The case for interdependence in a family business
Interdependence refers to a mutual reliance on other family members and signifies that there is an inclusive mindset with a clear understanding of shared purpose, vision and mission. It is often also what sets a family business apart from other organisations.

What you need to know

  • For a family business, the natural transition from one generation to the next understandably can lead to a dispersed family unit. Especially in cases where founders have potentially encouraged their children to be more independent.
  • In Western culture, there’s an even stronger focus on independence and operating as an individual, which has its own benefits. In contrast to this, interdependence must be encouraged within a family.
  • Interdependence refers to a mutual reliance on other family members and signifies that there is a clear understanding of shared purpose, vision and mission.
  • Interdependence is an important goal in a family enterprise, as it is often what sets it apart from other organisations. Through collective leadership and inclusivity, a business can benefit from the diversity of thought and wisdom across generations. It also offers a financial advantage when families pool capital for unified investments.

 

Organisation Published on Simple November 17, 2021

On July 4th 1776, the United States Declaration of Independence was pronounced in Philadelphia, Pennsylvania. In the Declaration, the 13 American colonies severed their political connections to Britain, declaring their independence. The historic event culminated in the formation of the United States of America as we know it today: the leader of the free world, a nation that champions liberty, self-government, equality and individualism. Today centuries later, the quest for individual independence has spread beyond the borders of the US to the rest of the world, due to the “Americanisation” of global culture. The consequence of this is that independence is a common aspiration that many have been conditioned to consciously seek: our societies, education systems and media, and even previously inclusive families promote independence rather than interdependence.

Independence refers to where one is not reliant on other people to survive and exist. In families, independent individuals pursue their purposes, passions and visions with no support and interaction with other family members. Often the hallmark of success is when a teenager becomes an “independent” adult, able to stand on his/her own feet financially and emotionally, outside of his/her parents and siblings. In contrast, interdependence refers to a mutual reliance on other family members in pursuit of purposes, passions and visions. This dependency can be on physical, emotional and financial resources. There’s a shift of focus from the individual to the collective family unit.

One’s predisposition towards independence and interdependence is often strongly influenced by culture. North America and European countries tend to highly value individualism, independence and self-sufficiency, whereas Africa, Asia, the Middle East and South America tend to highly value collectivism. In individualistic cultures, one is encouraged to be autonomous, think independently and challenge the status quo. In collectivist cultures, there’s a greater emphasis on interdependency, cooperation, respect for hierarchies and a premium on social standing.

Independence vs interdependence

The independence-interdependence concept is not binary, but rather is a spectrum: Just as nations cannot enjoy absolute independence or absolute interdependence, similarly absolute independence and interdependence are both impossible and ineffective in families. Family members are dependent to some extent on each other for their physical, emotional and financial needs: no baby comes into the world able to fend for itself. Equally family members enjoy some level of independence as no one else can tend to their physical needs like eating, sleeping and exercising. This notion of independence and interdependence is equally applicable to the family enterprise.

Aristotle said, “The whole is greater than the sum of its parts.” Through greater levels of interdependence, families can thus enjoy better results than if individual family members were to go their separate ways. This is because the family capital does not comprise of just financial capital. In Dennis Jaffe’s “Six dimensions of wealth: leaving the fullest value of your wealth to your heirs,” he outlines six sources of family capital: financial, spiritual, human, family, structural and societal capital (“polycapital”). In addition, the family capital is deposited and drawn upon by all family members.

It is like gears in a car: the individual members are like the wheels that spin independently, however, the interaction of their movements, their interdependence, determines the overall speed of the car. The car is able to travel faster the better connected the gears are. Similarly, interdependence is an enabler to ensure the family enterprise successfully moves towards the future. This is particularly so, as families make generational transitions beyond generation one. They navigate multiple complex changes including the founder transitioning from being a boss to being a mentor to the siblings, the rising generation members moving from students to leaders in their own right and the siblings moving from independents to collective leaders. In addition, the family wealth typically becomes more complex in ownership where the number of owners typically increases. All these changes necessitate that families learn how to navigate shared ownership and shared decision-making. Therefore, they must foster the skill of not just independence but also interdependence.

Inclusive family business and interdependence

Interdependence as a goal is important in a family enterprise, as it is often a critical ingredient in its secret sauce. Over time the family may have forgotten this ingredient, and the sauce begins to lose its taste. In the early days of the business, the family may have been highly interdependent: family members were asked to make sacrifices of their time and money to keep the business going. The family may have gone through challenging financial seasons together: during these tough times, they built up a bond, like soldiers at war that develop a camaraderie, nurtured through the hardships of the battle. After some time, the business hit an inflexion point and moved into a growth phase where revenues, cash and profits grew rapidly. In the good times, there was no obvious need to pool human and financial resources of the family. The bond was not actively nurtured. Instead, as the family’s financial wealth grew, the founder may have actively encouraged the independence of the children, rather than their interdependence. In addition, the founder may have placed emphasis on the management of just the financial wealth. As such as the family transitions into generation two, the family may look to split the financial wealth and each family branch manage theirs independently.

inclusive family business

Inclusive families that work together are likely to be more successful than those who operate independently.

Interdependence is a source of competitive advantage when it comes to the management of the family business and wealth. Through collective leadership, the business is able to benefit from the diversity of thought and collective wisdom, knowledge and intelligence of contributors, generating synergies and greater quality and quantity of solutions. Businesses that do not optimise interdependence are at a disadvantage as they lack different vantage points, limiting their pool of ideas.

Interdependence is also an advantage when families pool financial capital: it can yield greater financial returns as a result of economies of scale. The culmination of the diversity of thought and pooled capital can also have a wider positive impact on social change, through social entrepreneurship and impact investing. Interdependence is mutual, meaning that all family members are dependent on one another and all contribute their polycapital towards the collective. It is not codependence, where members cannot function outside of each other, nor is it dominance. Interdependence does not require uniformity of perspectives, preferences and priorities, but it does require unity, where family members have a clear understanding of their shared purpose, vision and mission: the shared identity may differ from the individual family members’ identities. Lastly, interdependence is achieved through inspiration and not legislation, meaning family members do not feel a sense of obligation, but a sense of willingness.

Developing an inclusive family business

Families can build interdependence through building stronger connections with one another. Connected families have the 3Cs, i.e. they have clarity of mission, vision and values, they communicate well within and across generations and collaborate effectively. Such families enjoy a culture of inclusivity.

Research suggests that inclusive organisations are two times more likely to meet or exceed their financial targets, three times as likely to be high-performing, six times more likely to be innovative and agile and eight times more likely to achieve better business outcomes than those that are not. This is because inclusive teams allow for diversity of thought. Not only do inclusive teams lead to stronger collective performance, but they also lead to a greater affirmation of the individuals: this contributes to up to 70% increases in experiences of fairness, respect, value, belonging, psychological safety and inspiration. Therefore families must also encourage inclusivity to maximise interdependence.

Projecting into the future, over the next century, the world will see greater technological changes in artificial intelligence, blockchain, big data, and robotics that will rapidly transform the economic and business landscapes. Therefore more than ever, family enterprises must be capable of problem-solving by building agile, adaptable, future-focused organisations, otherwise, they will fail to ensure the continued success of their enterprises.

Teamwork makes the family dream work

Greater interdependence within the family creates an encouraging environment for the rising generation to contribute their ideas to the family enterprise through geographic expansion, new product/services, joint ventures and/or investments. These can take the form of entrepreneurial or intrapreneurial ventures. These new activities are critical in making the business family more resilient: Through the contribution of new activities, the family enterprise becomes increasingly diversified in asset type, currency, geography and industry. As a result, the enterprise is better able to withstand disruptive business environments and thus be future-proofed.

About the Authors

Nike Anani

Nike Anani

Leadership & Next-Generation

Building generational bridges in family enterprises to ensure future-focused organisations that leave a lasting legacy

Connect with Nike Anani View Nike Anani Profile

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