Soriano: The powerful role of your Family Code of Conduct

Inside Family Business
Soriano: The Powerful Role of Your Family Code of Conduct: The B Family Case Study
SunStar Soriano

Last week, I strongly asserted, rather than merely encouraged, the need for family-owned businesses to establish a Family Code of Conduct and Ethical Behavior (COC). In my experience, this is not just important but fundamentally essential for any family enterprise seeking to diffuse conflict and pursue stewardship and legacy.

Generational change and conflict are often unplanned, typically resulting from a history of discord, an unexpected death, or the incapacitation of the current business leader. Such transitions can thrust two, three, or even four branches of the family into leadership roles simultaneously, each with different styles and approaches. This raises critical questions: Who will assume leadership? What are the rules of engagement when all siblings inherit equal ownership? How should these owners behave during meetings, voting, or when their opinions are sidelined? The transition from the first to the second and then to the third generation can further increase both the number of owners and the diversity of their ambitions for the business. The more family members join the fray, the more likely conflict will happen.

The Importance of Having a Family Code of Conduct (COC)

A COC is pivotal in shaping values and standards within the family and the business realm. Upholding and enforcing ethical principles fosters a healthy and harmonious environment. Here are the key reasons a Code of Conduct is indispensable:

Transparency Leads to Trust

A solid COC builds transparency, and trust naturally follows when there is openness. Upholding ethical standards fosters positive behavior among family members and employees, which is vital for effective communication, collaboration, and long-term success.

Role Modeling

Family leaders serve as role models for younger generations by demonstrating ethical behavior, such as honesty, integrity, and respect. This instills these values in their children and positively influences the broader family unit.

Guiding Decision-Making

Ethical standards guide decision-making processes within the family and business. They help individuals make informed choices that align with their values, ensuring decisions are morally sound and contribute to the well-being of both the family and the business.

Conflict Resolution

A COC is crucial for resolving conflicts effectively. By promoting open communication, active listening, and empathy, it provides a framework for addressing disagreements and finding mutually beneficial solutions, fostering a supportive and harmonious environment.

Creating a Positive Work Culture

Extending the COC to the business realm contributes to a positive work culture. When ethical principles are upheld, employees feel valued, respected, and motivated, which enhances productivity, employee satisfaction, and overall business success.

Balancing Personal and Professional Life:

A COC helps individuals balance their personal and professional lives. By prioritizing family values and well-being, it enables individuals to make conscious choices aligned with their ethical standards, harmoniously integrating personal and professional goals.

Consider a scenario where your family-owned business faces a decision regarding a potential partnership with a company known for unethical practices. By upholding the Code of Conduct, the family members can prioritize their values and choose not to engage in a partnership that compromises their ethical standards. This decision not only protects the family’s reputation but also reinforces their commitment to ethical business practices.

In conclusion, a COC is essential in upholding and enforcing ethical standards and values within the family and business. It serves as a foundation for trust, role modeling, guiding decision-making, facilitating conflict resolution, creating a positive work culture, and balancing personal and professional life. Implementing such a code contributes to a harmonious and successful environment, ensuring the longevity and legacy of the family enterprise.

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