Conflict between Family Firms - Essay Example

Running Head: Conflict between Family Firms Conflict between Family Firms of the of the Conflict between Family Firms When family firms or businesses are formed, they are usually expressions of an entrepreneur's need for independence (Ward 1994). Family firms are often formed without the purpose of strictly remaining as family businesses, and usually family issues only start to arise when other family members, or just anyone from the family, enter the business on a permanent basis (Hoy and Verser 1994). The family, while a source of support initially remains in the background and it is the character of the owner that profoundly affects the growth of the company. The craving of an entrepreneur to be accepted as the business superior to a any other family member, and equally of the entrepreneur's family members to be his or her coequal seem to create tensions over who takes up different job roles (Rosenblatt et al. 1985). The founders tend to manage and supervise dissent, allowing very little contribution from others in the decision making process (Dyer 1986). It is this tension among family business partners and unequal business partners that leads to conflict. When one partner believes he/she had the lead position in forming the roots of the business, he/she may anticipate more of his/her time to be allocated to the job role. Conceptual Background Family Businesses "Family businesses are unique institutions in the socioeconomic environment of the United States. Family businesses, whether large or small, are characterized by having the founder or a family member as president or chief executive officer, members of the founder's family employed by the company, and managers defining their firm as a family business." (Davis and Harveston, 2001) Those who play down the impact of family firms may not be aware that family businesses comprise an estimated 80 percent of the 15 million businesses in the U.K. (Carsrud 1994) and represent more than 50 percent of Britian's GDP (McCann, Leon-CJuerrero, and Haley 1997). Despite their importance in the Britian economy, family businesses have a complex set of problems not completely addressed by classical management theory (Davies and Stern 1980). One such problem is the effect of conflict in the family. Conflicts "When examining intraorganizational conflict, a central issue is determining the foci of conflict. Conflict theorists (such as Guetzkow and Gyr 1994; Ross 2001; Wall and Nolan 1986) typically describe conflict as either substantive, consisting of task disagreements, or affective, consisting of emotionally-charged interpersonal clashes characterized by anger, distrust, frustration, and other forms of negative affect. Because our focus is f) in the investigation of conflict concerning the business, the model developed here focuses on substantive conflict which describe as "intellectual opposition among participants, deriving from the content of the agenda". (Davis and Harveston, 2001) "That is, substantive conflict arises from disagreements about task issues including the nature and importance of task goals and such key decisions as procedures for task accomplishment, and the appropriate choice for action" As used here, the existence of "substantive conflict is defined as the owner/manager's perception that there are disagreements about task issues including the nature and importance of goals and decision areas". (Davis and Harveston, 2001) "Beckhard and Dyer (1983) have "suggested that the key substantive issues that leaders of family business should address are (Ownership and executive leadership continuity or change, power and asset distribution, and the role of the firm in society". Luce and Raiffa (1957, p. 1) characterize substantive or issue-based conflict as situations in which "an individual is in a situation from which one of several possible outcomes will result and with respect to which he has certain personal preferences. However, though he may have some control over the variables that determine the outcome, he does not have full control. Sometimes it is in the hands of several individuals who, like him, have preferences among the possible outcomes, but who in general do not agree in their preferences." Family business owner/managers may disagree with other family members on substantive issues. As Beckhard and Dyer (1983, p. 59) note, "Family members often differ from the founder and conflict frequently results." For example, while founders usually want to continue family ownership, this may not be true of their immediate family or later-generation family members. It is this concept of preference incongruity among individual family members which provides the theoretical basis for this study". Much of the research on conflict has relied on the work of Thomas and Schmidt's (1997) process model, which conceptualizes conflict as an individual-level perceptual construct. Of course, the locus here on perceived conflict should not be taken to imply that conflict does not objectively exist, only that disputants' experience is their reality and thus determines the nature of the conflict for them (Klar, Bar-Tal, and Knjglanski 1987). In the framework presented here, we draw upon cognitive psychology to argue that one's perceptions of people and their preferences on various issues is a theoretically valid concept whenever the perceiver has had meaningful experiences with the other party pertaining to these issues (Schneider, Hastorf, and Ellsworth 1997) and the perceptual task is consistent with the perceiver's normal information processing capabilities (Dyer 1986:Astrachan 1988). Such would certainly seem to be the case with both the participants and the issues addressed here". (Davis and Harveston, 2001) Family-Level Factors The literature suggests that family members exert a differential impact on decision processes in family businesses (Dyer 1986: Astrachan 1988). One obvious reason why family members' views may diverge is differences in familial distance. For example, in-laws' views may differ from those of blood relatives. "In addition, organizational researchers (such as Gouldner 1994; Blau 1994) have long maintained a distinction between instrumental tics (those arising in the course of fulfilling work roles) and primary ties (those informal social relationships that have been shown to both enhance and impede organizational processes and the attainment of organizational goals)". (Lincoln and Miller, 1979) While some family members remove themselves from management and become absentee owners, others prefer to be actively involved in managing the firm (Beckhard and Dyer 1983). Family members who are working in the firm may sec things differently from those family members who are not active in the business's day-to-day operations (Ward and Aronolif 1994). These differing attributes-familial distance and the nature of the ties that hind the family together, including instrumental tics (work relationships) and primary ties (the family's social relationships) suggest that certain family members may play a more central role than others in family business conflicts. Family Work Group Composition In the family business setting, owners who employ other family members have been found to experience significantly higher levels of work-family conflict (Boles 2003). Despite the higher levels of business-family conflict experienced by owners of businesses with family participation, Rogoff and Lee (2003) concluded that this conflict is generally well managed and does not interfere with the achievement of business objectives. Although increasing the involvement of family members may be viewed positively by business owners, I here is little research which explicitly takes into account the effect that familial distance and increased participation in the family's work and social groups has on conflict at work. As noted above, some family members may be actively involved in the management of the firm while others are not. In the former case, selected family members (often those most closely related to the owner/manager) may comprise members of the firm's "upper echelon" (Bluedornet al. 1994) whose participation in joint decisions becomes a foci for conflict reduction and resolution. Prior studies on family work groups imply that the closer the relationship of the family member to the owner/manager, and the higher the member's position or level of responsibility/ authority, the more influence the member has on the decision processes of the family business (Davies and Tagiuri 2001). Due to the possible combined effect of higher levels of both family affiliation and organizational roles, the composition of the family work group may exert a strong influence on the extent and frequency of conflict in a family business. Substantive conflict can arise due to internal group processes involving task-related interactions, such as defining goals and developing plans of action. There is a long history of case studies of family businesses that suggest that because family dynamics are often acted out in organizations, the presence of added family members in these organizations seems only to intensify the eruption of conflict (for example, see Levinson 1997). One explanation for these findings of increased conflict may be that previous studies approached conflict in the family business from a more affective perspective (Jehn, 1997). "The control and coordination functions assigned to closely related family members who occupy top management roles require the maintenance of direct and efficient communications channels among them. Group members can communicate about task issues by expressing agreement or exchanging information that supports a perspective they share. Because they face similar organizational circumstances, family members working in the organization are likely to develop common interests and perspectives leading to greater consensus on the issues facing the organization". (Lincoln and Miller, 1979) It therefore seems reasonable to expect that the more homogeneous the family work group (such as consisting of family members with higher levels of family affiliation and higher organizational roles), the lower the organizational conflict. Family Non-work Group Composition The owner/manager, like many members of his/her firm's "upper echelon," is a member of overlapping subgroups. Because they are identified with both work and family groups, owner/managers may become the object (and initiators) of attempts to exert influence by members of these various subgroups to represent and reconcile the firm's and family's interests. Many scholars (for instance Boles 2003) suggest that when more family members are involved the family business, conflict is higher; however, these studies fail to account for differences among family members based on their membership in work or non-work groups. While not occupying organizational positions of decision-making responsibility and authority members of the family social group may still influence conflict via "kinship responsibility" (Dyer 1994) "Kinship responsibility is based on the premise that it is easier to be involved with relatives who work at the same organization and live in the same community than with those who do not" allowing members of the family social group to exercise influence over organizational processes is desirable as a means to maintain the kinship network. (Dyer, 1994) Family members in the business and those outside the business may have competing needs and goals which can translate into conflict (Dyer 1994). While interpersonal frictions may lead family members outside the business ("sleeping partners") to sometimes dive for each other's throats, they often function as valuable sounding boards for ideas and help "keep the overall vision of the company alive" (Davies 1998, p. 113). In these cases, efforts are exerted to cope with the conflict and resistance that accompany management of the family firm and thereby minimize their potential negative effects on family cohesion. In other words, family members who are not active in day-to-day management may seek to play the role of peacemakers. Family Social Interaction Social constructivist theories generally presume that social and symbolic processes produce patterns of shared cognition (understanding) among members of the same social group (Salancik and Pfeffer 1997; Fulk, Schmitz, and Steinfleld 1990). To the extent that this is true, closely-knit networks, such as families, are key sources of social learning. (Generally, it is believed that one benefit of social interactions among group members can be shared learning (understanding, consensus) that may reduce conflict among group members (St. John and Rue 1991). Social interactions among family members who are in some way "involved" in the business, should lead them to experience closeness and reduced levels of conflict. Since families usually 'seek to avoid conflict at all costs (Ward and Aronoff; 1994, p. 55), the drive for family members to maintain ties of kinship and get along well with each other should mean that social interaction will reduce the overall level of substantive conflict present in family businesses. While a considerable body of evidence has been accumulated to support the power of social influence to produce convergence of interpretation, attitudes, and meanings between an individual and a group, some evidence suggests that the reflects of social interaction on conflict may not be so salubrious. For example, communications within the social group can increase the saliency of issues simply by calling attention to them (Salancik and Pfeffer 1997). Unfortunately the potentially important role of family social interaction on business conflict remains unresolved. Generation Effects "The existing literature also suggest that generation effects (here used as a moderating influence) in order to better depict stages that may underlie the basic structure of conflict in family businesses". (Davis and Harveston, 2001) Following Leach (1990), first-generation family firms should be less family-oriented than later generation firms. This effect is anticipated because of the importance of the founder as the most powerful influence on organizational culture (Bennis 1986). As Schein (1985) contends, during the birth and early growth of organizations, the founder dominates the organization and holds the organization together by emphasizing socialization and developing commitment, while organizational midlife is characterized by the spawning of subcultures and the loss of key goals, values, and assumptions. 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