The role of familiness in the success and failure of family-business groups.
Author(s)Venter, William Peter
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In both developed and under-developed countries, family businesses are the most prevalent, best-performing and resilient expressions of applied entrepreneurship. Despite this, however, the general impression one gathers from both the academic and the popular literature is a negative one, suggesting that family businesses tend to be fragile, transient of nature, and prone to destructive, internal conflict. Consequently, the positive performances and valuable socio-economic contributions that family businesses do actually generate in global economies, are inadequately acknowledged and largely inconsistent with the negative images that prevail in the bulk of the literature on the subject. Mainstream family-business theory, known as the orthodox approach, regards the family and the business as separate entities. The current study is conducted in opposition to this view, preferring the heterodox approach, which acknowledges family and business as an interrelated, virtually indivisible unit of productive and profitable association between the two constituent parts. In successful family firms, the business and the family seem to be inseparable. This homogeneity is termed a "unified systemic" relationship, and the reciprocal inter-relationship between family and business is regarded by the "systems" school of thought as the leading factor contributing to the generally superior performance of family businesses. Central to the unified, systemic model is the concept of "familiness". This characteristic underpins the co-ordination of the family inter-action with the firm, leading to flexibility, resilience, sustainability and superior performance. The current study does not attempt to deny the difficulties that confront family businesses. This would be unreasonable in the light of an alleged 30-percent-onaverage generation-transition survival rate in family businesses. However, the study has chosen to focus on a more positive view of family-business relationships, acknowledging an inseparable association between the family and the business, and the pro-active management thereof. More specifically, this study investigates the role of familiness in the success and failure of family-business groups in South Africa. Because of the vastness of the field, the study does not attempt to include familybusiness groups on a global scale. For the purposes of the current study, familiness is investigated as the development of, and the relationships formed between, founder capital, family capital and generation capital, leading to family-business-capital-behaviour, as these concepts are defined in the study. To facilitate this investigation, a conceptual model, comprising fourteen different, developmental channels, was created. Collectively, the model represents familiness in all the different phases of growth and advancement of family-business groups (see Familiness Transmission of Capital Model, Figure 2.14, p. 86). In evaluating the model, semi-structured interviews were used to do a qualitative investigation of all fourteen proposed transmission channels. Eight of the most prominent and influential family-business groups in South Africa participated in the study. Family-business groups were specifically chosen for the current study because they are more complex than smaller family businesses and secondly, because it is virtually impossible to gain access to the family-business owners of multinational, multi-billion-rand enterprises. The sample of family-business groups selected for the current study had already achieved successful transitions through their second, third and fourth generations. The results of the current study indicate that the concept of familiness appears to play a vital role in the success or failure of generation-transmission in the eight prominent South African family-business groups investigated. More specifically, it would seem that the systemic inter-relatedness between the family and the business, through the concept of familiness, plays a pivotal role in the various transmission channels that lead not only to the advanced success of family businesses, but also to the successful transition of the business to the succeeding generations of the founding family. The findings of the current study endorse the heterodox view that the family and the business cannot be separated, but should rather be seen as an interactive system with unique, collectable resources. The findings respond to a need created, according to Bornheim (2000:163), by the principal deficiency in the family organisation literature, namely a theory that explains the developmental stages of each generation succession. ii The study concludes that family businesses seem to engender a "soul" into the functioning of such enterprises by means of service leadership in eight areas of operation, identified by means of a conditional matrix, namely: customer-care; social responsibility; culture; innovative behaviour; leadership-by-example; legacy of family ownership; passion for the family business; and the treatment of employees as if they are members of the family. The concept of familiness engendering a "soul" into a business, offers a possible explanation for the superior performance of family businesses when this is compared with the general performance of non-family businesses. Several recommendations and suggestions are offered for further research on the topic.