The Mindful Family Business: Leveraging Familiness by Reducing the Salience of the Nonfamily Out-Group

Guy Sack, M.A., Management Fellow (2013-2015)

Boston University Questrom School of Business

Department of Organizational Behavior

 

Introduction

Most businesses are family businesses. Scholars have estimated that up to 80 percent of organizations worldwide are family firms. They comprise about 40 percent of the fortune 500, account for half the United States Gross Domestic Product (GDP), and employ half the US workforce (Gersick, 1997). Despite their ubiquity, scholars have yet to agree on whether family involvement helps or hurts the firm. Recent research suggests the answer may lie with the level of collective mindfulness of the controlling family (Zellweger, 2013).

A recent meta-analysis by Carney et al. (2011) lends empirical support to the notion that family involvement tends to systematically help family firms, and a growing body of family firm researchers agree with this conceptualization (Frank, 2010). Unfortunately, this is not always the case. Issues such as interpersonal conflict, roll carryover, and sloppy succession planning have been emphasized as particular important problems for family firms (Dyer, 1986), but a systematic empirical exploration of the drawbacks of family interaction with the firm has yet to be conducted (Zellweger et al., 2010).

The concept of familiness was introduced by Habershon and Williams (1999) to describe the unique resources and capabilities brought about by family involvement in the firm, such as increased loyalty, commitment, financial capital, and free labor (Frank, 2010). Despite progressive explication of the construct in recent years, little is specified in the literature regarding the differences between families that are able to leverage familiness and those that are not (Zellweger et al., 2010). If collective mindfulness is the key to leveraging familiness, why might this be, and what are the implications for researchers and practitioners?

In the pages that follow I will introduce the concept of mindfulness as it applies to management of family firms by controlling families. Next, I will introduce a framework of multiple organizational identities and use this to demonstrate the tendency of different levels or kinds of organizational identification, depending on whether an individual is a family member or not, to result in nonfamily members being treated as a devalued out group within family firms. Then, I will take a closer look at the microprocesses of mindless management of the family firm. Finally, I will lay out some implications of a mindfulness lens on family firm management.

 

Collective Mindfulness in the Family Firm

Zellweger (2013) has suggested collective mindfulness (Weick, Sutcliffe, & Obstfeld, 1999) of the controlling family may act as a moderator of firm performance, such that more mindful families are able to leverage the positive attributes of familiness, while less mindful families suffer from the less well understood downside of family involvement in the firm. Zellweger takes a paradoxical approach to studying the family firm, noting the usefulness of such an approach for studying two seemingly incompatible truths: the family both helps and hurts the firm.

Seemingly incompatible demands may come from the family and business spheres, and a paradoxical approach appreciates these tensions, as well as responses that recognize these tensions. On a similar note, Smith and Berg (1987), theorizing from the paradoxical approach, note that tensions cannot actually be resolved, but can be “released” via the recognition of their inevitability. Before unpacking collective mindfulness as it applies in the family firm context, it is useful to map family firms onto a model of multiple organizational identities (Pratt & Foreman, 2000).

 

Differential Management of Multiple Identities: Creation of an Out-Group

Zellweger et al. (2010) have also highlighted the advantages of a firm taking on a family business organizational identity (Albert & Whetten, 1985), however this identity tends to be more complex than that of a nonfamily business, as the firm shares various aspects of its family identity with its firm identity (Sundaramurthy & Kreiner, 2008). As such, it may help to consider a lens of multiple organizational identities and discuss managerial responses to the challenge of regulating those identities within individual members of the organization.

Pratt and Foreman (2000) highlight the importance of microlevel management of individual identities in organizations that have multiple identities [such as a healthcare unit that carries identities of both rehabilitation and acute treatment (Pratt & Rafaeli, 1997)]. However this work lacks discussion of multiple identity management for individuals with differing levels of salience for each identity of the organization. In other words, researchers do not currently have a framework for understanding how family firms manage the multiple organizational identities of “firm” and “(controlling) family,” differently for family and nonfamily members.

Pratt and Foreman (2000) propose that, when multiple identities are supported and considered legitimate by powerful stakeholders and/or hold future strategic or political value, a plurality of those identities should be maintained by management, relative to those identities considered less legitimate or strategic. Based on this logic, while the work identities of both family members and nonfamily members in the firm will be supported, the (controlling) family identities of family members will tend to be supported a greater amount than the family identities of nonfamily employees, each with their own families at home.

Building on the same model, multiple identities that are seen as more compatible will be treated as high synergy, resulting in greater integration or overlap between the identities. The tendency for family members of the firm to have family identities more highly compatible with their work identities than those of nonfamily firm members (each with their own families at home) suggests that family members’ multiple identities should be managed such that the two identities fuse together, while nonfamily members will be more likely to maintain a separate, dominant work identity at work. This subordination of one identity in favor of another results in a process referred to as deletion (Pratt & Foreman, 2000), which could be considered the norm for most employees of nonfamily firms for whom family identities are relatively unimportant at work.

This idea of greater likelihood of deletion of nonfamily members’ family identities while at work is congruent with the identity literature on paradox, as adopted by Zellweger (2013) in his conceptualization of collective mindfulness as a moderator of the effect of family involvement in the firm. Smith & Berg (1987) note that individuals interact symbiotically with their groups, subordinating aspects of personal identity in order to benefit from the identity of the group. These authors propose that group members engage in a return-on-investment type of calculus as they weigh their gains from the group against their losses to it. In light of the relative tendency toward deletion of nonfamily members’ family identities, as well as their looser financial affiliation with the firm relative to family members, nonfamily members seem to give up more to the firm while getting less from it, compared to family members. This creates an undesirable faultline (Lau & Murnighan, 1998) between a valued family in group and a devalued nonfamily out-group (Tajfel & Turner, 1979; 1985).

 

The Folly of Mindless Relational Identification in the Family Firm

Zellweger et al. (2010) have argued that a primary source of the advantage of familiness is derived from a firm having the organizational identity of a family firm. Unfortunately, these authors have conflated what it means to see oneself as a member of a family firm with what it means to see oneself as a member of a firm that is “family like,” which is demonstrated by their example of Southwest Airlines supposedly holding a family firm organizational identity, even though it does not actually identify as a family firm. The importance of this distinction cannot be understated in discussing the significance of mindful management of the family firm as it embodies the distinction between the systematically different ways that family and nonfamily members of the firm will tend to identify with the organization. That is, even if family and nonfamily members consider all organizational employees to be treated “like family,” nonfamily and family firm members will still tend to identify with the firm in different ways because everyone knows who is really family and who is not.

Kreiner, Hollonsbe, and Sheep (2006) characterize a state of social or organizational identification as the overlap an individual perceives himself or herself to have with a collective. Based on the above discussion of work/family integration for family and nonfamily members, it stands to reason that, all other things being equal, family members will tend to identify more strongly with their organization that nonfamily members identify with it. In light of Ashforth and Mael’s (1989) conceptualization of the degree of identification representing the degree to which the fates of the individual are tied up in the fates of the organization (eg-the individual experiences collective losses as personal losses and collective successes as personal successes), this reasoning seems to hold. In other words, it makes sense that family members would identify more with their family business than nonfamily firm members, based, in part, on the financial rewards (or pitfalls) of the intermingling of family and business finances (Frank, 2010).

In addition to identification with the organization (Mael & Ashforth, 1992) and their respective work groups (Van Knippenberg & Van Shie, 2000), Sluss and Ashforth (2007) have highlighted the importance of identification with work role relationships. From the perspective of individual family members in the firm, these relational identifications can be generalized (my relationship with nonfamily members in general) or particularized (my relationship with Bob, who is a nonfamily member of the firm).

According to Langer’s (1989; 1997) model of mindfulness, as well as Weick et al.’s (1999) extension of the model to the group level, mindful responses to the challenge of managing multiple organizational identities in family and nonfamily organizational members will consist of active differentiation and refinement of social categories within the organization, creation of new discontinuous social categories within the organization, and increased appreciation of context, leading to novel ways of relating. Based on this conceptualization, especially the differentiation and creation of new categories, more collectively mindful approaches to management on the part of the family will consist of more particularized relational identifications, especially regarding relational identifications with nonfamily firm members.

When family members hold more mindful and particularized relational identities and identifications vis a vis nonfamily members, the salience of the nonfamily out group can be decreased as the focus shifts from the broad groups of family and nonfamily to the particular identifications with individual nonfamily member role relationships in context. Family members will naturally differentiate individual nonfamily members from each other and will do so with varying degrees of mindfulness. The situation to avoid is a mindlessly general relational identification, in which family members focus on the differences between family members and nonfamily members, as opposed to thinking in more broad, creative terms.

An example of such mindless relational identification, noted in Rosenblatt et al. (1985) is the tendency for more senior family members in the firm to be particularly tough on junior family members of the firm, in a supposed attempt to prove to nonfamily members (as well as the junior family member) that he or she will not be favored simply because the person is a member of the family. Such treatment may actually have the unintended effect of emphasizing the difference between family and nonfamily members and adding greater salience to the nonfamily out group.

The most relevant aspect of mindful behavior on the part of the controlling family (for the sake of our discussion) pushed by Zellweger (2013) is a hesitation to pick either a family first or business first mindset. This thinking is congruent with Zellweger’s other notes about the mindfulness of the controlling family, such as having a reluctance to simplify situations and avoiding rule-based assumptions. This also represents a reduction in salience of the nonfamily out group.

 

Mindfulness in Practice: the Example of an Improvement Focus

Wilson and Ross (2000) show the tendency for individuals who focus on improvement to make temporal-self comparisons as opposed to social comparisons. Such self-focus reduces salience of social comparison and thus the salience of the difference between the family in-group and the nonfamily out-group. A controlling family focusing on individual improvement of employees would also be enacting a mindful management strategy, based on Zellweger’s (2013) description of collectively mindful controlling families as focusing on the long-term. In addition, Weick et al. (1999) note the importance of resilience and reliability in continuous improvement processes, such as learning from failures and small misses.

Ely and Thomas (2001) highlight the importance of diversity in organizations for continuous improvement to occur through organizational learning. They discuss how diverse groups bring diverse perspectives to bear on a situation and, in addition to improving decision-making in context, can actually improve organizational performance by teaching other organizational members about their unique perspectives. In family firms, the nonfamily members bring an importantly diverse perspective to the firm, and without mindfully particularized relational identifications, the advantages of these new perspectives may be lost as the faultlines between family and nonfamily firm members become more salient and damaging to communication (Lau & Murnighan, 1998).

Likewise, Janis (1972) has highlighted the tendency for groupthink, dysfunctional decision-making as a result of desire for group harmony, to occur in highly cohesive and homogeneous groups, of which family firms are usually examples (Michael-Tsabari & Lavee, 2012). Likewise, Dyer (1986) discusses the tendency for family firms to respond rigidly to environmental changes as well as foster inefficient decision making through the disproportionate influence of the founder and the controlling family. Reducing the salience of the nonfamily out group will help improve decision making by increasing open communication among diverse (family and nonfamily) stakeholders.

Ashforth and Mael (1989) hold the perspective that social identification carries an evaluative element, such that individuals hold higher regard for entities with which they identify and lower evaluations of entities with which they do not identify or with which they disidentify (defining oneself as NOT like an entity) (Elsbach, 1999). Langer’s (1997) characterization of mindfulness as nonevaluative suggests a mindful approach on the part of the controlling family is incompatible with this kind of identification. In the context of the family firm, this evaluative nature would tend to influence family members to evaluate family members more positively than nonfamily members to the extent that relational identifications remain mindlessly generalized. However, when nonfamily members are treated mindfully, such evaluations are less likely.

 

Conclusion

So, what have we learned? The elusively bivalent nature of familiness in the family firm is now better understood through the new framework of mindfulness, allowing for greater specification of how family firms can leverage the advantages of familiness and avoid the possible drawbacks of family involvement in the firm. In addition, a framework of multiple organizational identities helps explain some of the in group/out group dynamics between family and nonfamily members of family firms. The importance of mindfulness for the construction and maintenance of more particularized relational identifications with family-nonfamily role relationships was also highlighted, in addition to the implications that a focus on continuous improvement can reduce the salience of the faultlines between in-group (family) and out-group (nonfamily) within the family firm.

 

 

 

 

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