Management Controlling and Governance of Family Businesses by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030477417
Publisher: Springer International Publishing

2 Mapping Family Business Topics as Networks Distributed in Space: The Challenges of Managerialization and Professionalization, Internationalization and Relations with Financial Markets

2.1 Mapping Managerialization and Professionalization: Family and Non-family Members as a Network Distributed in Space

Managerialization and professionalization have received great attention from family business academics, entrepreneurs, and practitioners. Both processes are interrelated with the business life cycle, performance, development, and survival of every family business (Dyer 1989; Stewart and Hitt 2012). As described in Chapter “Professionalizat​ion and Managerializatio​n in Family Firms:​ A Still Open Issue”, managerialization pertains to the presence of formal management control systems in businesses (Songini and Vola 2015). Although surviving challenging markets and economic contexts calls for an increasing amount of information, family businesses appear less formalized in terms of management control than non-family ones (Cattaneo and Bassani 2015; Hiebl and Mayrleitner 2017).

Moreover, the introduction and use of formal management accounting and control systems cause internal issues, such as the acknowledgement of merit and the non-family managers’ empowerment through a clear process of delegation. When family members have a poor reputation, the coexistence of family and non-family managers undermines the familiar context of the business. Reputation, competence, proactiveness, and risk-taking behavior intertwine with rewards. The principle of merit should guarantee the right rewards to family and non-family managers (without prejudice) according to the above criteria.

Some studies have suggested the introduction and use of performance evaluation systems as a guarantee of transparent and appropriate rewards (Chua et al. 2009; Dekker et al. 2013; Sinha et al. 2017; Ward 2004). Personal performance measured by these systems usually benefits from a tight relationship with the performance of the business as a whole, and this relationship drives its members in the correct strategic direction. Although the presence of a formally acknowledged system might mean that family members receive discretionary rewards (Sinha et al. 2017), the principle of merit, if it is part of the business’s culture, should guarantee that discretionary rewards are exceptions, not a routinized process; and, as with all exceptions, the human resource manager should be able to justify it.

Performance evaluation systems are not the only formal systems mentioned in the family business literature. Empirical evidence of where managers have used strategic planning (Dekker et al. 2013; Ward 1988) shows that family and non-family members or entrepreneurs and managers are able to delegate tasks. Rue and Ibrahim (1996), for example, scanned more than a hundred family businesses with the aim of recognizing strategic planning functions and roles. Their results revealed a high degree of sophistication in corporate performance objectives and an appropriate presence of monitoring systems, albeit with periodic signs of deviation. Family business researchers who have focused on the strategic process espouse the benefits of strategic planning (Ward 1988) and have offered opinions on how it should be implemented.

Strategic planning and performance evaluation systems provide valuable information to manage and drive businesses. Boards of directors constantly use these systems. Many authors (Mustakallio et al. 2002; Songini 2006; Yildirim-Öktem and Üsdiken 2010; Zhang and Ma 2009) have identified

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