The Influence of Family Culture on Corporate Culture in Family Business - Literature review Example

The Influence of Family Culture on Corporate Culture in Family Business - Towards Employee’s Motivation 1 Theoretical framework Literature Review 1.1 Family Business Most of the companies in the world started their business as a family business, according to Family Business Network (2006). According to Poutziouris (2001), in most developed economies, family business accounts for about two-thirds of all enterprises and about half of the GDP economic activity. More than 90% of the firms in Italy are family-owned while the figure stands at 70% in UK, against 85% in EU. Global names like Levi, Benetton and until recently Marks & Spencer are all family-owned businesses. Generally, a family business can be defined as a company owned, controlled, and operated by members of one or several families (Wikipedia, 2007). Research suggests that family businesses are influenced by a family or by a family relationship, and that perceives itself to be a family business. According to Shanker and Astrachan (1996) the criteria used to define a family business include the percentage of ownership, voting control, power over strategic decisions, involvement of multiple generations, and active management of family members. Neubauer and Lank (1998), state that a company is considered a family business when it has at least two generations of a family and when this link has had a mutual influence on company policy and on the interests and objectives of the family. 2.1 Culture Definition The word ‘culture’ means to cultivate and generally refers to patterns of human activity. Various anthropologists have come with different definitions of culture and each one becomes the basis for understanding or evaluating human activity. Culture is learned and not inherited. Individuals are born into and shaped by that culture which has been existing. This culture influences the way we think, behave and act. It is known that culture is an important concept to understand the reason why people behave differently. Culture can explain the differences among people, because culture influences people’s attitudes and behavior; it varies within and across nations and within and across ethnicities (Lindsay, 2005). Additionally, culture influences the motives, values, and beliefs of individuals (Hayton, George, & Zahra, 2002) that reflect on their attitudes. Generally, culture refers to patterns of human activity and the symbolic structures that give such activity significance. Culture has been called "the way of life for an entire society." As such, it includes codes of manners, dress, language, religion, rituals, norms of behavior such as law and morality, and systems of belief. Different definitions of "culture" reflect different theoretical bases for understanding, or criteria for evaluating, human activity (Wikipedia, 2007). Culture according to Rugman & Hodgetts (2002), can be interpreted as the acquired knowledge that people use to interpret experience and to generate social behaviour. Hofstede (2005) defines culture as “the collective programming of the mind, which distinguishes the members of one human group from another…. Culture, in this sense, includes systems of values; and values are among the building blocks of culture” (Hofstede & Hofstede, 2005). People would not be only satisfied with materials; they also have knowledge and aims in their life based on their own consciousness and aspiration. As Maznevski et al., (2002) state that culture is a group-level phenomenon, but it influences individuals’ perception, values and behaviour, especially with respect to social interaction. It can be assumed that culture is a big influence on people, which influences how people enhance their value in every aspect of their life. Alisjahbana finds six values that could determine individual’s personality and people’s ethics (cited by Simuh, 2003): The surrounding environment can be determined by identifying the objects and phenomenon that contributes towards knowledge. This is known as the theory value. The economic assessment process based on efficient logic and aimed at life’s benefit and happiness is called economic value. The combination between theory value and economic value that keeps advance is called the progressive aspect of culture. If the process of surrounding assessment is seen as the expression of secret and the greatness of life and universe, it is the religion value and as human beings we can feel the marvels of the holiness. If it is about beauty, the aesthetic process that moves into objects and phenomenon is called the aesthetic value. The combination of religion value and aesthetic value highlights intuition, feelings and fantasy and is the expressive aspect of culture. In human relationship the main goal is to get the power. We would be satisfied if the others follow our norms and values; in the other word we have power and authority on them. In the solidarity process, we arrive at the relationship of love, friendship and sympathy with others; we appreciate them as individuals or groups with their abilities and we satisfied if we could help them. These six values determine people’s personality configuration and the ethic norms (Simuh, 2003). 2.2 Family and Culture Hofstede’s study describes many influences on culture and the many organizations or groups that an individual might belong to, such as race, sect, religion, gender, family and peer group. Each of these groups has a different culture which may influence the culture within an organization (cited by Burns, 2005). Furthermore, every family develops their own culture that may be at variance with the norms of the society, and the personalities of individual parents and children can lead to non-typical behavior (Hofstede & Hofstede, 2005). In term of business, family culture brings loyalty and hard work, which has its own value, whereas emotional bonds lead to a strong commitment. The value of the family is reflected by their traditions, lifestyle, and philosophy. It is also evident from their attitudes such as tolerance, harmony, trustworthiness, and solidarity. According to Aronoff and Ward, the values, ideals, and sense of purpose nurtured by the owning family are potentially a vast source of strength and energy for a business. A healthy owning family with strong values, in fact, may be the greatest resource a business can have. (Cited by Neubauer and Lank, 1998) Therefore, it can be assumed that as most people are born into a family that has their own culture; which generates and sets the family’s value. The root of individual culture is derived from the family and it leads to wider context of culture application including corporate culture as Lee (1996) states that people build organizations according to their values, and societies are composed of institutions and organizations that reflect the dominant values of their culture. 2.3 Javanese culture: as the basic principle of the company’s owner 2.3.1 Original Javanese culture For indigenous Indonesian, and in particular the Javanese people, religion value is the most important value that influences other values (Simuh, 2003). Solidarity value called gotong-royong or mutual help/sharing of burdens and rukun or social harmony are strongly emphasized in their life. It marks the typical Javanese as inexpressive, avoiding social and personal conflict. Mulder (1978) has described rukun is soothing over of differences, cooperation, mutual acceptance, quietness of heart, and harmonious existence. The whole of society should be characterized by the spirit of rukun, but whereas its behavioral expression in relation to the supernatural and to superiors is respectful, polite, obedient, and distant, its expression in the community and among one's peers should be akrab (intimate) as in a family, cozy, and kangen (full of the feeling of belonging) (cited by Zeitlin et al, 1995). Even though harmony and unity is important, it has to be complemented by social hierarchy, where everybody has to know her level and position, while honouring and respecting those in higher positions. Consequently, the other values, such as rationale, power and economics are still low. Hence, it can be stated that the pattern of Javanese culture is greatly affected by religion, followed by solidarity value. On the other hand, as their rational mind has not developed, democratic system in power value is also low in people’s structure. Conversely, the feeling and emotion is more powerful to face the nature. Additionally, the economic value also has not developed (Alisjahbana, cited by Simuh, 2003). 2.3.2 Javanese people Koentjaraningrat (1985) states that to be Javanese means to be a person who is civilized and who knows his manners and his place. The individual serves as a harmonious part of the family or group (cited by Zeitlin et al, 1995). For Javanese people, what they call as the mother tongue is the real Javanese language. Javanese are indigenous people who live in the central and east part of Java Island, Indonesia and speak Javanese (Simuh, 2003). According to Koentjaraningrat (1957), based on social group, there are two levels of Javanese people - the wong cilik (or common people), consisting of peasants and the urban lower classes, and the priyayi (or high-class society), comprising civil servants, intellectuals, and the aristocracy (cited by Zeitlin et al, 1995). 2.3.3 Javanese culture, values and its social implications In Javanese culture, there are two principles in the social-life pattern (Geertz, Cited by Simuh, 2003). This is supported by Zeitlin et al., (1995) who state that “the Javanese values of respect and the maintenance of social harmony (rukun) are basic principles of normative and moral guidance for social interaction within both the family and the community”. The first principle states that in every situation, everyone should behave well in order to avoid potential conflict. This principle is called kerukunan or harmonious principle, which is aimed to keep people in harmony. Being harmonious means to live peacefully, without and any social and personal conflict, and live together by helping each other (Simuh, 2003). The second is the respectfulness principle, which guides how people should behave and interact in social relationships. The principle stresses how people should adapt themselves and show their respect to others based on their level. This respect should reflect in their social behaviour in every context, such as the workplace, schools, and political organizations. Besides these two principles, I would like to add the respectful center point, which is a figure or a person who has an important role in the society. Based on the respectfulness principle, Javanese culture is one of many cultures in Indonesia that still strictly keeps and holds traditions and etiquettes in their daily life. They highly respect the central figure, such as ancestors, parents, theologians, etc as the figure who has more knowledge and wider experience in life. 2.4 Corporate Culture The concept of 'organization culture' has become popular since the early 1980s (Hofstede, 2005). There is a definite co-relation between culture and performance, culture and economic results, culture and sustainability, culture and strategic growth, culture and recruitment, motivation and retention of human capital, including downsizing. Generally, corporate culture comprises the attitudes, experiences, beliefs and values of an organization (Wikipedia, 2007). As culture is powerful, it has a great influence on people; culture can be referred as an energy force that becomes woven through the thinking, behavior, and identity of those within the group (Thorsen, 2007). Schein (1992), state culture as “a pattern of shared basic assumptions that the group learns as it solves its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.” Additionally, Cornwall and Perlman (1990) define culture as “an organization’s basic beliefs and assumptions about what the company is about, how its members behave, and how it defines itself in relation to its external environment” (cited by Burns, 2005), Hence, corporate culture is expected to guide the members and distinguish the organization from others. Furthermore, corporate culture is defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. Organizational values are beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behavior organizational members should use to achieve these goals. From organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behavior by employees in particular situations and control the behavior of organizational members towards one another" (Hill & Jones, 2001). Hence, corporate culture also can be the metaphor of the glue that bonds a company together and it also shapes the behaviour of organization’s members and leads them to share the goals and objectives that can establish and determine company’s success. There are also a great number of corporate culture definitions, but basically most of them refer to three analytical perspectives approach: integration, fragmentation, and differentiation (Martin, 2002). Firstly, the integration perspective states that every organization has its own culture; which is created by the leader and it colours every value and activity within the organization. This perspective highlights the consensus of the members to one culture dominantly. Secondly, the fragmentation perspective is characterized by the acknowledgement diversity among the organizational culture (cited by Järvensivu, 2004). This perspective emphasizes on sub-culture consensus that causes the organization to have one or more sub-cultures. The different subcultures may have positive (enhancing), negative (conflicting), or orthogonal (indifferent) relationships to each other (cited by Järvensivu, 2004). The third is the differentiation perspective, in which there is no consensus among members. In other words there are no similarities or differentiation but ambiguity is accepted and seen as normal state of culture. These illustrate that there is no definite corporate culture but it is the personal value of organization’s members, in particular corporate culture is "the moral, social, and behavioral norms of an organization based on the beliefs, attitudes, and priorities of its members" (Smalley, 2006) and it is the personality of the group (Burns, 2005). According to Schein (1985) in conceptualization of culture, there are three levels of culture and their interaction, which is shown in figure 1. Figure 2.1 Levels of culture and their interaction Source: Schein (1985), cited by Harris, 1998 Artifacts and creations is the surface of culture, because it can be seen concretely or can be said to be the physical creations of culture (Harris, 1998). Artifacts and creations should reflect the basic values and assumptions that is belief. This should be applied by the company even on visible products, such as technology, language, symbol, etc. as the basic element of corporate culture. Value is viewed as a belief and the guidance of behaviour. Even though, value can not be seen concretely, it has a big influence on individual behaviour and attitude. Basic assumption is the rational level of culture. In terms of corporate culture, assumption is the foundation of members’ values, attitudes and beliefs. Schein describes four dimensions of basic assumptions that relate to organization relationship with environment. Assumption is the reference that employees use to make sense of their relationship (Harris, 1998). According to Kotter and Heskett (1992), four factors determine the management’s type in a company (Cited by Moeljono, 2003): Corporate culture Structure, system, plan and formal policy Leadership Regular and competitive environment Research suggests that culture has a significant influence and impacts the organization’s achievements (Kotter and Heskett, 1992): Corporate culture can affect the company’s economic performance significantly in long term. Corporate culture can be an important factor that determines the success or failure of a company in the future Corporate culture can obstruct the financial performance, even though there are a great number of genius people within the company. Although it is difficult to change, corporate culture can be created as a support that is able to help to improve company’s performance. According to Despande and Farley there are four types of corporate culture: competitive culture, entrepreneurial culture, bureaucratic culture, and consensual culture. In the competitive culture, values relating to demanding goals, competitive advantage, marketing superiority, and profits are emphasized. In the entrepreneurial culture, the emphasis is on innovation, risk taking, high levels of dynamism, and creativity. In the bureaucratic culture, values like formalization, rules, standard operating procedures, and hierarchical coordination. The long-term concern of this culture was predictability, efficiency and stability. In the consensual culture, elements of tradition, loyalty, personal commitment, extensive socialization, teamwork, self-management, and social influence are important in the organizational values (cited by Rashid, et al, 2003). Robbin (2001) describes seven characteristics in corporate culture: innovation and risk taking, planning orientation, aggressiveness orientation, result orientation, team orientation, and people oriented. He also states that corporate culture has several functions. Corporate culture has a role as a differentiator, which means culture creates a clear distinction between organization and others. Corporate culture brings a new identity for the organization’s members. Corporate culture raises individual’s commitment of their necessity to wider context. Finally corporate culture improves the social system stability. Based on all descriptions above it can be assumed that the important point that has to be in corporate culture is the values system that can be sensed by all members of the organization (Moeljono, 2003) and corporate culture plays an important role in company’s success. This can only be achieved by assuring an appropriate culture is developed or shaped in the organization that matches their values, attitudes and behavior (Rashid, et al, 2003). 3.1 Motivation Motivation is one of the important factors that can affect individual’s attitude including work. In order to discern how and what can motivate people, it is needed to understand how motivation can be formed. Generally, motivation refers to “the forces within or beyond a person that arouse and sustain their commitment to a course of action” (Boddy, 2005). Weiner (1992) cites that “motivation is why human and subhuman organisms think and behave as they do.” Furthermore, motivation also refers to the initiation, direction, intensity and persistence of behavior (Geen, 1995). Hence in terms of work, motivation can be assumed as a factor that makes people productive in their jobs. Motivation differs significantly from satisfaction. Motivation to work can come from external factors or from within. Organizational commitment itself is a motivating factor and no satisfaction with job is a demotivating factor. According to Maslow’s Hierarchy of Needs, the physiological needs have to be satisfied for an individual to be motivated to work for the next need. In this hierarchy the self-actualization arises when all other needs have been satisfied. Researchers describe the basic human motivation as self concept realization, which means an individual would be motivated if that person is happy and satisfied with his role and is treated appropriately with his expectation, or if he is appreciated by rewards based on his ability. Motivation in the work place is dependent on employers being able to understand the needs and wants of their employees. When employers can understand and satisfy an employee’s needs, the employee is more inclined to perform well. Therefore, three factors in motivation are important: role, treatment and reward. 3.1.1 Sources of Motivation Regarding the motivational complexity factors, different points of views have resulted in different motivational theories. As a whole, it can be divided by two categories: internal theory and external theory. 3.1.1.1 Motivation As Internal Driver Motive as the key word of motivation, appears as the consequence of unsatisfied feeling when the basic need is unfulfilled. The basic needs such as food, safety, achievement, etc internally drive people’s behaviour as the physiological needs appear through the mechanism of biological system of human being. It is shown in the figure below. Figure 2.2 Biologic process based on the physiological needs Source: Adaptation from Hariadja (2002) As can be seen from figure above, motivation process can not be seen directly but the attitude is reflected in the efforts; the bigger the effort the higher motivation on achieving the objective. Numerous theories describe internal motivation, such as Maslow’s hierarchy needs theory, ERG theory, Hertzberg’s two factor theory, etc. The motivation theory that illustrates the description above is represented by hierarchy of needs theory by Abraham Maslow. Maslow (1970) proposed that individuals experience a range of needs, and will be motivated to fulfill whichever need is most powerful at the time (cited by Boddy, 2005). According to Hertzberg two factors act upon the motivation of employees – the hygiene factors and the motivators. Hygiene does not pertain to the actual job while motivators are intrinsic within the work itself (Tietjen & Myers, 1998). According to Hertzberg motivators cause positive job attitudes because they satisfy the workers need for self-actualization, which according to Maslow is the need for self-actualization, which is an individual’s ultimate goal. These motivators have the potential to give job satisfaction but the absence of these motivators does not result in dissatisfaction. These motivators include recognition, achievement, growth prospects, responsibility and the work itself. Work brings fulfillment and the attainment of the higher order of needs as specified by Maslow (cited by Tietjen & Myers, 1998). The hierarchy needs theory consists of five levels of needs. The bottom level is the physiological needs, which must be satisfied to survive; unless people fulfill the need for food and water, they will not attempt to satisfy the higher needs. In terms of work this need relates to good working conditions and money or salary that enables them to obtain the necessities of life. The second level is the safety need that refers to security, stability, and protection etc, in term of work. It relates to job security and safe working conditions. The next level is belongingness and love or social need that refers to feeling accepted in social relationships and belonging to a group. The fourth level is esteem need that refers to self-respect and the respect of others. In terms of work, this need appears as the need for achievement, which leads to recognition and attention; as the result, status and respect will be earned. Lastly, as the highest level is self-actualization need that refer to the desire for self-fulfillment and realizing potential. 3.1.1.2 Motivation As External Driver Motive is a natural driver and can be sourced internally from an individual. Basic needs can develop and change as the result of interaction of the individual with the environment. For instance, when esteem need appears as biologic need, it can be changed by a work condition whereas a group does not accept an individual’s achievement and vice versa. Several theories that support the statement above, such as, expectancy theory, equity theory, goal-setting theory, etc, attempt to explain why people choose one action to satisfy a need rather than another. In expectancy theory, Vroom (1964) describes that motivation depends on an individual’s belief in the probability that effort will lead to good performance and that good performance will lead them to receive an outcome they value ( cited by Boddy, 2005). Moreover, equity theory states motivation is affected by perception of unfairness and leads to tension to resolve that unfairness. In goal-setting theory, motivation is influenced by goal difficulty, goal specificity and knowledge of result. Thus it is evident that motivation is not merely influenced by internal factors of an individual but also by external factors such as the environment and target that is expected to be achieved. Read More