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Family businesses promise close-knit family-like cultures that attract employees with similar values, but management must deliver on this promise to retain employees. Family firms must lean toward their unique interests by fostering a sense of belonging and shared identity among company employees. Doing so creates a productive workplace and helps protect employees from layoff proposals and offers from other companies. Family business managers often can’t offer financial incentives to encourage retention, but they shouldn’t settle for not being able to do anything. By fostering a company’s family-like atmosphere and shared identity, family businesses can retain valuable employees who help them thrive for generations to come.
In the wake of the Covid-19 pandemic, “The Great Retrenchment” has made talent retention a priority for most organizations. This phenomenon can be even more severe for family-owned businesses, as they often offer less competitive wages and benefit packages than their corporate rivals. Retaining non-family employees can be a concern, especially with the best career opportunities available to family members, as they may find that there is a ceiling on career growth within their organization. Despite these challenges, family businesses also have unique advantages that they can use in their retention efforts. Our research suggests three important ways family firms can leverage talent retention to their advantage.
Create a “family” feeling for all employees.
Family businesses promise close ties and family-like cultures that attract employees with similar values, but management must deliver on this promise to retain employees. Our research suggests that employee identification with the organization is key to competitive advantage as family businesses rely on their unique cultures. Identification involves becoming one with the organization and taking its successes and failures as your own. Because family firms often cannot offer wages commensurate with their competition outside the family, fostering a sense of unity between the business and its employees is important to keeping talent within the firm.
Creating this sense of togetherness enhances retention by embedding employees in a family-like culture, a cohesive environment that should produce a happy, engaged workforce. In addition to being good for productivity, this sense of camaraderie keeps employees from even thinking about looking for other jobs. A sense of belonging can reduce demand for better-paying positions elsewhere, because leaving the organization is tantamount to losing a part of oneself. Family business managers must realize that leaving a family is much more difficult than leaving a job. Leveraging that unique advantage by fostering a sense of “family” should help family firms retain talent.
Treat it like a family.
A sense of “family” requires strong relationships among employees. So, what can family business managers do to build these relationships? Some simple steps are to give family firms more opportunities to communicate outside of work and to change the design and layout of their workplaces. Open workspace designs have both advantages and disadvantages for productivity but are great for creating interaction and promoting relationships.
Family firms can consider the implications of current trends for working from home. Family firms are especially important in fostering relationships that provide unique benefits, including maintaining physical contact. Although the flexibility afforded by remote work may offer some advantages, family firm managers often need to be aware of the impact on the family-like culture that is essential to their firm’s competitive advantage and broader retention efforts. Every organization’s situation is different, but remote work can have cultural implications for family organizations that can hurt retention.
In order to create assets—and reduce employee turnover—family business managers must ensure that workplace conditions allow their workforce to function as a family.
Don’t forget family members.
Although non-family employees are the biggest flight risk, family businesses should not forget about the family members employed in the organization. Family members have different reasons for joining the business, and the assumption that they will stay forever may be wrong. Family employees may join the organization because their relatives are a safe alternative to an upward career path, not necessarily out of family obligation or loyalty. Family members deal with problems such as family conflict and sibling rivalry that are not experienced in other organizations and are not immune to thoughts of moving on to greener pastures. Securing a successor is a goal of most family businesses, so losing family members being selected for senior management can have serious implications for the company’s future. Given the long-term importance of family presence in business, management should remember to include family members when taking steps to foster a sense of unity among the workforce.
Our research suggests that family businesses have unique advantages despite their challenges. Family firms should lean toward those benefits by fostering a sense of belonging and shared identity among company employees. Doing so creates a productive workplace and helps protect employees from layoff proposals and offers from other companies. Family business managers often can’t offer financial incentives to encourage retention, but they shouldn’t settle for not being able to do anything. By fostering a company’s family-like atmosphere and shared identity, family businesses can retain valuable employees who help them thrive for generations to come.
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