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Managing multiple role identities in the family enterprise ecosystem
Family directors often struggle with concurrent and competing role identities that jeopardize objective decision-making, effective governance, and performance in family enterprises.
Directors in any organization are often required to perform a juggling act between worker and leader. The modern workplace demands flat structures and access to leadership, tasking its stakeholders with leading by example and playing both an operational and supervisory role at all times.
Although common practice in many startups today, the existence of multiple role identities in the workplace is not a new phenomenon and exists to no greater extent than in family firms, where the prerequisite of being family-owned adds another identity to the mix.
Family firms are traditionally led by directors who bring the perspectives of family, ownership, and business. These multiple role identities not only exist concurrently but, to some extent, compete, jeopardizing objective decision-making and effective governance, as well as the performance and longevity of the family enterprise.
Through our work with family enterprises, we know that multiple role identities can have a profound effect when not managed correctly. Symptoms often include increasingly complex decision-making, role ambiguity, incongruent expectations, and a range of psychological challenges. It can trigger an intensified state of imposter syndrome for directors, causing them to question their purpose as well as worth, and it can force them to become gatekeepers of vital information. Another side outcome for directors is failing to actively listen to or engage with the next generation, resulting in a lack of alignment and risking the longevity of the family enterprise.
This undoubtedly leads to a critical governance dilemma for family firms, but what has been difficult to ascertain until now is what family firms are actively doing to help individuals manage their multiple role identities and how they prevent them from damaging the family enterprise.
From family director pathos to board ethos
This is the center of our new research, which explores how multiple role identity struggles emerge in family businesses and how they are managed by their boards. We adopt the two ancient Greek terms of pathos and ethos to describe the suffering or sorrowfulness of directors due to their multiple role identity struggles and the nature, attitudes, and habits that characterize their behavior.
Our research presents a clear path from suffering to success, offering tangible next steps and best practices for family firms to follow to capitalize on the strengths of multiple role identities (ethos) without harming the family business or its leaders (pathos).
Together with my academic peers Cristina Bettinelli, Manisha Singal, and John Davis from the University of Bergamo, Virginia Tech, and MIT Sloan School of Management, respectively, we interviewed 36 elite family firms in Italy, the home of family capitalization. We conducted this qualitative research to enhance our theoretical and practical understanding of how multiple role identity struggles emerge and are managed, and through our work, we have unlocked exclusive insights into the impact of these struggles on the family enterprise ecosystem.
The three different types of family director
One of the first conclusions we reached was that three types of directors exist within the family enterprise ecosystem, and the intensity with which they struggle with multiple role identities differs across the three types. These include:
- Family operating director – actively involved in the board and day-to-day operations
- Family supervising director – plays a watchdog role over external management
- Family investment director – plays the role of investor rather than manager, seeing the entity as an investment
We found that the more actively involved in the operations of the business the director is, the more intensely they struggled with multiple role identities. We labeled these struggles as sailing in bewilderment, navigating in a haze, and steering with clarity, with family operating directors likely exhibiting passive listening and subjective decision-making while family investment directors practice active listening and objective judgment.
In a family firm, when the roles of patriarch and business director are of equal importance and both pressingly relevant to a board discussion, how does an individual manage the conflation?
How multiple role identities are managed
For most family directors, stepping back into a passive role is not a viable option, so the second phase of our research focused on how multiple role identity struggles are managed by the board of family firms.
When multiple role identity struggles are not managed correctly, they can affect entrepreneurial orientation and performance, and so their management is vital. Existing research suggests that this is usually managed in one of two ways: internal, by an individual, and external, through their environment.
There is a growing understanding that individuals hierarchically organize their multiple role identities, with the more salient identities placed higher in the hierarchy. However, in a family firm, when the roles of patriarch and business director are of equal importance and both pressingly relevant to a board discussion, how does an individual manage the conflation?
This was the case for one of the family firms that we spoke to during our research that had recently faced a difficult strategic and interpersonal situation. This is an extract from our interview with an advisor of a large family firm.
“The company is owned equally by the chair and his brother. The brothers resigned from their executive roles as CEO and CFO respectively when the company was thrown into a very difficult period due to an event in their industry. They wisely hired a non-family CEO who has been doing an excellent job helping the company recover. The complication for the board chair (now 63) is that he has sons working in the family company who are also performing well, and the chair had wanted one or more of them to lead the company. If the company gives the non-family CEO a long-term employment contract (desired by the CEO and supported by the independents on the board) the chairman’s sons would need to wait years to lead the company. The chair’s brother maintained a neutral position. The other board members felt that the non-family CEO was needed for some time to reorganize the company and transform the company’s portfolio.
During my meetings with the family chairman, I appreciated that he was deeply torn about what to do. As a father he wanted to select one of his sons for future leadership; as a board chairman and owner, he knew he should consider what was in the best interest of the company and the owners, which on balance favored keeping the non-family CEO.
The board members performed a careful analysis of the qualifications of the CEO and sons of the chairman for the job of CEO. They also spent considerable time discussing the issue with the board chair, getting him to understand how his role as a father was confusing his obligations as a board chair and owner of the company. The independent board members then helped the board chair fashion useful and attractive roles for two of his sons in a new venture by the company that kept the CEO in place. In this case, the director who knew the chair best kept the other directors informed and they worked as a team to help the father-chair come to a decision. The board members got to know the sons of the chair and tried to demonstrate to them that they were supportive and respectful of the family and wanted to help the company make a decision that was in the interests of the owners. This was a team effort.”
Our research found an unexpected focus on external management and how environmental factors in a family firm can help its individuals manage their multiple role identities. Something we coined Boardroom Structural Forces. It refers to the view that a family boardroom, in its physicality, and along with fellow board members, can help a director separate their role identities.
Boardroom Structural Forces
If we metaphorically see the boardroom table of a family firm as a dining table, as we frequently do in the family business world, directors can struggle to distinguish their role as head of the family from head of the business. If he or she arrives at a board room, which is decorated with pre-prepared meeting notes and agendas instead of place settings, he or she will find it easier to regulate priorities.
This notion of a boardroom being the apex of the firm’s decision-making featured frequently in many of our interviews with the 36 family firms. The directors interviewed spoke of the boardroom with pride and excitement, relating it to being in church during mass or wearing a national soccer jersey and singing the national anthem ahead of a game. It was also described as the brain of an organization, feeding directions back to the rest of the business organs, which, without it, wouldn’t survive.
Directors tend to perceive themselves differently in the boardroom than elsewhere; if it is set up to establish identity boundaries and encourage directors to have objective distinction, it can create healthy boundaries and manage the typical struggles associated with multiple role identities.
“Establishing buffers is described as defining identity boundaries, raising awareness among family directors that have concurrent, and to some extent competing, role identities as owners, family members, and managers.”
Buffers and bridges
This is one of the tangible next steps that we categorize in our research as buffers and bridges which are especially relevant for boards with family operating directors.
Establishing buffers is described as defining identity boundaries, raising awareness among family directors that have concurrent, and to some extent competing, role identities as owners, family members, and managers, and objectifying thinking. Bridges refer to other stakeholders implementing and enforcing these boundaries, ensuring separation activities are initiated, and that directors with multiple role identities are held accountable for any concurrent opinions or behaviors.
This could be ensuring directors maintain cohesion and communication across involved generations or electing an external, non-family board member to bridge communication between the family and business. Both examples are evident in the case study cited above where the board collectively worked with the individual experiencing multiple role identity struggles to reach the best conclusion for the family and the business.
Directors need to draw cognitive and physical boundaries that reinforce mental distinctions so that family firms can capitalize on the strengths of multiple role identities without compromising their distinctiveness.
You can access the full research paper here, or, for a conversation about how your family enterprise can manage concurrent or perhaps competing role identities in the board room, please get in touch.
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