The Importance of Leadership, Corporate Climate, Use of Resources, and Strategic Planning in Family Business

The Importance of Leadership, Corporate Climate, Use of Resources, and Strategic Planning in Family Business

Danny C. Barbery (Universidad de Especialidades Espíritu Santo, Ecuador) and Carlos L. Torres (Universidad de Guayaquil, Ecuador)
DOI: 10.4018/978-1-5225-8012-6.ch011

Abstract

This chapter deals with the significance and interaction of four key elements for the development of the family business: on the one hand, the leadership and the working environment as human elements, and on the other hand, the resource management and strategic planning. After reviewing some literature, the authors concluded that family business, through their socioemotional wealth (SEW), emotional intelligence (EI), and social intelligence (SI), generate an interaction between these four variables which results in a model centered on the socioemotional intelligence (SEI). The SEI is the main pillar of family businesses, as these are classified in four types: the fearful, the curious, the careful, and the focused.
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Introduction

For researchers, family businesses are subject to more in-depth studies, if we take into account the following: they comprise between 70% and 95% of all companies (Pérez, Gómez, Argente, & López, 2018); more innovative (Kammerlander & van Essen, 2017); complex at decision making (Allen, George, & Davis, 2018), their beginnings (Tsai, Lin, Lin, Lu, & Nugroho, 2018); and the goals set by family members (Basco, 2017) to create a sustainable business. From this perspective we address the most relevant issues for the proper performance of a family business, considering variables such as leadership, work environment, planning and resource management, for the decisions which support the profitability and growth of the business.

Leadership is the ability to guide and influence a group in order to achieve goals (Robbins & Coulter, 2010). It might be one of the issues frequently addressed by many authors, but it is essential as time and environment change, thus does the way to lead. All in accordance to Iberbuden (2017), who states that changes in the environment are permanent and continuous, exposing the need to adapt to new realities, through innovation and creativity, in order to develop attitudes and leadership skills. The influence of leadership could be formal, considering the hierarchy of a person within the company, but could also be natural, when an individual has a positive influence on the people, without being the boss or manager, and driving them to reach their goals. According to Izquierdo, Novillo, and Mocha (2017), the managers or leaders of such microenterprises have, as a primary challenge, to maintain or enhance the level of available human talent in correspondence to the progressive earning of profit, thus demonstrating their performance and even expanding the business they control, turning a small family business into a much bigger one.

As mentioned by Hernández (2011), it must be considered that there are two ways of human thinking, as proposed by Douglas McGregor, the X, and Y theories. Theory X think of workers as working animals, who only respond to the yoke, control, and threat, while theory Y is based on the premise that people want and need work, and they are self-motivated, which makes these behaviors an influence on leadership styles.

Several types of leadership can be followed by the employees of a company, who according to Cardona (2000), are increasingly more dependent on motivations or relationships among them. These leaderships are: (1) Transactional Leadership, referring to a leadership defined by economic influence; the employee interacts with the leader only by intrinsic motivation; (2) Transforming Leadership, defined by work influence; the employee interacts with the leader by intrinsic and extrinsic motivation; (3) Transcendent Leadership, defined by contribution influence; here the employee interacts with the leader by intrinsic, extrinsic and transcendent motivation.

As stated by the same author, it is important to highlight that in a relational leadership, the defining element for the influence is the type of motivation received by the employee; the leader's behavior remains a critical element in the relationship, as it can affect motivation. Esguerra (2017) also coincides, he states that relational leadership is a framework for identifying the factors that make up these inter-relations, such as assets, resources and complementary skills.

According to Pedraja and Rodriguez (2004), the types of leadership are: (1) participatory leadership, where the leader considers the opinion of his subordinates; (2) collaborative leadership, where the leader helps his team with the commissioned works; these two styles have a positive influence on the effectiveness of the organizations; (3) instrumental leadership, where the leader lectures his subordinates on how to carry out the work, he also decides how things should be done, which may exert a negative influence on the staff.

Key Terms in this Chapter

Financial Capital: It refers to equity that a company or person has, either because it is saved or invested in a financial market.

Relational Capital: Ability to interact with stakeholders by creating a sense of belonging and interaction among all.

Structural Capital: Knowledge gained by a company as a product of its daily operations, either in the market or with its customers, is housed within each worker or in an information system; it is a significant source for the creation of competitive advantage.

Socioemotional Wealth (SWE): Variable that builds trust within the family businesses; considered an intangible resource within these companies.

Emotional Intelligence: The ability that allows us to identify, understand, and manage emotions properly so that relationships with others are facilitated.

SEILERS: Acronym for socioemotional intelligence for leadership, environment, resources and strategy, and refers to the dynamic model of these variables; it is based on the SEI.

Human Capital: One of the most critical resources in a company; it is related to productivity, capacity, and workers experience.

Socioemotional Intelligence (SEI): Conceptual skill that works as an engine for the interaction between leadership, work environment, resource management and strategic planning in family businesses. The socioemotional intelligence is based on the action variables of the family business, that is, society, intelligence, and emotions.

Social Resonance: Term associated with the relational capital; the ability of a company to interact with the environment, looking for better sustainability of the company and its stakeholders as a result.

Social Intelligence: Skill which allows people to relate harmoniously with others.

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