Change Management in a Family Business:
Effects of Style of Management, Readiness for Change and
Change Approach on a Family Business Succession
A Case Study of a 150 years-old Family Business
Charlotte Basse
s1661469
June 2011
Master of Science of Business Administration –
Change Management
Faculty of Economics and Business
University of Groningen, The Netherlands
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Abstract
The success of successions of family firms is dependent on crucial factors in the social system. The different variables for investigation are management style and readiness for change and the applied change approach. The variables can have both effects on the succession, a positive and a negative, therefore a business has to look after the status they reached before the succession, at the succession and after the succession. The research investigates into two successions of one business. The two cases, the two successions, are analyzed and compared to each other. This multiple case study conducted 22 open interviews with a focus on qualitative data. Management style was operationalized by the two different dimensions of change of Beer and Nohria (2000). Readiness for change was operationalized by the characteristics of the humans relation culture in an organization; Jones et al (2005) analyzed the support of this organizational culture type for readiness for change; and
additionally by the antecedents for the individual readiness to change by Steele Johnson et al (2011). Succession as a change management event was operationalized by the different change approaches introduced by Kotter (1995; 2008) and Burnes (2004), the planned change approach and the emergent change approach. At the succession in 1982 the social system suffered and the outcome was financial losses after the succession. The second case, the succession in 2010, is not over but the succession is running much better. A succession plan is significant for the success of a succession and the personality and the management style of the successor and predecessor joint together is also significant. The analysis revealed that open communication and strategic thinking from the top management are two well working instruments within a succession. The three different variables have a key role in the
succession and have significant influence on the success of a succession. The two cases are analyzed and discussed by the different points and also compared to each other. A
management style concentrating on economic value and organizational capabilities is supportive for a successful succession. Effective succession planning, in advanced, and high readiness for change are also supportive for a successful succession. The findings are
discussed in terms of the practical importance for the business and in terms of the theoretical contribution to family business and change management.
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Table of Content
Abstract 2
1. Introduction 5
1.1. Introduction of the Situation 5
1.2. Introduction of the Case 6
1.3. Research Overview 8
1.3.1. Management –
Research Question Hierarchy 8 1.3.2. Outline of the Research 10
2. Theory 10
2.1. Family Business Definition 10
2.2. Succession Planning 12
2.2.1. Family Business Succession 13
2.3. Antecedents 15
2.3.1. Style of Management 15
2.3.2. Change Approach 19
2.3.2.1. Planned Change Approach 19 2.3.2.2. Organizational Development Approach 20 2.3.2.3. Emergent Change Approach 21 2.3.3. Readiness for Change 23
2.4. Conceptual Model 25 3. Methodology 27 3.1. Case Study 27 3.2. Data Collection 28 3.3. Sample 29 3.4. Data Analysis 31
3.4.1. Interviews and Documents 34
4. Results 35
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4.2. Data Analysis Overview 36
4.3. Case Analysis 39
4.3.1. Analysis of the Past Succession 39 4.3.2. Analysis of the Present Succession 46
5. Interpretation of the two Cases and the Comparison 54
5.1. Management Style 55
5.2. Readiness for Change 59
5.3. Applied Change Approach 62
5.4. Additional Findings 66
6. Conclusion 68
7. Limitations 69
8. Recommendation and Contribution 70
References 74
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1. Introduction
1.1. Introduction of the situation
Change is the new challenge for the economic world in the last decade. Changes occur in any field of business life and their amount and frequency has increased dramatically (Burnes 2004). This is exactly the reason why firms and their employees face new challenges which had not been common before (Burnes 2004). High speed technology is a new issue at business level and organizations have troubles to adapt to the new technology, in the worst case their adaptation process has finished when the next technological enhancement is already developed. But this could also happen to other fields of business not only the technological part. Organizational structures become more and more flat, as hierarchical structures contain too much bureaucracy.
Workplaces have changed a lot, too. Working times have shift from day time to nights and part time jobs. At home working and connected to the firm‟s intranet are changes any firm had also to adapt to. But also external changes have been crucial in recent times for companies. Mergers and acquisitions are the new buzz phrase. Many failures have been noticed by the world and the implementation seems to be one of the major problems of a merger and acquisition business strategy. Any change in the leading management is always a difficult issue for a company, what became very clear in the recent times of the merger and acquisition phase (Nahavandi & Malekzadeh (1988), Kotter (1995), Weick & Quinn (1999), Kotter & Schlesinger (2008)).
Having said this, scientific focus has now shifted from change to change management. One change which has become already a very certain phenomenon in business history is the succession in a family business (Miller, 1993). Within Europe there are
businesses which are still family led, in some countries the rate is about two third of all business which are family led (Neubauer & Lank 1998). Even though the family led business has also to cope with new trends, the succession from one generation to the next is a task which is, similar to a merger or acquisition, a very complex and long lasting process, where it is essential to fully concentrate on a smooth business
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kind of business (Ward, 1987) and eager to follow the life of the previous generation member. Secondly, it is not easy to plan the future of a family business as time changes a lot of industry sectors. There is no security that a business will be able to survive in a long term perspective (Bruch & Sattelberger, 2001).
Change management theories may enable us to grasp much better the challenges of family businesses, facing the repeating task to hand the business over. Theories of change are kept often general about the type of change, because changes happen in any business surrounding; there are several variants of change. Family business succession is one event by which a change approach is applied. The findings of this study are discussed in terms of their theoretical contribution to the literature used in this study of change management and in relation to the practical importance of developing positive change attitudes within a family firm, if the succession initiatives are to be successful.
Therefore this research has a twofold goal, on the one hand the research will
contribute insights to the theoretical ideas about change management and succession and on the other hand it will examine the two cases, the two successions of one firm, and give some recommendations how to continue in the actual succession until it is over.
1.2. Introduction of the case
Soltau Kurier Norden GmbH & Co. KG (SKN) was founded in 1856 publishing a local newspaper. The family business, now in its fourth generation, will shortly give over to the fifth generation. Especially during the fourth generation the business scope has been extended by also printing newspaper advertisements, catalogues and
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opening of international markets, international competition and a lot more. One clear observation of the fourth generation is that especially in the recent decades changes occur much faster and adaptation time is therefore shorter. It is necessary to become very alert about any market changes but also on the other hand leading the business in a calm but very secure manner as the industry suppliers and several customers still focus on long-term relationships.
The committal from the third to the fourth generation in the year 1982 was a very struggling and quick event for the firm and it took some years to recover. The firm had been in a bad condition and the succession erased the last trust the employees had had. According to the managers of the third and the fourth generation of the family Soltau, they, the managers, think that the style of management and the preparation of the workforce by the past manager hindered a successful succession. The past manager preferred a hierarchical top-down structure and neglected the positive effects of communication to employees. The succession itself had been conducted in a rush and within six months the present manager, fourth generation, took over completely from the past one, the third generation. Both managers perceived this succession as
problematic and believe by themselves the business would not have been in such a bad condition the following years if the succession was better planned before: a clearly developed plan in advance, long term orientation, and integration to the workforce and customers. For the manager from the fourth generation as well as for the manager from the third generation, the style of management of the past manager by means of leading the firm is the main reason for an unsuccessful succession. However, the present manager believes, times have changed and the succession now is more
complex due to other changes such as the willingness of the employees to adapt to the succession.
The organization is interested in understanding the events that happened in the past in1982 and how the family business had coped or not coped with those events in order to be more prepared for the future events the family business will face. The more the present manager knows about the past succession process the more alert becomes the present manager for the next succession. He and his successor can prepare and
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had an effect on the behavior of the managers at the last succession. This knowledge can be a crucial factor for the future survival of the business.
The management question of SKN is to prepare for a successful succession and to learn from the former succession. However, the managerial problem is complicated by the massive growth in the last generation as can be seen by the two organograms in the Appendix A and B.
1.3. Research Overview
The managerial problem should be investigated from a scientific perspective.
Principles and theories help to convert the practical problem into a researchable object. First the management-research question hierarchy of Cooper & Schindler (2006) will be used to get a more scientific view. This tool enables researchers to convert a management dilemma into a researchable academic question. At the same time it explains also how the results can be re-converted into a practical solution for the business. Secondly, the outline of the research will be introduced.
1.3.1. Management-Research Question Hierarchy
Cooper & Schindler (2006) approach the research process by a management-research question hierarchy. The aim is to convert the managerial problem into a research question and after the research to formulate appropriate recommendations for the practice. They write that it is important to convert the management
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Concentrating on the management-research question hierarchy a research question has to be formulated. Cooper & Schindler (2006) suggest a three step approach to formulate the research question.
Starting with the managerial dilemma the first step is not to concentrate on symptoms but ask for the reasons behind it. In a first interview both managers identified the management style as one problem of the last succession. The strong top-down hierarchy was established long before the succession. When the
successor was at the top, employees did not accept the new leader immediately and were questioning about actions ordered. Acceptance of the management by the employees had been gone when the past manager left the company. Another reason was the short time, due to serious illness this point could not have been changed but both managers think things would have been gone smoother if there had been more time. The successor had not met all business partners when he took over the company and did not know all. Even the annual balance sheet had to be done by the successor on his own from the spot, without having support by the past manager. It can be seen the managerial problem is to conduct a successful succession for the fifth generation.
Secondly, after the definition of the problem the management will formulate a question concerning the problem and a solution for it. There are always questions about how to solve the situation and what could be done next. The management needs some answers on the questions whether the managerial style today is suitable for a succession and how much time must be considered for the whole succession process, which characteristics of the new manager are important and how will the implementation process look like.
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What are the effects of possible crucial factors in the family succession process with regards to the social system, in particular what is the role of management style, change approach, and readiness for change?
There are two sub questions:
1. What happened in the past succession process of SKN with respect to change approach and management style and readiness for change?
2. What was the success of the succession process of both cases and how can these effects be linked to the management style, the existing readiness for change and the change approach?
1.3.2. Outline of the Research
The outline of the paper is as following: the next section contains a literature review of scientific theories, which are appropriate for this case and help to better understand the situation, in which the firm is at the moment. Afterwards, the method of study as well as the data collection and analysis processes are explained by the methodology
section. Third, the succession process in terms of change approach, management style, readiness for change and the smoothness of progression will be analyzed and results are defined and finally, the results are discussed, a conclusion is drawn and at the last section recommendations are given.
2. Theory
2.1. Family Business Definition
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significant shareholder. A different viewpoint comes from Flören (1998) where a business is a family business if half of the business owns one family, or one family has major influence on the business, or the major part of the management board is from one family. It can already be seen that there are differences in the definition of family businesses. Chua et al (1999) collected more than 20 definitions of family businesses and concluded that authors partly differentiate between ownership and management by defining both or only one as a necessity for a family business. On top of that there is a difference between a position in a management role or only in a governance role, where several authors are also not clear enough. According to Chua et al, the key factor for a family business is its uniqueness, thereby uniqueness of a family business is described as the following (Chua et al (1999), p. 22):
“It is not the fact that the members of a family own and/or manage the business, …what makes the family business unique is that the pattern of ownership, governance, management, and succession materially influences the firm‟s goals, strategies,
structure, and [manner of implementation]…”
This definition is more elaborated even though it is difficult to measure. However, this definition explains how much influence a family on a business could have and
therefore why it is something special, which needs to be separated from other business forms. Weber et al (2003) explain five key features which are typical for family business: born into the company, far faster movements in a decision making process, educate loyalty to the business, reinvestments for growth sake, and active and alert family business members.
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2.2. Succession Planning
Succession is explained by the Oxford Dictionary (2011) as a following of things or people right after another. From a business perspective this is highly interesting for jobs, which are inherited by some incumbent and are free after the retirement or other circumstances and need to be filled by new people immediately. Of course this is a complex process the more complex the job is. Especially for management issue this becomes important. Therefore businesses have started to develop a succession
planning for management and other important areas (Harrison et al 2006). According to Harrison effective succession planning can be seen when the business has a stock of qualified people able to fill any key roles of the company. The succession has failed if one key role cannot be staffed. Thereby this is not a replacement process because the effective succession aims also at success, what means the successor makes significant improvements to the firm and not only replaces a gap. Obviously, the succession is partly dependent on the preparation and readiness of the company for this situation. Additionally, one should not compare transition with succession (Graul & Grable 2004), as the transition is a process where it is the aim to keep the status quo while handing over the key role to an external.
Tropiano (2004) explains that the most important thing for an effective succession planning is that the management becomes aware of being responsible for the human capital. It needs more than a human resource department to gather material for the succession, because a sharp focus is needed how the business will look like in several years. Changes, of the business and the environment, must be included into this calculation to be prepared and to have the following successors prepared when they take over.
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2.2.1. Family Business Succession
Family business succession is a process where one family member, the successor, is taking over the business from the past family member, the predecessor, usually a member of the past generation (Westhead & Howorth (2007), Chua et al (1999), James et al (2009), Mitchell et al (2009), Miller et al (1993), Lansberg (2007)). Several scientists define the succession planning and process as a key feature for the post succession success of the business (Mitchell et al). Thereby different opinions can be found about the key features of a family succession process. Westhead and Howorth (2007) define six types of family business, which vary in their ownership structure and family dominance: transitional, cousin consortium, average, open, professional cousin consortium, professional family firm. Each type needs its own succession planning to continue the success of the business. Due to the difference in ownership and management it is necessary to develop an
idiosyncratic future plan for the family business, because one family business is not equal to any family business. James et all (2009) define a step by step model for accountants of the family business as they see the accountant being a key role of a family succession, because the accountant is leading any tax regulations and other duties and therefore forms a part of the whole succession process.
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continuous change is also seen by Lansberg (2007). According to him there are different tests a successor must pass to become a successful successor. This is named the iterative testing. Stakeholders, suppliers and customers all have their own special kinds of tests the successor must pass and only those successors, who are able and willing to different tasks, can manage the internal and external environment with its changes. However, Lansberg (2007) also advises that the successor must be able to develop an own style of management and not to copy the past incumbent otherwise it is not possible to pass the iterative testing phase. Copied reactions are not accepted by stakeholders and outsiders and bring no self-consciousness to the successor. Miller et al. (2003) explains failure of family business successions evolve out of the bad succession planning, by missing the focus on change and management style. They define three typical patterns of succession: conservative, rebellious, and wavering. All three patterns are a failure for the business future. The conservative pattern describes a successor copying the old method of management and missing thereby the progress of the market. Changes are not adapted and a loss of market share is the result. The wavering pattern is a mixture of inconsistency and weak decision making. The successor is caught between old and new, misses to conduct its own management style and therefore is not able to cope with changes. The result is shrinking margins and a confused workforce. The successor who neglects any management style of the past and tries to implement revolutionary change describes the rebellious pattern. The successor‟s style of management is new and strong but the internal changes are too big and costs too much. Miller et al (2003) define family dynamics, personality and experience, firm context and market context as antecedents for the inputs of the problematic succession. The inputs are the personal decision making process, in particular to strategy, governance, and the organization and culture (the
management style), and the personal approach to changes of the market environment. Mitchell et al (2009) explain why personality and the evolving management style are that important for the post succession success. In a
succession managerial control is transferred and it is dependent on the successor discretion how well the control is handled. Thereby the personality of the
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complexity and commitment of the successor form the discretion and therefore the style of management. However, Mitchell et al (2009) also emphasizes the
management style of the predecessor and its personality, because changes within the organization must be made possible for the successor and the predecessor must be willing to transfer. The willingness depends on the personality, tolerance, cognitive complexity and commitment, of the incumbent. It is important to notice that not only the successor is a key role for a succession but also the predecessor who is responsible for the preparation of the business (Mitchell et al 2009).
2.3. Antecedents
Literature about family business succession and succession itself opens up a big variety of inputs and outputs for this process. The output is either a successful succession or a failing succession. Therefore one must concentrate on the inputs to develop a successful succession. Literature before has shown that the three
variables style of management, change approach and readiness for change of the employees of the company play an important role for a family business succession. All three variables can influence the succession and seem to have interrelations to each other. A theoretical framework built by literature can help to develop a conceptual model about the process of a family business succession. Furthermore the theoretical framework will contribute to family business succession literature and shape a clearer picture about the relations of the different theoretical concepts to each other. Combined; the different theories are able to explain causes for the different succession outcomes such as a successful succession or a failure. A closer investigation of the three topics is necessary to clarify the understanding about relations and the intensity of influence.
2.3.1. Style of Management
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another contributor to management by the culture studies he conducted in the 80ies. The study proofed that each culture has its own characteristics and therefore the culture shapes the socio-economic system people are living in. Albaum et al (2010) connected management and the culture studies of Hofstede to proof that management style is also dependent on the culture. Having said this according to Albaum‟s study it is important, that the management style is dependent on two issues, the manager‟s personality and culture, not on the economic-system the business is connected with. This also explains why subsidiaries in alien countries launched by a CEO of the parent firm of the home country might face difficulties when the culture of the CEO and of the country is not matching. In a different study Beer (2003) defined that the
implementation of TQM programs is failing if the style of top management is not flexible enough to create a platform of communication, joint decision making and actions. Implementing any advanced quality system forces top management to prepare the business for the new system, therefore changes must be conducted to enable broader communications and divers data gathering as it had been done before. These actions are only going to be successful if the top management is supporting the actions and exemplifying this to the employees through one‟s own behavior and style.
McCrimmon (2010) claims, that one reason for the incapabilities of today‟s managers is the misunderstanding of management. In the industrial age organizations tended to become very hierarchical and the managers only observed the middle management but lost the view for the whole organization. This fixed organizational structure has often been kept and still hinders management to do what actually has been their job, not only observing the peak of the organization but focusing on each single employee. Therefore managers have to overcome the old organizational structures and pick up their original tasks and fine tune their management style (Mc Crimmon 2010). This misunderstanding of management becomes a dramatic outcome in family business or any other kind of small businesses, because the business is going to fail if the
overview is lost by the manager. Additionally it can be said that the personal
management style is not only different among the managers but also significant for the business, the business is dependent from the personal management style of the
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focus on in order to make profits, but this is only possible if the manager gets a focused view about his business.
Beer and Nohria (2000) explain that a lot of change projects fail due to the style of management. Therefore their advice is to include change management as an important key factor for successful dealing with change situations. According to Beer and Nohria (2000) there are two extreme styles of management, which enable certain changes to successfully happen and other not. Theory E is a management style
focusing on economic value of the business. The whole business structure and strategy is laid out for an economic focus. The other extreme is a management style according to Theory O. The focus lies on the organizational capacity and the firm structure and strategy is somewhat more social, a softer approach. Both styles of management are the ideal types, it is important that Beer and Nohria (2000) emphasize the possibility of combinations of both management styles in order to overcome any kind of changes. Therefore it is the task of the management to adopt both approaches in the right way. Simultaneous combinations of the approaches are difficult to implement but will enable the firm to cope with any kind of events or changes. The different
18 Dimension of
Change
Theory E Theory O Combinations
Hard Approach Soft Approach Goals Maximize shareholder value Develop organizational capacities
Explicitly embrace the paradox between economic value and organizational capacity Leadership Manage change
from top down
Encourage
participation from the bottom up
Set direction from the top and engage the people below
Focus Emphasize structure and system
Build up corporate culture: employees‟ behavior and attitudes
Focus simultaneously on the hard and the soft
Process Plan and establish programs
Experiment and evolve
Plan for spontaneity
Reward Systems Motivate though financial incentives Motivate through commitment – use pay as fair exchange
Use incentives to reinforce change but not to drive it
Use of Consultants Consultants analyze problems and shape solutions Consultants support management in shaping their own solutions
Consultants are expert resources who empower employees
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2.3.2. Change Approach
The book of Palmer et al (2006) “Managing Organizational Change” is written to exemplify how much change happens in different areas of a business as well as how much the external environment changes and therefore influences the business as well. Several other authors have studied different types of change (Beer & Nohira (2000), Kotter & Schlesinger (2008), Weick& Quinn (1999), Kotter (1995), Chrisman et al (2009), Cummings and Huse (1989)). The dictionary (Oxford Dictionary 2007) explains change as a process of becoming different from one state to the next, however, all authors above define change slightly different to each other, Burnes (2004) explains it is easier to understand change as a paradigm which has a variety of theories and approaches.
This research investigates into family business succession. A family business succession has typical characteristics: it is an internal process within the business within one family, therefore external factors can be neglected for a succession. The succession is mostly at a certain time, when the predecessor is old and hands the business to the younger successor over. Therefore the point of time, the person, the company and the workforce is known; knowing these characteristics it is useful to focus only on theories which consider type of changes with similar attributes as mentioned before.
2.3.2.1. Planned Change Approach by Kurt Lewin
Lewin (Weick and Quinn 1999) focused on the planned change approach and developed a theory and an approach about how to handle planned change. Lewin formed the group dynamics school, which explains the actions and reactions of humans within social groups within the society (Cummings and Huse, 1989). The single human is affected by the group he or she belongs to. Decisions, actions and reactions are fine-tuned by the social group he or she is in. Therefore behavior can be foreseen, if the group behavior has been understood in advanced by the
researcher. Lewin introduced the approach of planned change in the 40ies of the twentieth century. The goal is to understand the social environment and its
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stakeholders. These understandings could also be used for a business with all its employees and other stakeholders, when the situation forces some changes. Lewin‟s model includes four elements: Field Theory, Group Dynamics, Action Research and a Three Step Model (unfreeze- move- refreeze). Following these four elements the applying person should understand the community and be able to foresee the resulting actions when something is changed. Essential to this approach is the sequence in it. During the three step model all steps can only be taken after each other as the approach is action-reaction-action. Therefore it cannot be
planned in advanced. However, by knowing this the management should be able to know exactly what needs to be changed in order to reach the desired goal and other further actions. Having said this, Burnes (2004) explains that a planned change approach by Lewin is used when the management has analyzed and understands the group behavior and its norms, roles and interactions. Thereafter the management must make clear to the single human within the group why things must change until there is a “felt-need”. The group by each individual feels the urge to change and only then the three step model comes into practice. It is clear that this kind of change approach takes a long time and a lot of effort for the management to put it into practice.
2.3.2.2. Planned Change Approach by Organizational
Development
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a successful change. This approach is defined to be only for business (Braunstein 1974). The aim is to increase efficiency of the business, the focus lies on the organizational level. Similar to Lewin a three step model has been developed in order to implement the planned change into the business. However, this three step model is planned in advanced without considering the reactions of any step (McKendall 1993). A business applying a planned change approach by OD
therefore has developed a three step model how to implement the changes into the business. The plan and the single steps are clearly formulated. However, what is missing is the analysis of the situation and the group before the actual changing process. Therefore the approach concentrates on the business level and its changes but less on the social group behavior or the different relations within the business. It can be seen that the two approaches, even though they are named equal, contain different starting points and therefore have different outcomes.
2.3.2.3. Emergent Change Approach
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how well it can be coped with numerous events and process. Weick (2000) defines emergent change as some irrational processes, which cannot be steered into any direction. Organizations caught within an emergent change process can nothing do but align and cope; it is an inertia which can turn out to be one of the biggest problems a firm can face (Weick 2000). It is the responsibility and the duty of the management to steer the company through the emergent change processes there are. A family business succession will also bring with it some unseen events and processes the incumbent and the successor have either jointly or separately to cope with.
If a business copes with emergent change it should look at the description of the XYZ case of Burnes (2004). The environment of the firm was very hostile and the business suffered from this. Furthermore, internally the style of management was not liked and also very hostile towards the workforce. With the retirement of the old manager a new manager was employed to remit the badly performing
company. The manager had a complete different management style and just behaved the way he thought it would be useful. Therefore the business
experienced a lot of changes, unpronounced. Fortunately, the new manager was more skillful and professional. The management board was broadened by several key employees and new customer and supplier programs were launched. The XYZ company experienced a totally change in anything. The environment became friendlier, suppliers and customers build relationships towards the firm and internally the workforce build a social system. However all the changes came out of the blue and the changed situation with the friendly relations was completely new to the firms and its employees. The changes by the new manager had only been the starting point and was followed by several emerging changes. Customer relation was something completely new to the firm but with the new manager the company felt able and flexible enough to cope with all new occurring issues. It can be seen, that this kind of change is completely different to the planned change approach as mentioned before.
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a change (Burnes 2004; Weick 2000). Previously, it has been said that family business successions also vary in the necessary time to finish the succession process. Logically, one would say that the time needed for a succession is dependent on the preparation and the readiness of the business. Therefore readiness for change is another issue, in which is investigated.
2.3.3. Readiness for Change
The participation of all employees is crucial when a decision is put into action. Cooperation or resistance are those outcomes management can expect when they check the readiness for change (Hicks & McCracken, 2011). The employee itself needs to be prepared, needs to be “ready for change”. Only if this situation can be achieved it can be said that readiness for change becomes an organizational
characteristic (Weeks et al, 2004). Weeks et al define two variables which form the readiness for change for the whole organization. In their opinion the organizational culture and the organizational climate are the independent variables resulting in readiness for change or reluctance for change. They hypothesized as Hicks and McCracken (2011) also hypothesized that the individual perception about oneself within the firm is positively interrelated to organizational readiness for change. The better the self-confidence of an employee about his job the better it is for the
organization. Jones et al (2005) support the importance of individual self-confidence and organizational culture. Their study tested the four different values a company can have, human relations, open system, internal process or rational goal, whereby
companies with an organizational structure on human relations have a positive
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for change starts with the single employee. The company is only able to shape an environment, which supports these characteristics and forms such an organizational capability. Kotter and Schlesinger (2008) emphasize that resistance is often evolving out of the chosen strategy of the management. The management has to deal with several factors to implement new strategies or to change certain issues. Their article had already been published at the early 80ies but is nowadays more actual than before. The implementation process becomes difficult and resistance is rising more and more. Education, involvement, support, negotiation and coercion are factors management has to deal with and which is forming resistance. Additionally there is the speed about how fast the implementation has to be. Thereby situational factors are the outcome of those implementations: the amount and type of the resistance must be identified as well as the position of the initiator. It must be clarified which stakes are involved and where relevant data can be gathered to change the situation. The fact, that readiness for change is such a complex issue, is also supported by Holt et al (2007), who investigated into the different outcomes were readiness for change can be identified. The result of their study is that readiness for change is a multidimensional construct influencing employees and organizations on different levels: change-specific efficacy, appropriateness, management support and personal valence could clearly be identified as important outcomes. Having said this, the definition of Holt et al (2007) about readiness for change being a multidimensional construct can also be supported with respect to the other theories. The importance of readiness for change becomes also very clear, as it can be seen that it has influences on change implementation.
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2.4. Conceptual Model
The research question for this study is:
What are the effects of possible crucial factors in the family succession process with regards to the social system, in particular what is the role of management style, change approach, and readiness for change?
There are two sub questions:
1. What happened in the past succession process of SKN with respect to change approach and management style and readiness for change?
2. What was the success of the succession process of both cases and how can these effects be linked to the management style, the existing readiness for change and the change approach?
The literature review has shown that family business succession is dependent on different factors, a family must consider. Furthermore it is evident that a preparation supports the succession process and that the better the preparation is the higher becomes the chance for a successful business succession. This case study examines two successions of one firm, whereby one succession turned already out to be a failure according to the past and present manager. Theory explains several reasons for failure. The review of the past succession should open up what crucial factors there are, especially investigating into the role of style of management, applied change approach and readiness for change. The management is interested in effects which are
responsible for a smooth and successful succession.
Firstly, management style is an independent variable influencing the family business succession process. The management style opens or closes certain possibilities. Literature has explained why some styles of management rather hinder the
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change implementations (Kotter & Schlesinger 2008). The whole organization and the management need readiness for change in order to cope with novelties and changes. This is also the case with the applied change approach.
Finally, it is possible to see some more interrelations. The change approach is related to the style of management and to the readiness for change because the management choses an approach to change and prepares the workforce for this change. It can be seen that there are probably certain interdependencies among the independent
variables. However, these interdependencies are not included into the study because it is not possible to gather relevant data for these additional relations. Therefore the conceptual model contains some clear relations and some possible, virtual relations as can be seen at Figure 2.
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3. Methodology
3.1. Case Study
The literature review has already shown that family business succession is an outcome of several inputs. The three defined variables have an influence on a succession
process.
The advantage of a literature review is that a topic can already be examined without interrupting into the case company. Thereby the topic has been explored without losing objectivity within the business. Conducting interviews within the business as a first action to understand what happens in a family business succession would erode the objectivity for the research about the actual managerial problem (Yin 2009). The research is a multiple case study, concentrating on two cases of one firm at
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3.2.
Data collection
Van Aken et al (2009) mention several ways to collect data from a qualitative study: interviews, focus groups, documents, observations, protocols and diaries. Interviews are the most common way to collect data (Cooper & Schindler 2006). During the interviews the researcher has the possibility to ask certain questions aiming on certain factors or variables. The interviewer always has the possibility to direct the interview into one direction and observe if the interviewee is still following him or her. This is a disadvantage of closed questionnaires, where the researcher cannot control if the respondent really understands the question or just guessing (Flick 2006). Therefore an open interview opens several possibilities. An interview can have several
characteristics (Gummesson 2000), they can be structured and semi structured or unstructured, formal or informal, open or closed. Yin (2009) recommends semi structured interview with open questions. The semi structured interview opens the possibility to gather not only facts for a certain question but also gather data about context, circumstances and other conditions. This data is also important for a qualitative case study like this is. Cooper and Schindler (2006) explain that closed questions are answered by yes or no, while open questions enable the interviewee to answer in a free speech. This is useful for the researcher to gather context data as said before. The importance of open questions is that the interviewee is charged to answer in a free response. As Yin (2009) explains further the good researcher is reacting on the answer and asking more detailed questions to certain aspects of the free response. Thereby the researcher has the possibility to gather specific data about preconditions and causes for reactions. However, this additional asking makes the interview semi structured, because depending on the answer of the respondent the researcher has to decide whether another clarifying question must be asked or if the answer was
sufficient enough for the purpose of the study and the interview can be continued with the next question of the interview.
This research is interested in the family business succession of the past and the
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effects of the three independent variables. The questionnaires can be seen at Appendix D and E.
The second part of data collection is the collection of documents. There are several documents which are useful to get better insides about the family business succession with respect to the three independent variables (Aken et al 2009). First of all to get an impression about the two successions the balance sheets of the past 30 years can tell us what the financial condition of the firm has been. Especially the balance sheets around the succession two years before and after are of major interest. The past and present manager evaluated the past succession in 1980 as a failure which could be proved referring to the financial situation by the balance sheets of 1980 and the following years. The balance sheets can be found at Appendix C. Business failures and success for family businesses are often also reflected at the amount of the
workforce (Neubauer & Lank 1998). By a document analysis it is possible to discover the effects of the outcome of the succession.
Besides, the different documents are not only helpful for the research but also a tool to be able to control the results from the interviews and the other way around. This controllability is been done at the data analysis section.
3.3. Sample
Flick (2006) argues that the sample must be consistent and the sample size is only sufficient if the collected data is consistent, otherwise he recommends extending the sample. However, there are also restrictions to the sample size. In the case of a comparative analysis it is important to keep the sample sizes equal to each other, otherwise the cases cannot be compared. Data gathered from a big sample is not comparable to data gathered from a small sample (Schindler & Cooper 2006).
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in everyday life at the company. A theoretical selection as mentioned before by the hierarchical status of the employees at the company is not possible, because this multiple case study has due to its wide time span significant problems in the sample. People of the middle management of the first case, the succession in 1982, are not alive anymore. In 1982 the middle management was rather old with an average age of 55 years, several people would be more than 82 years old, they do not live anymore. Therefore theoretical selection criteria do not work. Demographical issues are often criteria for the definition of a sample size (Flick 2006). A division by age and gender is typical but not applicable for this study because the important variable for the sample is the period of belonging to the company and the possible knowledge about the succession and the contact to the management. The interviewees must be able to answer questions about the content of the conceptual model; questions about the independent and the dependent variable are absolute significant knowledge for this study. Due to the situation of a big time span between the first case and the second case and the research, pragmatically, it was wise to identify former employees being still alive in 2011, who could be possible candidates for the sample. There are 21 retired persons who are still alive, however 13 people have worked at the ground floor and have had no regular contact to the top management. Three people suffer serious illness and it is impossible to interview them. There are five retired people left which could be interviewed about the past succession in 1982.
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In total there are eleven interviews for each case. The people who are still alive from 1982 have the following jobs. Of course, their counterparts nowadays are also interviewed:
- 2 x Personal Secretary
- 2 x Chief of the Photosetting Department - 2 x Head of the Accounting Department - 2 x Corrector of the daily Newspaper - 2 x Print Designer
The people of these jobs are working already for a lifetime at the company and know both succession processes:
- Digital Media Designer
- Salesman for printing products - Print Designer
- Editorial Journalist
- Chief of the Printing Office - Technical Assistant
By these people it is possible to gather data of eleven interviews for each case. Each case is questioned to eleven people and can therefore be compared to each other.
3.4.
Data analysis
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The small sample forces to analyze the collected data as much as possible to be able to discuss findings and recommend further. Gummesson (2005) emphasized that there are several methods to analyze data and that the analysis of data by different methods increases the value of the results. As said before data collection is done by two different ways: interviews and document analysis and evaluation. The documents are an aid to support the results of the interviews, especially to support the outcome of each succession, being a success or failure, and give a clear direction about what needs to be asked within the interviews. Flick (2006) introduces semi-standardized
interviews. A semi standardized interview constructs the subjective opinion of the interviewee meanwhile the researcher is aiming on the objective background. He explains that Scheele and Groeben (1988) developed the method of semi standardized to enhance the respondents to tell the researcher their opinion about a certain topic, because they see that the interviewee owns much more knowledge about the topic than the researcher. Three kinds of questions contain the semi-standardized interview, whereby it is still a semi-structured interview with open questions. First there is the open question aiming on the different independent variables, secondly a theory driven question to ensure the understanding of the interviewee and finally there is a
confrontational question aiming to assure the right understanding of the researcher about the interviewees‟ opinion. The three different kinds of questions can be found at the questionnaire (Appendix D and E).
However, this knowledge is subjective. Despite this the subjective knowledge can be used when more of this subjective knowledge is gathered by several interviews. To double check if the subjective knowledge is written down correctly, Flick uses structure laying technique (SLT), by which afterwards the interview is mind mapped by the researcher and the interviewee is asked a week after the first interview if the mind map about the subjective opinion is still correct. By this it is secured that not any kind of pipe dreams but the real opinion of the interviewee is collected. By the SLT the interview is already analyzed once, before it is compared to other interviews and to theory. Internal validity of the study is increased by this method.
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is done by pattern matching and time series analysis (Yin 2009). Pattern matching compares the empirically gathered patterns with the theoretical patterns from the literature review; it is an instrument to analyze the interviews at the analysis section. As pattern can be anything defined which is mentioned by more interviewees, for example an internal rule or right could be a pattern described by the interviewees. Of real interest are those patterns which can be linked to theory. Patterns which can be either explained by theory or contradict are very interesting, but there could also be patterns adding details to theoretical issues. The different patterns of the interviewees are compared to the theoretically based relation within the conceptual model. It is important to notice similarities and to notice other factors influencing the model. Pattern matching includes different kinds of patterns whereby for this research the rival explanations of pattern are highly suitable. Rival explanations as patterns are mutually exclusive patterns. Variables often can have different outcomes, readiness for change can be high or low, However, it can be either high or low not both. Therefore rival explanation patterns are very suitable for variables as in this study to be able to exclude other outcomes of the variable.
Pattern matching relates theory to the empirical findings. However, this is a multiple case study and the two cases are in one business and have to be compared to each other. Time-series analysis is the second tool and enables us to compare both cases. The patterns are linked to theoretical variables, by this the two cases can be compared at the level of the two variables. Yin (2009) explains that Campbell (1969) has already done so at his study to be able to compare two different times with each other. By this method the researcher is able to analyze time trends under different conditions. As the study explores two cases with a time gap of 28 years, this instrument is supporting the comparison.
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3.4.1.
Interviews and Documents
There are two different sources of data, interviews and financial documents. Both sources are used separately to answer the research question.
Triangulation is an instrument by which several different sources are analyzed and compared to each other in order to increase validity of the research (Flick 2004). The research is a multiple case research comparing two cases. The research is interested in different time-phases. For both cases there are
interviews and balance sheets used. The balance sheets of the two years before and the two years afterwards, as far as this is possible, are used. After the interviews are analyzed and patterns are identified the results can be compared and checked against the results from the balance sheets, to see if the trend is also financially recognizable. This triangulation is increasing the validity. The conceptual model of the research explains what needs to be empirically gathered by the data. This exploratory research analyses empirical data and compares it to existing theoretical ideas. After the study the theory can be extended by these findings and contribute to the phenomenon of family business succession. The firm has defined a managerial problem, whereby the managerial problem is not influenced by external factors according to the management. The balance sheets of the years 1980-1984 and 2008-2010 are used and analyzed in the result section. The management searches for a problem within the social system of the company. As Neubauer and Lank (1998) already explain the social system of the firm is crucial for the
succession. Only if the employees and the management work together there is a chance to continue the business without failures or unprofitable businesses. The conceptual model considers theory and the research is looking from this perspective on the situation at the case firm. Therefore the different
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4. Results
4.1. Pretest: Pilot Interview
A pilot interview has been done with an employee, who is 36-years-old and working for the company since the last 13 years. The employee works at the sales department, which is the biggest department of the company, therefore within the department there are enough employees, who could also be interviewed during the real interview phase. Furthermore the pilot interviewee knows the company very well and also the
management; by this the developed questions could be tested. Due to the fact that the employee has a close contact to the management this interviewee must be able to answer all questions; on top of that the answers of the questions must refer to the case. The main importance of the pilot interview is that the questionnaire is working. Interviewees
understand the question and furthermore answer the question by referring to the case. It is important that the interviewee clearly separates succession of the management from other events or changes happening at the business.
A positive pilot interview, being focused on the succession and the management, ensures internal validity, because it is only a pretest. When the pretest works, there is a higher chance that the other interviews are similar focused and reliable (van Aken et al 2007). The pilot interview had been done under the same conditions (Flick 2006), as the other interviews will be: A room within the company, only for the interviewer and the interviewee. The interview took 76 minutes and was recorded on tape. Additionally the interviewer made notes.
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Can you explain the actual process and events of the succession and the people who were involved into it?
The candidate was confused and asked several times to reframe the question. Therefore the question had been divided into two questions; the first question aims on the behavior of the management. Thereby it can be seen how much the succession has been planned by the management and how they have communicated the succession within their firm. The second question aims on how the workforce experienced this plan about the succession and how they experienced the top management behavior.
Question 1: Can you explain how much the succession was pushed through without considering any employees
Question 2: Can you explain at which points the succession process has been done jointly by present manager, future manager and workforce?
4.2. Data Analysis Overview
All planned interviews have been conducted; all interviewees understood the questions and answered those. One interviewee became ill for a longer period, he had been replaced by a colleague of him from the same department. 16 Interviews have been recorded on tape and notes had been made. Because six interviewees were interviewed about both cases, for each case eleven interview manuscripts were gathered. Some general observations from the interviews are:
- The applied change approach was the variable which was least identified by the candidates to be of importance. No differences could be identified between planned change approaches or emergent change approaches.
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- There are significant pattern divergences between the two cases. As expected the two cases are completely differently judged by the employees, as can be seen in the overview, the table below.
- All interviewees grouped the independent variables as correlated to each other; it was difficult for them to separate the variables.
- The style of the past manager is very idiosyncratic, while the present manager is a rather rational but also empathetic one. Even though it could have been possible that the style changes over time the second case describes the same style of the present manager and a young and inexperienced but also rational new manager. He is careful and patient but also eager and interested.
- The relation of the workforce and the top management differ totally from each other in the two cases, from very close but also very personal, to professional but highly informative.
- At the answers of the question about the success of the succession are analyzed it can be seen that the past succession was a social failure focusing on the workforce and the top management. On the opposite, there is the present succession where workforce and top management stick together and go jointly through the
succession.
Case 1: Past Succession 1982 Case 2: Present Succession 2010 Management
Style
Very subjective and idiosyncratic, focused on personal goals, sporadic and unequal communication
towards the employees, strong connected to the social network, manager decides on her own at all
Objective and professional, focused on profitability and strategy, open and strong
communication to every employee, professional relationship to the workforce, participative decision making process
Readiness for Change
Employees felt unprepared before and during the succession, no
38 official succession plan, no communication, partly workforce resistance during the succession, no commitment from the workforce nor from the predecessor
successor, for preparation:
succession plan communicated and distributed to the workforce, positive compliance of the
workforce for the top management during the succession, high level of commitment as well of the
workforce as also from the top management
Applied Change Approach
Not really planned: No succession plan forced an emerging succession process, very quick hand over of the business, clear hand over of ownership and management
Planned: Well-developed
succession plan for the introduction phase to the firm, preparation of the workforce and the business partners for the entrance of the successor, problems and other events are jointly solved Effects on the
Succession
Negative effects on the social system, mistrust among the employees, loss of employees, demotivation among the
management and the workforce, high level of confusion and insecurity
Positive effects on the social system of the business,
commitment of the workforce at the succession projects, no loss of employees, motivation of the workforce and the management, preparation helped to feel strong
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4.3. Analysis
Data of each case was gathered from eleven interviews, in total 22 interviews. There are clear patterns which could be defined. The theoretical basis for this research introduces three variables which can have different effects influencing the outcome of a succession. The results are divided by the two cases and by the three independent variables and the dependent variable. The tables are a summary of patterns all interviewees mentioned. Special issues are mentioned afterwards. Management style can be different from one person to the other person; within a succession it is important to identify the style of both managers. The planned changed approach is something jointly of the two managers, however the approach could be very different from succession to succession. Readiness for change is an issue for the workforce which is either ready and able to cope with the succession or not ready und feels unprepared for a succession.
The following two sections explain the two different cases; each starting with the different patterns of the management style followed by the applied change approach and the
readiness for change. Afterwards the success of the succession is described and the financial documents underpin the impression of the interviews.
4.3.1.
Analysis of the past succession
Style of Management
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41 „
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Furthermore the not official entering of the present manager into the company was an important event for all interviewees; but even more important thinks one interviewee was the fact that the present manager took over that quickly certain departments. After two times the present manager had joint the past manager at a meeting with the house bank, he took over the financial department completely.
Another pattern only six interviewees could describe has been when the responsibility areas of the two managers touched each other and how the past manager immediately rejected and left the field to the present manager. The interviewees saw this as one reason why it was so difficult to know about the ownership and responsibility of the firm. All eleven interviewees describe significant difficulties by distinguishing at which time who was owning what of the company.
Applied Change Approach
Patterns described by the interviewees referring to the planned change approach by Lewin
- All interviewees had the feeling that there were no plans made by the management
- Group dynamics of the business were not considered
Patterns described by the interviewees referring to the planned change approach by OD
- There was no communication to the workforce - There was no step-by-step plan the top
management followed Patterns described by the
interviewees referring to an emergent change approach
- When the present manager analyzed the situation of the company he decided ad hoc to dismiss the pro bono magazines
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advertisement leaflets and the present manager decided to do that
- out of the work of the present manager new rules developed and the focus of the company changed
- it seemed that the different behavior of the present manager compared to the past manager changed also the behavior of the workforce and the attitude towards the business
It can be said that all eleven interviews described an identical situation about a change approach for the past succession. It is significant that the interviewees could not find any detail at which they had the feeling that this succession was planned. One interviewee explained that the illness of the past manager was not that bad that she had to leave the company immediately, however, the interviewee says the two managers were not able to work together due to their totally different management styles.
Readiness for Change
Interviewees perception of
Organizational Culture
- strong social network among the workforce at the company
- less groups but a big community, everybody knew everybody
44 Interviewees
perception of Organizational Capabilities
- the workforce was not able to adapt to new issues immediately and had difficulties to follow the present manager‟s orders, the implementation of email orders was difficult for most employees Interviewees
perception of Personal Readiness for Change
- the single interviewee felt not ready for a succession or the present manager
- in a group the changes were easier but for one personally it was hard and difficult
Interviewees perception of
Motivation to Learn
- due to the better communication and the explanations about decisions of the present manager the
interviewees were motivated to learn and to progress Interviewees
perception of Perceived Social Support
- the community of the company sticked together and tried hard to pull everybody through the succession, even though they missed five employees which left with the past manager
Interviewees perception of Perceived Choice
- there was no choice and no time for the employees, when the succession started everybody was already involved and could not go back but leave
Interviewees perception of Goal Orientation
- four interviewees remember that the extension of the machines and the sales department became a
significant upturn for the business and the goals had a very clear definition: making more profit
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At this case readiness for change is a twofold variable, because the succession here has a change at the management level from predecessor to successor but also at the same time a strategic change from an unprofitable business without clear goals to a profitable business. The readiness for change for both events was rather low, so explains one interviewee that the younger employees noticed less of the enormous changes within the company
referring to hierarchical structures and business tasks, because the younger people were eager to progress. Therefore the interview argues that the five people, who were as old as the past manager were absolutely not ready for a succession and a business change.
Success of the Succession
All interviewees think that the succession could have been improved. Communication at all, and especially about the business actions, the authority of the different managers and the future goals of the company would have increased the trust of the workforce and the readiness; and a real plan would have added value and given a perspective to anybody about the succession. Therefore all eleven interviewees would name the succession a failure referring to the organizational capabilities, the workforce of the business. The social system of the company at that time is described on the one hand as weak, because the management was very much involved into it and after the dismissal of the past manager it was also partly destroyed, on the other hand it was strong because a lot of people tried together with the successor, the present manager, to build the company up and to continue the business, which worked out after some years.
Another pattern is that ten of the eleven interviewees think that the style of management is more important than the readiness of change, at last following the change approach. Only one interviewee thought that position one and two, the style of management and the readiness for change, should be the other way around.
Balance Sheets 1980 – 1984 (Appendix C)
The profit of the firm, decreases significantly during the first case the succession in 1982. The firm worked well in the years before the succession, in 1980 the profit was
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only 261,939.93 € and in 1982 only 37,286.70 €. Only when she recognized that the business was not going to stay profitable she asked her son to overtake the business in summer 1982, however the son was not able to immediately turn the business around. Unfortunately the income statement of 1983 is lost, however, it can be seen that the negative tendency was kept, there was an enormous loss in 1984 of -233,057.77 €. Even though the present manager took over quickly and worked on the profitability of the business it took him until 1990 to make a profit again.
4.3.2.
Analysis of the present succession
Style of Management
As can be seen at the table below (Figure 6 and 7) there are certain patterns all interviewees identified about the management style of the two managers during the succession. The new manager is known by all of the interviewees since he was a child. Two third of the interviewees call him by his first name, one third by his sir name. The situation is therefore difficult, because at a discussion some employees call him at this first name and some at his sir name, all interviewees get the impression that the people calling him at this sir name are insecure talking to him while an employee is attendant who calls him at his first name. Eight interviewees, who know the new manager for longer, do not see any problems with the integration, the other three, who do not know him before, fear that there will be occurring problems with the personal relations of the new manager to the employees. Respect and trust are mixed within the workforce and all interviewees say the new manager must first earn the respect and trust of anybody before he starts managing.
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48 „
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