Nine
Family Business Etic Parameters of C.A.S.E.
1.
Regulated resource boundary
In cultures
with strongly regulated resource boundaries, a clear line is drawn
between the resources of the family and of the business, and the
business is expected and given freedom to seek non-family resources
to cover its resource gaps. The business may engage quite
freely in subcontracting relationships, hire professional managers,
sell equity to the outsiders, take dept, and seek foreign technology,
capital, and partnerships. However, this freedom may be regulated
through the transfer of intangible resources, such as values,
attitudes, and priorities, of the family to the family business. The
criteria for securing non-family resources are clearly regulated,
for instance to ensure compatibility of the values of the professional
managers at the time of hiring with that of the family’s
values as infused into the family business.
In cultures
with weakly regulated resource boundaries, the business relies
actively on the family for its resource needs, and has an implicit
obligation to take care of the family’s needs on an ongoing
basis. If the family’s resources are limited, the business
is expected to follow a conservative strategy.
2.
Emphasis on Business Reputation
In cultures
with a strong emphasis on business reputation, the focus is on
building a competitive and sustainable business, that would attract
both the family successors as well as high quality external partners. The
family business may give a cushion to various parties –
such as suppliers and workers – in times of their need or
in situations of poor performance, but that is intended to assure
that its partners grow with it and that its foundations remain
strong.
In cultures
with a weak emphasis on business reputation, the focus is on providing
employment to all the members of the family, and using the lower
cost family labor as a source of competitive advantaged. The
family businesses tend to evaluate decisions, such as diversification,
on the basis of their impact on family prestige and power. When
a particular business fails, the families may seek to still meet
the debt obligations in order to protect their reputation.
3.
Proportion of Bridging relationships
In cultures
with low proportion of bridging relationships, the core competencies
of the business are assumed to be rooted primarily in the home
community of the family. The resource networks of the business
– including employees, customers, and vendors – are
predominantly comprised of the members of the community with whom
the family has social relationships. Most business associates
and key competitors are owned by the families in the same community. The
choice of market domain and segments is guided by the skills,
resources, and other strengths of the home community.
In cultures
with high proportion of bridging relationships, the family businesses
seek to “break-out” from the family and the community
of the family in business, and to diversify and invest into the
markets where the family has no roots. At the same time,
they seek to develop family-like committed, engaging, and emphatic
relationships with their key stakeholders and with the communities
in which they invest.
4.
Pervasive Organizational Professionalism
In cultures
where organizational professionalism is pervasive, there is a
greater openness to employ professional managers, including at
the senior leadership positions. The family businesses invest
in scientific operations and control systems, formal management
tools and methods, and in new technologies. The management
style is team oriented, where the non-family employees are given
freedom to participate in strategic decision making. There
is a high level of trust between the family and non-family members.
In cultures
where organizational professionalism is not pervasive, there is
a reluctance to share power with the professional managers. Professional
managers are either not hired, or are not promoted to the senior
most leadership positions. Long years of service are required
for the professional managers to gain trust of the family, and
even then power is given to them because of their cultivation
of social relations with the family, rather than because of their
competencies in the business alone. The family businesses
rely on intuition, informal techniques, and authoritarian leadership. The
employees must accept the decisions by the family members, who
hold the top positions.
5.
Regulated Family Power
In cultures
where the family power is strongly regulated, attempt is made
to set protocols that would protect the business from the family
dynamics. If some family members are not committed to the
family business, they can readily exit without causing a break
up of the family business. The family conflicts and influences
are contained through a family forum, which provides a single
channel for communication with the business. The criteria
and boundaries for the employment, compensation, and managerial
involvement of the family members are clearly laid down. Similarly,
governance is structured in a way that allows for the family oversight,
as well as access to key areas of external expertise.
In cultures
where family power is weakly regulated, the family influences
business in a number of ways on an ongoing basis. The family
members may influence the strategic decisions, even if they are
not involved in the management of the business, from behind the
scenes and through their social relationships. The governance
tends to be thin and opaque, and confined only to the family members. Confidentiality
of information is considered an important source of competitive
advantage. The power of individual family members is not
limited, and they may single-handedly induce break up of the family
business. The family business decisions are made to accommodate
the interests of the family, such as for employing members and
friends of the family.
6.
Competitive Succession
In cultures
where the succession is competitive, the successors prepare themselves
by getting education, and some work experience at the operating
levels externally or inside the family business. The criteria
for succession are specified clearly, and the successors must
demonstrate competence to earn leadership. The successors
enjoy attractive alternatives other than joining the family business,
yet they make a conscious decision to join the family business. The
predecessors transfer their knowledge of running the family business
to the successors, and assign responsibilities in accordance with
competence and interest to various family members. They gradually
withdraw from the family business affairs, as the successors learn
and gain knowledge about those affairs. After the succession,
the predecessors either retire or are available only as sounding
boards, leaving all business affairs to the successors. The
board of directors may be involved in the process. Also,
non-family employees may be considered for succession, particularly
when no competent family member is available or interested.
In cultures
where the succession is not competitive, the successors may have
limited education and no experience other than working within
their own family business. The successors are socialized
into the family business from an early age, and are expected to
assume the leadership when they grow up. The predecessors
tend to continue holding reins and making strategic decisions
– formally or informally behind the scenes – until
their death. The successors may not get sufficient leadership
training even after working for long years within the family business,
and may lack confidence among the other family members and among
the non-family employees. The employees are not given leadership
positions, unless they have long standing friendly relationships
with the family. If the family does not have a competent
successor available, attempt is made to prospect successors from
the extended boundaries of the family, including family cousins,
in-laws, and friends. Daughters may be strategically married
to bring in son-in-laws who could become the successors.
7.
Women in Leadership
In cultures
where leadership of women is endorsed, daughters are given equal
rights to the family estate, to the participation in the governance,
and to the senior management and leadership positions, even if
sons are also present. Couple family businesses are more
prominent. Women family members have clear strategic roles,
such as taking leadership of new business lines, introducing professionalism,
and introducing new technologies. Wives and mothers play
an important role in building social relationships for the business,
and in maintaining family commitment to the business.
In cultures
where leadership of women is not endorsed, daughters are excluded
from the family estate, from participation in governance, and
from senior management and leadership positions. They are
given subservient, informal, and invisible roles, and are not
permitted any decision making rights without consulting with and
reporting to the male members. When no male successor is
available, preference is given to marrying the daughters strategically
to potential son-in-laws who could join the family business.
8.
Operational Resiliency
In operationally
resilient cultures, family businesses are able to rely on the
temporary assistance of the family, extended family, family friends,
and acquaintances in times of need; or find their employees, vendors,
customers, and communities willing to lend an extra helping hand
because of the family feel relationships; or are able to hire
professional managers on short notice for responding to the competitive
forces. They follow a coherent diversification that insures
them from market constraints in specific business lines, while
also allowing synergies across different business lines. Through
their services, they enjoy a premium in the market place, which
protects them from the cost-based and technology-based competition
of the non-family businesses. When operating in traditional
and economically under-developed regions and sectors, they bring
a sense of hope, optimism, and innovativeness. They continually
rejuvenate and regenerate the regions, sectors, and communities
they operate in.
In operationally
non resilient cultures, family businesses are expected to provide
employment for their family members, extended family members,
family friends, and acquaintances, even if their competencies
do not match the needs, and even if they lack motivation and commitment. The
employees, vendors, customers, and communities do not take pride
in the family orientation of the family business, and are unwilling
to give it a slack in times of its need. The family businesses
are either not diversified or diversified into unrelated areas,
which leaves them vulnerable to market shocks and stretches their
resources too thin. They are more susceptible to the cost
and technology based competition from the non-family businesses. They
operate in hostile environments, with minimalist resources and
minimalist incomes.
9.
Contextual Embeddedness
Contextual
embeddedness influences organizational goals, attitudes, and practices. In
contextually embedded cultures, family businesses rely on direct,
face-to-face communication characterized by informality and flexibility
at all levels, in all their business operations – old or
new, in traditional or emerging sectors, local or global. The
emphasis is on using the family business experiences as a basis
for competitive advantage and senior leadership. High levels
of cultural cohesiveness extend to all the stakeholders, including
the family, business, community, business partners, and employees. Dense
communication channels are maintained with the customers, enabling
high levels of personal relationships, responsiveness, customization,
trust, and differentiation premium. The growth occurs organically,
and investments are made primarily in the local community or through
family and community connections. Globalization tends to
be avoided, or limited to culturally proximate regions.
In contextually
un-embedded cultures, family businesses use more formal, structured,
and indirect communication channels at different levels, and in
many of their business operations. External education and
outside experiences are given high importance in leadership appointments,
and for strategic decision making. Mergers and acquisitions,
joint ventures, and other similar channels for rapid growth are
pursued. There is also a greater openness to globalization,
if need be by hiring professional managers and by using information
technology. |
