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Writer's pictureDr Suresh K R Kumar

Repetition Compulsion Syndrome in Family-Owned Businesses

Updated: Sep 8


Introduction to Repetition Compulsion Syndrome


Have you heard of a psychological phenomenon called “Repetition Compulsion Syndrome”?


This was a theory developed by Sigmund Freud. While studying his patients he found that many of them keep on repeating events or circumstances despite the fact that these events and circumstances have had a negative impact on the lives of the individuals. This included re-enacting an event or even recreating actions that would lead to an event which had happened in the past.


This theory explains the logic behind some people who have had an abusive relationship continue to seek to continue the relationship or if it is broken, look for a partner with similar nature of abusive pattern. People in general find comfort and contentment in repeating an act even if it means it does not bring in the required result for them.


This theory holds good in the business and corporate world too. We are all familiar with business houses and business tycoons making a fortune by building up businesses from scratch. When they started their business certain strategies and plans were followed and since they produced the desired results, the CEO or the Chairman of the Company now feels that it is not necessary for them to think of a new theory or new management concepts.


Repetition Compulsion Syndrome in Family-Owned Businesses


Have you ever felt like your family run business is stuck in a loop? You're not alone. Many businesses experience what psychologists call "repetition compulsion." It’s that nagging tendency to repeat past mistakes, often without realizing it. For family companies, this phenomenon can be particularly tricky due to the emotional ties and shared history.


Whether it is the Italian mafia or the giant Reliance Group of India, family run businesses are an integral part of every economy. A study conducted by Insead Business School found that family run businesses contribute 70% to global GDP and 60% to global employment. They play an important role in the global economy and value creation.


A corporate executive standing amidst buildings
Family-Owned Businesses contribute about 70% to the Global GDP and 60% to the Global Employment.

Picture this: a third-generation family member stepping into the business only to find themselves making the same missteps as their predecessors. It's a cycle that can hinder growth and innovation while fostering tension within the family dynamic. The challenges are real, but understanding repetition compulsion is the first step toward breaking free from its grip


What is a family-owned business?


A family-owned business is just what it means – a business run by members of the family.  Generally the principle shareholders, the management, etc are all from the family.


According to Deloitte's extensive September 2019 research, family businesses often prioritize long-term goals based on their shared values, vision, and culture. However, simply being family-owned does not ensure a business's lasting success.


The study involved 792 executives from 58 countries who discussed the challenges and opportunities they encounter. Despite the importance of maintaining family ownership in their long-term plans, only 41 percent of those surveyed feel confident in their strategies for achieving success. (Global Family Business Survey: Long-Term Goals Meet Short-Term Drive - Deloitte)


There are some companies that have existed for generations, despite the fact that family ownership alone does not guarantee business longevity, according to the Deloitte survey. Houshi Ryokan is a hotel chain founded by the Houshi family in 718, in Japan! For over 1300 years, they have owned and managed it!


In fact, the oldest family owned company was Kongo Gumi Co Ltd. It was the world's oldest and continuously ongoing independent company operating for 1,427 years. Japanese companies dominate the list of the oldest companies in the world. After becoming a subsidiary of Takamatsu in January 2006, it lost its independence.


Logo of Kongo Gumi the world's oldest company
The oldest family-owned business in the world - Kongo Gumi

As the popular Chinese proverb states, "Wealth does not pass three generations." The first generation founders of the organization overcame numerous obstacles to establish it. We have all heard tales of their perseverance and determination despite facing financial constraints.


This generation has unwavering confidence in their business-building methods and firmly believes that the strategies they implemented served as the foundation for their success. They are convinced that the company's past strategic directions, which have proven fruitful, must be continued for future prosperity.


The Early Signs of Repetition Compulsion Syndrome in Family-Owned Businesses


A family run business usually faces a repetition compulsion at this point. The first generation patriarch, who would have ended up as the Chairman of the Company, would strongly advocate maintaining traditional processes and strategies and would be reluctant to change them. The process and strategy they used to achieve their initial success is continued, in accordance with Freud's theory of repetition compulsion.


As a management consultant, I have faced innumerable obstacles in convincing these first generation entrepreneurs that the strategies of the twentieth century won't work in the twenty first. In order to align with the new norms, I have demonstrated to them scientifically why it is important to think of new strategies and think with a new hat. However, very often the entrepreneurs receive these recommendations with strong reservations and agree to implement them half-heatedly. Many even brush it off as irrelevant idea!


In most cases, the strategy fails because there is no management buy-in, giving the first generation entrepreneurs an "aha" moment and an opportunity to tell everyone what they already knew!


As a result of this ‘Repetition Compulsion’ syndrome, their judgement is clouded and they become like an ostrich who buries its head in sand and refuses to see the change of wind. In the absence of a change in the mindset of the first generation entrepreneur or the second generation taking over the company, the businesses remain stuck in a timeline.


Let’s dive deeper into how this pattern affects family businesses and explore strategies for creating healthier dynamics. After all, every successful sage family business knows that adapting and evolving are key components of lasting success!


Impact of Repetition Compulsion Syndrome on Family Businesses

Repetition compulsion can have a profound impact on family-run businesses. Many times, families unknowingly repeat the mistakes of previous generations. This cycle can hinder growth and innovation in what could otherwise be a thriving enterprise.


When family members mimic past behaviors, it often leads to conflict. Imagine siblings clashing over decisions simply because they echo their parents' disputes from decades ago. This not only affects relationships but also decision-making processes within the business.


Moreover, this pattern may result in missed opportunities. Families might stick to traditional approaches instead of adapting to market changes or embracing new technologies. Stagnation becomes a risk when creativity is stifled by fear of straying from familiar paths.


As these patterns persist, financial performance can suffer too. The inability to break free from old habits may lead to poor investment choices and ineffective strategies that don't align with current trends in the marketplace. A family company needs fresh perspectives—without them, progress remains limited while challenges mount.


Strategies to Break the Cycle of Repetition Compulsion Syndrome

Breaking the cycle of repetition compulsion in family businesses requires a thoughtful approach. Start by recognizing patterns that have been detrimental to your company’s growth. This awareness can be transformative, allowing you to identify behaviors and decisions that keep reappearing.


Next, engage all family members in open discussions about the business's history and its impact on current operations. Encourage everyone to share their perspectives and experiences. This dialogue fosters transparency and allows for a collective understanding of past mistakes, paving the way for change.


It might also be helpful to involve external advisors or consultants who can offer unbiased insights into your management strategy. Fresh eyes can see what those entrenched in the business often miss. They provide valuable frameworks tailored specifically for family-run businesses navigating global management challenges.


Implement gradual changes rather than overwhelming shifts overnight. Small adjustments create less resistance among family members while still fostering an environment ripe for innovation and improvement within your family company business structure.


1. Strategy and Timing

It is important for us to remember that every strategy has its time and place. A strategy which was successful in the 1990s will not be effective in the current times. A successful strategy is one which it executed on time and under the right circumstances. The timing of the implementation of the strategy can make the difference between success and failure.


There are of course innumerable examples of how strategy and timing resulted in the success of the business. In the current era, examples of Airbnb, Uber, Amazon are all examples of right timing leading to success of a business. Companies which did not time their strategy well, always find themselves on the wayside. Blackberry, perhaps is a classic example in the recent past.


A person talking to the managers
The business world is dynamic and companies which do not change will soon disappear

While it was a sensational success when it was launched, it failed to see the changes in the technology and the way the customers accepted the touch screen phones from Apple. They failed to review their native operating system and found it too late to change with the IOS and Android operating systems flooded the market and made the Blackberry operating system obsolete.


There are many businesses, especially family run and individual centric business which have had tremendous success when they start and over the time grow up to be a sizeable company with impressive turnover and high staff strength.

 

2. Financial Performance and Repetition Compulsion

 Financial performance in family-run businesses can often reflect the patterns established across generations. Repetition compulsion, where past behaviors are unconsciously repeated, plays a significant role here. When family members mimic previous financial decisions—good or bad—they may overlook new opportunities and innovations.


This tendency usually stems from emotional ties rather than rational analysis. For example, a company might stick to outdated practices because it worked for previous leaders. This creates blind spots that prevent adaptation in an ever-evolving market landscape.


Moreover, when families prioritize loyalty over effective management strategies, they risk undermining their business’s potential profitability. A focus solely on tradition can stifle creativity and hinder growth initiatives necessary for success within a global management challenge.


Recognizing these cycles is crucial for improvement. By analyzing historical choices with fresh eyes, family companies can shift towards more informed decision-making processes that enhance financial outcomes and encourage sustainable development without being tethered to the past.

 

3. Managing Risks in Family Businesses

Managing risks in family businesses can feel like walking a tightrope. You need to balance personal relationships and professional responsibilities, all while ensuring the business thrives. It's essential to identify potential pitfalls early on. Whether it’s market fluctuations or internal conflicts, recognizing these issues is half the battle.


One effective strategy is creating a risk management plan that specifically addresses your family dynamics. Discussing roles and expectations openly helps mitigate misunderstandings down the line. Include all family members in these conversations; their insights can unveil blind spots you might overlook.


Another key element involves separating personal from professional life. This separation not only protects relationships but also improves decision-making processes within the company. Consider implementing clear policies that outline how decisions are made and who has authority over what aspects of the business.


Investing in training sessions or workshops can be invaluable for enhancing skills related to risk assessment and crisis management. A well-informed team will empower your family run business to navigate challenges more effectively while keeping familial ties intact.

 

4. Communication and Policies in Family Businesses

 Effective communication is the lifeblood of any family-run business. When family members work together, emotions can run high. Open dialogue helps in expressing thoughts and feelings without misunderstandings. It fosters an environment where everyone feels heard, reducing tension.

 

Establishing clear policies is equally important. These guidelines create a framework for interactions within the business. They help clarify roles and expectations among family members while promoting professionalism. A well-defined compliance management system ensures everyone understands their responsibilities.

 

Regular meetings can enhance communication further. These gatherings provide a platform to discuss challenges and brainstorm solutions as a cohesive unit. Encouraging each member's input can lead to fresh ideas that might not surface otherwise.

 

Remember that flexibility matters too! Family dynamics change over time, so it’s essential to revisit policies regularly and adjust them as needed. This adaptability allows your family company business to thrive amidst shifting circumstances while keeping relationships intact.

 


Conclusion

Implementing Change for Family Business Success

Implementing change in a family business can feel daunting, but it is essential for success. A family run business often has deep-rooted traditions and practices that may not serve its current needs. However, embracing new management strategies can lead to growth and better financial performance.


Start by fostering an open environment where all voices are heard. This encourages innovation while respecting the legacy of the family company business. Regular meetings can help identify areas for improvement without dismissing established values.


Utilize technology to streamline processes and enhance communication among family members involved in the business. A compliance management system tailored for your unique circumstances can significantly reduce risks associated with repetition compulsion.

 

Educated growth means staying informed about global management challenges that affect families in business today. Training sessions or workshops on these topics can prepare every member of the family for evolving market demands.


Change will require commitment from everyone involved, but the rewards are worth it—improved financials and better relationships. By implementing thoughtful changes while honoring your family's heritage, you create a sustainable path forward for future generations to thrive within their family businesses.


It is clear from Sigmund Freud's theory of 'Repetition Compulsion' that even executives in business implement certain strategies and processes because they were successful in the past, regardless of the fact that times have changed and strategies of yesterday no longer work.

 

The only constant we need to embrace is change.


"Change is essential for progress, and those unwilling to change their minds cannot change anything" - George Bernard Shaw


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