Academic journal article Entrepreneurship: Theory and Practice

Vision and Exchange in Intra-Family Succession: Effects on Procedural Justice Climate among Nonfamily Managers

Academic journal article Entrepreneurship: Theory and Practice

Vision and Exchange in Intra-Family Succession: Effects on Procedural Justice Climate among Nonfamily Managers

Article excerpt

We develop and extend fledgling literature on procedural justice climate and succession processes in family firms by focusing on the impact of family vision and exchange systems on procedural justice climate among nonfamily managers. Drawing upon social exchange theory, we argue that family involvement accompanied by a weak family vision will be associated with restricted exchanges in dominant coalitions, which will have a negative impact on procedural justice climate among nonfamily managers. Conversely, we suggest that family involvement with a strong family vision will be accompanied by generalized exchange, which should positively impact the procedural justice climate among nonfamily managers. We expect that the extent to which nonfamily managers work to support or hinder intra-family succession will be influenced by their collective perception of a positive or negative procedural justice climate.

Introduction

"I like Jim but, I got to tell you, he wouldn't be CEO if he hadn't been a family member. I met with the head of the nominating committee to tell him that Jim was the wrong choice for this business...." Nonfamily chief operating officer quoted in Lansberg (2007, p. 10l)

The above quote, from Lansberg's (2007) discussion of the personal tests family member successors must pass if they are to effectively take control of the family firm, suggests at least two important points concerning nonfamily managers and their influence during critical family business transitions. First, it conveys a conviction that the family successor, Jim, is unqualified for his position and that the succession process itself is procedurally unfair. Second, the nonfamily executive's declaration that he attempted to thwart the succession process indicates the impact that nonfamily members' negative perception of organizational decision processes might have on succession in family firms. While empirical family business succession studies and reviews of the succession literature indicate that a range of factors are important to fruitful transitions (e.g., Chrisman, Chua, & Sharma, 1998; Dyer, 1986; Handler, 1994; Lansberg, 1988), most family firm studies focus on characteristics of the incumbent or successor and, secondarily, on the impact of family relations. The impact of nonfamily managers' perception of the succession process has received far less attention.

Recent conceptual reviews of the family firm succession literature (e.g., De Massis, Chua, & Chrisman, 2008; Le Breton-Miller, Miller, & Steier, 2004), anecdotal evidence (e.g., Bruce & Picard, 2006; Goldberg, 1997; Lansberg, 1988), and a handful of empirical works (e.g., Cabrera-Suarez, 2005), however, have suggested that poor relations between a successor and the family firm's nonfamily management team can hamper if not prevent intra-family succession. Indeed, De Massis et al. (2008) discuss lack of trust and commitment among nonfamily managers as a significant factor contributing to succession failure. More specifically, Cabrera-Suarez's (2005) study examining seven family firms involved in transgenerational succession found important connections between the attitudes and perceptions of nonfamily managers and the degree of succession effectiveness, as defined by the actual installation of a successor in the formal leadership role, satisfaction of process participants, and post-succession financial performance. Although primarily focusing on more traditional variables (i.e., incumbent/successor traits), Cabrera-Suarez found that in each successful passage nonfamily managers had been empowered and were included in the entire succession process. In contrast, family businesses characterized by less successful successions tended to have nonfamily managers who were limited in their professional development, and who, consequently, obstructed the successor's development and opposed the intra-family succession. Similarly, Poza, Alfred, and Maheshwari's (1997) earlier empirical study suggests that nonfamily managers are less likely to perceive that decision processes for succession are the same for family and nonfamily managers and more likely to be dissatisfied when policies are not equally applied. …

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