When you tell your employees your company is a family, you're making a mistake.

The fact is, your company is more like a team. Families are based on unconditional membership; teams, on the other hand, are conditional--pull your weight, or you could get traded.

Reid Hoffman, the co-founder of LinkedIn; Ben Casnocha, an entrepreneur and co-author with Hoffman of The Start-up of You; and Chris Yeh, co-founder and general partner at Wasabi Ventures, write in Harvard Business Review about how important it is as a CEO to make this distinction.

"When CEOs describe their company as being 'like family,' we think they mean well. They're searching for a model that represents the kind of relationships they want to have with their employees--a lifetime relationship with a sense of belonging. But using the term family makes it easy for misunderstandings to arise," the authors write. "In a real family, parents can't fire their children."

The trio points to Reed Hastings, the CEO of Netflix, and his famous presentation about Netflix's values--the skills and behaviors for which the company hires and promotes--and company structure. "We're a team, not a family," Hastings's slide reads. "We're like a pro sports team, not a kid's recreational team."

But why should your company think of itself as a sports team? "In contrast to a family, a professional sports team has a specific mission (to win games and championships), and its members come together to accomplish that mission. The composition of the team changes over time, either because a team member chooses to go to another team, or because the team's management decides to cut or trade a team member," the authors write. 

Hoffman, Casnocha, and Yeh look at an interesting fact about the winningest sports teams in major American team sports. Although the NFL's New England Patriots have won three Super Bowls since 2001, the NBA's San Antonio Spurs have won five NBA titles since 1999, and Major League Baseball's Boston Red Sox have won the World Series three times since 2004, each team has only one player remaining from its first championship roster.

"Each of these winning franchises has been able to build a consistent identity and a long-term relationship with its players--even though many of those players change from year to year," the trio writes. "The reason these teams have been able to remain consistent winners despite high personnel turnover is that they have been able to combine a realistic view of the often-temporary nature of the employment relationship with a focus on shared goals and long-term personal relationships."

Since your company isn't offering lifetime employment, you need to promote the principles of trust, mutual investment, and mutual benefit, the authors say. "Teams win when their individual members trust each other enough to prioritize team success over individual glory," they write.

Published on: Jun 18, 2014