The Contribution of Leadership Style and Practices to Family and Business Success.(contains bibliography)(Industry Overview)

Based on Dyer's (1986) study of family business cultures, this study derives five approaches to leadership: participative, autocratic, laissez-faire/mission, expert, and referent. It argues that participative, expert, and referent leadership should produce positive outcomes for the business and the family, and high levels of employee satisfaction and commitment. It also argues that autocratic and laissez-faire/mission leadership should be associated with relatively negative outcomes for the business and the family and produce low levels of employee satisfaction and commitment. A study of 59 small family businesses produced the following significant results: participative leadership is positively related to both family and business outcomes as well as to employee satisfaction and commitment; referent leadership is positively related to family outcomes and employee satisfaction; and, unexpectedly, laissez-faire/mission leadership is positively related to employee commitment. Using correlational data as the basi s, the paper discusses practices that might promote participative, referent, and laissez-faire/mission leadership.

Introduction

This paper assumes that applying the terms family and business to an organization implies that the purpose of the organization is to provide positive outcomes for both the family and the business. Producing positive outcomes for both, however, seems somewhat at odds. The processes necessary to produce a successful business may disrupt a family, and the processes necessary to promote harmonious family interactions may interfere with a thriving business.

For example, consider the differences between a bureaucracy and a family. According to Weber's bureaucratic model of business, the purpose of business organizations is to maximize productivity (Henderson & Parsons, 1947). Thus, a business should eliminate anything that diminishes productivity, including hiring and promoting based on family relationships. Weber argues that the reason German organizations did not perform to potential was that people were hired because of social standing or "privileged status" rather than job-related qualifications. He argues that organizations should be rational and efficient and be founded on principles of logic, order, and legitimate authority. A major role of managers is to control and regulate activities carefully.

From this bureaucratic perspective, family businesses should include only family members who help maximize organizational performance. Moreover, business and family should be kept separate, and the treatment of family members working in the business and other employees should be identical. Family members should be hired, promoted, and rewarded based on qualifications. They should be monitored, and if they do not perform to set standards, then they should, like other employees, be reprimanded or fired.

On the other hand, the purpose of a family is to support, develop, and nurture family members. From this perspective, family comes first, business second. Family members are "insiders," others are "outsiders." Family provides a place of refuge and safety for family members. Emotions and family values such as patience, kindness, and love are prominent factors in making family decisions. Family resources are devoted to family members. And even less talented and ambitious family members are favored over outsiders when distributing family resources.

In combining families and businesses, compatibility problems thus arise (Hollander & Elman, 1988; Lansberg, 1983). How does a family business maintain a standard that yields maximum performance and, at the same time, accommodate the interests of the family? It seems that one or the other will have to adapt. The family can bend to the interests of the business, or the business can yield to the interests of the family. Ideally, the means and structure can be found to optimize the interests of both the family and the business (Whiteside & Brown, 1991).