Knowledge represents a valuable organisational resource and a primary source of competitive advantage. Strategy, leadership, organisational culture and technology are all enablers of knowledge management and each must be designed and managed in alignment with the other in support of the process. Family businesses have an inherent interest in using both the business knowledge owned by the organisation and the personal knowledge of its family members and employees.
Tacit knowledge transfer starts at a very young age
Family businesses are very rich in knowledge that is highly specific, distinctive and tacit. This knowledge may generally only be accessed by family members and trusted agents. It is acquired through exposure to the idiosyncrasies of the business. While explicit knowledge is easy to perceive, easy to articulate, code and record, tacit knowledge is shared through demonstration and by actions, such as in role modelling, when the model may not even be aware of the knowledge being shared and learnt. It is held in a non-verbal manner. The internalisation of this knowledge requires a process over a long period of time.
Current leaders in family businesses possess tacit knowledge about the family and family business that cannot be verbalised or written. This is knowledge that is not gained through formal education but through experience and actions. This is very important knowledge for the preservation and extension of the competitive advantage and success of the family business.
It is accumulated from doing something or gaining experience. Tacit knowledge demonstrates capacity to solve problems. It is the ability to adapt to, select and shape environments to solve everyday problems. It is acquired from less formal environments and contains knowledge from responses to particular situations. A gradual and progressive transition allows for the right context for the passage of tacit knowledge.
Family business succession may be conceptualised as a process of knowledge management, specifically knowledge transfer, integration and creation. One of the most relevant obstacles in family business succession is the difficulty to retain the knowledge from the current leaders to the next generation.
The majority of family businesses are small businesses, and as such will endure a greater risk from the occurrence of knowledge loss compared to large organisations because most of the key knowledge is held in the minds of few people, specifically the owner managers.
In family businesses, tacit knowledge transfer starts at a very young age. A lot of traditions, values and social networks are transferred implicitly to subsequent generations from an early age. Knowledge transfer is a dynamic process of dialogue and practice, involving the social interaction between family generations and the environment.
Risks in knowledge transfer, and therefore knowledge management, are related to dynamics in family relationships, a lack of appreciation of each other’s opinions and also competence. Emotional factors also come into play. The difficulty of current family business leaders to relate with the next-generation members as adults, and no longer as children, is one of the factors that jeopardises the whole process of knowledge management.
Knowledge transfer from the current to the next generation is also influenced by next-generational variables. Business-orientation, hard work, passion and an entrepreneurship spirit are some. Commitment, motivation, expectations, and time dedicated to learning also impact knowledge transfer.
On the other hand, the current leaders’ characteristics which positively affect knowledge transfer to the next generation are the desire to transfer knowledge and the availability of such a knowledge source. These are, in turn, affected by the expectations of the current leaders and the extent to which they embrace a stewardship concept. There is a positive relationship between relational competence and knowledge management in family businesses. The propensity to trust is positively correlated to disclosure of information.
Developing a knowledge management strategy is key to sustainability as improvement in the way knowledge assets are managed and reported, can lead to better corporate governance, facilitate continuous improvement, enhance stakeholder value and provide sustainable competitive advantage.
Roberta Fenech is an associate consultant for EMCS group and a lecturer at St Martin’s Institute of Information Technology.