Page last updated at 03:18 Asia/Manila, Thursday, 03 April 2014 PH
Those trying to improve governance in both the private and public sectors highlight the importance of such values as integrity, fairness, transparency, solidarity and humility. Even before they state the mission-vision of their respective organizations, leaders are asked to articulate their so-called Core Values. In addition to the above-mentioned "values", the other most common core values enumerated are social responsibility, trust, excellence, patriotism, and concern for the environment. As I mentioned in a previous column, these values are actually found more frequently in family rather than non-family enterprises. As John Ward of the Kellogg School of Management in the U.S. wrote in "Family Values and Value Creation," family firms, as contrasted with those who are not, emphasize collectivity more than individuality; they give stress to past and future orientation to time more than a present orientation; they have a stronger belief in the "natural goodness of man." In a survey he conducted differentiating family from non-family enterprises, he found out that the former assign the highest priority to such human qualities as courage, dignity, reputation, fairness, hard work, empathy, curiosity discipline, prudence, loyalty and sincerity. In contrast, the non-family firms give more importance to results-oriented goals: innovation, performance, change, leadership, profitability, efficiency, continuous improvement, customer service and entrepreneurship.
I must point out, however, that values that are found in an organization are only products of the institutionalization of the individual human virtues lived and nurtured by the founders of the enterprise. The values that contribute to the long-term growth and development of a business, such as integrity, transparency and generosity, would not have arisen had they not been first lived in the flesh by the founding entrepreneur and those who worked with him at the start of the enterprise. In other words, only virtuous persons can "build to last" (to use the expression of Jim Collins) businesses. These virtues or habits that have been formed through constant repetition of certain good acts (say, acts of courage or sincerity) have shaped the corporate culture or ways of doing things in an organization. Alexander Havard in his book "Virtuous Leadership", following the example of the Greek philosophers, lists four main human virtues: prudence, justice, courage, and self-control. To quote from his best seller: "These are the so-called cardinal virtues, from the Latin word cardo, or 'hinge.' These are the virtues upon which all other human virtues hinge. Each of the non-cardinal virtues is bound up in and depends on one of the cardinal virtues...We must mention two other virtues--magnanimity and humility. Both are fundamental, though are not considered cardinal by tradition. For the ancient Greeks, humility depended on the cardinal virtue of self-control and magnanimity on the cardinal virtue of courage."
In this article, I will borrow the succinct definitions given by Mr. Havard of the cardinal and fundamental human virtues. It must be stressed that all these virtues can be cultivated by any human being independently of his creed or religion (or no religion). The definitions are as follows: Prudence: to make right decisions; Courage: to stay the course and resist pressures of all kinds; Self-control: to subordinate passions to the spirit and fulfillment of the mission at hand; Justice: to give every individual his due; Magnanimity: to strive for great things, to challenge myself and others; and Humility: to overcome selfishness and serve others.
To illustrate the importance of one of these cardinal virtues, prudence (considered the queen of all the virtues), in the long-term survival of a family enterprise, let me cite one of the major mistakes in succession practices identified by Guido Corbetta in the same volume "Family Values and Value Creation." This mistake has to do with the failure of the leaders to understand the difference between ownership, governance and management. Quoting Corbetta: "Family members involved in the company can play three different roles: they can be owners, directors or managers. In many businesses, especially in first and second generation and in small companies, these roles often overlap because the same people may carry out more than one. Failing to understand that these roles differ in content, that they require specific structures and professional skills, and that they are transmitted according to different rules, can make generational transitions more complicated." Founders of family enterprises that have passed the test of time have been exemplary in their avoiding this mistake because they cultivated the virtue of prudence. As Havard explains in "Virtuous Leadership", prudent decision-making consists of three steps: deliberation (gathering information so as to establish a yardstick); judgment (the evaluation of that information); and actual decision making. The deliberative aspect is directed towards the real circumstances, whereas the judgment aspect and ultimate decision making have to do with will and action. Without any formal management training, the prudent founders of businesses are able to intuit the differences delineated by Corbeta through the virtue of prudence. They know how to distinguish among the roles of the owners, the members of the board of directors and the professional managers. It is the cardinal virtue of prudence that enables a founding entrepreneur to establish the foundation for the sustainable growth of the enterprise that he started.
Another example of how one of the cardinal virtues facilitates the long-term success of a family enterprise is suggested by Miguel Angel Gallo who contributed the article entitled "Power as Service in Family Business" to the same publication cited above. According to him, "the exercise of power as service requires that those positions of power recognize the influence of their personal preferences and the subjectivity of their judgments. It also requires a willingness to be more objective and to accept that the community may require them, in the exercise of their strategic responsibilities, to do things that go against their personal preference." In other words, the tyrannical use of power by the founder can lead to the eventual failure of the business he founded. It is obvious, therefore, that the human virtue of humility, which is a corollary virtue to self-control, is essential to the long-term viability of a family enterprise. These are just a few examples of the main point of this article: that enduring values within family-owned businesses are the human virtues of their founders institutionalized or enshrined in the corporate culture. For comments, my email address is email@example.com.