Building knowledge

This theme details how participants discussed ‘building knowledge’ in relation to governance in the family business. It draws upon a wide variety of interpretations of how knowledge is built, including: the introduction of new qualifications across the family business to support the succession process, the family council as forum for learning and the importance of making mistakes.

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The first example explores how governance has been related to developing staff knowledge through specific training for formal qualifications. In FB6 the incumbent had recently dismissed a high-ranking (non-family) member of the management team who was expected to take over management of the business. The incumbent, along with his sister who is a director and 40% shareholder, expressed determination to make changes in the business. This included discussions about National Vocational Qualification (NVQ) management training for staff and

apprenticeship programmes. These quotations are taken from a response to a question about how the business is implementing a succession plan. This was asked after the participant explained that the family had a plan in place. FB6-GEN2F(I) explained:

…what I didn’t mention was er…Shock, horror! Management training to NVQ [level]. Erm…and that might sound pretty er…unambitious, but there’s an awful lot of folk been on that factory floor 20 plus years and this will be a major shock to their system, but you’ve got to start somewhere…and the beauty about it, is that er…it will begin to separate the wheat from the chaff.

…we started our first apprentice - first formal apprentice, recently, about a year ago, on the engineering team. We’re also looking at er…two other appointments er…of

apprenticeships. One to cover the admin function and one on the technical management side of the business.

In the first quotation, when the participant vicariously describes the reaction of people in the business by using the phrase “Shock, horror!” he implies that employees pretended to be surprised upon discovering their required involvement. This, slightly jocular, description is followed up in a more serious tone when he states “this will be a major shock to their system,

but you’ve got to start somewhere”. FB6-GEN2F(I) knows that this will cause uncertainty

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This is further confirmed in his last sentence when he states that: “it will begin to separate the

wheat from the chaff”. Use of this idiom suggests that part of his motivation for introducing

NVQ training is that it will facilitate a process of separating the higher quality staff, “the

wheat”, from the lower quality staff, “the chaff”. Thus, he seems to be using education to build

a stronger, more sustainable business moving forward. This is further supported by his second quotation which discusses the apprenticeship programme that has been introduced into the business. In both of the above examples the participant is building knowledge within the family business as part of the succession plan. Although planning for succession is usually associated with the ownership of the business, this participant seemed keen to ensure that it was undertaken for other areas of the business as well.

A family council can be an ideal place (Habbershon & Astrachan, 1997; Lambrecht & Donckels, 2006) for family members to learn about the business and how governance is working within the firm. The following example comes from the daughter of the participant used in the previous example. The family have both a board and a family council; the family council consists of the father (FB6-GEN2F(I)), his sister (FB6-GEN2A(I)), the father’s daughter (FB6-GEN3(S)), her three siblings (two brothers and one sister) who have their own careers outside the family business and an external facilitator. The following extract shows how time spent on the family council has enabled the third generation (the four siblings) to be in a position to challenge the second generation, regarding family business matters. FB6-GEN3(S) explained:

…you know, when we first started the family council we were just listening to Dad and my Aunt. Erm…and now we very much say well…why aren’t you doing this? And we’re in a position now, where we feel we can challenge much better than we [would] ever have been able to.

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The quotation presents a ‘before and after’ type impression. In the beginning, when the family council first started, she says: “we were just listening to Dad and my Aunt”. Her use of “just” as an adverb implies that they were ‘simply’ or ‘only’ listening, and therefore not actively

contributing to the conversation in a constructive way. Yet ‘afterwards’ she describes them as being in a position where they can “challenge much better than we [they] [would] ever have

been able to”. This would suggest that the time they have spent serving on the family council

has enabled them to learn about the family business. Thus, in this family business the family council has provided an opportunity to both build knowledge in the younger generation and as a forum to challenge how things work in the business. This further contributes to understanding how governance works in family businesses, because it shows how the family council can build knowledge for the next-generation to become more actively involved in decision-making.

When a succession plan is formulated and implemented, provision should be included to facilitate knowledge transfer from incumbent to successor (Handler, 1994). How that provision ‘looks’ is interesting because documenting a lifetime of experience could pose challenges. The following example provides insights into the experiences of an incumbent (mother) and successor (son). The succession event (the point where the successor is in control) had already taken place at the time of the interview, so the son was in the position of CEO of the family business. His mother, FB5-GEN2(I) explained her experiences of helping him understand the financial elements of the business:

…he has taken to it like a duck to water, but in the beginning he hated figures. It was like doing maths homework with him all over again. But now, like me, he will actually get excited by seeing how things work, and if we move this, what effect will that have on the bottom line and things.

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In the extract the participant seems to be re-living two experiences and reflecting on how they are connected. She draws a comparison between her recent experience of transferring

knowledge to her son about the financial elements of the business and the time when she sat with him doing his maths homework. She continues by describing what he is like now, after that knowledge transfer has occurred; she says: “But now, like me, he will actually get excited by…”. The fact that she begins to compare him to herself would suggest that she feels accomplishment in teaching him something he did not know before (just like she did with his maths homework). Her use of “But now” to describe how her son feels about dealing with figures would suggested he has learned an appreciation for their value, compared to a previous time when he did not. This is also supported by her use of the adjective “excited” to describe his changed emotion when dealing with figures. Further to this, use of the idiom “like a duck to water” suggests that he has learned about figures very quickly and enjoyed the process, compared to the beginning when he “hated figures”. FB5-GEN3(S) (her son) also reflected on how knowledge had been transferred between generations. He said:

…yeah, I guess it’s been a kind of, you know, gradual transition of understanding…erm ensuring, as much as possible, I filled all the gaps in terms of knowledge and

experience, as it were, to get there.

He describes the knowledge transfer as a “gradual transition of understanding”, which implies that it has taken place slowly in a controlled way. He also discusses how he wanted to fill “all

the gaps in terms of knowledge and experience”. This would indicate his desire to learn all of

those things he did not know (including the financial elements) and to gain insights into

experiences of the previous generation and also to build knowledge through his own experiences over time. The examples presented in this family show how building the next-generations’

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knowledge is important in order to ensure that they are adequately prepared for the challenge of running the family business.

Thus far, examples of knowledge building where incumbents have been actively involved in the process, whether that be concerning the business generally or directly as a successor, have been discussed. The final discussion within this theme explores how some kinds of knowledge cannot be passed on, and can only be learned by experience. The following examples will draw upon participants who have already been discussed in this section. The first is from FB5-GEN2(I) who reflected on her ability to allow her son to make mistakes:

It is allowing him to make mistakes, that’s the hardest bit. I have to, sometimes I have to just bite my tongue and think, the only way he is really going to learn is to do what [he thinks is best], to follow his [own] path.

It is evident that she struggles to let him “make mistakes” and not to correct him, when she uses the idiomatic term: “I have to bite my tongue”. However, the reason she does this is because she believes it is “the only way he is really going to learn”. Use of the adverb “only” suggests that there is no alternative way of teaching him, leading to the conclusion that the only way he can learn, these kinds of lessons is to make mistakes and “follow his [own] path”. This is further supported by evidence from FB6-GEN2F(I) who describes his own experience of learning in this way:

…when I joined this business…as a 19-year-old erm…I was a loose cannon…I made all sorts of godawful mistakes, and probably for two or three years [I] was something of a laughing stock. I suppose it has made me what I am, whatever I am…

This reflection on FB6-GEN2F(I)’s learning by making mistakes shows that he believes the “godawful mistakes” which he made when he was young have “made him” what he is today.

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The phrase “made me what I am” suggests that previous experiences have shaped his character, thus implying the whole process has taught him lessons which he would not have learned otherwise. The two aforementioned examples highlight how experience can be an invaluable way to learn and build knowledge. Thus, it could be suggested that, in preparation for future business leadership, the experience of making mistakes and learning from them, is important for a successor’s personal development.

This theme has focused on how individuals have considered knowledge building in relation to governance in the family business. It has shown how there are various ways that individuals comprehend knowledge building and how each interpretation further expands the way we understand how governance (and the succession process) works in family business. The data have shown four examples of how building knowledge has emerged. The first was the

introduction of formal qualification for employees within the business to ensure knowledge is of an adequate level. The second example explored the family council and its role in helping successors and next-generation family business owners to learn about the business and to feel empowered to challenge incumbents. Third was an exploration of how important a period of learning between incumbent and successor is in order to pass on knowledge but also to give successors the opportunity to gain confidence in particular areas of the business they are unsure about. The final example highlighted the importance of successors being able to learn through making their own mistakes. Each of these examples has shown that families’ approaches to building knowledge are varied. This further contributes to the various ways that governance works in family businesses. The next, and final, theme within this chapter will explore how individuals discussed governing activities within their business through values.