The recent climax to the television series Succession highlighted the many difficulties that families face when doing business together. Family related issues such as identity, values, and, indeed, succession, may not align with the economic goals of the company, which can lead to decision-making tensions.
Decision-makers in all firms – and family firms in particular – face temporary goal tensions which cannot be solved, only managed. For instance, family firm decision-makers often emphasise non-economic goals that are significant to the family such as transgenerational succession, preservation of family harmony, family reputation and identity, and the perpetuation of family values.
While economic and non-economic goals might converge in the long term, they often lead to decision-making tensions in the short term. Investigating the precise mechanisms through which family firms manage perceived tensions between economic and non-economic goals is important, as goals affect decision-making, which in turn determine the strategies that family firms pursue and, ultimately, their performance.
Sensemaking and sensegiving
There is an extensive body of research exploring how decision-makers make sense of situations and how that sensemaking influences their organisational process. Organisational members endeavour to clarify novel, ambiguous, confusing, or unexpected situations by interpreting cues from their environment and trying to make sense of what has occurred through the creation of meaning.
While sensemaking is concerned with how managers interpret and make sense of information, sensegiving is another important step in the sensemaking process. It refers to how decision-makers attempt to communicate their thoughts to others. In this regard, sensemaking and sensegiving cannot exist without each other.
A sensemaking-sensegiving perspective
In a recent study published in the Journal of Management Studies, researchers Vanessa Diaz-Moriana, Eric Clinton and Nadine Kammerlander used a sensemaking and sensegiving perspective to understand how family firms manage the tensions that can manifest between economic and non-economic goals when making decisions. To answer this question, they analysed eight private Irish family firms, comprising 59 interviews, 501 items of archival data and 39 observations.
They identified three sensemaking mechanisms – ensuring continuity in the family firm, preserving family cohesion, and delegating responsibilities to trusted advisors – that assist family firm decision-makers in managing these goal tensions.
Moreover, they found that sensegiving, based on three different values – sense of commitment, community embeddedness, and family firm identity – helps family firm decision-makers to justify and communicate their decisions.
Their results reveal that when family firm decision-makers perceive a temporary goal tension, they attempt to reconcile their economic and non-economic goals by adopting a sensemaking mechanism related to the specific goal tensions, and thereafter, they use a sensegiving mechanism to justify and communicate their decision.
What does this mean for family firms?
The study provides a better understanding of the management of goal tensions in family firms. Prior research on family firm goals has acknowledged that these firms pursue both economic and non-economic, but this study moves the conversation beyond an ‘either/or’ approach. Instead, it shows how family firms aim to balance conflicting economic and non-economic goals, depending on the specific goal conflict.
Furthermore, this research advances knowledge on sensemaking in family firms by revealing how sensemaking can explain idiosyncratic family firm behaviour and how family firm decision-makers use specific values when ‘giving sense’ to justify their decisions.
Lastly, the study can inform research on mixed gambles, as the trade-offs of non-economic versus economic goals go along with potential gains and losses that family business decision-makers need to consider in a complex sense- and decision-making process.
- Please contact Harry O’Neill on 07725 944 973 or harry@insightm.co.uk if you would like to speak to the authors of the paper or require any more information