Family businesses can out-compete: as long as they are willing to question the chosen path.

This commentary extends the discussion of whether CEO tenure will lead to strategies that have a longer-term orientation by examining the moderating role of task conflict which may either foster a decision-making context in which a long-term orientation represents a superior approach to decision making, or foster one which leads to strategic inertia, depending upon its intensity. The findings indicate that family firms that persist with the same CEO tend to persist with the same strategy when the level of executive team task conflict is high.

Introduction

The notion that successful firms are capable of sustained strategic focus is not at all new. Mintzberg (1987) has long argued that great firms have the capacity for sustained focus while maintaining strategic flexibility. Le Breton-Miller and Miller (2006) argue that managers of family-owned businesses (FCBs) focus on sustainability for the benefit of the family members-owners of the firm. They argue, as others have in the past (Anderson, Mansi, & Reeb, 2003; Anderson & Reeb, 2003; McConaughy, Matthews, & Fialco, 2001) that the social capital and long-term focus of an FCB is greater than that of non-family-controlled firms. While I believe that such a linkage may exist, it is not clear from the existing research that this is the case. Existing studies suffer from substantial methodological limitations that make it difficult to conclusively determine whether the linkages exist. If such linkages do exist, it is not clear whether they are systematic or enabled by other functional aspects of the FCB, which has implications for the ability to develop useful managerial prescriptions.

Le Breton-Miller and Miller (2006) convincingly demonstrate in their work that a linkage exists between CEO tenure and strategy sustainability. However, this relationship is likely to be moderated by a wide range of potential contextual or situational factors. The level of strategically oriented task conflict within the family executive team is certainly one such potential factor that deserves to be tested (Amason, 1996). This research note explores the influence of a single moderator--family executive team task conflict--on the linkage between CEO tenure and strategic persistence. While past studies have demonstrated the linkage between CEO tenure, strategic persistence, and firm performance (Finkelstein & Hambrick, 1990; Tushman & Rosenkoff, 1996), especially in the context of established firms, the contribution of this brief research note is to test the above linkages in the context of the family firm.

Strategy Stability, Simplicity, Learning, and Viability of Change

Is a single, stable strategy a key to firm success? Which is more important to design into an organization--the capacity to focus, or to be flexible? It is easy to criticize businesses for failing to question a chosen strategy over a long period of time. Indeed, the strategy literature has focused considerable attention on the problem of strategic inertia (Kelly & Amburgey, 1991; Romanelli & Tushman, 1986). Further, authors have been interested in developing finer-grained models of how firms may operate, such as the architecture of simplicity (Miller, 1993). Taken together, these articles suggest that the sustained focus of a firm on a single strategy is based on what Miller called single-loop or simple feedback-oriented learning. In his book The Icarus Paradox, Miller (1990) argues that a sustained focus on a single strategy strongly correlates to a long-term negative impact on firm performance. One conclusion to draw from the extant literature is that deep concern should develop when a firm maintains a single strategy over a long period of time (e.g., in excess of 5 years). This would seem to run counter to the arguments of Le Breton-Miller and Miller (2006), who argue that the sustainability of strategy should lead to long-term performance. Of course, one could argue from the perspective of strategic inertia that any strategy that sustains over a longer period of time is susceptible to strategic creep and irrationality (Fredrickson & Iaquinto, 1989), irrespective of the involvement of family members.

These contrary arguments could be considered a basis to dismiss the work of Le Breton-Miller and Miller (2006) as not fully incorporating the extant literature on strategy and perhaps overselling the idea of family firms. However, there are threads of logic that exist in the work of Le Breton-Miller and Miller (2006) that build upon Miller's (1993) work on simplicity and sustaining strategy. Miller (1990) has argued that while strategy can be maintained, it must be done in a state where executives are encouraged to think broadly about the strategy of the firm and to question the firm's direction. Taken together, past research seems to call for an improvement in the strategic evaluation or conflict management capabilities of family executive teams (Ensley & Pearson, 2005). Therefore, the moderator of interest in this research is conflict management and its influence on the linkage between strategic persistence and firm performance.

Understanding the Potential Impact of Effective Conflict Management

Recent research on conflict in teams in general (Jehn, 1994, 1995) and executive teams in particular (Amason, 1996; Amason & Sapienza, 1997) suggests that the key to strategic renewal or firm sustainability is the willingness of an organization to put its adopted strategy on "trial" on a regular basis, and that task conflict is the way in which executive teams work together to arrive at solutions to the issues surrounding strategic persistence. In particular, past research has demonstrated that when team conflict takes the form of task conflict, it is exceptionally productive (Amason, 1996; Jehn, 1994). Thus, the strategic decision-making context of interest is one in which there is a strong intellectual exchange between the executive team members or one where the level of task conflict is especially high (Amason, 1996). This kind of situation should prove important as it gives family executives a clear understanding of the costs and the upside of staying short or going long in their strategic views.

Task conflict describes a mechanism through which a family executive team is able to jointly reflect upon what is right with their firm's strategy and what should potentially be adjusted. Further, task conflict is the mechanism through which family executives make decisions about strategy for the survivability of their firm and its strategy. It also allows the executives to maintain their focus on a particular strategy and to be convinced through a rigorous and logical debate that it is the most logical economic path to continue sustaining the strategy.

Therefore, I propose a short test of the preceding notion of moderation by positing that task conflict is an influential moderator of the linkage in the Le Breton-Miller and Miller (2006) article between CEO tenure in FCBs and the creation of a longer-term orientation. The argument is that long-term orientations are not just products of family executive team members in the family business firm but also the argent debate between family business executives about the long-run viability of the firm and its strategy. It is my supposition that greater strategic persistence will actually exist in firms that develop such a level of debate. The following sections lay out a short test of the proposed moderator model.

Methodology

The Inc. 500 was selected as a study sample for this test. The Inc. 500 has been used in several studies of new ventures. However, the familial relationships between team members of new venture teams of Inc. 500 firms have not been examined except in very recent studies. I began studying this sample of Inc. 500 firms in 1995 and 1996 and did annual surveys with the companies for over a decade. The following sections do a quick explanation of the data collection followed by the development of measures.

In the initial data collection, each of the 2,481 officers of the 500 firms received a personalized letter and an individually numbered questionnaire. Individual names and addresses for the top management team (TMT) members were obtained from the Dun & Bradstreet Market Identifiers database. Of the 2,481 questionnaires mailed, a total of 749 responses were returned from 371 firms. However, after eliminating firms that were no longer in existence, firms from where responses were received from less than half of their TMT, managers who were not active in their TMT, and managers who provided incomplete responses, the sample was reduced to 581 managers from 327 firms--a response rate of 19.4%. In a final reduction, all of the firms with at least a single family relationship on the team were kept in the sample. This final reduction brought the final sample to 168 firms and 351 respondents.

Of the 351 managers retained, approximately 90% were male, and the average age was 38.4 years. Seventy percent were founders and 74% held at least 10% of the equity in their firms. Nearly 90% considered themselves entrepreneurs and 40% had been involved in new ventures previously. Just over 50% reported their highest degree as a bachelors degree; 33% held masters degrees, and 5% held doctorates. Thirty-two percent majored in business, 6% in accounting, and 13% in engineering. Other majors included English, History, Nursing, Medical Technology, Sports Management, Law, and Kinesiology.