The Dependence of Family Businesses on a Single Decision-Maker*

Abstract

Anecdotal evidence suggests that family businesses are very dependent on a single individual (the owner-manager). However, the degree of dependence previously has not been studied formally. Further, an explanation for why some family businesses are highly dependent on the owner-manager and others are not has not been explored. Utilizing a national survey of Canadian family-owned businesses, this paper therefore addresses two central issues: (1) the degree of dependence of familyowned businesses on a single individual; and (2) the factors associated with this reliance.Self-report responses from family business owners provided evidence of a high level of dependence on the owner-manager. In 75 percent of all family businesses, respondents believed that the company was either dependent or very dependent on them. The response to this subjective question is consistent with responses to our three more objective measures. First, 65 percent of owner-managers responded that they made all the major decisions in at least three of five functional business areas. Second, these businesses had few key managers-in 57 percent of all businesses, there were only two or fewer key managers in addition to the owner. Third, in 62 percent of all family businesses, neither had a successor been chosen nor had a process been put in place for choosing a successor. These results strongly suggest that family businesses are highly dependent on a single individual.Six factors had significant power in explaining the degree of dependence. Two factors related to the owner-manager-dependence decreased in the age of the owner-

Family entrepreneurship as a field of research: Exploring its contours and contents

“…The importance of family businesses is recognized worldwide (Faccio & Lang, 2002;Holderness, 2009) in terms of job creation, gross national product, and wealth generation (Beckhard & Dyer, 1983;Feltham, Feltham, & Barnett, 2005;Kelly, Athanassiou, & Crittenden, 2000;Shanker & Astrachan, 1996). Family businesses are the main form of management and governance in Europe (Corbetta & Salvato, 2012) and in the US (Astrachan & Shanker, 2003).…”

A power perspective on knowledge transfer in internal succession of small family businesses

“…Failure in succession often occurs due to the successor's dependency on the transfer of the predecessor's knowledge (Cabrera-Suárez et al, 2001). The overall dominant role of the owner manager in the business and their high level of expertise can be either a success factor of succession, or contribute to failure (Bracci and Vagnoni, 2011;Feltham et al, 2005). One of the greatest challenges is transferring knowledge from the owner manager to the successor and "the successor's ability to acquire the predecessor's key knowledge and skills adequately to maintain and improve the organizational performance of the firm" (Cabrera-Suárez et al,…”

“…At the same time, these characteristics are often the cause of business failure, and therefore need to be contextualized within family business research. For instance, the centrality of the owner manager has been identified as the main reason of succession failure (Bracci and Vagnoni, 2011;Feltham, Feltham, and Barnett 2005;Malinen, 2004).…”

“…Role changes are important because knowledge transferred from the predecessor to the successor is essential for the future success and the continuity of the business (Cabrera-Suárez et al, 2001;Poutziouris and Chittenden, 1996). At the same time, the centrality and the prominent role of the previous owner manager has been identified as one of the main reasons for succession failure (Bracci and Vagnoni, 2011;Feltham et al, 2005;Malinen, 2004). This is because the success of succession strongly depends on two people -the traits and behaviors of the owner manager and of the successor Sharma et al, 1997).…”

Students’ Perceptions of Family Entrepreneurship – A Study on Family Business Academic Education

“…Founder centrality affects family business operations and decision-making. The retirement of the founder and the age of the owner-manager have an impact on the family business culture and founder dependency (Feltham et al, 2005). Succession reflects organizational commitment.…”