De Gruyter Handbook of Business Families by Michael Carney Marleen Dieleman

Author:Michael Carney, Marleen Dieleman
Language: eng
Format: epub, pdf
Publisher: De Gruyter
Published: 2023-02-15T15:58:50.320000+00:00

P1.1: The O-TGT is likely to be formed in family businesses facing an increasing complexity of their cluster in terms of competing entrepreneurial needs, resource allocation discrepancies, and risk-taking divergence between owners and enterprises.

As the ownership circle evolves from controlling owner, to sibling partnership, then to cousin consortium (Gersick, Davis, McCollom Hampton, & Lansberg, 1997) and advanced cousin consortium, the owners tend to increasingly diverge in terms of financial interests (Labaki, 2011), need for family control and influence as well as identification and emotional attachment to the cluster and to the businesses within the cluster differ (Michael-Tsabari, Labaki, & Zachary, 2014). Members of the Rodriguez Family agree that “we are a ‘retail family’ and this is where our heart is. In the rest of the businesses we own, we are investors, therefore our patience with poor performance, our flexibility and our long-term commitment to them are more limited.” In addition, as ownership dipersed in both the Rodriguez and Richardson cases, the financial needs diverged between owners who have an executive or a governance role in the cluster and receive compensation, and those who don’t. This affected the extent of SEW which typically requires alignment of the rising generation on a shared vision that incorporates their aspirations for the family business cluster. According to one of the Richardson’s siblings, “as family members’ interests differ, it will be more difficult to transmit our father’s entrepreneurial spirit and “his/our way of doing business” across family members, board members and executives”. For one of the third generation CEO of the Rodriguez FBC, “when the business was passed on to us [cousins in the third generation], we realized that we needed to have a team with formalized processes at the owner’s level, who could collaborate, make decisions based on alignment of opinions, and set the tone for the businesses within the portfolio”. In a similar line, the Rodriguez O-TG stated “one of our tasks is to preserve the family bonds among branches and individuals. We are a representative group of the owning family, our collaboration fosters collaboration among branches and family members.”

Given this, O-TGTs also emerge in FBCs with an increasing potential for agency problems type II related to divergent interests among family owners.

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