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Paper Presented at USASBE 2011 (Hilton Head, SC)

“RULES OF CONDUCT”: APPLYING DEFERNCE AND DEMEANOR TO UNDERSTAND STATUS INCONSISTENCY AND ROLE CONFLICT IN FAMILY FIRMS. Paper Presented at USASBE 2011 (Hilton Head, SC) Diana M. Hechavarria, Amy Ingram, Jeremy Woods, Charles Matthews, Sidney Barton Department of Management

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Paper Presented at USASBE 2011 (Hilton Head, SC)

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  1. “RULES OF CONDUCT”: APPLYING DEFERNCE AND DEMEANOR TO UNDERSTAND STATUS INCONSISTENCY AND ROLE CONFLICT IN FAMILY FIRMS Paper Presented at USASBE 2011 (Hilton Head, SC) Diana M. Hechavarria, Amy Ingram, Jeremy Woods, Charles Matthews, Sidney Barton Department of Management College of Business University of Cincinnati

  2. What Is a “Family Business/Firm” • Complex and vary over a range of characteristics (Chua et al., 1999; Sirmon & Hitt, 2003). • Small/large, old and established/start-ups, privately owned/publicly traded, etc. • Many different definitions in the literature. This paper uses the following definition: • Family members must have a controlling ownership interest. • And be actively involved in the business at the strategic level.

  3. Why are Family Firms of Interest? • About one-third of all start-ups in the United States are based on people related by marriage or kinship (Ruef, Aldrich, & Carter, 2003; Matthews, Schenkel, Hechavarria, 2009). • Estimates consistently suggest that over 80% of all businessesin the United States are closely held family businesses, • Employ over 60% of the U.S. workforce, • Contribute over 60% of the nation’s gross domestic product (GDP) (Astrachan & Shanker, 2003). • Family-owned businesses are the dominant business types in many other countries around the world, including Australia, Brazil, Canada, Chile, Finland, Germany, Italy, Sweden, and the United Kingdom (Family Firm Institute, 2005).

  4. How Can Family Firms Best Compete? • Relationships are a potential source of strategic advantage for family businesses (Milton, 2008). • Both Agency Theory (Fama & Jensen 1983) and Stewardship Theory (Davis et. al 1997) posit that altruistic impulses among family members lower agency costs. • The social complexity of family ties also suggests that these reduced agency costs can be a sustainable source of competitive advantage (Barney, 1991; Poza, 2010).

  5. Why Doesn’t This Happen? • In actuality, family ties do not always produce the altruistic benefits purported by Agency Theory, Stewardship Theory and RBV. To leverage family relational ties, the top management team has to optimally balance their family and business statuses by appropriately expressing their roles. • The handling of topics such as compensation, promotion, and ownership stakes can often inflame underlying family tensions such as feelings of not being taken seriously, the need for parental love, lack of trust, and favoritism (Astrachan & McMillan 2003). • In dysfunctional situations, these challenges can lead to extreme relationship conflict between family members – causing business liquidation (Astrachan & McMillan 2003), or systematic nepotism – causing chronic firm underperformance (Chua, Chrisman, & Bergiel 2009).

  6. Some of the Existing Literature on Conflict in Family Businesses • Thomas’ conflict management strategies of collaboration, accommodation, compromise, and competition in the context of family business (Thomas 1992; Sorenson 1999). • The relationship of control concentration, participative decision making, and altruism in family firms to levels of process, task, and relationship conflict (Kellermanns & Eddleston 2004; Eddleston & Kellermanns 2007; Eddleston, Otondo, & Kellermanns 2008). • Relationship conflicts between and among next generation family members and prior generation family members (Handler 1991; Davis & Harveston 1999; Davis & Harveston 2001; Marshall, Sorenson, Brigham, & Wieling 2006). • The specific relationship conflicts which can arise in certain types of family relationships, such as conflicts between marriage partners (Foley & Powell 1997; Danes & Olson 2003; Ehrlich & Bianchi 2006) and conflicts between fathers and sons and fathers and daughters (Haberman & Danes 2007). • The types of underlying conflicts which can bleed over from family roles to business roles (Astrachan & McMillan 2003).

  7. Deference and Demeanor • Impression management: considering how people present positive impressions and attempt to avoid embarrassment or contradiction. (Goffman, Hochschild). • The Nature of Deference and Demeanor (Goffman, 1956) • Defines demeanor to be the way a person acts (character) , and deference as the respect and/or reaction another person has toward that behavior. • These actions are influenced by "rules of conduct" that govern an individual's identity and encourage him or her to act according to cultural norms.

  8. Status Inconsistency and Role Conflict • Through the display of deference and demeanor identities are formed by individuals acting according to a certain status(a collection of rights and duties) and role (a collection of expected behaviors) and by gaining feedback on their demeanor through the deference of others. • BUT--- what if there is incongruence between “rules of conduct” between simultaneously held statuses/roles? • Status inconsistency • Role conflict

  9. “Rules of Conduct” for Family Firms CONFLICT Family “rules of conduct” Firm “rules of conduct” Sweet Spot: ability to manage incongruent group demeanor & deference

  10. Propositions P1: When role expressions of deference and demeanor to family status are valued over deference and demeanor to business status in the context of the firm, the probability of diminished organizational performance increases. P2: When role expressions of deference and demeanor to business status are valued over deference and demeanor to family status, the probability of  interpersonal family conflict increases.

  11. Conflict Management Strategies for Family Business Role Conflicts Proposition 2 High Business Role Deference & Demeanor Low Proposition 1 Low High Family Role Deference & Demeanor

  12. Key Strengths • Deference and Demeanor are identifiable behaviors which nearly all individuals engage in when interacting on a regular basis • These behaviors are often noticeably different for family status/role versus business status/role. • Given these discernable differences, deference and demeanor may be useful constructs for explaining when and why conflict occurs in family business. • Deference and Demeanor are easily understandable and adjustable behavior which lend themselves to practitioner prescriptions.

  13. Key Challenges • How to relate deference and demeanor, used in this paper to explain relationship conflict, to the rest of the nomological network of theory on conflict (task/process/relationship, functional/dysfunctional, competing/avoiding/ accommodating/cooperating/compromising). • How to relate deference and demeanor to some of the major topics of interest for family business scholars & practitioners (succession planning, non-family organizational members, family members without an active role in the business). • How to consistently measure high/low deference and demeanor in interactions between family member pairs (spouse-spouse, parent-child, sibling-sibling). • How to link this measurement back to discernable performance differences relevant for agency theory/stewardship theory/RBV analysis of family firm competitiveness.

  14. Next Steps • Theoretical Paper? • Case Study? • Survey Research?

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