Soroof International: Leadership in Family Business

Introduction

Background of the Study

The business world has reshaped significantly over the last several years. Research shows that modern businesses have their backgrounds from certain family partnerships and shareholdings (Schermerhorn 320). In his research on the impact of family-owned businesses, Ward discovered that family firms have been pivotal in the global business landscape (93). Family-owned businesses have been playing an important role in spurring business development and economic growth throughout history (Scheirer 74). From history to date, family-owned businesses have been part of the national economies for they create employment opportunities, help in income generation, and boost wealth accumulation (Rhodes and Lansky 111). Several countries around the world are currently relying on family-owned businesses for economic development. According to Zheng, since the beginning of the 1950s, business historians started becoming interested in studying the nature of family businesses (54).

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Despite the growing knowledge about the presence and persistence of the family businesses in the entrepreneurship landscape, people are still unaware of the structural and leadership arrangement of family-owned businesses (Cestone and Fumagalli 198). A salient feature that prevails and persists in the family-owned businesses is the direct influence of the families in the leadership and organizational structure of the businesses. Despite the multidimensional nature of family-owned businesses in terms of management systems and organizational structures, the direct influence of the business owners in the management of such entities is inevitable (Barrett and Moores 38). Colli discovered that regardless of their abilities to modernize their ownership in the businesses and their organizational structures, the significance of the family shareholding and influence has been pervasive (10). Statistics proves that most global corporations are in the form of fully or partially owned and controlled family business entities.

Saudi Arabia is one of the economies where patriarchal influence extends even to business ownership and management (Gundry et al. 21). Research indicates that family-owned businesses from the western economies seem more successful in their strategic approaches to corporate sustainability, performance management, and decision-making as compared to their counterparts from the Asian and Eastern economies (Bernhard 83). Although the reasons behind such disparities in the success of family-owned businesses may be complex to establish, some observers believe that most such businesses from the western nations have transformed leadership styles and better decision-making techniques (Gundry et al. 18). Enhanced organizational performance, transformative leadership, and better decision-making techniques are salient features that often characterize leadership behaviors and make up the most important components of organizational success. Even as family-owned businesses succeed in various parts of Asia and Eastern nations, performance, sustainability, and decision-making are crucial issues.

The Research Gaps

A research gap exists concerning the manner in which family-owned businesses behave and the way in which their nature affects certain aspects of business growth and development (Longenecker 403). Leadership styles practiced by leaders differ from one person to another. Therefore, establishing the nature of the family-owned businesses independently and aligning the characteristics with leadership may help to explain certain issues of sustainability, performance, and decision-making (Longenecker 121). Leadership is a crucial aspect of every business, and it acts as an imperative aspect in the development and survival of any organization that exists in the modern business world (Carney 252). Therefore, it should be viewed from the capacity to provide sustainable solutions, focus on performance, and handle issues that require proper decision-making strategies (Longenecker 325). Due to the above prevailing gaps in research, this paper discusses how leadership in family-owned businesses associates with business sustainability, business performance, and decision-making.

Statement of Problem

Leadership is the umbrella of every performance or venture in any existing business. Therefore, since businesses differ in their nature in terms of ownership and organizational structure, it is worth examining how certain leaderships associate with business sustainability, performance, and decision-making (Bernhard 67). According to a study conducted by Colli on the modern family-owned businesses, family firms have been resisting modern leadership styles due to their conservative policies in investment and development (17). The stagnancy nature of the family-owned businesses makes the leadership of such firms unable to sustain growth and development because innovation, capital structure, and technology seem to influence various aspects of modern leadership (Bernhard 53). Holding on to the traditional leadership ideologies and principles of managing businesses has strongly associated with poor business performance and sustainability (Bernhard 75). The old approaches used by family-owned businesses towards business management seem to fail in handling sustainability, performance, and proper decision-making.

The Research Objectives

  1. To determine how the leadership of owners in family-owned and family-controlled businesses influences the sustainability of a firm.
  2. To examine how the leadership of business owners in the family-owned and family-controlled businesses influences performance.
  3. To investigate the manner in which the leadership of business owners in the family-owned and family-controlled business influences decision-making.

Rationale and Motivation for the Study

Over the past several years, studies on behavioral sciences have focused mainly on the issues of leadership behavior of the individual leaders in the family-owned businesses (Yasser 75). However, these studies have not established the association of such leadership with business sustainability, performance, and decision-making (Spencer 178). The growing trend in research has led to the negligence of certain aspects of leadership that influence business sustainability, performance, and management directly. Most researchers believe that every multi-generational family-owned business has its unique history, although resilience and an unshakeable commitment to leadership make most of them successful (Spencer 165). Despite the unwavering commitment and resilience of the business owners, leadership succession, and generational transition are controversial issues in family-owned businesses. Poor handling of succession and generational transition have often affected the long-term sustainability, the performance, and the decision-making activities of the firm (Spencer 153). Such complexities make this research noteworthy.

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Conceptual development: Literature Review

Sustainability in the Family-owned Businesses

Research works reveal that building and sustaining a family business through the family structures and the leadership of the founders is a challenging endeavor (Leaptrott 6). This assertion holds because establishing lifetime leadership frameworks is normally difficult. Even though family-owned businesses can start and grow comfortably from a petite background, successful continuity and management of these businesses are complex and often demanding aspects. According to Leaptrott, the business world strives in a manner that each firm experiences the end of a certain leadership and the beginning of a new one due to the termination of the old guard or death of the leaders (3). In a research of 50 American family-owned businesses, Gordon conducted a qualitative research to identify the succession and continuity plans of the leadership (1). In this research, it was established that an average life span of a family-owned business is often less than 25 years. This period represents the average tenure for the business founder (Gordon 1).

In his research, Gordon established a connection between leadership, business continuity, and generational transition in the family-owned businesses (1). In the research of the American family businesses, it was discovered that from history to now, less than 33% of the family-owned businesses survive the second generation, while only about 15% of the family-owned businesses transition to the third generation (Gordon 1). Further assessment of the survival of the founders’ leadership in the American family-owned businesses showed that by the year 2005, most of the 20th Century family businesses had virtually lost their core founders to death or retirement. According to Gordon, “management growth can be challenging in a family firm, and thus the majority of family-owned businesses are turning to psychologists not only in psychology but also in business consulting” (1). As the family-owned businesses expand in production and capacity each successive year, the leadership capacity of the business owners reduces for the families can no longer manage the growth pressure.

Based on the research of Indermun about leadership and decision-making, one of the salient features that accompany the family-owned businesses is the element of business succession (64). This element often determines the growth and continuity of the family businesses. While investigating the nature and behavior of the family-owned businesses, Gordon found out that a family-owned business would end up collapsing or declining in its development (1). This scenario emerges due to the perennial failure of the leaders to manage the complex and emotion-laden succession issues in these multidimensional businesses. Gordon posits, “Most families prefer to create some version of an egalitarian culture, where in their businesses, the family business owners must operate on meritocratic principles, which demand that children must succeed with different-sized roles” (2). The problem that later emerges in the sustainability of the family-owned businesses due to successions wars is the continued development of the conventional policies that lead to laxities in adopting new innovation and technologies that emerge in the business environment.

Theoretical Perspective: The High-Performance Leadership Model

To understand how the science and art of organizational leadership influence family-owned businesses, it is important to appreciate the High Performance Leadership Model (HPLM). According to Fishman, the High Performance Leadership Model holds that organizational leadership exists in a systematic manner, and the behaviors of individual leaders play a significant role in the performance and growth of a business (79). The model maintains that leaders possess two important responsibilities that drive success or failure in organizations depending on how the leaders will implement the techniques in their leadership (Keyt 73). According to the High Performance Leadership Model, leaders have the role of coaching and instructing, where the responsibilities of balancing vision building, business support, challenge confrontation, individual empowerment, business ownership, knowledge sharing, and creation of understanding emerge as vital components of strategic leadership (Fishman 36). A combination of these facets makes leadership an important growth and development aspect.

The Theory of Six Thinking Hats Model

The Six Thinking Hats Model, which originated from the works of Edward de Bono, is a theory that helps people to understand how managers can explore complex business issues or challenges (Ulrich 38). The model states that this model has six perspectives described in the form of white, red, black, yellow, green, and blue. Each of the colors represents specific notion or idea related to social relations and enterprise management. The model typically indicates the emotional state of mind in a situation (Almeida and Wolfenzon 2664). In the perspective of the family-owned businesses, some business decisions end up facing the consequences of emotional decision-making because the leaders have to balance their leadership roles with their emotions towards their family members (Doraiswamy 179). Making crucial decisions in the family-controlled businesses is a bit complex due to the multidimensional nature of the family-controlled businesses.

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Research Methodology

Research Design

The study will employ a mixed research case study to narrow down to the specific research approach needed. The intent of the research is to examine the issue of leadership in family-owned businesses, with a focus on the SOROOF International Company, which is among the giant Saudi Arabian companies under family leadership. According to Johnson, Onwuegbuzie, and Turner, case studies form an important part of research because a salient feature of such studies focuses on a single phenomenon in a real-life context (117). Crowe et al. note that a case study is “an empirical inquiry that investigates a contemporary phenomenon in depth and within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident” (9). The focus of this research is to examine leadership in family-owned businesses with a special attention on SOROOF, which represents several companies with similar leadership traits in the Arab business world.

Target Population and Sampling Technique

The study will target 50 respondents from SOROOF International Company. To obtain realistic, reliable, and credible results, the research will sample the targeted population to obtain a representative sample (Schwandt 805). The study will employ two research-sampling techniques to obtain the required sample of respondents. Purposive sampling is a form of sampling technique where the researcher selects respondents based on their specific characteristics or roles that are relevant to the research inquiry (Teddlie and Tashakkori 17). Since the study is relying on the case study approach, purposive sampling will automatically choose the C.E.O. In the stratified random sampling technique, the study may not want to implicate anyone in the ultimate findings of the research, and it may not want to achieve results driven from scattered opinions (Schwandt 803). The study will place the 49 ordinary employees in 7 specific strata to investigate the problem from a group perspective.

Data Collection Instruments and Analysis Methods

The research intends to use questionnaires as the main data collection instruments. According to Crowe et al., mixed case studies allow the use of various data collection instruments as sources of evidence to create in-depth understanding of the case study and the manner in which it relates to a certain research phenomenon (5). According to Teddlie and Yu, the most trusted source of primary data is normally the questionnaires because they are easy to construct, unambiguous, and in a position to collect a large pool of information on limited research duration (79). The research will use a mixed research method to investigate the problem, and thus it will employ open-ended questionnaires to collect qualitative data and closed-ended questionnaires to collect quantitative data from the identified respondent (Teddlie and Yu 81). The study will use SPSS software to analyze the gathered quantitative data and a content analysis method to analyze the qualitative data gathered.

Study Implications

The study will uncover the relationship between the leadership of family-owned businesses and the aspects of business sustainability, performance, and decision-making. The study expects to make significant suggestions towards reforms in the management of family-owned businesses especially those under the cultural influences where traditional and conservative business ideologies tend to influence the successive management of the firms. Due to poor succession plans, families running businesses tend to disagree on various issues that affect the sustainability, performance, and the affairs of decision-making in the firms (Halyk 5). On the people who operate family-owned businesses, the proposed research will make significant influence on the manner in which they view the aspects of generational transition, succession, and planning in such companies. Researchers interested in this research area should focus on how managers can influence the three business concepts independently to identify how individual effort can shape transformative leadership in the family-owned businesses.

The Research Work Plan

The intended research is going to follow a pragmatic schedule or work plan that will prevail in ten main stages. The first stage of the work plan will involve the identification of the research problem or the area of interest. The second stage will involve the selection of a specific topic. The third stage will involve an analysis of the topic to make it more refined to develop the dissertation proposal. The fourth stage will involve following the processes that determine the authenticity of the research such as ethical approval. The sixth stage will entail reviewing the existing literature while the seventh stage will involve the collection of data from the beginning of the action stages. Stage 8 will entail an analysis and interpretation of the data collected, and stage nine will encompass the writing of the dissertation to combine theory with the established facts, before making a submission in the last stage.

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Barrett, Mary, and Ken Moores. Women in Family Business Leadership Roles: Daughters on the Stage, Ontarioa: Edward Elgar Publishing, 2009. Print.

Bernhard, Fabian. Psychological Ownership in Family Businesses: Three Essays on Antecedents and Consequences, London: Books on Demand, 2011. Print.

Carney, Michael. “Corporate Governance and Competitive Advantage in Family-controlled Firms.” Entrepreneurship Theory and Practice 29.2 (2005): 249–265. Print.

Cestone, Giacinta, and Chiara Fumagalli. “The strategic impact of resource flexibility in business groups.” RAND Journal of Economics 36.3 (2005): 193–214.Print.

Colli, Andrea. “Family Firms in European Economic History.” Journal of Social Science Research 26.1 (2010): 10-17. Print.

Crowe, Sarah, Kathrin Creswell, Ann Robertson, Guro Huby, Anthony Avery, and Sheikh Aziz. “The case study approach.” BMC Medical Research Methodology 11.5 (2011): 1-9. Print.

Doraiswamy, Iyer. “An Analysis of Servant Leadership in Family Owned Business.” International Journal of Social Science & Interdisciplinary Research 1.11(2012): 169-174. Print.

Fishman, Allen. 9 Elements of Family Business Success: A Proven Formula for Improving Leadership & Relationships in Family Businesses, New York: McGraw Hill Professional, 2008. Print.

Gordon, Gail. “Family-Owned Businesses: Is There a More Difficult Type of Business to Run?” Workplace Solutions 2.9 (2010): 1-4. Print.

Gundry, Lisa, Jill Kickul, Tatiana Lakovleva, and Alan Carsrud. “Women-owned family businesses in transitional economies: key influences on firm innovativeness and sustainability.” Journal of Innovation and Entrepreneurship 3.2(2014): 8-15. Print.

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Keyt, Andrew. Myths and Mortals: Family Business Leadership and Succession Planning, London: John Wiley & Sons, 2015. Print.

Leaptrott, John. “The Effect of Work – Family Role Conflict on Business Startup Decision-Making Processes.” Journal of Behavioral Studies in Business 9.18 (2007): 1-15. Print.

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