Advising Family Enterprise

Family firm advisors have expertise and skills that can significantly contribute to the long-term success of family-owned and/or family-managed enterprises. However, as noted by Strike (2012), so far there has been very little research attention focused on these advisors and the services they provide. In the early days of Family Business Review (FBR), many advisors contributed articles describing their practice in an effort to share knowledge and improve their collective ability to provide helpful services for clients (Sharma, Chrisman, & Gersick, 2012). In fact, providing assistance to advisors in understanding family firms was one of the many reasons cited for FBR’s creation in the first issue: “Hence, lawyers and accountants as well as business consultants and family therapists are seeking to learn more effective ways of helping their clients” (Lansberg, Perrow, & Rogolsky, 1988, p. 4). Strike (2012) reports in her thorough and insightful review on family firm advising:

Early articles were based on personal consulting experiences whereas more recent ones used surveys. The majority of articles focused on offering prescriptions (64), followed by surveys (22), conceptual (8), qualitative (6) interviews, and one literature review with a section on advisors. (p. 157)

This has changed over time as FBR became much more research focused, turning attention to quantitative empirical research that follows the strong tradition of theory building and testing expected in high-quality business journals (Sharma et al., 2012). As a result, the role of the advisor remains somewhat cloaked in mystery—from a research perspective it is not clear what family firm advisors really do and how they bring value to the firm. Although Family Firm Institute (FFI) conferences provide an excellent opportunity for advisors to share their practices with others, what is still missing is a systematic database that can advance knowledge about advisors and the process of advising. We believe that it is time to refocus attention on family firm advisors themselves and to do so from a research perspective. This significant gap in the literature has propelled our editorial team to take on the adventure of a special issue focused on advisors themselves.

Thus, we are very pleased to introduce this special issue, Advising Family Enterprise, in FBR! In response to our call for papers, we received a wide variety of empirical and conceptual papers addressing different types of advisors and different ways of accomplishing their work. All submitted articles were scrutinized by all editors, and those selected to be peer reviewed underwent multiple rounds of revisions. This special issue contains five empirical articles that provide important insights into what family firm advisors do and how they do it. Consistent with the goals of FBR to “advance the understanding of family enterprise around the world,” we are proud to showcase articles that make theoretical contributions to the literature (Reay & Whetten, 2011); rely on high-quality methodology, both quantitative and qualitative (Chenail, 2009; Pearson & Lumpkin, 2011); and give us a sense of the international context through studies based in Australia, Italy, Canada, and the United States. Furthermore, this issue illustrates the success of advisors and researchers working together to enhance the research agenda (e.g., Davis et al., 2013). The important point overall is that all the articles published here highlight the role of family firm advisors—giving us a platform to spur further research.

Family firms, family offices, and family business groups operate within the interface of family, business, and ownership dynamics. Because of this, they face a unique set of dilemmas that necessitate decisions likely to significantly affect not only their enterprises but also their families. Many advisors offer specialty services particularly designed to deliver appropriate and helpful advice and support for different types of family enterprise. Such expertise may be provided by a range of professionals, including (but not limited to) attorneys, accountants, family business consultants, family office directors, family philanthropy managers, financial services advisors, management consultants, psychologists, and family therapists. Coordinating the services of such an array of professionals could be challenging for family business owners, but trends toward a team approach (Sharma, Melin, & Nordqvist, in press; and as illustrated by Su & Dou, 2013) may be an effective way of managing the multiple needs of family firms.

There are many reasons why family firm advisors can offer value to their clients, but we see particular importance in their potential to serve as a mechanism for transferring research knowledge to practice. In a business world that is increasingly cognizant of the critical role for evidence-based management (the use of high-quality evidence to effectively manage organizations; Pfeffer & Sutton, 2006), family businesses should not be left behind. Family firm advisors have access to current, reliable knowledge about effective management strategies through conferences or workshops, such as those offered by the FFI. These learning opportunities are one way that advisors can keep up-to-date, but new initiatives such as FBR online executive summaries and podcasts of research articles can further facilitate the spread of evidence-based knowledge to enable continuous improvement in family enterprise. We see that family firm advisors can be effective translators of research knowledge to implementable practice. In short, if family firms want to be up-to-date on high-quality, evidence-based management strategies, well-informed family firm advisors can be one of the important ways that knowledge transfer occurs.

The three coeditors worked together closely throughout all stages of creating this special issue. We collectively developed the call for papers, identified appropriate reviewers, compiled reviewer comments, made decisions about which authors were invited to submit a revised manuscript, and developed what we hope was helpful feedback to authors of all submissions. In addition to receiving scrutiny by all three coeditors, each paper was reviewed by two or three highly qualified reviewers. Each article appearing in this issue went through at least three rounds of revisions. Please see the appendix for a list of reviewers who took the time to provide rich feedback to authors. Without these reviewers, this special issue just would not exist. We thank all 33 reviewers from the bottom of our hearts. And we also thank the authors of the five articles appearing here. They have responded to our challenges in a timely fashion, and we are proud to showcase their work here. In the remainder of this introduction to the special issue, we provide our summary of each article and our perspectives on its particular value. Finally, we close with our observations across all articles and the exciting future research opportunities we see.

In the first article of this issue, Davis et al. (2013) address how an advisor’s goal orientation affects his or her ability to generate high-quality feedback from clients in order to adapt and innovate advising behavior to appropriately guide the client. The authors surveyed 314 advisors affiliated with the FFI, including family enterprise advisors, family wealth advisors, and wealth consultants. Advisors’ goal orientation relates to how advisors demonstrate ability in achievement settings, such as providing guidance to a client. Goal orientation consists of three types: “learning,” “proving,” and “avoidance” orientations. Advisors with a learning orientation are those who believe that increased effort can result in greater learning and ability. Proving orientation and avoidance orientation individuals assume that personal ability is stable and unchanging. As advisors are often required to adapt quickly to client needs and the changing dynamics of the client’s firm, a goal orientation that solicits needed feedback is valuable. Feedback quality measures how well feedback provided from the client helps the advisor better understand his or her performance and how to improve performance. Advisors to family firms must be highly creative in problem solving and achieving goals for the client. Personal bricolage measures how effectively advisors were able to combine existing resources to reach solutions. Individual innovative behavior measures how well advisors introduced new ideas and procedures for their client. The authors found that advisors with a learning orientation were able to increase feedback quality from clients, whereas those with a proving orientation yielded reduced client feedback. The learning orientation of the advisor, in the presence of quality feedback, leads to increased personal bricolage and innovative behaviors of the advisor. Alternatively, a proving orientation, even in the presence of quality feedback, resulted in reduced advisor personal bricolage and innovative behaviors. Given that family firm advisors work in complex firms, coupled often with complex family issues, advisors must be able to solicit client feedback and provide adaptive solutions. This study demonstrates that those advisors with a learning orientation are more likely to do so than advisors with either a proving or avoidance orientation. These results demonstrate that some advisors—at least those with a learning orientation—are able to self-manage in creative ways to reconfigure and recombine their available resources to provide innovative solutions to clients. The authors conclude by offering a prescriptive model of desired advisors’ approaches depending on the degree of task complexity and the amount of openness of the family firm client.

Next, Salvato and Corbetta (2013) investigate how advisors can improve the process of succession by taking a strong role in mentoring the next generation leadership. Their article is titled “Transitional Leadership of Advisors as a Facilitator of Successors’ Leadership Construction,” and we see that this new look at succession highlights important new insights. As the authors state, the “form of temporary shared leadership” identified has previously not been “reported in either family business succession or leadership literatures” (p. 235). And yet it is clear that this temporary shared leadership could be so very effective in preparing the next generation for their future leadership role. Through their in-depth qualitative interviews with family firm advisors as well as “senior” and “junior” firm leaders, the authors have shown us not only how important such a temporary shared leadership can be to the success of the junior leader but also how the firm can benefit as a result. Interestingly, one of the key activities the advisor must plan for (and undertake) is the staged withdrawal of his or her mentoring support, because junior leaders must move forward to their full leadership positions. By focusing attention on this special role that family firm advisors can play, we see that Salvato and Corbetta make an important contribution to our understanding of the potentially holistic relationship between advisors, successors, and family firms. This conceptualization of dynamic relationships and the simultaneous development of all dimensions of a family firm provide a foundation that we believe will hold significant potential for understanding the succession process.

In the third article, Su and Dou (2013) offer an interesting and important look into the effectiveness of multidisciplinary teams of family firm advisors, from the perspective of the advisors. Their article, titled “How Does Knowledge Sharing Among Advisors From Different Disciplines Affect the Quality of the Services Provided to the Family Business Client? An Investigation From the Family Business Advisor’s Perspective,” is based on qualitative data from interviews with advisors who work in such interdisciplinary teams. These advisors believe that the quality of services provided through a teamwork approach is far superior to services provided by independent professionals. The authors suggest that service quality is improved through the following actions: (a) improving the accuracy of issue identification, (b) achieving systematic analysis of the issue, (c) arriving at an integrated total solution, and (d) increasing the credibility of the solution provided. Their study provides an important first step in opening up the question of whether (and how) interdisciplinary teams of advisors can be valuable for family firms. By shedding light on the mechanisms that advisors see as critical to improving their advisory role, the stage is set for further research that investigates this important question from other perspectives.

In their article titled “Do I Need to Use an Accountant? The Growth and Survival Benefits to Family SMEs,” Barbera and Hasso (2013) investigate whether the use of an external accountant in family small- and medium-sized enterprises (less than 200 employees) increases the likelihood of firm sales growth and survivability, and if external accountants are used, whether strategic planning processes increase the likelihood of firm sales growth and survivability. This article builds on growing interest in the nature of accounting in family firms (Salvato & Moores, 2010). The authors used longitudinal data from the Australian Bureau of Statistics’ Business Longitudinal Survey, which allowed the performance variables of sales growth and survivability to be lagged in order to capture the time-delayed effect of the study variables. The study results show the positive impact of family firm advisors on family firms: the utilization of external accountants decreased the likelihood of firm failure; the utilization of highly embedded accountants (those advisors who provided frequent advice) improved sales growth of family firms and decreased the likelihood of failure; and the utilization of highly embedded accountants, while also using a documented, formal strategic planning process, led to increased sales growth. In sum, when family firms in the sample used a highly embedded advisor, both sales growth and survival benefits were found.

And finally, in her article titled “The Most Trusted Advisor and the Subtle Advice Process in Family Firms,” Strike (2013) investigates how advisors who have come to be “most trusted advisors” (MTAs) gain the confidence of family firm owners and engage in strategies that reinforce their ongoing relationship with the client as well as continue to serve as a valuable resource. Strike reminds us that not all advisors engage family business clients in a short-term consultation relationship. Some advisors serve for many years; though often behind the scenes, they play a powerful role in shaping the actions and decisions of leaders of family firms. Strike studied the roles and behavior of nine MTAs in six family firms. One MTA had served the owning family for 31 years and the MTA who had served for 8 years had the shortest tenure (the mean was 17 years). The MTAs Strike studied typically had backgrounds in law or accounting and thus were privy to some of their family firm clients’ most guarded secrets. In her qualitative analysis of the MTAs, Strike determined that MTAs help their family firm clients by “capturing attention,” “influencing attention,” and “facilitating collective action.” Through these mechanisms, the MTAs were able to help their clients deal with the thorny issues surrounding the overlaps between business and family. In summary, Strike’s article provides us with a rare look at the strategies and tactics used by those advisors who are likely to have the greatest and most long-lasting impact on their family firm clients.

Looking across the five articles, we identify four important themes to consider. First, we see that the relationship between family firm advisors and the client(s) is critical. It can be improved through repeated interaction or embeddedness (Barbera & Hasso, 2013), learning orientation of the advisor (Davis et al., 2013), and the development of trust (Strike, 2013). Through ongoing interactions and providing wise counsel (Su & Dou, 2013) where innovative and adaptive solutions are proposed (Davis et al., 2013), such as facilitating the development of the successor (Salvato & Corbetta, 2013), an advisor or teams of advisors can achieve the rare status of MTA (Strike, 2013). Through trust and repeated guidance leading to solutions that reinforce that trust, family firm advisors provide strategic, financial, legal, and, perhaps most important, family advice to guide the family firm.

Second, we see that the articles in this special issue show that family firm advisors must be attuned to the family in order to be able to garner attention, and provide relevant guidance on how the family can work together successfully. Indeed, it is the needs of the family that make family firm advising significantly different from advising nonfamily firms. In fact, trusted advisors are expected to place the needs of the family above their own needs (Strike, 2013). In addition to understanding the strategic, financial, legal, or tax issues, the family firm advisor must consider “the emotional concerns that affected both firm and family” (Strike, p. 293). It is the family component of family firms (Dyer, Dyer, & Gardner, 2013; James, Jennings, & Breitkreuz, 2012) that makes them unique, and advisors must take this characteristic to heart—recognizing that the family (potentially the family firm’s most critical asset) is often entrusted to the advisor for guidance.

In short, the family firm advisor is one of the designated “keepers” or “protectors” of what researchers have labeled the socioemotional wealth (SEW) of the firm (Berrone, Cruz, & Gomez-Mejia, 2012; Gomez-Mejia, Cruz, Berrone, & de Castro, 2011) and may be an important factor in helping the firm maintain its long-term focus, rather than reacting to short-term financial variations. SEW refers to the nonfinancial aspects of the family firm that serve to meet the family’s affective needs. SEW benefits may include the ability of the family to exercise authority in decision making; the preservation of the emotional and sentimental value of the firm; the satisfaction of emotional needs, such as belonging and identity; the perpetuation of family values; the enhancement of family reputation and image (Reuber & Fischer, 2011) and preservation of family harmony; and the recognition for philanthropy (Berrone et al., 2012; Gomez-Mejia et al., 2011, Lungeanu & Ward, 2012). Berrone et al. (2012) suggest that families will act to preserve SEW even in lieu of financial gains. It may be that family firm advisors, particularly those who are deeply embedded (Barbera & Hasso, 2013) and those that are “most trusted” (Strike, 2013), have the role of assisting the family in carefully protecting the SEW of the family, at times even over the financial gains of the firm. Certainly carefully mentoring of the next generation of family leaders (Salvato & Corbetta, 2013) could be an effective way to protect the SEW of the family firm for future generations. This role of SEW preservationist surely makes the advisory duties of family firm advisors far more challenging than those of advisors in nonfamily firms. We see that this is an interesting and exciting area for future research.

The third theme we see is attention to the many different roles played by advisors to family firms. This is an important aspect of advising family firms, and we suggest that future research might focus more specifically on each of the four types of advisors identified by the FFI (legal, financial, behavioral, including family counseling, and management, including strategic planning) and their impact on family enterprise. In line with the Barbera and Hasso (2013) study in this issue, we wonder if the ideas of deeply embedded advisors apply to other types of advisors beyond accountants. For example, are there deeply embedded family therapists? Lawyers? And, if so, do they also lead to increased sales growth and survivability? Does learning orientation (Davis et al., 2013) also apply to other types of advisors?

Finally, and perhaps most important, we note that the set of articles in this special issue show that advisors can have a positive impact on firm performance and family dynamics. Data presented in the five articles suggest that family firm advisors, with the proper professional training, skills, and processes in hand, can have a positive impact on the economic and noneconomic value and wealth creation of family enterprises. This can largely be attributed to advisors who help the family understand that there are ways to manage the firm that are more effective than traditional management and operational patterns developed by the family. Moreover, as family firm advisors get to know the family and understand the family dynamics, they can help the family prepare for difficult transitions such as leadership succession and can also help the family manage the conflicts that are inherent in running a business while striving to retain harmony in the family. We were heartened by the fact that this special issue presents empirical evidence that advisors can have a positive influence on both firm and family. Moreover the articles in this special issue suggest that collaboration among advisors, although currently relatively rare, may have a positive impact on the consultation process. Interprofessional teamwork is increasingly being used in other settings, such as health care and building design. We can see potential for further studies investigating the value of such collaborations from the family firms themselves. Family firm advisors may not even know that there are other advisors working with their clients, since their clients may not readily share such information. The findings from this special issue suggest that family firm advisors would be well-advised to gather information about prior and current advisors to their clients, often in the initial “chemistry meeting” with a client, in order to understand what work has been done by other professionals in the past and what current work is going on (Hilburt-Davis & Dyer, 2003). In this way, the advisor can make contact with other advisors and hopefully collaborate with and share information with other advisors to help them serve the client more fully. This, of course, should be done with the full knowledge of the client.

In conclusion, we’d like to thank all those who submitted their work to this special issue on advising, and we hope that this special issue will encourage other researchers to study the roles and impact of family business advisors. We think that the advisors as well as the leaders of family businesses will benefit from such knowledge. Furthermore, we would like to encourage family business advisors to write about their experiences, partner with researchers and academics to systematically study advising, and share their work through contributions to FBR or the FFI Practitioner Journal. Of all the fields of management inquiry, the field of family business and those of us interested in the future of family businesses should strive to encourage links between theory and practice. We believe this special issue is an important contribution to this effort.