WPI Research is the research magazine of Worcester Polytechnic Institute. It contains news and features about graduate research in the arts and sciences, business, and engineering, along with notes about new grants, books, and faculty achievements.
Issue link: http://wpiresearch.epubxp.com/i/90696
" By putting its name on the business, a family conveys a sense of integrity and trust to employees, customers, and creditors." — Frank Hoy gives researchers access to information about more than 95 companies, which can be used to answer a wide range of questions about why some businesses survive from one generation to the next and succeed in the global market- place. "One thing we're finding is that good practices in family companies translate to non-family businesses as well," Hoy says. Although the research is still in its early stages, he says there is "solid evidence" that shows family businesses are more likely to prosper because they have the ability to make longer term decisions to achieve their goals. While each company and its leaders are different, Hoy says evidence is mounting that an organization's culture is an important factor in its success. "By putting its name on the business, a family conveys a sense of integrity and trust to employees, customers, and creditors," he notes. "It is a way of saying they are going to deliver on their promises." Kasouf says participating in STEP has enabled him to expand his research on small businesses to include perspec- tives from transgenerational family-owned firms. While he cautions that it can be difficult to find common ground among such a diverse group of organizations, he's observed that researchers can also learn a great deal from the mistakes that multigenerational companies make. "I've seen small companies fail to thrive because the second and third generations threw out the business model and treated the place as an annuity and not an investment," he says. Family dynamics like these distinguish multi-genera- tional family-run companies, Phillips says. "The complexi- ties and pressures involved are different for family busi- nesses," she notes. "There are issues of separating family ties with business decisions and absorbing personal risk. The dynamics affect viability over the long run." Family businesses are also characterized by complicated governance structures, says Kasouf, who notes that fam- ily members from multiple generations often hold equal shares, and have equal votes, making it tricky to determine who will have the final say. And when some family mem- bers work for the company and others don't, they may face what Hoy calls "the predator versus parasite controversy." "People outside of the business see their relatives get- ting salaries and nice benefits and say, 'they're sacking our inheritance,'" he says. "Company insiders feel entitled to the rewards they're reaping and may feel that family mem- bers who are not contributing to the business are sucking blood out of them." Overcoming obstacles like these can make achieving intergenerational success a challenge. Kasouf recalls one Connecticut business that resorted to therapy to figure out how to transition the business. "They wanted to be sure everyone could deal with what was going on before moving forward," he says. [20] wpi.edu/+research