family member, for example, might avoid
certain work situations with a relative for fear of being let down again.
Because the relationship between two blood relatives begins in the family,
when one or both are infants, the two practice for many years certain ways of
behaving around each other. Many of the impressions that the two have of one
another are unconscious, well-established, and difficult to change. When the
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two begin to work together it is easy for them to lock into their old mutual,
reciprocal ways. Each acts as a cue to the other to resume their respective
roles. If the history of the relationship is positive and constructive, the ease
and speed with which the mutual patterns come into operation is an advantage, an economy. But if the relationship has been difficult, the rapid locking is
a disadvantage out of which it seems difficult to escape.
Emotional Involvement and Confusion
As a result of the combination of benefits and constraints that relatives present
to one another throughout the history of their relationship, family members
hold concurrent and powerful positive and negative feelings for each other.
That is, they have ambivalent feelings toward one another.
Given the potential for greater love and greater hate among family members, it is not surprising that emotions between relatives often surface more
easily than between nonrelated individuals. Because of the emotional content
of their bond, relatives working together may find it difficult to interpret one
another’s actions and words objectively. Instead, communications often are
interpreted in terms of their meaning in a family context and they can elicit
the same response they did at an earlier time in life.
Not all emotions between relatives are expressed openly. Indeed, there
are generally strict psychological prohibitions against open conflict among
family members. Once emotion (love or hate) rises from the unconscious to
consciousness, the family member must decide whether to express or suppress
the feeling.
On the positive side, the expression of love can generate unusual motivation, cement loyalties, and increase trust among relatives. The prohibition
against public conflict can be a norm among family members that can eliminate embarrassing conflict situations. This, in turn, can put family members at
ease in public situations which can aid work relationships.
Powerful feelings of hate and resentment and the accompanying sense of
guilt can greatly complicate work relationships. The denial of negative feelings can result in the suppression of discussions about quite natural differences
of opinion, and lead to covert expressions of hostility such as undermining
each other’s confidence, withholding emotional support, avoiding one another
(particularly around sensitive family issues), and issuing conflicting orders to
the organization. The expression of a relative’s negative feelings toward a family member can damage the work and family relationship and greatly disrupt
the company.
The Private Language of Relatives
An interesting feature of the work interactions among family members is the
relatives’ private language. Over the many years of shared experiences between
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relatives special words, phrases, expressions, and body movements evolve that
have agreed upon meanings. Private languages, “family languages,” allow family
members to communicate more efficiently than is generally possible among
nonrelatives, even among close friends. This can permit relatives to exchange
more information with greater privacy and arrive at decisions more rapidly
than can two nonrelatives.
Nevertheless, aspects of this private language can trigger sensitive, painful reactions that can distort communication. A private language can keep
nonfamily people uninformed and can also be a weapon in an ongoing family
struggle. It is an interesting paradox that in even the most embattled family
company, there is often strong adherence to even the most painful family language.
Mutual Awareness and Privacy
Family members have an especially keen awareness of each other’s circumstances: what pressures they are under, what makes them happy or angry, how
they are feeling physically, and so on. This awareness is created through three
channels. First, there is the explicit communication among family members.
This can be greater for relatives than for nonrelatives since relatives may see
each other more often in many types of business and social settings. Second,
family members have a private language which aids this awareness of each
other. Third, family members share relatives who may pass on information
from one relative to another.
Increased awareness can improve communication between relatives and
help to temper business decisions with an understanding of their implications
for family members. It can give relatives insights on how to support one another.
But increased awareness can lead some family members to feel trapped or
overwatched. Since family members who work together have relatively little
time apart and since they have a heightened awareness of each other, they may
feel as if they are “living in a fishbowl.” The “fishbowl” is often hidden from
the world’s view, but these relatives may feel very exposed to one another. The
combination of heightened awareness and emotional intensity may add up to a
feeling that personal privacy is not available in a family company system. Moreover, because of this feature, family members often are vulnerable to the attacks of relatives.
Meaning of the Family Company
Depending on the generation of the company and length of the family’s association with it, the organization takes on particular meanings for members of
the owning family. The firm (especially a first-generation company) is typically regarded as a part of the family and relatives often can have strong feel-
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ings about it. To a founder-father it often represents a wife, mistress, or child.
For a son (especially if he grew up with the firm), the company is the father’s
creation or mistress and the son becomes its guardian, sibling, or suitor. Later
generations can also feel strong personalized attachments to the organization
but this seems to occur more infrequently.
It has been our observation that in a family system where there is adequate
security and abundant nurturance the family company will not be perceived as
a threatening rival or interloper. However, in a family where there is a prevailing struggle for security and a perceived lack of emotional resources, the family firm may be perceived as a displacing family member who takes away status
and resources from real family members.
The meaning of the company for a family member and the corresponding
attachment to it are important influences on work relationships between relatives. Father and son can become fierce rivals for the possession of this nurturing symbol. A founder can fight to maintain control over the company and
seem to love the firm more than he loves his son. When strong attachments
exist, discussions about organization control can become subjective and highly
charged emotional confrontations.
Conversely, if relatives are strongly attached to the organization, they can
be united in their goals for it and in their willingness to contribute to the
business. Ultimately, this symbolism can define a sense of mission for the organization that nonfamily companies rarely match.
Conclusions
For managers in family companies, or for those who interact with such companies, it is crucial to recognize, as this conceptual note has pointed out, that
the same organizational features of these firms account for both their strengths and
their weaknesses. Thus it is necessary to recognize the potential for positive and
negative consequences in each of these features which we have called Bivalent
Attributes. See Table 1 for a summary of these characteristics. It is not possible
for management to eliminate the presence of the Bivalent Attributes–they derive directly from the defining overlap of membership groups. The challenge
in these organizations is to manage the inherent Bivalent Attributes to maximize their positive, and minimize their negative consequences.
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Table 1. Bivalent Attributes of the Family Firm
Disadvantages (-)
Attribute
Advantages (+)
Norm confusion and anxiety.
Family business and ownership
issues can get mixed up. Lack of
business objectivity.
Simultaneous Roles
Heightened family and company
loyalty. Quick and effective
decision-making.
A stifling sense of being
overwatched. Resentment toward
family and business
Shared Identity
Heightened family and company
loyalty. A strong sense of mission.
More objective business decisions.
Family members can point out
weaknesses. Early disappointments can reduce trust in work
interactions
Lifelong Common History
Relatives can draw out relatives’
strengths and complement their
weak-nesses. A strong foundation
can encourage a family to
weather adversity.
Lack of objectivity in communication. Resent-ment and guilt can
complicate work interactions.
Covert hostility can appear.
Emotional Involvement and
Ambivalence
Expression of positive feelings
creates loyalty and promotes
trust.
Can trigger sensitive reactions
that can distort communication
and encourage conditions for
conflict.
Private Language
Allows for more efficient
communication with greater
privacy.
Can lead relatives to feel
overwatched and trapped.
Mutual Awareness and Privacy
Improved communication and
business decisions that support
the business, owners, and family.
Fierce rivalries can develop
between relatives
Meaning of the Family Company
Company symbolism can develop
a strong sense of mission for
employees.
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Renato Tagiuri is Professor Emeritus in the Graduate School of Business Administration at Harvard University. John Davis, DBA, is President of the Owner Managed
Business Institute, Santa Barbara, CA.
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