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Faculty Insights

Why Values Matter in Family Businesses

By Sherry Herwig

May 18, 2015

Do you remember the television series Cheers? You know, the one where everybody knows your name and where you sit? Each day, a character named Norm would come into the bar, greet the crowd who responded with an enthusiastic shout of his name, sit in his usual spot, and order a beer. This was the norm on Cheers, literally.

Sherry Herwig
Sherry Herwig, Director of the Wisconsin School of Business Family Business Center

Norms are the written and unwritten rules that shape and guide our behavior and expectations for family, work, and social functions. Shared values help keep norms in place.
Sometimes norms just happen without much thought or intention as a result of people being together; other norms may be specifically created and nurtured. The longer people are together (such as families or work units), the more rooted the norms become both good and bad, productive and unproductive.
In a family business the family norms and beliefs, especially those of the founding generation, have a direct impact on the culture and practices of the business. Family norms often include rules for communicating (don’t question Dad the CEO) and decision making (Mom the CFO will have the final say), work ethic (no one rests until the work is done), how we treat each other (the golden rule), and celebrating good times together (work goals, birthdays, holidays, babies, weddings, and more).
Unfortunately, when norms are not explicit, as is often the case, it takes time for someone new to the work environment—a spouse, younger generation, or non-family employee—to understand what is expected and how to fit in.
Best practices for family businesses stress the importance of identifying, writing down, and sharing the values and beliefs of the company. Once values are understood, having an open discussion and mindful observation of norms in a business can help ensure that leaders and family are consistent in their behaviors, in sync with the company values, can better orient new family or employees to the business, and can explain why the business operates the way it does.
When family businesses have clearly thought about values and intentional norms, they are better able to leverage the family aspect of the business as a competitive advantage.