Boston Consultingresearch report

“Soft rules” of family business From Boston Consulting

The following is the “Soft rules” of family business From Boston Consulting recommended by And this article belongs to the classification: Boston Consulting, research report.

1. What is the “soft rule” of family business

The “soft rules” of family business are a series of expectations of how family members interact and influence each other. For example, no family member should be compared with another in public; Or members can’t talk to the media about their families.

Soft rules have three key characteristics


First, “soft rules” are based on emotions and values, such as family affection, fairness, respect and equal treatment of family members.


Secondly, the “soft rules” of each family are different, and influenced by the public order and good customs of the family and the whole society – these rules keep pace with the times.


Finally, when the “soft rules” are violated and some people feel hurt, then sit back and ignore the problem, it will lead to discord and conflict, affecting the normal management and operation of the enterprise. Because of the basic characteristics of family business, its members can not quit as easily as the employees, which increases the risk of worsening problems.

Family enterprises need to manage “soft rules”. Although this applies at any time, it is most easily overlooked in the first two generations of the family, because the family is often not formed at that time. With the maturity of the family, the demand for “soft rules” becomes urgent. Therefore, it is prudent and relatively easy to establish the necessary “soft rule” system as soon as possible.

2. Four steps of “soft rule” management

The following four steps can help family businesses understand and manage their “soft rules” effectively.

First, understand the reasons for violating the “soft rules.”. Second, the “soft rules” are very clear. Third, foster an open and responsive family culture. Finally, a transparent and fair settlement mechanism should be established.

1. Reasons for violation

Understanding the causes of violations is critical to managing “soft rules” so that problems can be found and solved in time. There are five reasons for violating “soft rules”.


Trust and respect eroded:

This usually happens when a powerful family member makes a decision that others consider biased, unfair or immoral, or when he / she feels that he / she has been unfairly evaluated or forced to condescend to a particular member. If rules do not treat family members equally, or decisions are not made for the common good, trust will also be weakened.


Different family Customs:

Family members are expected to abide by deep-rooted family customs, but members of different generations, sometimes even one generation, will have differences on customs.


Conflicting values:

As family members spread around, the values they were taught from childhood become more difficult to maintain, and disagreements can arise. For example, who is responsible for the achievements made by hard work and business acumen, the whole family or individual family members? Is rank based on merit, age or descent?


Different life experiences:

Because of different life experiences, family members may unintentionally violate the “soft rules” of the family. Marriage and travel can also lead to different views of different family members, making the relationship between the same generation and between generations tense.


incompatibility of temperament:

Personality conflicts often appear in business management. Some members may be analytical, while others may be intuitive and make decisions quickly without discussion. Unless these differences are publicly understood and recognized, friction and resentment will ferment.

2. Clarify

Because the boundaries between housework and business affairs are unclear, it is very important to clarify the family “soft rules” to avoid conflicts. It’s not easy for family members to recognize the importance of making these rules. Unless everyone understands and is willing to abide by these rules, and the consequences of violating the rules are clear, violations will continue to occur.

The following aspects can be included in the family charter, easy to identify, manage and strengthen, and have a certain flexibility.

First, the use of compensation, company benefits, family property and other assets needs to be clearly defined. Even for smaller amounts such as travel expenses, club membership and housekeeping, the responsibility should be clear.

Secondly, we should consider the rights and freedoms enjoyed by family members, such as when they can enter the family business; Whether they have the freedom to pursue commercial interests outside their family business. When it comes to marriage, whether it’s timing or freedom to choose a partner – it’s a particularly tricky issue in some countries; Other rights issues include the ability to expose private life in the media, serve on external boards of directors and run for office.

Finally, what members are forbidden to do should be stipulated. On the one hand, it is a matter of common sense and common courtesy. For example, family members are not allowed to abuse family funds and talk about family affairs with the media. On the one hand, there are more hidden problems, such as forbidding to exclude or exclude family members or one branch of the family; Or violate cultural taboos, contradict elders in public and so on. Unless otherwise stated, the ban must be applied equally to all family members, and if violated, everyone will be subject to the same punishment.

3. Cultivating culture

In order to manage “soft issues”, families need to create an open culture of communication and responsibility. When family members are unable to express their frustration, and when those who offend others are not asked to make amends, violations of the “soft rules” intensify. In order to maintain harmony, the head of a family needs to be aware of the risks of ignoring problems.

The patriarch plays an important role in the establishment of this culture. Explaining decisions and solving problems directly helps to ensure that small problems don’t evolve into big ones. Family leaders or family committees and other governance bodies can convey strong and clear information and promote open discussion. Leaders can also regulate expected behavior by encouraging frank discussion of the family’s “soft rules.”. They should be sensitive to the impact of changes in social norms, such as women’s involvement in economic development, on families.

Family leaders also need to make it comfortable for family members to ask tough questions. Being outspoken should not be seen as making trouble, but as a constructive effort for the sake of the family. No problem should be belittled or considered too trivial to be solved.

Another complicated situation is that young members reflect that senior family members or even patriarchs have violated the “soft rules”. Culture and tradition may not allow such issues to be widely discussed within the family. Fear of retaliation, whether real or perceived, can have the same effect. Therefore, families need to have a prudent mechanism to prevent such discussions from leaking out of the context of management violations.

4. Set up mechanism

Once the “soft rules” of the family have been clarified and a culture of dealing with violations has been established, there is also a need for ways to deal with outstanding issues. This mechanism should be clearly defined to restore family harmony when informal discussions and apologies are not enough to solve the problem. This can be led by the head of the family or by the family governing body. The method of selection depends on the nature of the family, but it should always involve authoritative family advisers and ensure transparency of the process.

Family committees or other governing bodies can play an important role in the decision-making process, but the participation of family advisers is also beneficial. Consultants can be family members, friends or outside professionals who are supported and trusted by the family head and each generation. Some families may be suitable for both internal and external consultants. Either way, he / she should be respected, trustworthy and approachable. Most importantly, consultants should understand the dynamics and traditions of the family and act prudently and fairly.

Any resolution process depends on transparency of legitimacy, especially for those involved in disputes. Transparency needs to be incorporated into process design and decision-making. The assessment made by family advisers and governance agencies must be provided to members, who should be given the opportunity to respond within the family “soft rules” system. In many cases, even a voice of concern can play the same role as punishment, and stop the “soft rule” violations from happening. At other times, some form of condemnation is needed to appease the aggrieved family members. But ideally, the problem should be solved as soon as possible to avoid fermentation and deterioration.

It is not easy to manage the family business well, because in addition to managing the business, the family also needs to manage itself well. Family enterprises must understand the importance of managing “soft problems”. Solving “soft problems” also requires systems, processes and good decisions. The accumulation of outstanding emotional problems will gradually damage the family business; The management of “soft problems” can release more potential.

Enterprises must understand the importance of managing “soft problems”, and solving “soft problems” also requires systems, processes and good decisions. The accumulation of pending emotional problems will gradually damage the family business; The management of “soft problems” can release more potential.

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