Human resource management ± a survey of practices
within family and non-family firms

Renee S. Reid and                                                                 leading employers in West Germany, Japan...
Renee S. Reid and                ownership. Family businesses employing           and have greater turnover, more employee...
Renee S. Reid and                for competitive advantage gained through           Resource Management at Cranfield
John ...
Renee S. Reid and                Table II
John S. Adams                    Characteristics of owner/director with HRM resp...
Renee S. Reid and                Table IV
John S. Adams                    Company characteristics ± employees and turnove...
Renee S. Reid and                first'' ethos as opposed to a ``business first''       Significantly higher numbers of fa...
Renee S. Reid and                Figure 1
John S. Adams                    Percentage of annual salaries and wages spent o...
Renee S. Reid and                Table VII
John S. Adams                    Family business characteristics (n = 133)
Renee S. Reid and                need for implementing sound governance               Business advisors, educators and tra...
Renee S. Reid and                Dunn, B. (1995), ``Success themes in Scottish            Leon-Guerrero, A.Y., McCann III,...
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Organizational Behavior


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Organizational Behavior

  1. 1. Human resource management ± a survey of practices within family and non-family firms Renee S. Reid Management Institute, Faculty of Business & Management, University of Ulster, Shore Road, Newtownabbey, Co. Antrim, Northern Ireland John S. Adams Management Institute, Faculty of Business & Management, University of Ulster, Shore Road, Newtownabbey, Co. Antrim, Northern Ireland Keywords the field of family business research is Family firms, Human resource management and maturing. Human resource management, SMEs In a comprehensive review of family Small- to medium-sized enterprises Ulrich and Lake (1990, p. 40), state that the business literature and publications Desman Abstract most enduring and the most difficult thing to and Brush (1991) reported that only 4 per cent Much of the literature relating to achieve is ``gaining competitive edge from of the 202 citations reviewed dealt with the human resource management the improved organisational capability of development of human resources through (HRM) has attempted to demonstrate that the ``Human people''. They define ``organisational education and training. Additionally the field resource'' is the most valued capability'' as ``a business's ability to of HRM is an especially sensitive area for asset in a company. Large establish internal structures and processes companies have revolutionised family businesses; having been criticised for that influence its members to create their approach to the training and engaging in nepotism and in some cases organisational-specific competencies and development of their personnel in failing to provide management training for order to maximise their thus enable the business to adapt to changing family members. Therefore, the necessary ``competitive edge''. Hotly customer and strategic needs''. debated is whether investment in Human resource management (HRM) has, starting point for these family businesses is ``good HRM'' is linked to until recently, been seen as inappropriate for to identify their current HRM practices in commercial success. However, order to identify any strengths and very little is known about HRM the smaller firm and consequently little practices within the small- to research on the practices within the small weaknesses which may exist. medium-size business (SME) and firm sector have been documented. Storey The purpose of this survey is twofold: first, even less is known about the (1994), highlights ``The Bolton Report'' to identify HRM practices within the SME practice within a family business. (Bolton, 1971) as the first major survey that (20-100 employees) population in Northern This survey describes the HRM practices of SMEs (both family stated small firms required different and Ireland and second, to compare practices and non-family businesses) in specific attention in the areas of employment, between ``family'' and ``non-family'' Northern Ireland. Comparisons trade and industrial policy. enterprises within the Northern Ireland SME between the groups are made and According to Hughes (1989), small firms are market. The survey provides the first truly findings suggest that family businesses practice HRM more likely than large ones to take on young comprehensive examination of HRM differently than their non-family people and people without qualifications. practices within the SME sector in Northern counterparts. Implications for the This factor is becoming more relevant today Ireland. Additionally, it will set these training and development of these and, therefore, makes the study of small firm two groups question whether findings in the context of HRM practices family businesses need to be employment features and HRM practices in identified by both HRM researchers in family treated as a ``special case''. particular, a necessity if small- to medium- and non-family enterprises. enterprises (SMEs) are to maximise their As previously stated, the search by SMEs ``competitive edge'' using best practice HRM. for a ``competitive edge'' through more effective utilisation of human resource HRM and family owned and controlled firms The authors would like to practices appears to put family firms, in Attention has been drawn by several reports thank Dr Barbara Murray, (Ward, 1987; Leach, 1990, 1994; Dunn, 1995; particular, under even greater stress. Family Director of the Centre for businesses may be pressured at times to Family Enterprise at Glasgow Reid et al., 1999) on differences which may Caledonian University, for all exist between family businesses and non- employ, promote or end employment for close her support and advice. family businesses. A significant proportion or extended family members. It is also of SMEs in the UK are family firms, yet extremely difficult for a CEO who is the Cromie et al. (1995) and Dunn (1995) argue father, mother or uncle to practise HRM that research into the UK's family business is management objectively with family Journal of European Industrial in its infancy. Elsewhere, such as the USA, members. Training 25/6 [2001] 310±320 The research register for this journal is available at The current issue and full text archive of this journal is available at # MCB University Press [ISSN 0309-0590] [ 310 ]
  2. 2. Renee S. Reid and leading employers in West Germany, Japan, John S. Adams Current HRM issues and the USA spend up to 3 per cent of Human resource management ± a survey of practices within Storey (1989) identified that HRM models, turnover per annum on training, on average family and non-family firms whether British or American, commonly employers in the UK spend only 0.15 per Journal of European Industrial assert that employees should be regarded as cent''. This statistic implies a vicious cycle ± Training valued assets and that there should be an SMEs have to generate jobs to get support ± to 25/6 [2001] 310±320 emphasis on commitment, adaptability and generate jobs requires a competitive edge. consideration of employees as a source of Pfeffer's (1998) book The Human Equation: competitive advantage. Thus, the theory of Building Profits by Putting People First ``resourceful humans'' may more accurately suggests that the impact on performance is be posited. Edwards (1987) and Storey (1989) more pronounced when complementary suggest there is a need to further understand groups (or ``bundles'') of HR practices are the role of line managers in operationalising used together, and that this conclusion holds HRM. These authors highlight survey good for all organisations and industries evidence suggesting that personnel managers irrespective of their context. This may be are not generally involved in matters of appealing to the ``in-house'' SME types, strategic importance, and additionally, it however, Guest (1992) remarks that these seems they are also not always involved in ideas might be ``right enough to be implementation. This lack of involvement of dangerously wrong''. Pfeffer does identify these line managers at key stages makes it seven practices of successful organisations, extremely difficult for them to manage the which reduces his earlier (Pfeffer, 1994) list of human resource effectively. In the family 16 (see Table I). business setting, where many companies are A significant problem with the various dominated by the CEO, the involvement of lists of ``best practice'' HRM is that there are line managers in HRM strategy is perhaps inconsistencies between studies, with some even less likely. ignoring one factor but including another. A study by Atkinson and Meager (1991) For example, despite the importance found that, not surprisingly, the ``owner- attached to employment security by Pfeffer, proprietor'' as a distinct managerial position this is not included in quite a number of the diminished slowly with firm size. Following other lists (e.g. Delaney and Huselid, 1996; this, the appointment of specialist managers, Wood and de Menezes, 1998). Also, ``best (in particular personnel managers) were practice'' is largely a wish list of descriptors found among only 12 per cent of the largest and may seem unreal or unattainable in firms (50 plus employees). These studies some SMEs. suggest that many of these companies prefer Although Pfeffer encourages working with to undertake their own ``in-house'' training unions, he does not suggest the format this and personnel practices. working relationship should take. However, Huselid (1995) found that extensive he argues that, because of improved and open recruitment and training procedures, communication, co-operation with employee incentive compensation and increased representatives can only have positive employee involvement were associated with outcomes. higher levels of turnover, higher productivity and better financial performance. Family businesses ± a special case? Family business should be regarded as a Current trends special case regardless of size, as the long- Minehan (1996) sees a new role of HRM in term commitment of the CEO and family that eligibility for government assistance members involved in management require will be further tied to employment and job the balance of not only management but creation. The influx of unskilled and low- skilled workers will focus attention on Table I improving the quality of the workforce thus HRM practices of successful firms necessitating more emphasis on in-house Employment security Selective hiring training and development programs with Self-managed High compensation contingent more interest in school-to-work programs teams/team on organisational and other business-education partnerships. performance Keep (1987) uses statistical evidence to re- Extensive training Reduction of status differences enforce this argument suggesting that the UK Sharing of information is lagging behind in training provision even at the macro level. He points out that ``while Source: Pfeffer (1994) [ 311 ]
  3. 3. Renee S. Reid and ownership. Family businesses employing and have greater turnover, more employees, John S. Adams family members need to address both these and perhaps three or more participating Human resource management issues in many cases. Owing to the unique family generations implying ``family'' could ± a survey of practices within family and non-family firms organisational structure of the family be expected to considerably influence Journal of European Industrial business HRM policies may require greater operations. Mintzberg and Waters (1990) Training clarity in the areas separating ownership and suggest that the formalization of the family 25/6 [2001] 310±320 management. Astrachan and Kolenko (1994) business is an inevitable result of growth. suggest that limited organisational capability Company growth spurs change in may be one key factor contributing to the management practices, transforming the short life span of family firms in an ``small, personalized, flexible, knowledge- increasingly competitive global market. based firm into a larger, more formal, Cascio (1991) reports ``people costs represent economically powerful corporation''. In later approximately 55 per cent of operating stages of firm development, the utilisation of budgets across all US industries, it is business-focused practices are increasingly important that there be more research focus used and are more dependent on business on organisational capability and human growth. resource practices in family businesses''. It Leon-Guerrero et al. (1998) hypothesised should also be remembered that family that practices, such as formal employee businesses are the predominate form of reviews, incentive compensation plans, business not only in the USA but also in written job descriptions, training and career the UK. development plans are utilised more Taguiri and Davis (1992), Holland and extensively as family businesses grow and Boulton (1984) and Beckhard and Dyer (1983) develop. suggest that relationships between the Many approaches to strategy begin with management of the firm and the family defining the mission of the firm and the increase the complexity of organisational development of a mission statement (Harris and management problems. In particular, et al., 1994). They further suggest that the Astrachan and Kolenko (1994) suggest that presence of a family mission statement is the this special relationship between family and fundamental starting point in strategy firm creates a volatile situation concerning formulation because it sets out the tasks such as employee selection, expectations of the owners (who are related compensation, appraisal and personal to each other) in terms of their expected development. They also suggest that family return on investment. It also represents the businesses more frequently use employee most visible and public part of a strategic reviews, compensation plans, written plan, specifying the foundation for priorities, employee policies, and written job resource utilisation, and organisational descriptions than written succession plans or structure. formal entry requirements for family Leon-Guerrero et al. (1998) reported results members. Yet the latter are the very means that suggested in ``higher revenue businesses by which family recruitment, selection and family-focused practices diminished, promotion and exclusion are determined! whereas utilization of business-focused Lansberg (1983) emphasises strongly (as practices increased''. Also, the utilisation of does Ward, 1987), that effective management formal business practices, such as employee in family businesses requires the reviews and incentive compensation plans, establishment of structures and processes was significantly different between revenue which link management and ownership. The categories, although that practice was not establishment of these reduce conflict and related to the number of family generations. can be especially helpful in the area of HRM It is therefore, again, more meaningful to to improve the practices of selection, explore the stage of family ownership and to compensation and equity, appraisal, training expect more formality as ownership becomes and development, and promotion. It also more complex, as in the case of sibling establishes a firm basis for decision making partnerships and cousin consortiums that can be understood and adhered to (Gersick et al., 1997). equitably by all employed family members. Astrachan and Kolenko's (1994) study of Leon-Guerrero et al. (1998) state that over 600 family firms found that employee researchers to date have not offered reviews, compensation plans, etc., were used extensive evidence linking specific practices significantly more frequently in family firms with the development of the family and the for non-family employees than similar HRM business. The stage of evolution of the family practices for family members. business is thought to be of significant They found positive correlation's between influence. A family business at a relatively HRM practices and gross firm revenues. mature development point would be older Their results also support prior arguments [ 312 ]
  4. 4. Renee S. Reid and for competitive advantage gained through Resource Management at Cranfield John S. Adams effective use of HRM practices. These University examining HR practices within Human resource management ± a survey of practices within findings lend weight to the argument that as larger enterprises (> 100 employees). family and non-family firms companies grow the structures required to Appropriate amendments were made in Journal of European Industrial support them become more formalised and order to reflect areas of relevance to a Training complex. smaller enterprise, for example, the 25/6 [2001] 310±320 Cascio (1995) suggests that larger non- exclusion of assessment centres when family firms are now approaching succession recruiting employees. The questionnaire was planning by defining more generic divided into six sections examining CEO competencies rather than specific knowledge characteristics, company characteristics, and skills. He also states that career HRM policy, staffing practices, employee development is being left to individual development and family employee practices. responsibility with no promises regarding future opportunities in the firm. The family Data collection firm, he asserts, is employing a range of Questionnaires were mailed to 1,360 SME strategies to deal with succession from businesses in Northern Ireland. A total of 230 individual grooming at a young age to letting responses were received of which 219 were siblings choose their own leader or leaders. usable (16 per cent). Five respondents This may signify much more flexible actually employed between 15-18 employees approaches to HR matters than earlier and, although this was less than the required ideas about nepotism in family firms number of 20 employees, they were included suggested. in the analysis. Family firms accounted for 61 In the light of the perceived importance of per cent (n = 133) and non-family firms 39 per HRM practices and ``competitive edge'' and cent (n = 86) of the returns. No follow up was the appearance that family ownership and carried out to increase returns as the rate size of firm may be factors effecting outcome, was considered reasonable ± being based on this paper will explore the HRM practices of the total population of SMEs in Northern SME family firms in Northern Ireland, Ireland. No effort had been made to ensure comparing them to the practices reported in ``family firm'' representation as previous their non-family counterparts. studies (Cromie et al., 1995) suggested that the majority of all enterprises are family owned/managed and the returns for this Methodology survey confirmed these figures. The questionnaires were electronically scanned Population using the aforementioned Data Capture The population base comprised all companies Software and the responses analysed using based in Northern Ireland employing SPSS for Windows (Version 6). between 20-100 employees (referred to as the small- to medium-sized enterprise SME employer). The definition used to distinguish a Analysis and results business as a family firm was one utilised in Basic descriptive statistics and chi-square a previous family business survey (Reid et tests of independence were utilised to al., 1999) that ``the family'', own more than 50 examine differences (if any) between family per cent of the shareholding of the business and non-family enterprises. The results on a and participate in the management of the per section basis are presented as follows. business. Results section 1 ± CEO/director Questionnaire design characteristics The survey was designed using automated Table II summarises the characteristics of Design and Capture software (FORMIC 3.3). the owner or director who has responsibility This package allows for automatic direct data for HRM. In family businesses, 48 per cent of capture of questionnaire returns via the sample were owners and in non-family scanning. businesses only 16 per cent were owners. The questions comprised 47 fixed and Additionally, a higher percentage (81 per multiple-choice answers in order to assist in cent) of family businesses had male owner/ the process of automated data capture. directors than non-family businesses (71 per Content of the questionnaire was designed by cent). the HRM Research Group, within the Faculty The age structure of the owner/director in of Business and Management at the family businesses highlights the fact that University of Ulster-based on the Cranet owners of family businesses tend to remain Survey on International Strategic Human in control for much longer (average tenure 24 [ 313 ]
  5. 5. Renee S. Reid and Table II John S. Adams Characteristics of owner/director with HRM responsibility Human resource management ± a survey of practices within Family business (%) Non-family business (%) family and non-family firms Yes No Yes No Journal of European Industrial Training Are you the founder 48 52 16 83 25/6 [2001] 310±320 Male Female Male Female Gender of owner/director with HRM responsibility 81 15 17 28 Base n = 133 n = 86 Age (years) < 25 26-30 31-40 41-50 51-60 61-70 71+ Age of owner (family business) 2% 4% 21% 34% 30% 8% 1% Age owner/director with HRM responsibility (non-family business) 0% 7% 30% 37% 21% 5% 0% Family business (%) Non-family business (%) Yes No Yes No Do you have a university degree 33 67 63 37 Male Female Male Female Have you a professional qualification 32 68 44 56 years (Dunn, 1995)) than their non-family Family businesses were more highly counterparts. The non-family owner/ represented in the 26-50 employee group (74 directors dominated the age range 26-50 years per cent) whereas, non-family businesses while the family group dominated the 51-71+ were larger in that 24 per cent of non-family range. businesses employed 51-75 employees in A substantially higher percentage of the comparison with their family counterparts non-family business owner/directors (63 per (14 per cent). In terms of turnover however, cent) had a university degree compared to family companies were larger with 84 per the family group (33 per cent). The difference cent of the sample producing turnovers in was not as marked when examining those excess of £1 million per annum against 74 per who held a professional qualification ±32 per cent of non-family companies. These higher cent of family owner/directors compared to turnover figures could reflect the higher 44 per cent of non-family owner/directors. percentage of family companies from the ``other manufacturing'' sector. Results section 2 ± company Labour costs for non-family businesses characteristics were much higher than family businesses Table III details company characteristics and (see Table V). both family and non-family businesses, as A total of 72 per cent of non-family expected, were most strongly represented in businesses reported that more than 20 per the service sector. However, a higher cent of last year's turnover or revenue budget percentage of family businesses (32 per cent) accounted for labour costs whereas for family to non-family businesses (14 per cent) were businesses the percentage was 43 per cent. represented in ``other manufacturing''. This too could also be a reflection of the The breakdown of businesses by employee respective sectoral breakdown between size and turnover is given in Table IV. family and non-family firms. Table III Company chacteristics ± sector Family Non-family business business Main sector of industry or services you operate (%) (%) Agriculture, hunting, forestry, fishing 4 5 Energy and water 0 0 Chemical products; extraction and processing of non-energy materials 3 1 Metal manufacturing, mechanical, electrical and instrument engineer 9 9 Other manufacturing (food, drink, tobacco; textiles, paper, etc.) 32 14 Service sector 47 51 Public sector 4 19 [ 314 ]
  6. 6. Renee S. Reid and Table IV John S. Adams Company characteristics ± employees and turnover Human resource management ± a survey of practices within Total number of employees Company turnover family and non-family firms Family business Non-family business Family business Non-family business Journal of European Industrial Training (%) (%) (%) (%) 25/6 [2001] 310±320 15-25 10 12 Under £100,000 0 1 26-50 74 62 £100,000-£999,999 16 23 51-75 14 24 £1-£5 million 65 57 76+ 2 2 £5 million+ 19 17 Table V Company characteristics ± labour costs Percentage of the last financial year's turnover or revenue budget Family business Non-family business accounted for by labour costs (%) (%) 1-10 19 12 11-20 36 14 More than 20 43 72 Results section 3 ± human resource policy conditions. This again may reflect the Table VI reports the results of the companies' sectoral breakdown, additionally, it may also human resource policies. Where appropriate underline the view that family firms tend to significant chi-square results are reported. be introverted and ``family centered''. It also Significantly higher numbers (2 = 5.19; highlights an issue that Pfeffer (1998) raised 1df; p 0.05) of non-family businesses when he recommended that firms should reported having a personnel or HRM become more open with their information department/manager. Less than 50 per cent and negotiations with trade unions was one of both family and non-family businesses of the steps that he recommended. reported that the head of HRM did not have a Significantly higher numbers (2 = 18.80; place on the board. These findings support 1df; p 0.01) of non-family businesses had a those of Edwards (1987) and Storey (1989) who mission statement. Ward (1987) saw this as pointed out that HRM/personnel managers one of the first public signs that family firms are generally not involved in matters of should adopt to indicate a more strategic strategic importance. It also supports family approach to their business. firms research (Ward, 1987) that many CEO's Significantly higher numbers of non- in family firms tend to fight relinquishing family businesses kept records on disability control and highlights the lack of division (2 = 10.16; 1df; p 0.01), ethnic origin between ``ownership'' and ``management''. (2 = 4.22; 1df; p 0.05), gender (2 = 9.13; 1df; Significantly higher numbers (2 = 9.73; p 0.01) and religion (2 = 7.35; 1df; p 0.01) 1df; p 0.01) of non-family businesses and once again this may indicate the fact that negotiated with trade unions on pay and many family firms suffer from a ``family Table VI Personnel ± human resource policy Family business (%) Non-family business (%) Yes No Yes No Does your organisation have a personal or HRM department 40 60 55 45 Does the head of the HRM department have a place on the board 41 46 36 55 Do you negotiate with trade unions on pay and conditions 10 88 28 72 Does your organisation have: A mission statement 45 47 77 20 A business plan 65 29 77 17 A personnel/HRM management plan 26 63 34 52 If you have a business plan ± what stage is the person responsible for HRM involved in its development: From the outset 47 52 On implementation 7 14 Not consulted 15 12 [ 315 ]
  7. 7. Renee S. Reid and first'' ethos as opposed to a ``business first'' Significantly higher numbers of family John S. Adams ethos (Reid et al., 1999). businesses used flat rate and individual Human resource management Only 26 per cent of family and 34 per cent of bonus pay and reward mechanisms (2 = 3.99; ± a survey of practices within family and non-family firms non-family businesses reported having a 1df; p 0.05) for manual workers than non- Journal of European Industrial personnel/HRM management plan. Of those family businesses. This could be due to the Training companies who had a business plan only 47 high percentage of family firms in ``other 25/6 [2001] 310±320 per cent of family and 52 per cent of non- manufacturing''. Significantly higher family businesses reported that the person numbers of non-family businesses used responsible for HRM was involved in its merit/performance related pay (2 = 3.92; 1df; development. p 0.05) as a pay reward mechanism for their Interestingly, both family (34 per cent) and management than their ``family'' non-family (40 per cent) businesses counterparts. The findings suggest that many considered the major challenge for HRM in of the non-family firms have put in place their businesses over the next five years to be HRM structures and policies ahead of their ``Training and development''. ``family firm'' counterparts. Results section 4 ± staffing practices Results section 5 ± employee development Managerial vacancies in both family (65 per Family businesses reported spending less of cent) and non-family (72 per cent) businesses their annual salaries and wages bill on were generally filled by ``advertising in training than their non-family counterparts newspapers nationally''. Significantly higher (see Figure 1). Even though both family and numbers of non-family businesses (2 = 4.46; non-family enterprises reported that 1df; p 0.05) than family businesses reported ``training and development'' was their biggest using references as a selection method. HRM challenge over the next five years, Following this 54 per cent of family investment in training does not appear to be businesses reported recruiting managerial taking place. These results support Keep's vacancies internally, while the percentage (1987) findings that the UK is lagging behind for non-family businesses was 44 per cent. when it comes to paying for training Significantly higher numbers of non- provision. Family enterprises also reported fewer family businesses (2 = 5.08; 1df; p 0.05) had employees had been on training activities been involved in a take-over by another within the last year (see Figure 2). organisation lending support for the findings Significantly higher numbers of non- of Dunn (1995) and Reid et al. (1999) that family businesses (2 = 6.10; 1df; p 0.05) family businesses prefer to keep their reported systematically analysing employee businesses in family ownership. Similarly, training needs than family businesses. This significantly higher numbers of non-family suggests that a greater number of non-family businesses had used appraisal systems for enterprises have already implemented many managers (2 = 19.33; 1df; p 0.01) and of the HRM policies and practices suggested clerical staff (2 = 18.93; 1df; 9 0.01) than by the literature as ``appropriate''. family businesses. This finding, along with more in-depth record keeping by non-family Results section 6 ± family employee businesses, would suggest a more ``business practices first'' ethos for the non-family group (Reid et Table VII reports on the characteristics and al., 1999). practices that family businesses operate The following findings continue to lend regarding family employees. It is noticeable support for the ``business first'' approach of that founders who have handed over non-family businesses. Significantly higher management to the next generation have not numbers of non-family businesses reported relinquished their majority shareholding at that immediate superiors (2 = 6.44; 1df; the same time. Also, there is evidence that p 0.05) and employees (2 = 7.65; 1df; the majority of firms are in transition from p 0.01) contributed to the appraisal process founder to next generation (62 per cent of than family businesses. Significantly higher first generation having majority numbers of non-family businesses used shareholding). Few of these reported having appraisal systems for individual training completed much of the succession work needs (2 = 11.75; 1df; p 0.01); organisational required during this transition period, i.e. training needs (2 = 9.96; 1df; p 0.01) and for ownership and control. Therefore, in organisation of work (2 = 4.59; 1df; p 0.05). transition this struggle between old and new These figures appear to support the view of runs with tension affecting management Astrachan and Kolenko (1994) that limited practices throughout the organisation. organisational capability may be a feature of Of family businesses, 89 per cent reported some family businesses. that they intended to retain the current level [ 316 ]
  8. 8. Renee S. Reid and Figure 1 John S. Adams Percentage of annual salaries and wages spent on training Human resource management ± a survey of practices within family and non-family firms Journal of European Industrial Training 25/6 [2001] 310±320 Figure 2 Percentage of employees on training activities within last year (which was high in many businesses) of businesses reported using a formal family members working in the business. Of performance system to assess family family companies, 65 per cent stated that members. Of that 27 per cent only 38 per cent family members in management roles report that the remuneration package the received management training. This may family member receives is based on that reflect the fact that siblings in many family appraisal. This would endorse the findings of businesses receive their training in the Astrachan and Kolenko (1994) that family family business rather than availing of firms tend to offer training and utilise outside experience. Only 27 per cent of family appraisal systems, etc., for employees more [ 317 ]
  9. 9. Renee S. Reid and Table VII John S. Adams Family business characteristics (n = 133) Human resource management ± a survey of practices within 1st (%) 2nd (%) 3rd (%) 4th (%) 4th (%) family and non-family firms Journal of European Industrial Which generation currently has majority shareholding 62 20 13 2 0 Training Which generation currently manages the company 52 27 12 4 1 25/6 [2001] 310±320 Numbers of family members working in the business 1 2 3 4 4 How many family members work directly in the business 13 32 20 12 11 Yes (%) No (%) Is it your intention to retain the current level of family members working in the business 89 9 Does the company ensure that family members in management roles receive management training 65 28 Is a formal performance system used to assess family members 27 65 If yes, is the remuneration package they receive based on this appraisal 38 62 often than they do for family members. It also compensation more difficult in family firms. highlights Ward's (1987) view that for a This survey clearly demonstrates that some family firm to professionalise itself, it is of the family firms need to professionalise important to separate ownership and their procedures regarding HRM, management roles. The fact that particularly in relation to the introduction of remuneration packages are not based on family members into the business. As performance can only create difficulties Lansberg (1983) and Ward (1987) recommend, within the business for other non-family separating the reward for ownership and the management members. Ward also suggests reward for management of the business will that remuneration could be made through help clarify how the family extract wealth ownership for family members and that from the business. Ensuring that payment for the job should be based on remuneration for non-working family market value. The implications for so many members (this may take the form of perks) of these companies who have not addressed derives from the ownership ``pot'' and that the control issue, i.e. leadership and working family members who have market- ownership and who are in the transition based salaries coming from the management period, is that they may experience ``pot'', will assist in establishing sound tremendous difficulty in trying to establish structures that may mitigate intra family unified management practices necessary to firm tensions. Even when the family owners' achieve sound organisational capability. mission is clearly a ``family first'' one, remuneration must be managed realistically. Although Mintzberg and Waters (1990) Discussion suggest that all companies will Overall the findings would generally support professionalise with increasing size, the those of Astrachan and Kolenko (1994), that family firms in this study have tended to family businesses, perhaps partly due to operate their HR practices in a more their limited organisational capability, have distinctive fashion compared to their non- lagged behind their non-family counterparts family counterparts. This is characterised by in implementing HRM policies and practices. informality despite the push for However, many are clearly in transition and formalisation typical of larger sized firms to the new generation may have plans to change improved efficiency. things, when they get power. As Cascio (1991) Many of the CEO characteristics of the points out, if ``people costs'' represent family firm group indicate that succession approximately 55 per cent of operating has already taken place with respect to budgets, it is important that organisational handing over management responsibilities, capability and HRM practices in family firms (i.e. ``management'' succession). However, develop in line with their non-family the power base in many cases (i.e. opposites. shareholding) is still being held by the Astrachan and Kolenko (1994) also point previous generation (i.e. the ``ownership'' out that the volatility created by the overlap succession is not yet complete). The majority of family, business and ownership makes of these companies will be undergoing total implementing employee selection and succession within the next ten years and the [ 318 ]
  10. 10. Renee S. Reid and need for implementing sound governance Business advisors, educators and training John S. Adams and organisational structures and processes organisations need to be aware of the Human resource management ± a survey of practices within is necessary to aid the transitional process. differences that exist between family and family and non-family firms Lack of management training provision non-family businesses when designing Journal of European Industrial being provided to family members (only 65 training interventions. HRM in a family Training per cent receiving such training) in these business, the authors believe, needs to be 25/6 [2001] 310±320 companies may also adversely effect treated as a ``special case'' due to the complex successful transition of each generation if not relationship which exists between ownership fully prepared for the giving and receiving of and management. Some family members power. HRM practices appear to be one area have share ownership and work in the where family business carry out practices business, other family members may have differently to their non-family counterparts. only shareholding, while others are involved Whether their practices are more or less only in management. Interventions, successful requires further enquiry. therefore, need to address the perspective of Many siblings entering the family business all groups. Additionally, the reported within the next ten years will have the operating practices of family business benefits of tertiary education, Gersick et al. owners in this study support those from (1997) (many of whom will be MBA previous studies suggesting that they tend to graduates), and this may offset the lack of practice HRM differently (for their formal management training. Through their employees) than their non-family education and exposure to peer group counterparts. These issues are all extremely practices these siblings may perhaps be important for training providers to be aware aware of the need to professionalise of when attempting to marry HRM management in their businesses. interventions within the complex, The fact that many family businesses are introverted nature of the family business. often viewed as ``introverted'' would appear to have some support from these findings. References Pfeffer's argument for openness and freedom Astrachan, J.H. and Kolenko, T.A. (1994), ``A of information in, for example, negotiating neglected factor explaining family business with trade unions and the keeping of records, success: human resource practices'', Family has found more support within the non- Business Review, Vol. 7 No. 3, pp. 251-62. Atkinson, J. and Meager, N. (1991), Putting the family group. Training in Enterprise: The TECs and Small Caution should possibly be exercised in the Business Training Activities, Institute of interpretation of some of the findings Manpower Studies, Brighton. presented here, as the sectoral breakdown of Beckhard, R. and Dyer, W.G. (1983), ``Managing the companies, in particular the high continuity in the family-owned business'', numbers of family firms in manufacturing, Organizational Dynamics, Vol. 12, pp. 5-12. may partially explain some of the differences. Bolton, J.E. (1971), Report of the Committee of Furthermore, the higher turnover and the Inquiry on Small Firms, CMND, 4811, HMSO, smaller company size (employee numbers) of London, in Storey, D.J. (Ed.), Understanding the family firm group may indicate the Small Business Section (1994), Routledge, differences that are sectorally-based rather London and New York, NY. than simply due to ownership. Cascio, W.F. 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