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Analyzing organizational performance of family and non-family businesses using the HPO framework

Many businesses in the world are family-owned. A family-owned business differs from other types of businesses in several ways, because it is composed of both a family and a business. A recurring question in management research has been: which type of business performs better, the family-owned or the non-family owned? An alternative question which in this respect can also be asked, in the light of the high performance organization (HPO) theory which has become popular these past years, is: which type of business is more likely to become and stay high performing, the family-owned or the non-family owned? To try to answer these questions, many studies have been done in which the performance of family firms was compared with firms that have no family ties, but these studies gave mixed results and conflicting opinions. The paper aims to discuss these issues.

  • Design/methodology/approach – It seems evident that a new research approach is needed. A way forward is to use the HPO concept which looks at the factors important for an organization to become an HPO. Thus, the research question which this study attempts to answer is: are there differences in performance between family and non-family businesses, and if so, can these be traced back to differences in the way these businesses deal with the factors of high performance? The research used the HPO questionnaire and
    interviews to collect data at Palestine family and non-family owned businesses.
  • Findings – The research shows that Palestine non-family businesses significantly outperform family-owned businesses. Family businesses thus seem “a living paradox.” Balancing family interest and business interest often requires a compromise between family and business goals. It seems that Palestinian family businesses focus more on family interest by putting the goal of survival and “keeping the business in the family” above (short-term) financial goals. Family businesses might also feel more that the company’s money is the family money, and as a result their investment and expenses strategies are more conservative thus missing possible
    economic investment opportunities.
  • Research limitations/implications – The study results add to the current debate in the literature about which type of business performs better, and at the same time they add knowledge because if there are differences these might be explained by the factors of high performance. In this vein, the study results also contribute to the literature on high performance, as the HPO framework has not been used before for this typeof comparative research.
  • Originality/value – The study results have practical value because they yield knowledge about the ways to organize a business so it can achieve high organizational results which is of great value to managers attempting to make their organizations perform better.
  • Keywords – High performance organizations, Organizational performance, Family businesses, Palestine
  • Paper type Research paper

Introduction: Analyzing organizational performance of family and non-family businesses using the HPO framework

Many businesses in the world are family-owned (Duh, 2010; Kraus et al., 2011). A family-owned business differs from other types of family businessbusinesses in several ways, because it is composed of both a family and a business. For instance, families and businesses exist for different reasons. The family’s primary concern is the care and raising of family members, while the business’ main concern is the production and marketing of goods and services.

However, although the family and the business are in principle separate institutions, each with its own members, goals, and values, they do overlap in practice. Therefore decision making in this type of business often involves a mixture of family and business values (Abuznaid, 2014). In addition, there is always competition between business and family: which comes first, the family or the business?Most families are accustomed to making sacrifices for the good of their businesses, they usually tolerate inconveniences and disruptions to family life.  however, sometimes the tension between business’ interests and family’s interests is so persistent and severe that the family has to decide which comes first.
A recurring question in management research has been: which type of business performs better, the family-owned or the non-family owned? (Kraus et al., 2011). An alternative question which in this respect can also be asked, in the light of the high-performance organization (HPO) theory which has become popular these past years (de Waal, 2012a), is: which type of business is more likely to become and stay high performing, the family-owned or the non-family owned? The answer to this question is interesting because it yields knowledge about the ways to organize and structure a business so it can achieve high organizational results, i.e., according to business or to family-owned principles. To try to answer this question, many studies have been done in which the performance of family firms was compared with firms that have no family ties, but these studies gave mixed results and conflicting opinions regarding the impact of the family connection (Duh, 2010).
It seems that the extant literature does not give conclusive evidence regarding the performance differences between family and non-family owned businesses. It therefore seems evident that to further investigate this issue, a new approach is needed. A way forward is to use the HPO concept which looks at the factors important for an organization to become an HPO. The HPO in this respect is defined as an organization that achieves financial and non-financial results that are exceedingly better than those of its peer group over a period of time of five years or more, by focusing in a disciplined way on that what really matters to the organization (de Waal, 2012a, b). Thus, the research question which this study attempts to answer is:

RQ1. Are there differences in performance between family and non-family businesses, and if so, can these be traced back to differences in the way these businesses deal with the factors of high performance?

This study used de Waal’s HPO Framework (de Waal, 2012a, b), as this framework in previous research has been validated and used in many settings, including Palestine where this study took place (de Waal and Sultan, 2012). The research was exploratory of nature, because de Waal’s HPO Framework had not been used in the context of family vs non-family owned businesses. Thus, an exploratory research method was deemed appropriate as we dealt with a new phenomenon in the research area of organizational improvement (Robson, 2002). The study results have both theoretical and practical contributions. They add to the current debate in the literature about which type of business performs better, and at the same time they add knowledge because if there are differences these might be explained by the factors of high performance. In this vein, the study results also contribute to the literature on high performance, as the HPO Framework has not been used before for this type of comparative research. The study results also have practical value because, as mentioned before, they yield knowledge about the ways to organize a business so it can achieve high organizational results which is of great value to managers attempting to make their organizations perform better. The remainder of this paper is structured as follows…

Read Analyzing organizational performance of family and non-family businesses using the HPO framework, published in Emerald Insight in PDF!

Marco Schreurs

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