Role of Family System And Business In Family Business Sustainability - Essay Example

? Research Proposal ROLE OF THE FAMILY SYSTEM AND THE BUSINESS IN FAMILY BUSINESS SUSTAINABILITY Registration Number: Degree: Module Code: Word Count: Class: Professor: Submission Date: ROLE OF THE FAMILY SYSTEM AND THE BUSINESS IN FAMILY BUSINESS SUSTAINABILITY The Research Topic The approach to family business dynamics includes the concept of the family business as joint, interacting, or overlapping systems. Family and business are the two subsystems with their inherent and distinctive needs, “role requirements, rules, values and cultures” (Upton, Seaman and Dyer 1993, p.17). Both subsystems are crucial in determining the extent to which sustainability of family business is achieved. One method of investigating family systems is by utilizing the family system typology with family structures. For example, the disengaged family with a wide difference between the members appear to be unaware of the effects of their actions on each other. The enmeshed family where autonomy is impossible because of the close bonds between them may influence career decisions, as well as family business management decisions. The dynamics and structure of both disengaged and enmeshed families can impact career decisions, as well as family business management decisions. Family types have been identified by characteristics including how a family communicates, resolves conflict and organizes itself, style of leadership and decision-making, and importance of traditions and values” (Upton et al 1993, p.18). The family types influence family dynamics and the impact of the family on the business. Similarly, business sustainability is affected by various features of the business itself. Thesis Statement: This research proposal is for a research study to investigate the roles of both family and business systems in family business sustainability. Aims and Objectives of the Proposed Research The main purpose of the research study is to identify strategies that families can use to increase the success of both their business and their family, based on data obtained by surveying family businesses. The effects of the family system, and its responses to disruptions on gross revenue and the owner’s perceived success will be determined. Factors influencing the family system’s contribution to business enhancement include financial management practices, family functioning style, additional family income, and subjective measures such as functional integrity of the family, satisfaction with the family’s quality of life, and success in achieving the most important family goal. Similarly, other criteria related to family systems that help to improve business processes are reducing family tensions, living in a multi-generation family, undergoing sleep deprivation for devoting additional time to the business, hiring temporary help during hectic periods are other factors that will be taken into consideration to examine their impacts on business revenue. Olson, Zuiker, Danes, et al (2003) state that the family has a greater effect on the business than the business has on the family. The Family Business Research Group developed the Sustainable Family Business (SFB) model which equally recognizes the family and the business, and the dynamics between the two factors in achieving sustainability for both, state Heck, Jasper, Stafford et al (2000). The SFB model of empirical research portrays business system success as a systemic phenomenon. It includes research on several areas including “business performance, business strategy, subjective measures of business success and effects of the family on business performance” (Olson et al 2003, p.645). The research results will indicate the impact on business success by business characteristics, business owner attributes, and distinguishing features of the family system. Review of Literature The family system performs a “key integrating role for the business and at the same time meets the needs of the family” (Fletcher 2002, p.11). In this dynamic relationship, the family goals are the most important, and influence business and family decisions. Chrisman, Chua and Litz (2003) support the view that the family business exists because of the reciprocal economic and non-economic value created through the integration of family and business systems. The joining of the two systems leads to capabilities of “familiness” that cannot be duplicated, and which contribute to the survival and growth of family businesses. This approach is supported by Habbershon (2006) who emphasizes that family systems are important in family enterprises. Zachary (2011) reiterates that most researchers do not take into consideration the family system in investigating family businesses, mistakenly assuming that study of only the family business is adequate to determine the impact of the family itself. The importance of the family system is underlined, the concept of family business is critiqued, and a wide as well as detailed emphasis on the family system and the Sustainable Family Business Theory (SFBT) are examined. Similarly, Basco and Rodrigues (2009) conducted research to empirically demonstrate that family enterprises that focus in a balanced way on both the subsystems of family and business, achieve better outcomes in relation to family as well as business progress, as compared to enterprises that emphasize only on the governance of the business. According to Habbershon, Williams and MacMillan (2003, p.451), “theory and practice indicate that in family-influenced firms, the business entity, and individual family members” produce distinctive systemic conditions and constituencies that influence performance and the consequent results of the family business social system. It was earlier suggested by Habbershon and Williams (1999) that these distinctive and total family influences can be captured through an analysis of the resources and capabilities of the organisation. In alignment with this approach, Habbershon et al (2003) investigated in detail the systemic relationship of resources and capabilities as a source of advantage or constraint to the results achieved by family businesses. The distinctive set of resources and capabilities of the business system resulting from its interactions with the family system are termed as the “familiness” of the firm. It is responsible for its wealth-creating performance the production of transgenerational wealth for family businesses. The family systems that fulfill these criteria are known as “enterprising familiies”. Habbershon et al (2003) developed a unified systems model of performance that connected the resources and capabilities produced in the enterprising families system with their competence for transgenerational wealth creation. There may be some characteristics of the family system which are in conflict with the business system. For example, family members have lifetime membership, they are rarely “fired” from a family, and one’s membership to the family remains valid despite almost any type of behaviour. On the other hand, within the business system, the only two options are performing one’s duties or leaving the firm (Fletcher 2002). There may be a conflict when a family member’s behaviour calls for firing the person from the business system, yet the person continues to be accepted by the family system. Few family businesses consider firing a child, or other relative. Within family and business systems, individuals have different roles with specific expectations for behaviour. Thus, a child taught in the family system not to argue with the father, may have difficulty in expressing conflicting viewpoints in the business system when as a manager the individual is required to deal with the parent. “The confusion of roles such as parent/ founder/ owner/ child/ manager/ owner/ non-operating family member/ sibling, and the carryover of roles from one system to the other” (Upton et al 1993, p.17) are considered as critical sources of tension in the family business. Similarly, compensation, sibling and other relationships, communication, and decision making are other areas in which the family system may impact the business system. Although these factors may have positive outcomes, family rivalries and power struggles can have powerfully adverse effects on business sustainability. The Methodological Paradigm To achieve the purpose of the research and to identify strategies for family businesses to improve both family and business outcomes, the Sustainable Family Business (SFB) model can be used “to guide both specification of the operation model and estimation procedures” (Olson et al 2003, p.642). These details would assist in better comprehending the elements that sustain a family business. The Sustainable Family Business (SFB) model is an innovative approach to investigating family businesses. It is developed on household management theory based on family systems theory and takes into consideration new, unrecognized positive effects of the family on the business, as seen in Francis’ (1999) study of the positive effect of women in the family business examined in a comprehensive and quantitative manner using the SFB model and the national family business survey. Sustainable family businesses are highly useful for enhancing the national and local economies and to enable family business owners to increase their financial security. The beneficial impacts of a sustainable family extend to the enhancement of the health of the families that own these businesses. Healthy families in turn, provide the required resources for their businesses and the communities in which they live. The sustainable business model uses both objective and subjective indicators for gathering data, and to evaluate achievements. Different measures of financial success are the most common objective indicators of business achievements, according to most business and economic theories. On the other hand, subjective indicators such as motivations, for example for maintaining personal freedoms; rewards such as those achieved by meeting challenges; goals, for example increasing family security by building the business, and perceptions of success are also essential in providing family business sustainability taken as a whole. “With a greater understanding of the entire context of how business owners perceive their business success” (Olson et al 2003, p.644), it is easier to understand critical business management issues such as how the ways in which owners prefer to invest their resources of time and money, how they stay in business, their methods of working with customers and employees, and their ways of using their ability to identify and resolve problems. Objective and subjective indicators assess different things, and cannot be used as substitutes for each other. The sustainability model also promotes long-term health of the family business by anticipating and responding to change. When changes occur, new patterns of interaction are required for a family business to continue in a sustainable manner. Further, the sustainability model ensures that at the interface of the family and the business systems, there is an exchange of resources across systems to compensate for disruptions in regular patterns, states Olson et al (2003). The Most Suitable Research Method Now it is possible to quantitatively explore the essential component of family milieu “in which to start, grow, maintain and transition most businesses” (Olson et al 2003, p.644). The significance of the family system and the business system to the family business setting has been addressed by earlier researchers. However, quantitative investigation of the family, its interaction with the business processes, and consequent business outcomes have not been undertaken to the extent now possible using the National Family Business Survey (NFBS) through a questionnaire developed by a collaboration between VealeWasbroughWizards and the University of the West of England (VWV/ UWE 2010), state Collins et al (2011). Mutual sustainability between the family and the business requires collection and analysis of data on both the business and the family. The 2010 Family Business Survey instrument referred to above meets with these requirements. This online questionnaire helps to generate data for secondary analysis with carefully selected samples. According to the 2011 National Family Business Report the survey instrument (VWV/ UWE 2010) was administered to approximately 2,500 businesses from across the United Kingdom. The survey was distributed both online and in hard copy format. The researchers received 233 responses, an approximate response rate of 10%. This is in keeping with the response rates obtained for surveys of this type. Consequently, the sample size is considered to be statistically robust and the findings drawn from this data sufficiently reliable. “Almost 83% of those who completed the survey were owners or founders or majority shareholders of family businesses” (Collins et al 2011, p.1). The VWV/ UWE (2010) survey instrument is based on the sustainable family business model; its results can be applied for improving both the family and business systems. Justification of Sampling Strategy The sampling strategy of requesting 2,500 family businesses across the United Kingdom to fill and return the online questionnaire or its hard copy dispatched by post, is considered to be effective (Collins et al 2011). The researchers received nearly one-tenth of the number, as responses from the total number of businesses being surveyed. This proportion of responses being statistically strong, the validity and reliability of the sample size is considered to be high. Further, the sampling method of including a wide range of family businesses from across the nation, or located over a large geographical area ensures that the data gathered cover different types of family businesses in various types of locales. By using an online instrument, and requesting the respondents either by phone or mail to complete the questionnaires facilitates the user’s ease and rapidity of responding to the survey. Thus, using a sufficiently large sample size spread over a wide geographical area, and ensuring that a minimum of 10 percent of the total instruments are returned to the researcher with data for analysis, justify using this strategy. Potential Limitations of the Research and Ethical Considerations The VWV/ UWE (2010) survey instrument has been used effectively by researchers Collins et al (2011) to measure the success of businesses in both objective and subjective terms. The sustainable family business model forms the basis for this research strategy. The effect of family on business success, and the impact of the business system on profitabiltiy and progress of the firm are highlighted through the systematic approach of the research methodology. The most significant finding of family and business sustainability based research is that the “success of the family business depends on how the family manages the overlap between the family and the business rather than on family or business resources and processes” (Olson et al 2003, p.662). Potential limitations of the research pertain to receiving fully completed questionnaires and accurate accounts in response to the large number of questions in the survey instrument. Further, the great sample size will require a sufficiently long duration of time for data analysis and derivation of results. With regard to ethical considerations, a high level of confidentiality has to be exercised, because the study analyses family structures, the contribution of the members to the business, their compensation, the division of wealth, the profits of the family business, the methods of its distribution, and other close details of the family and business subsystems. Bibliography Basco, R. & Rodrigues, M.J., 2009. Studying the family enterprise holistically: Evidence for integrated family and business systems. Family Business Review, 22(1), pp.82- 95. Chrisman, J., Chua, J. & Litz, R., December 2002. Do family firms have higher agency costs than non-family firms? Paper presented at Second Annual Conference on Theories of Family Enterprise, Philadelphia. Collins, L., Goutas, L. & Smith, N., 2011. 2011 National family business report: Executive summary. VealeWasbroughVizards-University of the West of England, viewed 29 March, 2012, http://api.ning.com/files/Z64umNMxaE1q17rs0tcMIUX8Z2e*qDrQDY9c9Xginhla0uZkUU25gMUEMX0J0VJadv8vYIDogqG6mVkXZcsnKkVwMKC4Dnyh/NationalFamilyB Fletcher, D.E. (Ed)., 2002. Understanding the small family business. London: Routledge. Habbershon, T.G., 2006. Commentary: A framework for managing the familiness and agency advantages in family firms. Entrepreneurship: Theory and practice, November, pp.879-886. Habbershon, T.G., William, M. & MacMillan, I.C., 2003. A unified systems perspective of family firm performance. Journal of Business Venturing, 18, pp.451-465. Habbershon, T. & Williams, M.L., 1999. A resource-based framework for assessing the Strategic advantages of family firms. Family Business Review, 12(1), pp.1-22. Heck, R.K., Jasper, C.R., Stafford, K., Winter, M., Owen, A.J., 2000. Using a household sampling frame to study family businesses: The 1997 Naional Business Survey. In J.A. Katz (Ed). Databases for the study of entrepreneurship (Advances in Entrepreneurship, Firm Emergence and Growth) Volume 4, London: Emerald Group Publishing Ltd., pp.229-287. Olson, P.D., Zuiker, V.S., Danes, S.M., Stafford, K., Heck, R.K. & Duncand, S.M., 2003. Impact of the family and the business on family business sustainability. Journal of Business Venturing, 18, pp.639-666. Upton, N., Seaman, S. & Dyer, P., 1993. An exploratory analysis of family system types in family businesses. Journal of Business and Entrepreneurship, 5(3), pp.17-22. VWV/ UWE (VealeWasbroughVizards/ University of the West of England), 2010. Family Business Survey Questionnaire. Qualtrics Survey, viewed 29 March 2012, https://bristol.qualtrics.com/SE/?SID=SV_eDQuuYz6L7fDqYI&SVID=#error Zachary, R.K., 2011. The importance of the family system in family business. Journal of Family Business Management, 1(1), pp.26-36. Read More