The power behind family-run businesses

Family-run businesses have unique management issues and often rely on the leadership on an alternative CEO: the 'chief emotional officer'.

by Knowledge @ Wharton
Last Updated: 12 Apr 2016

Research published by Knowledge @ Wharton shows that the 'chief emotional officer' is a common presence in family businesses. Often filled by a woman, the CEO acts as intermediary between various parties in the family, smoothing relations and fostering openness.

John Ward, co-director of the Centre for Family Enterprises at the Kellogg School of Management, says: "They also help acculturate in-laws, protect family traditions and values, and make sure the family gets together to socialise and have fun."

However, this can lead to problems, especially in first-generation family businesses run by a patriarch who plans to hand the business on to his first-born son.

In instances where the mother acts as the 'chief emotional officer', this can mean she is stuck between two family members who, according to family theory, are often on a collision course.

This may be one of the reasons that only 30% of family-owned businesses survive into the second generation. The good news is that if it does survive the second generation, the trend is for the third to being building value.

One solution to the problem of 'chief emotional officer' becoming too embroiled in familial strife is to find an outsider to take the role. However, not everyone will be happy trusting a non-family member with intimate details. A negative attitude towards the role being fulfilled by an outsider is a good indication from the start that it won't work out.

The good news is that family businesses are challenging their reputation for being unprofessional and badly run.

This is reflected in the growth of membership numbers at the Family Firm Institute and the rise of joint MBA/PhD programmes in psychology and business.

Source: Many Family Firms Rely on a Largely Invisible CEO -- Chief Emotional Officer
Knowledge @ Wharton
27 June 2007
Review by Jennifer Whitehead

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