MASTER THESIS
PROFESSIONALIZATION OF FAMILY FIRMS
“What is family business professionalization?”
Perspectives of family and non-family executives
MSc. Business Administration Small business and entrepreneurship
University of Groningen, Faculty of Economics and Business
Name: Titia Onnes
Student number: 2592134
Address: Turftorenstraat 27, 9712 BM Groningen E-mail: t.w.onnes@student.rug.nl
Supervisor: Dr. ir. H. Zhou Co-assessor: Dr. M.J. Brand
Date, 19 April 2016
ACKNOWLEDGEMENTS
I would like to express my gratitude to my supervisor, Dr. ir. Haibo Zhou, for the guidance and input that I received during the writing process of this master thesis. Further, I would like to thank Dirk Harm Eijssen for his commitment, dedication, and assistance during the writing of this thesis. In addition, I would like to thank Dr. Maryse Brand for her considers and Steven John Hager, my fellow researcher for the collaboration. I am grateful for the generosity of the companies that helped me in my research. This process has been very informative for my personal and theoretical development. Writing this thesis has become a valuable part of my experience in the MSc Small Business and Entrepreneurship program. The passion and dedication of the family and non-family executives of the family firms that I investigated really appealed to me and motivated me to write this thesis with dedication.
ABSTRACT
Professionalizing family businesses is a topic that has obtained much attention in recent years. However, in the literature there is no agreement or consensus on what professionalization is and how it can be accomplished within the family business. Practitioners encounter the problem that the general notion of professionalization is often unclear; and family firms want to professionalize but do not know how to do so or which practices they need to use. These problems and the various interpretations that are proposed in the literature regarding the topic indicate that family business professionalization is an understudied topic that requires greater elucidation. The purpose of this study is twofold: first, it reviews the existing literature regarding family business professionalization; second, it compares the scholars’ views with those of practitioners in order to obtain deeper insight into what professionalization is considered to be in practice. The aim is to bring the different professionalization concepts together and to attempt to obtain more insight into what family business professionalization entails. In addition, the study further aims to investigate how family businesses implement professionalization, and the extent to what it benefits those businesses. This study contributes to and benefits family business practitioners and consultants by presenting further insights into family business professionalization. Furthermore, it provides advice to family businesses and consultants based on these insights in terms of successfully implementing professionalization.
organizational resources, including human and financial resources, as well the organization as a whole in light of the pursued organizational strategies.
TABLE OF CONTENTS 1. INTRODUCTION ... 6 1.1 PROBLEM IDENTIFICATION ... 7 1.2 RESEARCH QUESTIONS ... 7 1.3 THESIS OUTLINE ... 9 2. THEORETICAL BACKGROUND ... 9 2.1 FAMILY BUSINESSES ... 10
2.2 THE MEANING OF PROFESSIONALIZATION ... 12
2.2.1 Definition of family business professionalization ... 12
2.2.2 Family business professionalization ... 13
2.3 PRACTICES OF PROFESSIONALIZATION ... 14
2.4 PROCESS OF PROFESSIONALIZATION ... 16
2.4.1 Multifaceted perception of professionalization ... 17
2.4.2 Theoretical theories ... 17
2.4.3 Why professionalize? ... 19
2.4.3 Family involvement ... 20
2.4.4 What are the difficulties of professionalization? ... 20
3. RESEARCH MODEL ... 21
4. RESEARCH METHOD ... 22
4.1 RESEARCH DESIGN ... 22
4.2 DATA COLLECTION ... 24
4.3 DATA ANALYSES ... 27
4.4 CONTROLLABILITY, RELIABILITY, AND VALIDITY ... 28
5. RESULTS ... 29
5.1 INTERVIEW RESULTS ... 29
5.2 FAMILY BUSINESS PROFESSIONALIZATION ... 30
5.2.1 Defining family business professionalization ... 30
5.2.2 Practices of professionalization ... 33
5.2.3 The practitioners’ opinion about the and practices ... 37
5.3 PROCESS OF FAMILY BUSINESS PROFESSIONALIZATION ... 39
5.3.1 “Why” professionalize? ... 39
5.3.2 “Who” is involved during the professionalization? ... 42
5.3.3 Family involvement ... 42
5.3.4 What are the difficulties of professionalization? ... 43
5.3.5 What are the benefits of professionalization? ... 44
6. DISCUSSION ... 46
6.1 CONCLUSION ... 46
6.2 LIMITATIONS AND FURTHER RESEARCH ... 49
REFERENCE ... 51
APPENDIX I – THEORETICAL THEORIES ... 63
APPENDIX II – INTERVIEW GUIDE ... 67
APPENDIX III – INTERVIEW QUESTIONS ... 74
APPENDIX V – DATA ANALYSES TABLES ... 83
APPENDIX VI – PROFESSIONALIZATION PRACTICES ... 87
APPENDIX VII – EFFECTIVENESS ... 89
APPENDIX VIII – FAMILY INVOLVEMENT ... 90
APPENDIX IX – REFERENCE QUOTES ... 91
LIST OF TABLES Table 1 – Professionalization practices and related dimensions ... 15
Table 2 – Description of the theoretical theories ... 18
Table 3 – Triggers and/or drivers of professionalization ... 20
Table 4 – Overview of the family businesses ... 25
Table 5 – Overview individual demographic of the interviewees ... 26
Table 6 – “What” defines professionalization ... 31
Table 7 – Practices for professionalization ... 34
Table 8 –Determinants for professionalization practices ... 35
Table 9 – Practices for professionalization ... 38
Table 10 – Internal triggers and/or drivers to professionalization ... 40
Table 11 –External triggers and/or drivers to professionalization ... 40
Table 12 –Barriers to professionalization ... 44
Table 13 –Obtained benefits professionalization ... 45
LIST OF FIGURES Figure 1 – Research model ... 22
1. INTRODUCTION
Scholars who recognize the continuing vitality of family businesses believe that family firms would be more effective if they “professionalized” (Martínez, Stöhr & Quiroga, 2007). A recent study by Dekker, Lybaert, Steijvers, Depaire, and Mercken (2015) suggests that implementing professionalization practices is positively related and relevant to firm performance. In addition, Tsao, Chen, Lin, and Hyde (2009) find that family firms benefit from the use of professionalization practices, such as in-house training and development. However, in the literature, there is no agreement regarding what professionalization is and how it can be accomplished within family businesses. In support of this statement, results suggest that companies interpret professionalization in various ways, and the literature proposes different descriptions of the term (Hall & Nordqvist, 2008; Stewart & Hitt, 2012). Several theoretical articles have tried to contribute to defining and clarifying the concept of professionalization, and have attempted to elaborate and refine the definition of professionalization applied within a family business context (e.g., Chua, Chrisman & Bergiel, 2009; Stewart & Hitt, 2012; Dekker et al., 2015). However, a general agreement regarding the need, the effects, and the path towards professionalization has not yet emerged among authors, in spite of the many theories regarding this issue (Songini & Gnan, 2009; Songini, 2006). Recently, Dekker et al. (2015) attempted to distinguish five dimensions of professionalization that are positively related to firm performance. However, the issues that family business professionalization entails are not featured or substantiated sufficiently in this way (e.g. Hung & Whittington, 2011).
terms that are proposed regarding professionalization indicate that family business professionalization is an understudied topic that requires greater elucidation.
1.1 Problem identification
Based on Eijssen’s (2015) research as well as the experience of the consulting company Gwynt, it is evident that family businesses want or have to “professionalize”. However, it is still inconvenient for Gwynt to determine a “best practice” method for the professionalization of family firms because of the different definitions of the term. Both Gwynt and Dirk Harm Eijssen (2015) encounter the problem that the general notion of professionalization among family firm practitioners is often unclear, and that they want to professionalize but do not know how to do so or which practices to use. Moreover, recent research suggests that family managers often emotionally do not want to professionalize. A major fear of the family is that the company will become too bureaucratic and inflexible, and that its family values and identity will disappear (Eijssen, 2015). This study will contribute to and benefit family business practitioners and consultants by presenting more insights into family business professionalization. Furthermore, it will provide advice based on these insights regarding the successful implementation of professionalization. Further research is needed to understand the concept of professionalization and to present more insight into professionalization for practitioners, consultants, and academia.
1.2 Research questions
with family and non-family executives from family businesses. Based on this study approach, the following sub-questions are answered to fully understand the concept of family business professionalization.
Sub-question 1. “How should family business professionalization be defined?”
The first sub-question has the purpose of defining professionalization. The goal is to formulate a definition of family business professionalization that is comprehensible and convenient for practitioners of family businesses and consultants. Furthermore, another goal is to express a scientific opinion. The approach to answer this sub-question is based on scientific knowledge in combination with the insights gained from the study.
Sub-question 2. “To what extent are professionalization practices measured in family business?”
The second sub-question has the purpose of obtaining the practitioners’ opinion of the professionalization practices that Dekker et al. (2015) propose in their recent study. Dekker et al.’s (2015) study is used because it proves already evidence in the literature. The goal is to determine which practical implications the family and non-family executives identify as professionalization practices. This is done in order to devise a comprehensible and convenient definition of family business professionalization.
the benefits of the professionalization implementation. These four listed topics are important for the process, in order to understand how family businesses implement professionalization practices and the extent to which professionalization benefits family firms. The goal is to present a clear overview of the obtained insight that answers the question of how family businesses implement professionalization and the extent to which they benefit from it.
1.3 Thesis outline
The thesis will proceed as follows. First, family businesses will be explained and a definition of family business will be given. The next section will give an overview on the professionalization and the concept in the context of family business. To obtain more insight into family business professionalization, theoretical theories that analyze family business professionalization will be explained. Then the operationalization of professionalization will be described, including its processes and practical implications. In the following section, the methodology will be presented. The final section will then present the results, the discussion of the results, and the overall conclusion of this study.
2. THEORETICAL BACKGROUND
The theoretical background developed in this chapter will provide definitions of family businesses and the term “professionalization”. This chapter begins with the discussion on family business, following by the overview on professionalization and the concept in the context of family business. Section 2.2 describe the meaning of professionalization, in order to gain a deep understanding on family business professionalization and the concept in the context of family business. This includes the definition of family business professionalization, and how professionalization is defined in the literature. Section 2.3 will explain the practices of professionalization. Section 2.4, which elaborates the process of professionalization is subdivided in the (1) explanation of the multifaceted perception of the professionalization; (2) explanation of theoretical theories for analyzing professionalization; (3) why family businesses professionalize; (4) an explanation of family involvement for professionalization; and (5) an explanation of the difficulties for professionalization.
2.1 Family businesses
In spite of a research history spanning more than 30 years, there is still a lack of agreement on what is meant by a “family firm” (Astrachan, Klein & Smyrnios, 2002; Litz, 1995). Many empirical studies do not even operationalize what family business is (Klein, Astrachhan & Smyrnios, 2005; Kayser & Wallau, 2002). This is partly due to the fact that features attributed to family businesses are not commonly applicable and, this leads to the possibility of results being biased (Westhead, Cowling & Storey, 2002; Stewart & Hitt, 2012).
Chua, Chrisman, and Sharma (1999) find that the behaviors of family and non-family firms cannot be distinguished. However, family businesses are distinct from non-family businesses in that they are owned and/or controlled by members of the family (Davis & Harveston, 1998). Two important sets of factors distinguish family businesses from non-family firms, and also make it possible to differentiate among family firms. The first, rooted in the resource-based view of the firm, suggests that the essence of a family firm is its “familiness” (Habbershon &Williams, 1999; Habbershon et al., 2003). The construct of “familiness” has been identified and defined to encompass resources and capabilities that are unique to the family’s involvement and interactions in the business (Pearson, Carr & Shaw, 2008). The second important factor that separates family firms from non-family firms relates to the involvement of the family in the enterprise and with its members (Astrachan, Klein, & Smyrnios, 2002; Klein, Astrachan, & Smyrnios, 2005), and is comprised of power, experience, and culture. In the context of family firms, power refers to the ability of the family to control a firm through ownership and/or management. Experience refers to the cumulative family memory that is available to an organization. Culture describes the values and commitment of family members introduced into the family firm through the family system (Klein, 1991; Astrachan et al., 2002; Klein et al., 2005). Klein et al. (2005) note that any theory of the family firm should describe why family businesses are distinct, how this uniqueness is built, and how and under what conditions this may lead to a competitive advantage. Therefore, the unique interactions among the family unit, the business, and individual family members must be taken into account when studying family firms (Aldrich & Cliff, 2003; Chrisman, Chua, & Sharma, 2005; Habbershon, Williams, & MacMillan, 2003).
principal aspects overlap with the distinctiveness of family and non-family businesses. Most of the definitions focus on the content of family business, such as the intention of the family business (e.g., Handler, 1989; Heck & Scannell, 1999; Litz, 1995). A number of articles utilize definitions that concentrate on family ownership, such as shareholders (Anderson & Reeb, 2003; Klein & Blondel, 2002; Littunen & Hyrsky, 2000). To a greater extent, recent definitions emphasize the family business culture (Chua et al., 1999; Dreux IV & Brown, 1994; Litz, 1995).
There are many different definitions of a family business. Storey (2002) notes that family firms are often defined in terms of ownership, but what makes them special is not the ownership per se, but the implications of the ownership for the family and the business. Villalonga and Amit (2006) propose a combination of three fundamental elements in their definition of family firms, and distinguish between ownership, management, and control. The combination of shareholder, governance, and management roles (Montemerlo, Gnan, Schulze & Corbetta, 2004) can result in intrinsic fragility related to a strong and sometimes conflicting relationship between the family’s and the firm’s interests and contexts (Gallo, 1993; Corbetta, 1995; Mustakallio, 2002). According to Anderson and Reeb (2003), family firms are firms in which the family continues to have an equity ownership stake or board seats. The authors also identify active family involvement in cases where a family member (the founder or a descendant) holds the position of CEO. However, this definition is difficult to use in the present research because of the criterion that specifies that a family member has to be the CEO or in another managerial position.
To obtain a more conveniently definition for the purposes of the present research study, Chua et al. (1991)’s establish a common criteria of family business, and include three qualifying combinations of ownership and management regarding family business: (1) family owned and family managed; (2) family owned but not family managed; and (3) family managed but not family owned. Most scholars agree that the first combination of “family owned and family managed” can be considered a family business (Chua et al., 1999 p.20). Chirico, Ireland, and Sirmon (2011) note that the unique attributes of family firms are both ownership and management coherence within the family. Therefore, the definition and the applicable combinations on which most scholars agree are the following: (1) family owned and family managed; (2) family owned but not family managed; and (3) family managed; but not family owned will be used for family business in this research study (Chua et al., 1999 p.20).
2.2 The meaning of professionalization
To properly analyze and define family firm professionalization, first section 2.2.1 explain the term professional related to professionalization in order to obtain a comprehensible understanding for defining family business professionalization. Section 2.2.2 give an overview of how family business professionalization is defined in the literature.
2.2.1 Definition of family business professionalization
Hall (1968), Abbott (1991), Starbuck (1992), and Torres (1991), generally distinguish professions from other occupations by their strong control over the application of their knowledge base via a range of institutions, such as training and licensing. Professions’ ethical codes and autonomous control over the education, licensing, and disciplining of their members are seen as means to guarantee expertise and trustworthiness. Thus, professions are assumed to operate according to principles antithetical to the nature of commercially oriented hierarchical bureaucracies (Barley & Tolbert, 1991; Greenwood, Suddaby & McDougald, 2006; Malhotra, Morris & Hinings, 2006). However, professionals are assumed to have preferences that conflict with the nature of bureaucratic organizations (Barley, 2005; Blau & Scott, 1962). A closely related theme that Chandler notes (1990, p. 127) is “defining the organizational structure precisely” so as to coordinate the work of the salaried managers. Nonetheless, the notion of professional management carries associations from these older occupations (Khurana, 2007, pp 69-70). Both of these interpretations are linked in the explanation that professionalization from “professionals” is as an alternative to bureaucracy.
2.2.2 Family business professionalization
2.3 Practices of professionalization
Professionalization is generally depicted as the unique transition from an entrepreneurial family business, often owner-managed, to a more formalized, structured, and institutionalized companies (Dekker et al., 2015). Dekker et al. (2012) argue that features, of professionalization may not be viewed as independent dimensions, since different features can be related and/or constitute one dimension when they are studied within a family business context. In this formulation, Dekker et al. (2012) imply that family firms differ from each other not only in the way in which they professionalize but also in the extent to which they professionalize. Furthermore it cannot be assumed that the applicability of one of these dimensions, in a given firm, reflects its applicability for others firms. For example, depending on the availability of talent, professionalization could entail the hiring of salaried managers or even a non-family CEO (Galambos, 2010), whereas for another firm professionalization might entail new systems and organizational designs to monitor and reward managerial performance. Some family firms have highly educated managers who use analytical decision-making, while other non-family firms have casually trained managers who use intuitive decision-making (Stewart & Hitt, 2012). Therefore family size, firm size, and other factors, such as organizational needs, might affect the professionalization decisions of family firms (Chrisman, Memili & Misra, 2014; Hofer & Charan, 1984; Masurel & van Montfort, 2006).
formalization, (2) delegation, (3) standardization, and (4) rationalization, which is subdivided into practices to reach professionalization within the family business.
Professionalization practices Description Source
Adoption of:
Formal governance mechanisms - Such as a board of directors Formal strategic planning
Managerial control systems
Formalization Control systems
Ward, 1991, 2001; Schulze et al., 2003; Gnan and Songini, 2003; Montemerlo et al., 2004; Villalonga and Amit, 2006; Songini and Gnan, 2008
Formal governance mechanisms - Such as a board of directors Formal strategic planning and control systems
- Such as budgeting, reporting and management accounting
The involvement of non-family members in board and management, often called professional managers
Formalization Control systems Involvement non-family members Dyer, 1996 Songini, 2006
Non-family involvement in governance systems - External board directors,
- (Reversed) family involvement in management team, - Non-family CEO
Financial control systems - Use of budgets
- Budget evaluation system
- Formalized financial goals and objectives - Firm performance evaluation system Human resource control systems
- Formal recruitment system - Formal training system - Incentive payment system
- Personnel performance evaluation system Decentralization of authority
- Delegation of control
- Centralization individual decision making (reversed) - Centralization of authority (reversed)
Top level activeness - Board activeness - Management activeness Non-family involvement (Specialization) Control system Decentralization Delegation Formalization Standardization Management and board activeness
Dekker et al. 2015
Formalization - Clear governance - Predictable processes - Planned budget cycles - Standard work instructions Rationalization
- Objective standards - Business cases - Steer programs - Use of selection criteria Delegation:
- Give responsibility - Stay within the agreed role
- Sharing information with the organization Specialization:
- Attracting experts
- Management development - Formalized structures - Formal planning
- Regularly scheduled meetings - Defined responsibilities - Performance appraisal systems - Formal training
- Formal governance bodies, and control systems
Specialization Formalization Standardization Rationalization Control systems Structure
Flamholtz and Randle, 2012
- Modification of organizational structure
- Defining the organizational structure precisely, so as to coordinate the work of the salaried managers
Structure Formalization
Chandler, 1990, p. 127
- The professionalization of family members, the professionalization of non-family employees, the employment of new professional managers.
Family, employees and non-family involvement
Dyer, 1996;
- Entrance of an external, non-family manager Non-family involvement Bennedsen et al., 2007; Chittoor & Das, 2007; Gedajlovic et al., 2004; Klein and Bell, 2007; Lin and Hu, 2007; Zhang and Ma, 2009; - Family involvement diminishes, and more non-family
managers start entering the business.
Non-family involvement Chittoor and Das, 2007
- Hiring outside expertise Specialization Hall and Nordqvist, 2008
- Independent directors Delegation Miller, Le Breton-Miller,
2006 - Board control task
- Agency control mechanisms - Formal governance systems - Managerial control systems
- Involvement of non-family members in governance and managerial roles
Control systems Involvement non-family members
Bammens, Voordeckers and Van Gils, 2011.
Table 1: Professionalization practices and related dimensions
As can be seen from the previous determinants and in Table 1, these noticed dimensions from the scholars overlap the selected practices of professionalization used by various scholars (Eijssen, 2015; Dekker et al., 2015; Songini & Gnan, 2008). Moreover, in concurrence with the recent studies in the literature, the term professionalization implicitly or explicitly entails various features and dimensions. These various practices and related dimensions discussed in the literature are presented together in Table 1.
2.4 Process of professionalization
2.4.1 Multifaceted perception of professionalization
General business literature portrays a multifaceted perception of the professionalization process (Songini, 2006; Yildirim-Öktem & Üsdiken, 2010; Stewart & Hitt, 2012). This is due to the lack of a singular meaning in popular and scholarly discourse (Hwang & Powell, 2009; von Nordenflycht, 2010). In the general business literature, firm professionalization tends to be understood in an organizational development context. As firms evolve through the organizational life cycle, the complexity of firm operations increases, as does the demand for more sophisticated management and organizational systems. As such, there is a shift towards firm professionalization, which enables the firm to progress to the next level (Flamholtz & Randle, 2012; Gabrielsson, 2007; Gedajlovic, Lubatkin & Schulze, 2004).
Often professionalization is treated as one-dimensional, whereas it in fact entails multiple dimensions that combine different approaches in various modes among family firms (Stewart & Hitt, 2012). For this reason, professionalization can involve a “holistic transformation”, although this can vary from firm to firm (Hung & Whittington, 2011; Parada, Nordqvist & Gimeno, 2010). Many scholars endorse the argument for a thoroughgoing “transformation” of family firms if these dichotomies accurately reflect reality. Nevertheless, the literature lacks a singular term for such a transformation (Stewart & Hitt, 2012). In order to obtain a term with a more specific meaning for transformation, “familiness” and “professionalization” have been proposed (Habbershon, 2006; Habbershon, Williams & MacMillan, 2003). In addition, to understand the meaning of “transformation” it is important to consider the lifecycle of the family business. To explain this, in the initial phases of a venture, a business is in greater need of entrepreneurial skills than of managerial skills, the former of which is expected to be better provided by an owner-manager. Later, as the business grows and stabilizes, its need for managerial skills becomes more critical; this may be the right time for the owner-manager to withdraw from day-to-day management and entrust it to professionals (Chittoor & Das, 2007; Steinmetz, 1969). The company growth theory refers to this as the time when it is most appropriate for the family to dissociate from management and to leave it to a more professional individual or team.
2.4.2 Theoretical theories
Nordqvist, 2007. However, a general agreement about the need, the effects, and the path towards professionalization has not yet emerged among authors, in spite of the many theories regarding this issue (Songini & Gnan, 2009; Songini, 2006). To properly analyze the features, drivers and advantages of family business professionalization, different theories can be used that are related to family business professionalization. The commonly used theories are the agency theory (Ross, 1973; Jensen & Meckling, 1976), the stewardship theory (Davis, Schoorman & Donaldson, 1997), the resource-based view theory (Barney, 1991; Habbershon & Williams, 1999), the organizational control theory (Hopwood, 1974; Galbraith, 1977; Prahalad & Doz, 1981), and the company growth theory (Rostow, 1960; Greiner, 1972; Normann, 1977).
Table 2: Description of the theoretical theories
These main theoretical theories can be classified into two categories: theories that indicate the drivers and need for professionalization of family firms, which include the agency theory and the company growth theory; and theories that mostly explain the reasons to avoid professionalization, which include the resource-based view theory and the organizational control theory (Songini, 2006). Table 2 presents an overview of the five theories and their description. Appendix I includes further insights into these theories.
Theory Description Source
1 Agency theory Considers the formal governance and administrative control systems as
a way to align interests and actions of managers and owners. Jensen and Meckling, 1976; Myers, 1977; Roos, 1973; Gnan & Songini, 2003; Montermerlo et al., 2004
2 Company growth theory
Analyses the features, the problems and the advantages of the development and growth process of a firm aiming at becoming a large enterprise, passing through different stages in its life cycle.
Deakins, Morrison & Galloway, 2002; Perren, Berry & Partridge, 1999; Christensen and Scott, 1964; Greiner, 1972; McGuire, 1963; Normann, 1977; Rostow, 1960; Steinmetz, 1969 3 Stewardship theory
Suggests that the coincidence of family and business values and objectives brings individuals to follow collaborative and altruistic behaviors aimed at pursuing the company goals.
Davis et al., 1997
4 Resource-based view of the firm theory
According to this theory the combined family and business systems in a family firm create both economic and non-economic value and “lead to hard to duplicate capabilities or ‘familiness’”. Suggests that a firm is a family business where the role of a family impacts on its functioning and performance.
Chrisman et al., 2003
5 Organizational control theory
Refers to the way in which decisions are carried out in an organization, and is related to the concept of organizational control. The theory point indicates that clan and social control systems are more effective than bureaucratic and administrative control when strategy formulation, decision-making processes, and the power in the organization are managed by a few people who share common values and coordinate tasks among themselves with informal relationships.
2.4.3 Why professionalize?
Table 3: Triggers and/or drivers of professionalization
2.4.3 Family involvement
Scholars note that the amount of family involvement is a main point of interest within the professionalization of a family business (Hall & Nordqvist, 2008) because the family can influence a business via the extent and quality of its ownership, governance, and management involvement, but also via legal, political, and economic considerations associated with different cultures (Klein, Astrachan & Smyrnios, 2005). In the literature there is still no balanced equal mean of family influence (Stewart & Hitt, 2012). Studies about family influence differ in the subjects they examine (strategic actions versus stewardship) and are therefore not fully comparable, but instead suggestive of mixed possibility (Sirmon, Hitt & Webb, 2008; Le Breton-Miller, Miller & Lester, 2011). Research has shown that family firms have more committed and trusting managers which can serve as one of the many ways that “familiness” can manifest itself in family firms (Chrisman, Chua, & Kellermanns, 2004) Comparing with family business professionalization is the “familiness” in the literature proposed also as a more specific meaning for the family business transformation (Habbershon; Habbershon et al., 2003). Therefore emphasizing how family involvement effect on professionalization is included in this study.
2.4.4 What are the difficulties of professionalization?
The fact that many family firms fail to follow the prescription of attaining professionalization is leading to different modes of professionalization (Stewart & Hitt, 2012). One of the reasons why many family firms fail to professionalize is because they cannot do so. They lack the skills or the will to successfully make the transition to professional management (Sharma, Chrisman & Chua, 1997, p. 16), or they are simply unable to pay market wages (Carrasco-Hernandez & Sánchez-Marin, 2007; Cater & Schwab, 2008; McConaughy, 2000). In addition, firms can face conditions that become more complex internally or externally (Pearce & Zahra,
Feature Reference
Guarantee sustainable growth Benavides-Velasco et al., 2013.
Agency problems Dekker et al., 2015; Bammens, Voordeckers
and Van Gils, 2011. Business needs (life cycle/ time period) Chittoor & Das, 2007
1992; Peng, 2004; Voordeckers, Gils & den Heuvel, 2007). Furthermore, the inability to professionalize may result from cognitive, cultural, emotional, or managerial barriers (Stewart & Hitt, 2012; Peletz, 2001). Similarly, from an agency perspective family firms are expected to professionalize when they are confronted with typical agency problems caused, for example, by parental altruism or self-control. To resolve these agency problems, family firms can adopt board control tasks and agency cost control mechanisms, such as formal governance systems and managerial control systems; furthermore, they can encourage the involvement of non-family members in governance and managerial roles that are considered to be part of the professionalization process. (Dekker et al., 2015; Bammens, Voordeckers & Van Gils, 2011).
3. RESEARCH MODEL
professionalization that is comprehensible and convenient for practitioners of family businesses and consultants, as well as for further scientific opinion. Figure 1 presents the research model.
Figure 1: Research model
4. RESEARCH METHOD
This chapter describes the methodology used in this research. Section 4.1 presents the research design. Section 4.2 explains the data collection and describes the characteristics of the participating family firms. Section 4.3 describes the data analysis and provides an overview of how the coding process was conducted and how the data were established. Section 4.4 discusses the controllability, reliability, and validity of the study.
4.1 Research design
Figure 2: Research approach
this study the interview guide includes questions related to family involvement that help gain an understanding of the family involvement within the companies (Astrachan et al., 2002).
The interview guide was developed and divided based on the corresponding part in the theoretical background and research model (Emans, 2003). For each company, two in-depth interviews were conducted, during which family executives and non-family executives were asked about family business professionalization. The interview guide and interview questions that were used to answer the sub-questions and main question of this study can be found in Appendices II and III. The interview questions are related to answering the sub-questions and main question of this research. The interview contains two types of questions: open questions, and statements requiring the use of a Likert scale from 1 to 7. Scores ranged between 7, “strongly agree”, and 1, “strongly disagree”. The statements that were given to the interviewees are related to Dekker et al. (2015) study. Because this study on the professionalization practices proved already evidence in the literature. After each rating, the interviewee was asked to explain his or her answer.
4.2 Data collection
Davis, Hampton & Lansberg, 1997). The companies that participate are located in various provinces of the Netherlands and are active in various sectors both in the Netherlands and internationally. General information about the participated family businesses and individual demographics is presented in two tables. Table 4 presents information about the family businesses, and Table 5 presents an overview of the individual demographic of the interviewees.
Table 4: Overview of the family businesses (* not initially starting the company)
As depicts in Table 4, the companies were active in industrial manufacturing; wholesale and retail trade; transportation; and storage. Turnovers ranged from approximately €10 million to more than €600 million. 10 companies have between 150 and 500 employees, while one company has 25 employees, and two another companies has approximately 550 and 5,000
Case Industry Turnover
In € x million Empl-oyees Age company Gene-ration Supervisory/ Advisory board Shareholders Interview F NF Case 1 Industrial, Food €200 - € 300 550 1957 59 years 3th SB 100% family v v Case 2 Industrial, Agricultural €50 - €100 500 1959 57 year 3th AB 75% Family – 25% (one) extern shareholder v v
Case 3 Wholesale and Retail trade + € 600 5000 1967 49 years 2th SB 100% family v v Case 4 Industrial, Manufacturing € 50 - €100 150 1830 186 years 7th No 100% family v v Case 5 Industrial Manufacturing < € 10 25 1932 84 years 3th No 50% family – 50% non-family executive v v Case 6 Waste processing €200 - €300 150 1974 42 years 3th No 100% family v v
employees. It is notable that almost only second and third generation family firms participated in this study. A reason for this could be that family firm from the second- and third generation interested in the subject of research. Eijssen (2015) noticed that the founder directed the company mainly from intuition and experience. While the second generation gave often attention to the family business processes and procedures which are elements of professionalization.
Table 5: Overview individual demographic of the interviewees.
Case Executive
Exe-cutive
Age
Gen-der
Edu- cation
Job function Years
active in the business
Other family members active in the company
Case 1 Family 2th 60-69 M HBO CEO 31-35 3th generation active in operations.
Non-family 50-59 M WO CEO 0-5
Case 2 Family 2th 50-59 M WO CEO 26-30 3th generation active in operations.
Non-family 50-59 M WO CFO 6-10
Case 3 Family 1st 70-79 M No
higher education
Shareholder 46-50 2th generation active in holding.
Non-family 50-59 M HBO CEO 6-10
Case 4 Family 7th 30-39 F WO MT general 0-5 6th generation advisory role,
7th generation active in operations.
Non-family 30-39 M HBO MT planning 11-15
Case 5 Family 3th 50-59 M HBO CEO 26-30 -
Non-family 50-59 M HBO CMO 26-30
Case 6 Family 2th 50-59 M MBO CEO 21-25 3th generation active in operations.
Non-family 40-49 M HBO MT sales 21-25
Case 7 Family 2th 50-59 M WO CEO 41-45 3th generation active in operations.
Non-family 30-39 M WO MT
operations
0-5
Case 8 Family 3th 30-39 M WO CEO 6-10 2th generation active in supervisory
board.
Non-family 50-59 M HBO COO 6-10
Case 9 Family 2th 30-39 F WO CEO 6-10 2th generation active in operations,
1st generation active in advisory role.
Non-family 50-59 M HBO CFO 0-5
Case 10 Family 2th 30-39 M HBO MT sales 11-15 1st generation active in advisory role.
Non-family 50-59 M WO COO (Retracted) 0-5 Case 11 Family 2th 40-49 M No higher education
CEO 26-30 2th generation active in MT.
Non-family 40-49 M WO CFO 0-5
Case 12 Family 2th 30-39 M WO MT
operations EU
6-10 2th generation active in SB.
Data from two companies were restricted, in the manner that interviews were only conducted with their family executive. Twenty-four interviews were held, with 13 interviews conducted with family executives, and 11 interviews conducted with non-family executives. One interview with a family executive was conducted by telephone; in this case, the questions deviated from those posed in other interviews, and the obtained information was limited. Except for the phone interview, which was conducted by one interviewer, all data were collected in collaboration with a fellow student. All interviews took place at the headquarters of the participating companies between November 24th, 2015 and January 8th, 2016 during
office hours (09.00 am - 17.00 pm). The data collected during the interviews are confidential. In order to ensure this anonymity, the collected information was treated with great care and the findings were not associated to a specific person or company. An interview lasted between 60 and 120 minutes and all interviews were tape recorded and noted.
4.3 Data analysis
The qualitative data analysis program, NVivo, has been used to analyze the data obtained from the interviewees. A within-case analysis was first conducted to gain familiarity with the data. The within-case analysis was performed by reading the interview transcripts, coding them, and interpreting them (Eisenhardt, 1989). Codes include a label which encompass an explanation of meanings to the descriptive and explanatory information, compiled during the study. For the purposes of coding the meanings of words matters more than the words themselves (Miles & Huberman, 1994). An initial start list was composed of the variables suggested by Eijssen (2015) and Dekker et al. (2015). For this study, the number of codes are counted and tables have been drawn in the results which present the extent of referred codes regarding to professionalization. To make a distinction between the definition of and the process of family firms professionalization, the statements relating to defining professionalization were separately coded from those relating to how family firms professionalize. In this way limited tables of results are elaborated in order to answer the sub-questions.
family involvement within the governance team may have been interpreted differently, as a reduction from one family member to zero family member involved in the governance team may yield different meaning compared to a reduction from six family members to five family members within the governance team. The clusters from the study of Dekker et al. (2015) that were used for the statements were (1) non-family involvement in governance systems, (2) financial control systems, (3) human resource control systems, (4) decentralization of authority, and (5) top level activeness. The efforts of stewards, as well as those of agents and owners, are bounded by imperfect and asymmetric information (Jensen & Meckling, 1976, 1994; Simon, 1945) which resulted that answers to the question of what are the professionalization phases for the family firm are limited to their own experiences. The emphasis on family involvement is not to identify the exact points of inflection where the effects of family influence during the professionalization change but to emphasize if family influence can have positive and negative effects on professionalization. Appendix IV contains a coding book that provides an overview of the codes and keywords gathered from the responses. To explain this coding process, an example is elaborated as follows. Family and non-family executives talk during the professionalization practices about structure (1) implement more structure; (2) improve structure; or (3) sharpening structure. To explain this professionalization practices the code “structure” is composited to explain the different professionalization practices related to structure. Thereafter, a cross-pattern analysis was conducted to examine the data. As this study does not include a hypothesis, all case studies were compared to find similarities and differences by using tables that may help to analyze the data in order to answer the sub-questions and main question (Eisendhardt, 1989; Miles and Huberman, 1994). In analyzing the results, a distinction was made between family and non-family managers’ perceptions. The results will be presented in chapter 5 and are mentioned in the same order as the theoretical background in chapter 3. Then, the results will be used to answer the sub-questions and the main question in chapter 6.
4.4 Controllability, reliability, and validity
sharing the individual analyzed interviews and the results with a fellow MSc student, Steven Hager, as well as with Dirk Harm Eijssen, who is an external specialist in the field of professionalization (Yin, 2009; van Aken et al., 2012). The dataset was discussed and codes were checked with the fellow student. To make the research results of this research controllable, a thorough explanation of the research design was provided. Regarding the reliability of this study, results should be established as objectively as possible (van Aken et al., 2012). To reduce a certain level of subjectivity in analyzing data evidence and assessing the reliability, this study followed Yin’s (2009) guidelines and a thorough explanation of the research results has been provided. Transparency was created by providing an extensive description of the data collection and analysis processes. By using the analyzing techniques and data analysis program, the process is transparent and can be assessed by future investigators. The validity of this study was assessed by collaboration with an expert, Dirk Harm Eijssen, which resulted in critical revisions. In order to increase internal validity, the data were translated in a systematic way and composed based on the research model. The external validity of this study is enhanced by in-depth interviews with 24 executives.
5. RESULTS
This chapter elaborates the results of the interviews based on this study’s research model. Cross-cases analyses are conducted on the basis of the textual information summarized from the within-cases analyses. Quotes from the interviewees are used as the basis for coding and for the summary of textual information during the within-cases analyses. Pattern matching is used for the cross-cases analyses in order to generate aggregated results from all cases. These aggregated results will first be compared to the theory and existing literature discussed in Chapter 2. Then, additional new insights will be discussed in order to extend the existing literature.
5.1 Interview results
conforms to the normative modes of organization and management (Arrègle & Mari, 2010; Chu, 2011; Fogel, 2006; Saito, 2008). In addition, Jongkind (2013) and Eijssen (2015) explain that often the second- and third generation executives rely on experience and intuition, which the founders also did in the family firm. Therefore new strategic choices, managing the governance, and organizing growth are relevant activities for the second and third generation. This explains why such little difference exists between family and non-family executives. Furthermore, the interviews demonstrate that executives have various interpretations of the meaning of professionalization. In the following sections, results on different aspects regarding family business professionalization are elaborated. When comparing and analyzing the answers and tables, it must be noted that the family executives include two participants more than the non-family executives do.
5.2 Family business professionalization
Section 5.2.1 describes how family and non-family executives define family business professionalization. Section 5.2.2 describes the practices for professionalization. Section 5.2.3 describes the practitioners’ opinion on these practices.
5.2.1 Defining family business professionalization
Dalziel, 2003). The introduction of administrative control systems can help a family firm to cope with peculiar features, such as ineffective managers, free-riding, and so on (Daily & Dollinger, 1992).
Table 6: “What” defines professionalization (n=24)
Furthermore, (2) adapting the organization to the market is often identified. This is consistent with the existing literature indicating that the size of an organization is a trigger for professionalization (Flamholtz & Randle, 2007). The company growth theory proposes that as the environmental and organizational complexities increase, professionalization becomes necessary for a company to define more formalized and clearer managerial responsibility of
Code Include topics of FE NFE Reference literature
1 Implementation of systems and techniques
Implementation of technical programs, computer systems
such as SLP, and process automation 6 3 Dekker et al. 2015; Flamholze and Randle, 2015
2 Organization adapting to market
Adapting to the market, market demands, rules of the market, open mind to the surrounding area, recognition of market development, servicing customers, growing along with the market
5 4 Benavides-Velasco et al., 2013.
3 Structures Converting structure, structure needed, consultation structure, insightful structures
6 3 Dekker et al. 2015; Chandler, 1990 4 Specialization/
knowledge
Attracting employees with higher education, smoothing the knowledge, knowledge needed, expertise at the right place within the organization, attract employees with higher education, attracting specialists and expertise, specialist needed
2 5 Dekker et al. 2015; Stewart & Hitt, 2012
5 Rationalization Description of rationalization or making it efficiently through operational issues (e.g. systems, process, automation)
3 3 Eijssen, 2015 6 Delegation Description of relocation of authority/qualification (e.g.
dividing proceedings, limiting oneself with controlling), job description, division of tasks, responsibilities
4 2 Eijssen, 2015; Hall, 1968; Benveniste, 1987; Abbott, 1988; Stewart & Hitt, 2012; Songini & Gnan, 2009
7 Formalizing Description in accordance with rules of convention, complying with regularities, writing down and making agreements, procedures (course of events)
2 2 Eijssen, 2015; Dekker et al. 2015; Bammens, Voordeckers and van Gils, 2011
8 Objectification Objectification of tunings, performance, measurements 2 1 Dekker et al., 2015 Lin & Hu, 2007 9 Standardization Description of all subjects to a predetermined standard
(e.g. standardization in engineering, standardization in measuring production)
1 2 Eijssen, 2015 10 Systematic
strategic policy plans
Systematic strategic plans, setting up framework, good vision, strategy, objectives
1 2 Dekker et al., 2015 11 Feeling to ratio Feeling to ration, tipping to managing business
circumstances 0 2 Dekker et al., 2015
12 Generating returns/ Efficiency
Generating return (earning money) 1 0 Chrisman et al., 2010 Used phase in the
description
Description of phases of professionalization. 4 6 Dekker et al., 2015 Used processes
in the description Description of process, e.g. restructuring management team, production process, process needed to professionalize, tipping.
different activities to specialized managers who are in charge of different organizational departments. This is done with the use of appropriate mechanisms, such as performance evaluation systems. The stage of professionalization is characterized by a more complex relationship between the company and the environment. This requires the adoption of strategic planning and control systems to allow the company to cope with the evolution of the external environment (Songini, 2006). This explanation can be linked with (3) converting the family business structure and (4) attracting specialists (Dekker et al. 2015).
In the family business literature, professionalization tends to be equated solely with the entrance of an external, non-family manager as indicator for professionalization (e.g., Bennedsen et al., 2007; Chittoor & Das, 2007; Gedajlovic, Lubatkin & Schulze, 2004; Klein & Bell, 2007; Lin & Hu, 2007; Zhang & Ma, 2009). Therefore, in this study a distinction is first made between obtaining knowledge and an explanation of hiring and/or attracting specialists. These processes are differentiated in the way in which they are explained. For example, gathering knowledge through training is even possible without attracting external individuals. The results show that, the combination of attracting specialists and obtaining knowledge leads that the same family executives notice obtaining knowledge as often as attracting specialists. Non-family executives also notice knowledge in combination with attracting specialists four times. This indicates family and non-family executives refer to obtaining knowledge as attracting specialists. Based on the observations, (4) attracting specialists remains an important element of professionalization, and it is identified more often by non-family executives than by family executive. In contrast, family executives identify the (1) implementation of systems more often than non-family executives do. This result may be related to the agency theory, which explains that non-family members in the board and management help to avoid family members’ opportunisms. This is identified more by non-family executives.
hand, the non-family executives cover professionalization in a more general statement and more often use the phase of professionalization in their definition. These results may be related to Sayles’s (1993, pp. 25-26) study, in which salaried managers were inclined to replace informal understandings with formal systems of command and control; the author calls this the “Generally Accepted Management Principles”.
In summary, these findings confirm that professionalization has become an umbrella term (Eijssen, 2015). The interviewees’ most commonly cited definitions are related to the practical implementation of control systems and techniques. They are also related to changing the organizational structure. In combination with the organization’s purpose of adapting itself to the market, it is possible to conclude that the definition of professionalization is primarily viewed from the agency and company growth theories. These theories are in favor of professionalization.
5.2.2 Practices of professionalization
Table 7: Practices for professionalization (n=24)
What is remarkable from the results is that the family and non-family executives often indicate that practices are associated with (3) objectification and measuring. Although the respondents indicate that the practices should be associated with objectification and measuring, from the results, it is clear that the respondents are more inclined to define implementing control operations. An interviewee explains this as follows: “You want to have this discussion based on arguments or based on data and therefore a proper analysis must be conducted. And then you have an opinion and analysis. And that is what you need. Large companies, which are more professional, they record everything very cleverly” (non-family executive, case 1). More details about the quotes see Appendix IX. The growth theory argues
Code Includes practices of FE NFE Reference literature
1 Specialization/ knowledge
Attracting someone from outside the company (e.g. employee, non-family executive, managers, specialist) knowledge and/or experience, retraining, competences, skills
12 11 Dekker et al. 2015 Stewart & Hitt, 2012 Eijssen, 2015 2 Implementation
of systems and techniques
Techniques, systems, software (e.g. implementation, division), operationalization resources (e.g. setting up production), managing processes
11 10 Dekker et al., 2015 Stewart & Hitt, 2012 Chrisman et al., 2014 Tsui-Auch, 2004 3 Objectification
and measuring
Objectification due to measurement, review, assessing, analyzing data, making decision based on data, checklists, monitoring (process check), awareness, tools, targets (measurement), composing/implementing objectives and targets, writing down the targets
9 9 Chrisman et al., 2014 Dekker et al., 2014 Stewart & Hitt, 2012 5 Delegation Delegation, giving people individual responsibility,
admitting responsibility for several people, employees have to take responsibility, more people are responsible for the department, more people become responsible (e.g. about decisions)
9 8 Eijssen, 2015 Stewart & Hitt, 2012 Dekker et al., 2015 Songini & Gnan, 2009 Gedajlovic, Lubatkin, Schulze, 2005 6 Formalizing Description in accordance with rules of convention,
complying with regularities, writing down and making agreements, capturing (e.g. registering), family regulations, family strategy, family protocol
10 6 Eijssen, 2015 Stewart & Hitt, 2012 Songini & Gnan, 2015 Songini & Gnan, 2009 Chittoor & Das, 2007 Tsui-Auch, 2004 7 Rationalization Description of rationalization or making it efficiently
through operational issues (e.g. systems, process automation, KPIs, selection criteria, business case, framework contracts, systematization, creating systematically, inventing logic, system
9 7 Eijssen, 2015 Dekker et al.., 2015 Stewart & Hitt, 2012 8 Structure Structure (structure follows strategy), implementing more
structure, improving structure, sharpening structure, optimizing structure, (installing) consultation structure, improving structural organization (e.g. task, control, operationalization), changing structure
8 7 Flamholtz & Randle, 2007
Songini & Gnan, 2009 Bammens et al., 2011 10 Non-family
executive in management team
Non-family executive, external board members in
management team 7 4 Dekker et al. 2015 Stewart & Hitt, 2012 15 Releasing
business
Withdrawal of management team, relinquishing, releasing, leaving.
3 1 Yildirim-Öktem and Üsdiken, 2010 16 Strategy
that this is certified by the way in which, after a family firm experiences successful growth, it enters a critical stage, namely professionalization. Professionalization requires the owner-manager to change his or her entrepreneurial approach to a more professional one. (Deakins et al., 2002; Perren et al., 1999). According to Weber (1968), Benveniste (1987), and Abott (1988), a “professional” is related to the traditional and still dominant understanding of the professional management notion of the bureaucratic organization. The rational/legal authority of the bureaucratic organization is based on objective rules, norms, and rational decision-making, where managers’ authority is grounded in technical qualifications and rational values rather than in individual characteristics and personal ownership rights (Hall & Nordqvist, 2008). The results indicate that those family firms are in favor of becoming more bureaucratic organizations.
Table 8: Determinants for professionalization practices (n=24)
Eijssen (2015) explains that the consequence of professionalization may be a procedural and bureaucratic organization. To avoid the bureaucratic or administrative control, the organizational control theory indicates that social control systems are more effective than bureaucratic and administrative control when a few people manage the strategy formulation, the decision-making processes, and the power in the organization. Furthermore, these people share common values and coordinate with informal relationships. In this study, the respondents’ companies consist of 150 to 500 employees. This indicates that these family firms can no longer be controlled with social control systems and are more effective with bureaucratic and administrative control systems that are in favor of professionalization.
Code Determinants for professionalization practices FE NFE Reference literature
4 Employees Changing people, improving people’s qualities, encouraging people, dismissing people, finding people who fit in the organization, switching people, people needing to change
9 9 Schulze et al., 2001 9 Consultancy Hiring and/or asking for/using advice from consultancy,
coaching, students (e.g. trainees), friends, external consultancy employees
9 5 Dekker et al. 2015 Stewart & Hitt, 2012 11 Communication
and feedback
Communication (e.g. changing the communication), communication due training, due conversations,
communicating more often with employees, giving feedback
6 4 Klein et al., 2005 Lubatkin et al., 2005 14 Culture Encountering cultural change, understanding the norms and
values to realizing a professionalization aspect, changing culture, attracting external employees who fit with the culture
3 2 Hall & Nordqvist, 2008 Klein et al., 2005 12 Transparency Transparency needed, being transparent, sharing information
with other employees 4 4 Stewart & Hitt, 2012 Bammens et al., 2011 13 Reflecting Reflecting on (own) qualities, facing and confronting (e.g.
by Advisory Board, Supervisory Board) 4 2 Dekker et al. 2015 Stewart & Hitt, 2012
17 Flexibility Flexibility needed 0 1 Chittoor & Das, 2007
Songini, 2006
Enhancing the professionalization in the organization will lead to inserting practices that give more (1) specialization, (5) delegation, (6) formalization, (7) rationalization, and (8) structures. Although the respondents indicate that the practices should be associated with structure, from the results it is clear that structure can be seen as an umbrella term to indicate internal governance and/or operationalization changes, such as specialization, delegation, formalization, and rationalization. From the professionalization dimensions proposed by Eijssen (2015), i.e. specialization, delegation, formalization and rationalization, it is that (1) specialization is most noticed by the participants. The results indicate that the interviewees might recognize (1) specialization earlier then the other three dimensions of Eijssen (2015). However (5) delegation (6) formalizing and (7) rationalization are identified also often as practice for professionalization. Considering that attracting (1) specialists to the organization, (5) delegation of the operationalization are needed, where professions are assumed to operate according to principles antithetical to the nature of commercially oriented hierarchical bureaucracies (Barley & Tolbert, 1991; Greenwood et al., 2006; Malhotra et al., 2006). Professional management tends to develop more decentralized firms, whereas entrepreneurial management is associated with centralized companies (Songini, 2006).
In summary, the practices identified by family and non-family executives can be related to the traditional understanding of the professional management notion of the bureaucratic organization (Weber, 1968; Benveniste, 1987; Abott, 1988). They can further be related to the company growth theory, which is in favor of professionalization. Comparing the findings with those presented in Section 5.2.1, the practitioners practices are in line with how they define professionalization, although the amount of identified practices differs from the identified practices in this section.
5.2.3 The practitioners’ opinion about the and practices
Average grade family executives Average grade non-family executives Average grade family and non-family executives
(1) Non-family involvement in governance systems
Non-family CEO 4.00 4.30 4.15
Reducing of ownership 3.45 3.60 3.53
Family involvement in management team (reversed) 4.27 3.80 4.04
Reducing family involved in Advisory Board or
Supervisory Board 4.27 5.40 4.84
Non-family involvement in governance systems 4.0 4.28 4.14
(1) Financial control systems
Formalized financial goals and objectives 6.09 4.60 5.35
Use of budgets 6.36 6.20 6.28
Company evaluation systems 6.45 6.10 6.28
Firm performance evaluation system 6.45 6.10 6.28
Financial control systems 6.34 5.75 6.05
(2) Human resource control systems
Formal recruitment system/- goals 5.73 5.10 5.6
Formal training system 6.00 5.50 6.1
Personnel performance evaluation system 6.45 6.20 6.6
Human resource control systems 6.06 5.60 6.10
(3) Decentralization of authority
Delegation of control 5.82 5.60 5.71
Centralized individual decision-making (reversed) 5.09 4.78 4.94
Centralization of authority (reversed) 4.73 5.10 4.92
Decentralization of authority 5.21 5.16 5.19
(4) Top level activeness
Board and management activeness 5.82 5.40 5.61
Top level activeness 5.82 5.40 5.61
Table 9: Practices of professionalization (n=21)
