Harvard Business review

Crafting a Retention Strategy for Your Family Business

Family businesses offer the promise of close-knit family-like cultures that attract employees with similar values, but management must live up to this promise in order to retain employees. Family firms should lean into their unique advantages by fostering a sense of togetherness and shared identity among company personnel. Doing so will create a productive workplace and help insulate employees from thoughts of quitting and the temptation of offers from other firms. Family business managers may often be unable to offer monetary incentives to induce retention, but they should not settle into the belief that there is nothing they can do. By enhancing the firm’s family-like atmosphere and shared identity, family businesses can retain the valued employees who will help them thrive for generations to come.

In the wake of the Covid-19 pandemic, “The Great Resignation” has made retaining talent a top priority for most organizations. This phenomenon may be even more acute for family-owned businesses, because they often provide less-competitive salaries and benefit packages than their corporate rivals. With the best career opportunities typically reserved for family members, retaining nonfamily employees may be a specific area of concern, because they perceive a career advancement ceiling within their firms. Despite these challenges, family businesses also have unique advantages they can leverage in their retention efforts. Our research points to three important ways that family firms can lean into their advantages to retain talent.

Create a sense of “familiness” for all employees.

Family businesses offer the promise of close-knit, family-like cultures that attract employees with similar values, but management must live up to this promise in order to retain employees. Our research suggests that because family businesses rely on their unique cultures for competitive advantage, employee identification with the firm is key. Identification involves feeling as one with the organization and adopting its successes and failures as one’s own. Because family firms are often unable to offer salaries that are on par with their nonfamily competition, fostering a sense of oneness between the business and its employees is vital for keeping talent in the organization.

Creating this sense of togetherness underpins retention by embedding employees in the family-like culture, which should produce a happy, engaged workforce functioning in a cohesive environment. In addition to being good for productivity, this sense of togetherness can prevent employees from even considering searching for other jobs. A sense of togetherness may reduce the allure of potentially better paying positions elsewhere, because leaving the organization would be akin to losing a part of oneself. Family firm managers should recognize that leaving a family is more difficult than leaving a job. Leveraging that unique advantage by promoting a sense of “familiness” should help family firms retain talent.


Act like a family.

A sense of “familiness” requires strong relationships among firm personnel. So, what can family firm managers do to build these relationships? Some simple steps are for family firms to provide more opportunities for socializing outside of work and to alter the design and layout of their workspaces. Open workplace designs have both benefits and drawbacks for productivity but are great for creating interaction and promoting relationships.

Family firms may also consider the implications of current trends toward working from home. In-person interactions are vital for fostering the relationships that provide family firms with unique advantages, including retention. Although the flexibility provided by remote work may offer some benefits, family firm managers should be aware of the effects on the family-like culture that are often vital to their firm’s competitive advantage and broader retention efforts. Each firm’s situation is different, but remote work may have cultural implications for family firms that could potentially harm retention.

To foster belonging — and reduce employee turnover — family business managers should ensure that workplace conditions allow their workforce to act like a family.

Don’t forget the family employees.

Although nonfamily employees are the greatest flight risks, family businesses should not forget about family members employed in the firm. Family members have diverse motives for joining the business, and the assumption that they will stay forever is potentially faulty. Family employees may join the firm because their kinship makes it a safe alternative with an upward career path, not necessarily out of family obligation or loyalty. Family members deal with problems such as family conflict and sibling rivalry that would not be experienced at other firms, and they are not immune to thoughts of leaving for greener pastures. Losing family members who are being primed for top management may also have serious implications for the firm’s future, as ensuring a successor is the goal of most family businesses. Given the long-term importance of maintaining a family presence in the business, management should remember to include family members when taking steps to foster a sense of togetherness among firm employees.

Our research suggests that despite the challenges family businesses have retaining talent, they also have unique advantages. Family firms should lean into those advantages by fostering a sense of togetherness and shared identity among company personnel. Doing so will create a productive workplace and help insulate employees from thoughts of quitting and the temptation of offers from other firms. Family business managers may often be unable to offer monetary incentives to induce retention, but they should not settle into the belief that there is nothing they can do. By enhancing the firm’s family-like atmosphere and shared identity, family businesses can retain the valued employees who will help them thrive for generations to come.

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