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

Abstract

Purpose 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 type of 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.

Identifying the characteristics of a high-performance finance function

“…The HPO framework has been shown to have high internal consistency and its five subscales have been validated repeatedly (e.g. de Waal et al , 2016; Sultan et al , 2017). On this basis, it was decided to average the relevant items into the original five subscales, instead of performing exploratory factor analysis (EFA).…”

Social networks and relationships in copreneurial firms: an international study

“…Despite the emergence of these new and important lines of enquiry, to date, there is little information of the effects of domestic and business relationships on copreneurial business performance. Sultan et al (2017) andEl Shoubaki et al (2020) note that many studies claim that copreneurial firms outperform other firms, but this is not consistent and in some cases is based on perceptions of copreneurs rather than objective measures. Regardless, one of the most common findings is that the blurry boundary between home and work life in copreneurial firms affords a flexibility that acts to advantage firms (Smith, 2000;Gudmunson et al, 2009).…”

“…Family businesses account for substantial proportions of every country's small and medium-sized business stock (Klein, 2000; Al-Dajani et al , 2014; Sultan et al , 2017). Many authors suggest that the most common of these are in fact copreneurial (Ruef et al , 2003; de Bruin and Lewis, 2004; Hall and Williams, 2008), defined here as per Barnett and Barnett (1988) as domestic partners in a married or as-married relationship who have formed and lead a business.…”

Does family ownership affect the profitability of construction and real estate firms? Evidence from India

“…A family-owned business differs from other types of businesses in several ways, because it is composed of both a family and a business. Families and businesses exist for different reasons (Sultan et al, 2017). The family's primary concern is care and rising of family members, whereas a business is concerned with delivering a product or a service.…”