Ikea is a Swedish family owned and operated enterprise in the home furnishings retail space. Broadly known as the world leader for designing, manufacturing and selling modernly designed and cheap functional furniture, first generation founder, Ingvar Kamprad originally started out as a “one-man mail” company in 1943. Today the firm counts approximately 70,000 co-workers and realizes over $33 Billion turnover through 332 stores and 30 franchises spread in 38 countries.
Ingvar Kamprad’s personality had a major influence in shaping the company’s organizational culture, which was informed by his core values of cost-consciousness, simplicity and efficiency. They have also tangibly translated into Ikea’s recipe for success: Selling good quality practical furniture’s at cheap prices. The multinational founder nourished the company’s commitment to cost saving long before he first introduced the ‘self-assembling’ Ikea-way.
Anders Dahlvis, Ikea’s former CEO from 1999 to 2009, describes the firm’s culture as informal, cost-consciousness, and with a “down-to-earth approach”. It has been famously reported that when IKEA management organized a gathering buffet-dinner for employees several years ago, Ingvar served himself last and made sure to shake hand with every worker before they left. Through this genuine and authentic action, the culture of IKEA was further solidified simply because this humble interaction with employees demonstrated the culture at work in the bones of the organization.
We’ve been blogging a lot recently about culture and the unique role is plays in the family enterprise – whether the size of an Ikea or the local hardware store down the street. IKEA’s story is likely not too different from those of other business owning families or even of your own. What stories come to mind of founder’s deeply influencing culture?
We’ve been talking a lot lately about the important role culture plays in organizations and how that is particularly visible within family businesses. That’s because family firms have been really clear about their values from the beginning – even if those values were never captured and put on a poster for the office. It is these values that form culture. The founder’s approach to doing business, interacting with customers, employees and the community all work together to help define a business culture, which can have significant impacts on how successful the family firm is over time.
So, while the culture of most organizations is deeply informed by the values of the founder, in a family business those values are more likely to continue long into the future and be deeply shared across the organization. The reason is simple: The founder of a non-family business will be eventually replaced as President or CEO by someone who has his or her own set of values and even though supportive of the culture, rarely has a vested interest in the company culture beyond understanding the role it plays.
But in the family firm, there is strong continuity of culture and values long after the founder is gone with the presence of family members as owners, managers or board members. The family “legacy” of a strong and positive culture can naturally perpetuate the original culture established by the founder for generations to come.
This kind of deeply held, long term culture is key to a winning business strategy by doing business in a way that is consistently in line with the values of the founder. From this point of view, continuity planning takes on a whole new level of meaning: It is so much more than making sure there are family members in future leadership roles. It also ensures that the winning culture of the family business can easily and seamlessly move with subsequent generations to perpetuate success.
Anthropologists have long known that the task of learning about a specific group’s culture–or the unique way they interact with each other and complete tasks–starts by asking individual members about what they value, their key relationships, and their history.
It is important to pay attention to the unique family business culture of a firm because culture is about identifying bedrock components of the business that are the functional equivalent of the core “bones” of a building (the foundation, beams, pilings, etc). And cultural traits in a family business tend to be simpler, outward manifestations of the more complex underpinnings that hold a family business together. These traits help define what it does and, more importantly, how it does it.
Identifying cultural traits in an organization is difficult if done from within the culture itself. For example, it’s been proven over and over again that the average American struggles to accurately identify much about “American culture”, beyond being independently minded. A careful observer from another country can easily describe some unique US traits: Highly patriotic, expectations around optimism, mobility, etc. In fact, not only is this struggle true of inhabitants of any national culture, it is also true for people living and working within organizations as well, including the family firm.
Being able to describe these core parts of a family business culture is important as the firm grows and moves into subsequent generations because it helps us understand who we are, how we like to do things and what makes us successful as a business and as a family. It also helps us identify where we might be bumping up against conflict that challenges that success and this is where the real value lies in understanding your organization’s culture.
We spoke earlier this week about a Midwestern retailer that walks its talk. Their corporate culture is directly shaped by the values of the owning family. So – the family gets the deep satisfaction of knowing they are part of a company that is living the family’s values. How about financial results?
Well, the company enjoys unbroken, significant growth and profitability.
The company is a preferred employer in every town where it opens a location. It enjoys a turnover rate well below the industry average, with vastly reduced employment expenses related to recruitment and training. As a result, its long-tenured co-workers get to know their patrons pretty well, which leads to fantastic customer loyalty and repeat visits.
When it goes out to borrow, banks and other financial institutions are tripping over themselves to be the first to loan them money for their continuous capital improvements and growth projects.
They have been awarded the top Mystery Shopper award in their industry, three out the past four years.
There are loads more examples of the awards and recognition, significant return to owners on their investment, and co-worker pride to share with you, but blogs are supposed to be short and sweet.
Has this one example of an exemplary family business culture inspired you? There are many paths to exemplary family business culture. Your path will be unique to your family, your location, your products and services. The important thing will be – to pay attention to your culture, and your unique expression of excellence within that culture. It is a proven path to excellence!
Many family businesses struggle with the question – how much financial information can we share – both with employees and with other family members? In fact, one negative stereotype of family business culture is of a secretive owning family that only fully trusts a small inner circle.
Yet sometimes, family culture can work in the opposite, positive, direction. Many top performing private companies extend the ‘family culture’ well beyond blood relatives. The Midwestern retail business referenced earlier this week is a passionate proponent of ‘Open Book Management’ – where all team members, at every level of the company, have full knowledge of the company’s financial goals and performance – and where everyone shares in generous profit sharing. Innovative bonus programs give every co-worker the opportunity to build for a secure retirement, based on company performance.
At year end, the founder and members of his top management team hold a series of meetings to report on company performance, set goals for the coming year, and most important – thank every co-worker for their hard work and contribution. In these meetings, the company’s mission and values – directly shaped by the values of the owning family – are reviewed and reinforced with examples from top performing stores. Though the timing always coincides with the busy holiday season, the top team spends a full week travelling the mid-west to these meetings, going out to the co-worker’s locations to thank them where they live and work.
These actions speak as loud as the words. And the results are more than only on morale. The ‘family’ culture that this company works hard to create and sustain leads to some fantastic financial results. Stay tuned for more later this week…
Arriving at the client’s headquarters, I noticed that only 3 of the 15 visitor parking spaces right in front of the building were occupied. As always, I parked my car at the very back of the lot, which was quite full. Also parked way in the back, I recognized the owner’s car, and several vehicles belonging to Board members and advisors. Board meeting day was always like this. The Board members and owning family members all park in the back, leaving the close-in spaces for the team members.
The Parking Lot Test tells you a lot about a company’s corporate culture and values. When the top management and family ownership welcome the chance to leave the best parking spaces for their co-workers, you can bet you will find many more examples of a terrific culture. When owners consistently park their own cars in the Visitor’s spaces right by the front door, well, you can draw your own conclusions as to what this might say about the corporate culture and values.
And yes, team members and co-workers – not employees – populate this company.
Note this is not some California high tech company with ‘foosball’ in the lobby, it’s a mid-west retail-related company that’s consistently won its industry’s top awards as well as being named as one of the Top Employers in their region.
What other practices would you expect to see here, just based on the Parking Lot test alone? Stay tuned for more in coming days.
Part biography, part “how to” management book, and part philosophical tract, Joel Manby’s excellent new book, Love Works, is inspiring, readable and useful. Subtitled “Seven Timeless Principles for Effective Leaders,” Manby uses his experience as CEO of Herschend Family Entertainment, Inc. (think Silver Dollar City in Branson, MO, Dollywood in Pigeon Forge, TN and other attractions from Georgia to New York to California) to explain a practical and effective method of management approach based on “leading with love.”
Herschend Family Entertainment is a family business in its third generation. Manby constantly credits Jack and Peter Herschend, brothers who led the company for over 40 years, for teaching by eample “how to lead with love.” Manby’s thinking behind the book involves how he is seeking to build the Herschends’ family values and their example into the DNA of the company’s culture.
As one who works with hundreds of family businesses, I see Love Works, in addition to its many other merits, as a terrific primer on the importance and power of fully integrating an owning family’s values in their enterprise. We often say that the strength of a company’s culture, built on its owning family’s values, is among the most powerful competitive advantages that a family firm can achieve. There are few examples of how this can be accomplished on a practical basis. Manby provides just that with Love Works, and I thank him (and the Herschends) for it and recommend the book to every family business for what it teaches.
The concept of stewardship in family business has its roots in the long-term view that family businesses take. Building strength for the next generation not just the next quarter is the strategic advantage of family business. Because family companies have different expectations than public companies regarding long-term planning they have the opportunity to create a culture of stewardship that pervades the organization.
This culture should begin with the family’s commitment to building value for future generations and be described in a family values statement. These values then become the foundation for company values, vision, and mission that can guide management decisions and actions. But these statements must not be just “window dressing”. The guiding principles of the family should be translated to guiding principles of the business that can be lived every day.
Just having family members leading the business and working in the business will not be sufficient to accomplish the kind of culture discussed here. It is too easy for even family members to compartmentalize family and business and in so doing fail to let family values consciously guide their actions. If family and non-family executives are going to manage as stewards rather than agents they need the support of ownership. Active owners who take the time to understand the goals, opportunities, and strengths of their business can give management the conviction to stand firm when peers in other companies are looking out only for their individual interests.
One of my clients, a fifth generation building products supplier, was hit very hard by the economic contraction of 2008. While it was necessary to cut costs in the business, the owners did not expect the employees to bear that burden alone. They worked with management to cut the distributions to owners significantly in order to preserve the strength of their business to take advantage of an upturn in the market that would surely come. This was a lesson they had learned from previous generations and their commitment to preserving value for future generations gave business leaders support and confidence in doing what was needed to respond to the challenges of the market.
According to John Ward, Professor of Family Enterprises at Northwestern University”The best tool in the family business kit is, without a doubt, its values, which shape the culture of the family and their business”. What distinguishes one family business from another are size, location, success in it’s niche, service and products. But there is a secret ingredient that acts as the glue to keep a company’s survival and the ability to pass the business proudly from generation to generation. The values and beliefs of the family are clearly articulated to employees, suppliers and customers.
The family and business values can be a powerful marketing tool. SCJohnson Company, a five billion dollar family company always ends it’s media message with, “We are a Family Company”. Fisk Johnson, SCJohnson president stated:
“We call our values family values. They are not radically different from the values you hear from major Fortune 500 companies, but I think we are better able to practice those values as family-owned company. People care about making quality products, really care about the family, each other and the success of the company, I believe our family caring values translate into the success of the company”.
Values play a special role in uniting family and business. When the goals of the family and the business diverge, as they invariably do at some point, shared values can LEND a sense of mission and purpose that transcends those conflicts. When values in the business and family reinforce each other, powerful synergies can arise that strengthen peoples’ performance in both realms. An excellent resource for this subject is a book by Craig Aronoff and John Ward, Values: How to Assure a Legacy of Continuity and Success.
Howard Buffet is Warren Buffet’s 56 year old son, and works as a corn and soybean farmer in Nebraska. Warren Buffet has recommended to the board that Howard succeed him as Chair after his retirement.
You might question this choice. Berkshire is a large enterprise that requires rigorous oversight of its operations, and a Chair who will ensure that strong governance is perpetuated after Warren Buffet retires. We might envision an industry expert, or at least someone who has work experience in multi-business enterprises.
Yet Howard Buffet’s background doesn’t fit that profile. He understands agriculture, and through the Howard G. Buffett Foundation works to improve the standard of living and quality of life in developing nations, particularly Africa. In addition to teaching farmers how to grow successful crops, he encourages them to learn accounting. Howard Buffett would not be considered an industry expert. But Warren Buffett is more concerned with engaging a Chair at Berkshire who understands the importance of perpetuating the values and culture that have helped create Berkshire’s competitive advantages. And he has pointed out the importance of this in family-owned businesses: “Family-owned businesses share our long-term orientation, belief in hard work and a no-nonsense approach and respect for a strong corporate culture,” said Buffet during a talk in Switzerland.
Howard Buffett may not seem like an obvious pick, yet based on what we know about continuity through generations in family businesses, he might just be the very best strategic choice for leadership at Berkshire Hathaway!