A Reflection by David Jiang on “More Than Meets the Eye”

[We’re pleased to welcome authors David S. Jiang of Georgia Southern University, Franz W. Kellermans of the University of North Carolina at Charlotte, Timothy P. Munyon of the  University of Tennessee, and M. Lane Morris of the University of Tennessee. They recently published an article in the Family Business Review entitled “More Than Meets the Eye: A Review and Future Directions for the Social Psychology of Socioemotional Wealth,” which is currently free to read for a limited time. Below, Dr. Jiang reflects on the inspiration for conducting this research:]

fbra_30_2.coverThis research is based on the first author’s dissertation, which is a winner of the Family Firm Institute’s 2017 Best Dissertation Award. The article reviews 421 papers published across 25 journals during the past decade to propose new directions for the social psychology of socioemotional wealth (SEW), which is a popular concept and theoretical perspective in the family business literature that deals with the nonpecuniary benefits that family members derive from control over their family firm.

What motivated you to pursue this research?
SEW research has helped significantly advance the family business literature since Luis Gomez-Mejia and colleagues first introduced SEW in 2007. However, although SEW research has already done a lot for the literature, we also believe that it can do so much more. Motivated by these beliefs, we originally spent 2 years (2014-2015) in the review process at the Academy of Management Review (AMR) trying to outline the emotional aspects of SEW, only to have our work rejected in the last round on a split editorial team decision. After this rejection, we realized that what we really needed to do was review the SEW literature in ways that would first establish a foundation to understand the many psychological phenomena that fit within SEW research. This is why we are thrilled to have our work on this subject published in Family Business Review (FBR) – a high-quality outlet that can help further the psychological understanding of various SEW phenomena and outcomes.

What has been the most challenging aspect of conducting your research?
We think that the most challenging aspects probably came from the review process. We were trying to say something that was connected to but very different from what existing SEW research has already said and/or done. Naturally, it’s often difficult to seamlessly communicate novel ideas in ways that reviewers will immediately understand with a first draft. Recognizing this, after we received feedback from the first round of FBR reviews, we realized that we had to extensively change our analytical strategy and approach in order to be as comprehensive as possible. This way, we could address the reviewers’ many concerns while still maintaining our core message and contributions. Although our original submission to FBR reviewed 41 SEW articles, as can be seen in the published article, our final sample included 421 articles. Altogether, it was extremely challenging to increase the review’s scope by more than ten-fold in a 3-month revision window! Needless to say, the first author spent a lot of late nights culling through the expansive SEW literature to create an action plan that utilized the authorship team’s collective strengths and expertise.

How do you think your research will impact the field?
It is difficult to tell at first but we hope that our article will ultimately help build stronger family firm microfoundations. We think there are a lot of novel directions that SEW and broader family firm research could go from here and hope that other scholars will agree and join us in these pursuits!

 

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Family Constitution and Business Performance: Moderating Factors

[We’re pleased to welcome authors Rocio Arteaga and Susana Menéndez-Requejo of the University of Oviedo, Spain. They recently published an article in the Family Business Review entitled “Family Constitution and Business Performance: Moderating Factors,” which is currently free to read for a limited time. Below, they reflect on the inspiration for conducting this research:]

fbra_30_2.cover

What motivated you to pursue this research?

Family Constitution is a relevant instrument that is used in practice for facilitating the continuity of family businesses. Nevertheless few academic studies have studied Family Protocols, due to the difficulty in obtaining pertinent information at both the aggregate and company levels.

However, Spain is characterized by an above-average implementation of Family Protocols and the prominent development of institutions that are linked to family businesses. The Family Business Institute of Spain (www.iefamiliar.com) is an important international leader regarding initiatives such as the Network of Family Business Chairs that exists throughout the Spanish university system and the Family Business Regional Associations that are present and active in every region in Spain.

In what ways is your research innovative, and how do you think it will impact the field?

We performed in-depth interviews with expert consultants who specialize in Family Constitutions to grasp primary components of a Family Constitutions. We have also analyzed a unique sample of 530 Spanish family businesses. Half of these firms received financial aid from the government to implement a Family Protocol during 2003-2013.

We present possible explanations to expect a positive relationship between Family Constitutions and future firm performance, primarily linked to its ability to reduce conflicts among family, shareholders and managers. We specifically explore the improvement in monitoring managers and firm professionalization, the improved alignment between firm owners that shareholder agreements entail, and the communication and transparency between family members that Family Constitutions foster.

We expect that this research promotes that business families engage in the complex and lengthy communication and agreements process of Family Constitutions with determination. Even during times of economic crisis, we observed that companies that had implemented a Family Protocol reported higher levels of firm performance growth.

We also expect that this article encourages family firm scholars to develop future studies regarding the topic of Family Constitutions.

What did not make it into your published manuscript that you would like to share with us?

A Family Protocol is the result of a process of communication and agreements among owners of a family business that are collated in a written document that includes a set of rules and procedures for governing family business relationships and is signed and ratified by each family member.
Family Constitutions address the firm history, the future vision of the family firm, include norms and rules for family members regarding their incorporation into the business, succession planning, shareholder agreements (transfer of shares, dividends, firm valuation), and develop power structures in the firm and the family in regard to the company (Board of Directors, Family Council). Protocols improve and channel communication, information (also prior to decision-making) and transparency among family members who are in some manner linked to the firm and guide future generations. Family Constitutions contribute to improving the coexistence and cohesion of family generations that are linked to the firm.

We observe that family businesses that implemented a Family Constitution had significantly improved performance within 2 years after the implementation. This positive relationship between the implementation of a Family Constitution and future firm performance is stronger for firms that had a nonfamily CEO, had multiple family owners, or were controlled by later generations.

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Big-Science Organizations as Lead Users: A Case Study of CERN

switzerland-93275_1920[We’re pleased to welcome authors Poul Andersen of Aalborg University, Denmark and Susanne Åberg of Uppsala University, Sweden. Andersen and Åberg recently published an article in the Competition and Change entitled “Big-science organizations as lead users: A case study of CERN,” which is currently free to read for a limited time. Below, Andersen reflects on the inspiration for conducting this research:]

ccha_21_3.coverWhat kind of customer is CERN – the leading research organization for nuclear research in Europe – and what can a supplier learn from collaborating with them? In this paper we pursue questions that was originally raised by Susanne Åberg – one of the authors – during her study of collaboration between CERN and Swedish suppliers (see Åberg, S. (2013). Science in business interaction: A study of the collaboration between CERN and Swedish companies (Doctoral dissertation, Företagsekonomiska institutionen, Uppsala Universitet. The dissertation can be downloaded, using this link:  http://www.diva-portal.org/smash/get/diva2:575589/FULLTEXT01.pdf).

In the paper, forthcoming in Competition and Change, we pose the question: What characterizes interacting with big-science organizations as lead users and how does it impact on suppliers’ potential innovation benefits?

We depart from Von Hippel’s Lead user concept to scrutinize user-supplier interaction and learning. We find that the lead-userness of CERN differs from other lead users on a number of vital points. Big-science organizations (BSOs), such as CERN represent a special breed of lead users as their demands are not necessarily the avant-garde of a coming market. Yet, they may be leading in other ways: they provide a valuable test bed for suppliers, because they are pushing the boundaries of technological capacities and thus challenging suppliers’ talents. Also, they are prestigious collaboration partners that help producers to be acknowledged as being at the technology forefront. Moreover, they are often deeply engaged in their suppliers’ manufacturing and development activities, which is seen as a characteristic of the customer-active paradigm, upon which the lead user notion builds. This paper investigates whether and how interacting with CERN concerning their development needs may contribute to suppliers’ innovation.

We believe that both managers and designers of innovation policy may learn from our study. Viewing CERN and other BSOs as lead users change the traditional science-push perspective on knowledge dissemination from leading science. Managers considering engaging with CERN and other BSOs can also learn more about potential benefits and challenges from engaging with customers such as CERN.

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Can Unions, by Themselves, Help Curb CEO Pay?

[We’re pleased to welcome author Muhammad Umar Boodoo of the London School of Economics and Political Science. Boodoo recently published an article in the ILR Review entitled “Do heavily-unionized companies compensate their CEOs less in periods of financial distress?,” which is currently free to read for a limited time. Below, Boodoo reflects on the inspiration for conducting this research:]

ILR_72ppiRGB_powerpointWord on the street is that CEO pay is too high, and more must be done to curb it and reduce inequalities in society.  This topic is quite timely given that the World is still recovering from the effects of the financial meltdown.  The topic of CEO pay is fascinating in and of itself: why is it that some research find that CEO pay is not actually linked to corporate performance?  Why do CEOs still (seem to) earn sizeable bonuses and options when their companies are performing poorly?  These questions remain intriguing, and still attract the interest of various groups in society.  The primary question I ask in my paper is whether labor unions have any influence on CEO pay.  Unions are known to compress pay; they stand for fairness and strive to mitigate the inequalities in their workplaces and in society in general.  Some research also suggest that unions are bad for company profitability.  Is it possible, therefore, that unions reduce profits of companies and/or put pressure on compensation committees to reduce the pay of CEOs in companies where they are organised?

My paper finds that companies which are more heavily unionized tend to pay their CEOs higher salaries and pension benefits.  The same CEOs do not receive lower bonuses or lower options.  In other words, CEOs of densely-unionized companies get paid higher than their counterparts who manage low-unionized companies.  The first result about salaries and pension benefits is not such a surprise, considering that unions do tend to prefer fixed incomes over variable incomes for their own members, which may then also be the case for their management and CEO.  What may be a surprise is that unions do not reduce the profitability of companies, and do not reduce the sensitivity of CEO bonuses and options to corporate performance and market valuation of firms.  In other words, unions do not affect bonuses, options and restricted units of CEO pay.

While the results of this paper are based during the financial crisis, there are a few questions that need to be answered, perhaps in a more “normal” period.  If unions are not the answer to curbing CEO pay, then what can help?  Do we need employee representation on Boards of Directors so that there are more checks and balances?  Should we even be interested in curbing CEO pay, or should we rather focus on closing tax loopholes that allow CEOs (and others) to port money overseas to tax havens?  More research is also warranted on voluntary sorting of CEOs into companies.  It is plausible that older, more mature, experienced CEOs sort themselves into companies that are heavily unionized, while younger CEOs flock more towards lower-unionized firms.  Older CEOs may also be more risk-averse and may prefer higher fixed incomes and security.  They may not care too much about performance-related pay such as bonuses and equity compensation, and may in fact support rather than thwart unions.  These are plausible research questions that need further investigation.

Stay up-to-date with the latest research from the ILR Review and sign up for email alerts today through the homepage!

Is It Better to Govern Managers Via Agency or Stewardship?

[We’re pleased to welcome author Albert E. James of Dalhousie University, Canada. James recently published an article in the Family Business Review entitled “Is It Better to Govern Managers via Agency or Stewardship? Examining Asymmetries by Family Versus Nonfamily Affiliation,” which is currently free to read for a limited time. Below, James reflects on the inspiration for conducting this research:]

fbra_30_2.coverThe research is based upon the first author’s dissertation. It is the result of his effort to understand the many different behaviours and outcomes that he witnessed during his 20-year career working as a non-family employee for various family firms—particularly his desire to understand why and how some families’ businesses seem to be more successful than others. It is also the result of a PhD supervisor’s determination to see her student succeed as an academic and her willingness to let him follow his passion and research questions.

The most challenging aspect of this process has been finding the way to tell the story of the research project. What is published here is the result of many re-writes, iterations, and direction changes. It was challenging to adapt concepts and measures to the particularities of the family business field. And it was challenging to make full use of the reviewers’ and editor’s advice. All in all, though, the challenges were an opportunity for a new academic to learn many things about rigorous research and publishing. Without the patient work, extensive knowledge and leadership of the co-authors, none of the challenges would have been overcome.

One of the study’s most surprising findings is the high level of positive work outcomes exhibited by both the family and non-family managers in the sample. Sometimes family business managers—of either type—are portrayed with at least a hint of negativity. Those in our sample, however, tended to score highly on behaviours and attitudes that are normally considered beneficial to organizations (i.e., job performance, organizational identification and affective commitment). As for the anticipated impact of our research, we hope that it will become known for providing empirical evidence that challenges commonly held assumptions regarding the attitudes and behaviours exhibited by non-family versus family managers and the mechanisms by which each group should be governed.

The advice I would give new scholars is to be willing to re-work the story you wanted to tell to your chosen audience. No matter how interesting you believe your research to be, you have to be willing to find the right way to tell the story. You need to tell the story in a way that fits your audience’s conversations. It is not easy to let go of parts of your research that were highly motivational for you. As hard as it is upon a first read, don’t take the reviewer and editor comments personally. Instead, take your time with the comments, let your reactions cool, and then find the nuggets and gems within them. Don’t be afraid to ask for help. This research started off as a study of non-family manager turnover intentions and became a story of the governance mechanisms used in family businesses. It is important to keep your eye on your end goal. If you can’t tell the entire story this time around, tell what you can, save the rest, add what you learned from the current round, and mix it into your next project.

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Case in Point: Introducing the Performance Review System to Students

[The following post is re-blogged from SAGE Connection. Please click here to view the original article.]

In most companies, performance appraisals (PA) are a common practice used to evaluate overall employee performance while monitoring and fostering the success of both the employee and the company as a whole. This month’s installment of Case in Point, a blog series drawn from SAGE Business Cases and containing insights from thought leaders in business and management, explores a case study written by Dr. David Kimball that follows one human resource director’s journey to construct a valid PA and performance management system (PMS). The following is an interview with Dr. Kimball as he explains the benefits of teaching performance review systems to students in a classroom setting:

  1. The case you wrote describes the implementation of a performance appraisal system at a company that had never had one in place before. In your opinion, what are the top three takeaways from this case for those learning about implementing a performance review system for the first time?

The top takeaway is to consider performance appraisals from the ground up. The student is able to think of the true goals of the PA. What does the company really want to accomplish with the implementation of a PA process?

The second takeaway is for the student to consider what an employee can learn from the PA process. What areas of a job are reviewed in the performance review? In the case, students can assess the areas of work that are the human resource director’s strengths.  Where are  her weaknesses?

The third takeaway is for students to design and complete a PA Form. Students can either use the form in the case or practice designing their own form. Students can also complete the form for this particular director’s performance.

  1. What kind of information would you expect students to bring to this case study in order to accomplish the assignment?

Most students have not been in a management position where they administer a PA. So, the case allows the student to experience what this individual has to accomplish by creating and administering a performance appraisal system. The student in class is able to role play being the human resource director in a performance appraisal situation.

  1. How are problem-based case studies particularly helpful in teaching real-world management issues in the classroom?

Student engagement in class increases dramatically during case discussions.  This case is intentionally short to allow students to read the case in class, discuss it within teams during class, and present their findings in class. Students like to participate in Skill-Building cases that allow them to develop their own skills as managers.

Learn more by reading the full case study, Why Do We Conduct Performance Appraisals? Jennee LeBeau and the Case of the Missing Performance Appraisal System  from SAGE Business Cases, open to the public for a limited time. To learn more about SAGE Business Cases and to find out how to submit a case to the collection, please contact Rachel Taliaferro, Associate Editor: rachel.taliaferro@sagepub.com.

Read last month’s case in point, A For-Profit Model for Social Entrepreneurship.

Dr. David Kimball, co-author of Sport Management: Principles, Applications and Skills and  Entrepreneurial New Venture Skills

Family Firms and the Impact of Incentive Compensation

[We’re pleased to welcome authors James Chrisman of Mississippi State University, Srikant Devaraj of Ball State University, and Pankaj Patel of Villanova University. They recently published an article in Family Business Review entitled “The Impact of Incentive Compensation on Labor Productivity in Family and Nonfamily Firms.” From Chrisman, Devaraj, and Patel:]

 Family firms are thought to face a managerial capacity constraint owing to the preference of hFBR_72ppiRGB_powerpoint.jpgigh-ability job candidates from outside the family to seek employment with non-family firms, which usually offer higher compensation and more lucrative career opportunities. In our paper, we theorize that incentive compensation can ease this constraint by signaling the attractiveness of working in family firms, thereby increasing the average ability of a family firm’s workforce. We therefore hypothesize that incentive compensation will reduce the productivity gap between family firms and non-family firms.

We are interested in this topic because much of the focus in the literature on non-family employees in family firms deals with issues associated with alignment of interests after workers have been hired. Few studies deal with the pre-employment problem of adverse selection, which is primarily (but not entirely) an issue of worker ability rather than worker effort. We also wanted to emphasize that if job candidates seek employment with firms that are compatible with their self-interest, adverse selection can exist even in the absence of an opportunistic pursuit of self-interest (or in the presence of stewardship motives).

Bounded rationality and information asymmetry make judging the ability of potential employees difficult for the owner-managers of both family firms and non-family firms (and even for the potential employees themselves). However, when the labor pool available to family firms becomes attenuated because high-ability workers self-sort according to a preference to work in non-family firms, the adverse selection problem facing family owner-managers becomes even greater.

Incentive compensation will be more valuable for high-ability job candidates than it will for low-ability job candidates because the former are most likely to benefit from it. Thus, incentive compensation signals performance will be rewarded, which may help alleviate the adverse selection problem facing family firms. Our empirical analysis of a matched sample of over 200,000 small and medium-sized firms obtained from a U.S. Census survey supports our contentions. Findings indicate that the productivity of family firms that provide incentive compensation increases at a greater rate than the productivity of non-family firms that provide incentive compensation (compared, respectively, with family and non-family firms that do not offer incentive compensation).

We hope that our paper will inspire further work on the adverse selection problem facing family firms. We also hope that our paper will lead researchers to focus more on how bounded rationality and information asymmetry, rather than simply opportunism or the lack thereof, influences the behavior and performance of non-family employees in family versus non-family firms.  In this respect, we suggest that the presence of bounded rationality and information asymmetry make incentive compensation and monitoring valuable tools in family firms regardless of the composition or proclivities to behave opportunistically of the workforce.

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