Family businesses and diversity – is it possible?

Diversity in business is more important than ever. The role of business in society continues to evolve, and companies are increasingly in the spotlight as they are expected to play an active role in addressing important social issues, including promoting diversity and inclusion.

What is diversity in a business context? In the past, diversity was typically viewed in terms of race and gender, but growing social awareness has led the definition to encompass a much wider range of characteristics – essentially anything that makes someone unique. Diversity in the workplace now includes age, sexual orientation, gender, religion, education, political beliefs, culture, religion, language and socioeconomic background, among others.

Fostering diversity requires an ongoing commitment to evolving company culture. Organisations must actively combat discrimination, build workplaces where people feel free to express themselves, open themselves up to a broader variety of management styles and voices, and embrace cultural differences as learning opportunities.

Social obligations aside, however, greater diversity also brings tangible benefits to companies. Glassdoor found that three-quarters of job seekers cited a diverse workforce as an important factor when selecting a potential employer. Gallup reports that companies with a culture of inclusion and diversity are more innovative, less likely to think in groups and able to appeal to a broader customer base. 

In terms of the bottom line, McKinsey found that companies in the top quartile for gender inclusion were 25% more likely to outperform companies in the bottom quartile, while that number rose to 36% for ethnic diversity.

Clearly, companies need to address their culture if they want to be a positive part of a changing world and take advantage of the opportunities that diversity offers. But despite growing awareness of the moral and business imperatives of greater inclusion, progress has been slow around the world as corporate cultures that have been entrenched for centuries prove resistant to sweeping change. From 2015 to 2019, McKinsey observed only a 5% increase in female representation on executive teams in the US and the UK and a 6% increase in racial representation.

The family business perspective

The culture and values of family businesses tend to be distinct, deeply rooted, and carefully preserved across generations. This culture can be a competitive advantage because it fosters stability and loyalty among employees based on shared values. Family businesses have a reputation for treating their employees like family, an attitude that inherently promotes a sense of inclusion and belonging. They tend to be guided by their values and focus on doing the right thing for their stakeholders and communities.

But in times of great change, as we’re now experiencing in the age of digital transformation, post-pandemic markets, and growing social consciousness, such a narrow culture can also prove to be a liability. Family values in businesses are often based on consensus and a tendency to promote from within, which can limit the ability to include people from different backgrounds.

Family businesses face the balancing act of meeting the challenges of this environment while preserving the essential, unique aspects of their culture. This may be difficult, but it is essential to the long-term success of the business. Because family businesses typically tend to take a longer-term view of their success, they are in some ways well positioned to make meaningful, lasting investments in building a more inclusive culture and representative workforce.

A holistic strategy for inclusion

Similar to digital transformation and sustainability, companies cannot afford to make diversity and inclusion (D&I) initiatives a mere ticking-off exercise; they must be integrated into the business at all levels of the organisation. This includes hiring processes, suppliers and partners, benefits packages, HR practices, and training.

This should also be considered in succession planning – often one of the most difficult processes in a family business – with the goal of handing over leadership to someone who, while not necessarily from an underrepresented background, is committed to greater representation in all areas of the business.

From the top

Building organisational diversity is increasingly seen as something that should be talked about openly rather than as a back-office function of HR. The chairperson or CEO of a family business is often the custodian and figurehead of the company’s culture and values. If they publicly advocate and commit to D&I initiatives, it can do much to change the internal and external perception of the company.

However, it is important to remain honest and authentic when addressing sensitive issues such as this. Empty platitudes are likely to be perceived as such while admitting one’s mistakes, and lessons learned demonstrate a more sincere commitment to understanding and addressing bias and inequality.

Diversity is also important in board composition, not only in terms of race and gender but also in terms of social, educational, and professional backgrounds. People from different walks of life encourage diversity of thought and opinion, which in turn enables better decision-making.

From the bottom

While strategies and speeches are important, so are conversations. Owners and managers of family businesses should engage with their employees and get their perspectives on the issue. These can help develop and optimise D&I programmes that employees will find meaningful and authentic.

Considering what an overwhelming undertaking it is to create true representation, focus on targeted initiatives that will quickly lead to real change. These can help build momentum within your family business toward broader, systemic change.

Align the family

Achieving real, long-term change requires the involvement of the whole family, from business leaders and employees to shareholders and board members. The word “inclusion” is key here; everyone needs to be included in the discussion and offer their perspectives, suggestions and doubts. These conversations can be difficult, so don’t be afraid to enlist outside help from groups that can help foster openness and defuse conflict.

The goal is to align the family on what D&I means to the family business, what can realistically be accomplished to move it forward, and what steps need to be taken by the various stakeholders. Remember that there’s no one-size-fits-all approach to D&I; every family business is different, as are the families behind it.