Business School
SACRED VALUES AS KEYS TO FAMILY BUSINESS SURVIVAL:
THE CASE OF OY GUST. RANIN
Master's thesis
International Business and Sales Management Anton Govorin (268275)
9 May 2016
UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Business School
International Business and Sales Management Govorin, Anton, V.:
Sacred values as keys to family business survival: The case of Oy Gust. Ranin Master's thesis, 120 pages and 2 appendices (7 pages)
Supervisor: Emma Incze Ph. D.
May 2016
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Keywords: family business, survival, organizational culture, values
Businesses all over the world face unpredictable external environment, and few companies of any type last long nowadays. Family businesses seem to have a higher chances of survival than non-family ones, yet a high amount of family companies fail and cease to exist nonethe- less. Average lifespan of a family company is just 24 years.
Business researchers seek to find out why some family businesses survive while others fail.
There are numerous explanations for survival of long-living family companies in different parts of the world. Explanations for family business longevity can be found, particularly, in the field of organizational culture. It is argued that a unique mix of organizational values helps a family business to achieve longevity. Yet, there is very little research done on identi- fying, naming and elaborating on the nature of specific organizational values that contribute to family business survival. The thesis addresses this research gap.
Organizational culture and values are discussed in the literature review part of the thesis, along with the role of the founder in family business. Several theories are used in order to construct theoretical framework and design specific research subquestions for the case study part of the thesis. Methodology chosen for the study is thoroughly addressed in corresponding part of the study. The research is based on the single case study of unique long-living Finnish family business Oy Gust. Ranin, founded in 1852. The research choice is a multi-method qualitative study, with semi-structured interview and numerous secondary sources used for data collection and subsequent analysis.
The master’s thesis provides several interesting findings. First, the author identifies and names values of the case company that contribute to its longevity, while also elaborating on the nature of said values, providing examples of how they manifest themselves in business re- ality. Second, the author identifies and names underlying assumptions of the case company that contribute to its survival, while also elaborating on the nature of said underlying assump- tions, providing examples of how they support organizational culture of the case company in real-life scenarios. Third, the author identifies prominent cultural artifacts of the case com- pany that support organizational culture of the surviving business. Their nature and real-life significance are also explained. The study contributes to the existing family business longev- ity literature by providing new insight on longevity of the Finnish family business, addressing it from cultural point of view. The study also has a managerial importance, since the findings provide information for future family business founders.
TABLE OF CONTENTS
1. INTRODUCTION ... 4
1.1. Background ... 4
1.2. Research gap and objectives ... 5
1.3. Study structure ... 8
2. LITERATURE REVIEW ... 10
2.1. Family business longevity ... 10
2.2. Organizational culture and values ... 13
2.3. Role of the family business founder ... 24
2.4. Institutional perspective ... 30
2.5. Theoretical framework ... 36
3. METHODOLOGY ... 41
4. CASE STUDY ... 59
4.1. Finnish alcohol industry: legal field overview ... 59
4.2. The case company overview ... 60
4.3. Family business founder ... 62
4.4. Current managing director ... 65
4.5. Relocation of operations ... 68
4.6. Theme bar and family estate ... 72
4.7. Arctic luxury ... 74
4.8. Team cohesion ... 79
4.9. Succession ... 84
5. DISCUSSION AND CONCLUSIONS ... 87
5.1. Summary of the research and key results ... 87
5.2. Scientific and managerial importance of the study ... 96
5.3. Implications for future research ... 99
6. REFERENCES ... 100 APPENDIX 1 – CASE QUESTIONNAIRE
APPENDIX 2 – CASE ILLUSTRATIONS
1. INTRODUCTION 1.1. Background
James et al. (2012, 90, 102), giving their remarks on the bibliographic analysis of family busi- ness research done in the period from 1985 till 2010, become concerned with the fact that while family business field receives attention from the scholars, in the big picture, there is an increas- ing dominance of business approach in research, and decreasing presence of family approach.
The researchers call for the renewed attention to the family science field. There is, then, an assurance that family business is a worthwhile area to apply research effort to, just as this thesis does.
The present research explores the topic of family business survival - or, in other words, family business longevity. Business longevity is defined as a measure of organization's ability to sus- tain its continuity (Montuori 2000, 61, 68-69), used synonymously with business survival (Fa- toki 2013, 134). To present time, the topic of organizational longevity remains under-re- searched, and even more so in the field of family business (De Falco & Vollero 2015, 293).
Business organizations around the world face chaotic external environments (Ward et al. 1995, 100), and very few business organizations of any type last long and enjoy successful lives now- adays (Poza & Daugherty 2013, 8). Family business organizations seem to have a higher chance of survival than non-family ventures (Habbershon et al. 2003, 452), yet a high amount of family companies fail in their generational transitions and cease to exist nonetheless (Dyer 1986, 3).
Around 67 percent of family companies do not survive beyond the founding generation, around 33 percent manage to survive into second generation and only 12 percent last through the third generation (Poza & Daugherty 2013, 8). Average lifespan of a family company is 24 years (Beckhard & Dyer 1983, 5; Benson et al. 1990, 54; Applegate & Judy 1994, 88; Stamm &
Lubinski 2011, 118).
Why some businesses survive while others fail? This is one of the cornerstone questions of business research, including the one that focuses on family organizations (Astrachan 2010, 7).
As extant literature shows, business survival can be explained by a number of factors - industry branch, company size, maturity stage, privilege and luck, external environment, historical con- text and so on. Of course, there can be no single and definitive explanation for family business longevity (Napolitano et al. 2015, 1). These are numerous. Specifically for long-living family businesses, to provide some examples, family cohesion, market niche specialization and crea-
tion of personal networks were identified as essential factors for Spanish family business sur- vival (Pérez & Raposo 2007, 460; Fernández-Roca et al. 2014, 791), while possession of a succession plan, the size of the firm and the location of the firm were found to impact longevity of family owned businesses in Jamaica (Williams & Jones 2010, 37).
Explanations for family business longevity can also be found in the field of organizational cul- ture. Sharma et al. (1996, 11), conducting a review of family business literature near the end of the last century, pointed out that «understanding of family business culture is at a very early stage». Later on, Agle and Caldwell (1999, 345), attempting to clarify the literature on organi- zational culture and summarizing the research done in the field by the end of the last century, concluded that while organizational culture and organizational values gain increasing interest of researchers, there is very little information in academic literature about the role of organiza- tional values in real business organizations. Since then, things moved on in a fruitful fashion.
Fletcher et al. (2012, 127, 130), providing literature review of culture and value research in family business in the period from 1988 till 2010, point out that the area became richer both empirically and conceptually, proving that culture is a powerful force at work in family com- panies. Importantly, the argument that cultural aspects influence long-term family business sur- vival gained a strong support over time (Denison 1984, 6; Kotter & Heskett 1992, 35-36; Chris- man et al. 2003, 468; Wilson et al. 2013, 1370).
Specifically, the link between organizational values, as cultural elements, and family business longevity was identified as clear and strong (Tàpies & Moya 2012, 134). In similar vein to Schein (1995, 238) and Denison et al. (2004, 63-64), Aronoff (2004, 59) argues that in order for a family business to achieve multigenerational survival, said business must have a unique mix of values. Indeed, one of the ways for a family business to achieve longevity is by fostering a strong, value-driven organizational culture (Miller & Le Breton-Miller 2006, 82).
1.2. Research gap and objectives
Dyer (2006, 270) argues that some family companies have unique assets that allow them to thrive, while other family companies falter. If one assumes that such assets can be represented in unique organizational values, as was pointed out above, what kind of values, exactly, are they? This is a viable question, yet there is still very little research done on identifying and naming organizational values that contribute to family business survival (Koiranen 2002, 176;
Astrachan 2010, 8; Tàpies & Moya 2012, 134).
Koiranen (2002, 175) analyzes 27 long-living Finnish family businesses and finds out that
«honesty», «credibility», «obeying the law», «quality» and «industriousness», as organizational values, contribute to Finnish family business survival. Tàpies and Moya (2012, 130, 143), com- bining their own long-living family business sample from Spain, Italy and France with the Finnish sample from Koiranen's (2002, 180-181) research, find that «quality», «honesty» and
«hard work» are the organizational values that contribute to family business survival in all of the mentioned countries. Ward (2004, xi) summarizes his years spent researching long-living family businesses, presenting 50 lessons he learned in the process. Lesson 25, named «Legacy of Values», delves into the topic of family business values. The researcher states that these may include «integrity», «persistence», «openness» and so on, acknowledging the fact that such values are passed from generation to generation and contribute to family business survival (Ward 2004, 92-94). Aronoff (2004, 59), taking a look at three long-living family businesses, states that a strong set of values «related to hard work, customer and employee relations, ethical business practices ... and philanthropy» gives one of the businesses a competitive advantage, enabling its survival. Więcek-Janka (2014, 16-17) presents organizational values of Hõshi Ry- okan, the world's oldest family business, with values «Women should watch out for fire» and
«Men should learn from the water» among them.
What is common for all the mentioned studies done on the subject matter, whether they are done using quantitative or qualitative methods, whether there is a relatively big sample utilized or a single case researched, is the lack of depth. The researchers generally do not elaborate on the nature of the values that they identify and name. As a result, sometimes it is not even clear what the values actually mean. Moreover, the researchers generally do not examine how the values manifest themselves in real business scenarios. The only research combining identifica- tion and naming of the values with explanation about their nature and examples of their mani- festation, known to the author, was done recently by Hougaz (2015, 211, 235-242), who inter- viewed third-generation Italian family members engaging with their family firms, that are over 100 years old, and found out their family business values: «work ethic», «loyalty», «profes- sionalization», «risk taking» and «looking forward». The researcher then provided interview excerpts to support her findings and elucidated how the values work in real life.
While general interest in family business, regardless of the topic of longevity, is traditionally strong among American and European scholars, Finnish family business is not being properly addressed (Littunen & Hyrsky 2000, 41). In fact, the only organizational value research avail- able on Finnish long-living family companies was made by Koiranen (2002, 175), who, as was
mentioned above, analyzed organizational values of 27 Finnish family companies over 100 years of age that contributed to their survival. The researcher mainly used quantitative ap- proach, namely, questionnaires, and found out that «honesty», «credibility», «obeying the law»,
«quality» and «industriousness and hardworking» organizational values were most highly ranked by the members of Finnish long-living family businesses (Koiranen 2002, 180-182).
While the research is, definitely, interesting, the author of the thesis cannot help but feel that it only touched the surface of the research area. What does «honesty», as a top scored organiza- tional value, really mean to Finnish family businesses? Is this «honesty» shared between organ- izational members, or does it extend, at the same time, to partners and customers of a company?
To which extent «honesty» is upheld and where is its limit? How does this organizational value manifest itself in day-to-day operations of the companies from the sample? In which ways
«honesty» differs from «credibility»? Most importantly, is it even possible to imagine that
«honesty», as organizational value, can mean exactly the same thing for all the 27 Finnish fam- ily businesses from the sample? Is it even possible that «honesty» manifests itself in the same way in different companies? The list of such questions can go on and on, and if at least some of these questions would get their answers, it can turn out that «honesty», as an organizational value, means, actually, different things for different companies, and under such circumstances
«honesty», as a generalized value, would be rendered meaningless. These are the problems that the author of the thesis sees with quantitative approach seeking out generalizations (Polit &
Beck 2010, 1451) applied to the research area that deals with questions related to organizational culture: cultural elements should not be reduced to mere variables (Siehl & Martin 1990, 274).
Acknowledging his research limitations, Koiranen (2002, 179) includes relevant qualitative el- ement to his study, asking respondents to write narratives about how the values affect their business operations in real life scenarios. Yet, this attempt to «overcome quantitative limita- tions» did not bring a desirable result, because only a very limited number of respondents wrote narrative examples (Koiranen 2002, 181).
This is the exact gap that present research aspires to fill. By analyzing a Finnish long-living family business using an appropriate qualitative approach, deep level of understanding of or- ganizational culture and, specifically, organizational values, leading to longevity, will be reached. The author sets to contribute to the family business longevity literature by identifying and naming organizational values of a Finnish long-living family business, while also elaborat- ing on the nature of said organizational values and providing examples of how said values man- ifest themselves in reality. Moreover, in the process, the researcher will shed light on the other
organizational culture elements of a Finnish long-living family business. Therefore, broad over- view of the long-living Finnish family business culture field achieved by mostly quantitative means by Koiranen (2002), combined with focused view applied to the same area, achieved by relevant qualitative means by the author of the thesis, will present, in the end, a more complete picture of the Finnish family business longevity field approached from cultural perspective.
Taking into account all of the said above, the central, overarching research question of the pre- sent research is «How can a family business achieve long-term survival?» Three research subquestions will be clarified in the literature review part of the thesis, since their formulation requires a deep look in the extant research.
1.3. Study structure
Introduction starts the thesis, discussing background of the research, along with research gap and objectives. The chapter also presents the study structure. The chapter provides an overview of the things to come.
Literature review follows the introduction. Subchapter 2.1 deals with family business longevity.
First, family business itself is discussed. Second, the survival of family business is addressed.
Third, family business survival in Finland is elaborated on. Subchapter 2.2 deals with organi- zational culture and values. First, to start off a discussion of culture, cultural anthropology is explored. Second, the notion of culture itself is addressed. Third, the notion of organizational culture is explained. Fourth, the connection between organizational culture and family business survival is shown. Fifth, the first cornerstone theory of the study is explored - the Three Levels of Culture by Schein (2004, 26). Sixth, the notion of strong organizational culture is introduced.
Seventh and eight, individual values and organizational values are discussed, and the connec- tion of the latter to family business survival is addressed. Subchapter 2.3 deals with role of the family business founder. First, role of the family business founder in creation of strong organi- zational culture is discussed. Second, role of the family business founder in creation of organi- zational values is discussed. Third, posthumous role of the founder is addressed. Subchapter 2.4. provides an institutional perspective on the studied matter. First, the concept of institutions is explained. Second, institutional theory and institutionalization are addressed. Third, second cornerstone theory of the study is explored - The Three Pillars of Institutions (Scott 2014, 60).
Fourth, organizational values as institutional carriers are explored. Fifth, normative transmis- sion of organizational values in family business is elaborated on. Subchapter 2.5 of the literature
review presents theoretical framework. First, the concept of sacred values and theoretical frame- work named «Family Business Survival Clock» are introduced. Second, research subquestions are designed.
Methodology follows the literature review. The «Research onion» model (Saunders et al. 2009, 108) acts as the guidance for the chapter. First, research philosophy is addressed. Second, re- search approach is clarified. Third, research strategy is decided on. The research uses the single case study method. The justification for the choice is given and the reasons for selecting Oy Gust. Ranin as the case company are given. Fourth, research choice is addressed. Fifth, time horizon is thought of. Sixth, techniques and procedures are addressed, with data collection tech- niques and data analysis process thoroughly explained. In this part, the author clarifies how he designed the questionnaire, what kind of secondary sources he used and how he made sense of all the data. Seventh, validity and reliability of qualitative research are addressed. Eight, the study limitations are touched upon.
Case study chapter follows the methodology. First, the author gives an overview of the legal field in which the case company exists, because it is relevant in the context of the history of the company. Second, the author gives an overview of the case company. Third and fourth, the author discusses the family business founder and the current managing director of the company.
Fifth, recent relocation of the case company's operations is addressed in full detail. Sixth, two prominent cultural artifacts of the company are discussed. Seventh, one of the core concepts of the company is dissected. Eight, team cohesion is addressed. Ninth, succession process is ana- lyzed through a subcase.
Discussion and conclusions chapter follows the case study part. In it, the key findings of the study are extensively summarized and the research questions, subsequently, answered. Scien- tific and managerial importance of the study is addressed, and implications for future research are provided.
2. LITERATURE REVIEW 2.1. Family business longevity 2.1.1. Family business
There is no generally accepted definition of a family business (Littunen & Hyrsky 2000, 41).
There are a number of ways to define family business and a number of researchers approached the definition in their own style, depending on field of study and task at hand.
For example, Bernard (1975, 42) concisely refers to family business as «an enterprise which, in practice, is controlled by the members of a single family». Stern (1986, 21), on the other hand, argues that family business can be «owned and run by the members of one or two fami- lies». Gallo and Sveen (1991, 181) specify that, in their view, the owning family should control more than half of the company's stock. Sonfield and Lussier (2004, 189) note that family mem- bers should not only dominate the ownership, but also perceive their business as a family busi- ness. Earlier, Lyman (1991, 304) elaborates on the roles and positions of the family owners, arguing that «at least one owner has to be employed in the business, and one other family mem- ber has either to be employed in the business or to help out on a regular basis even if not offi- cially employed». Even earlier, Donnelley (1964, 94) puts emphasis on generational transfer, stressing the fact that family business should be «identified with at least two generations of a family». Tagiuri and Davis (1996, 200), in an attempt to clear up the field, proposed an influ- ential approach to understand family business systems. In researchers' view, three components overlay in family companies: family, ownership and management, setting family businesses apart from non-family ones. The scholars argue that family company can be defined by three criteria: first, ownership in a family company should be controlled by one family, second, at least two family members should engage in company's operations and, third, there also should be employees in the company that do not belong to the owning family.
Chua et al. (1999, 20-21, 25), having reviewed over 250 papers, provide an excellent summary of family business definitions, including some of the presented above. The researchers argue that, judging from extant research, the core of a family business consists of a sustainable vision, developed in the early history of a company and transmitted across generations. Capturing this central theme, the unified definition is presented.
«The family business is a business governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the
same family or a small number of families in a manner that is potentially sustainable across generations of the family or families» (Chua et al. 1999, 25).
The definition above is appropriate for the purpose of thesis in question not only because of its summarizing nature, but also because it provides an outlook on a family business as an organi- zation that transmits early shaped vision throughout its whole history, from generation to gen- eration. While at this point in literature review it is only seen in very broad strokes, transmission is one of the main concepts lying in the theoretical framework of the thesis. Moreover, the definition is suitable, because it deals with the notion of sustainability, implying that any family business naturally strives to survive. But for how long do family companies usually survive?
2.1.2. Family business survival
Business organizations around the world face chaotic external environment, consisting of countless forces, which are often beyond the control of organizations' management, like gov- ernment regulations and changing competition, representing both threats and opportunities to firms (Ward et al. 1995, 100). In the beginning of the 21st century, only around half of new- born companies in Europe survived for more than five years (Napolitano et al. 2015, 2).
Indeed, few business organizations of any type last long and enjoy successful lives these days (Poza & Daugherty 2013, 8). Nevertheless, family firms seem to have a higher chance of sur- vival than non-family ventures. Habbershon et al. (2003, 452) demonstrate that family busi- nesses have unique competitive advantage, since they tend to not only strive for wealth creation, but also for systematic social value creation, resulting in unified commitment to «transgenera- tional wealth creation», which underlines the particular strive of family businesses for contin- uation and, consequently, business survival. Indeed, such social elements as family-oriented goals and high levels of social capital contribute to business survival (Wilson et al. 2013, 1370).
Nevertheless, high amounts of family companies fail in their generational transitions and cease to exist. Few survive more than a few years (Dyer 1986, 3). Data, tracking down life expectancy of 200 successful American family-owned manufacturers from 1924 till 1984, shows that 80 percent of the companies could not survive, and only 13 percent of companies that survived lasted through the third generation, with some other surviving family companies being sold to outsiders or going public (Ward 2011, 1-2). Many family businesses vanish after ten years, around 30 percent survive into second generation, around 13 percent make it in the third gen- eration, and only around 3 percent make it in the fourth generation. Average lifespan of a family
company is 24 years (Beckhard & Dyer 1983, 5; Benson et al. 1990, 54; Applegate & Judy 1994, 88; Stamm & Lubinski 2011, 118; Poza & Daugherty 2013, 8).
Business longevity is a relative term and there is no agreed-upon time period of business activity after which a family company can be considered as a long-living one or as a «survivor». Some researchers say that five or ten years may be enough to consider a company long-lived (Napo- litano et al. 2015, 1-2). Judging from the aforementioned fact that an average lifespan of a family company is 24 years, it is also reasonable to assume that a family firm that operates for 25 years or longer can be considered as a long-living family business. Nevertheless, for exam- ple, Koiranen (2002, 180), exploring the values of old Finnish family firms, only includes fam- ily companies that are over 100 years old in his sample, considering them as long-living family firms. The author of the thesis follows suit and assumes, for the purposes of the thesis, that a family business that operates for 100 years or longer can be considered as a long-living family business. Combining this notion with the definition of family business adopted for this study (Chua et al. 1999, 25) for the reasons discussed before, the author presents a concise definition of a long-living family business, synthesized for the purposes of the thesis.
A long-living family business is a sustainable business owned and shaped by the vision of the same family for more than 100 years.
Now it is time to look at how many long-living businesses are there in the world and, specifi- cally, how many long-living family businesses there are in Finland.
2.1.3. Finnish family business survival
Goto (2006, 522-523), drawing on several sources, provides information on total number of long-living companies in the world, which survived for 200 years or more, country by country.
There are 41 countries at which the researcher took a look at, with total number of long-living companies being 3 505 in all of them combined. It turns out that Japan has the largest number of companies in question (1 146 firms in total, representing the largest proportion of 32.7 per- cent), followed by Germany (856 firms in total), Netherlands (240 firms in total), France (177 firms in total) and Austria (167 firms in total). Finland, on the other hand, has a very small number of long-lived firms that survived for 200 years or more, exactly 10 long-living compa- nies, which represents only 0.3 percent of the companies from all the countries mentioned in the research.
While this data presents a valuable outlook at the state of affairs, it is time to remember that the thesis deals specifically with family companies that survived for a long time, and the definition of a long-lived family company adopted for the purposes of the thesis implies that a long-lived family company can be regarded as such if it survived for 100 years or more. In relation to this, as of 2002, there are only 68 long-lived family companies in Finland that are over 100 years of age (Koiranen 2002, 175). Taking into account the fact that, as of 2013, there are 283 290 business enterprises in Finland (The Federation of Finnish Enterprises 2016), it presents an implication that each and every Finnish long-lived family business is, in a sense, unique, since all Finnish long-living family companies combined represent only around 0.024 percent of all companies in Finland.
As was elaborated on in the introduction, there are a number of explanations for family business longevity (Napolitano et al. 2015, 1). Since the thesis looks at the phenomenon from cultural point of view, it is a proper time to address the notion of culture.
2.2. Organizational culture and values 2.2.1. Cultural anthropology
Anthropological point of view serves as a start for the task of elaborating on the notion of cul- ture. Anthropology is concerned with the scientific approach to study human cultures, no matter the form of those, period in time when they existed or continue to exist, or geographical region where they can be found. The four intertwined layers of anthropology are presented in archae- ology, physical anthropology, anthropological linguistics and cultural anthropology. Cultural anthropology, in particular, is the «comparative study of cultural differences and similarities found throughout the world» (Ferraro 2002, 2-6).
Cultural anthropology analyzes social organizations and communities of various types. The relationship between culture and operation of social organizations is a recurring theme in the social sciences for over 70 years now (Denison & Mishra 1995, 204). In the beginning of the last century, cultural anthropology was traditionally occupied with studies of small and techno- logically simplistic societies. Yet, little by little, cultural anthropology became involved in the research of much more complex societies and, eventually, business organizations. Just like the people found in small, preliterate societies, members of business organizations engage in ritu- als, create and perpetuate organizational myths, stick to sets of norms and symbols, meet be- havioral expectations and use specialized vocabularies (Ferraro 2002, 6). Indeed, in a broad sense, any research work concerned with the study of human culture in the context of business
organizations, like the present one, is concerned with cultural anthropology. But, in the end, what is culture, exactly?
2.2.2. Culture
All people have culture, because the only requirement for possessing culture is to be human (Ferraro 2002, 18). It seems that the term «culture» can be defined in an almost infinite number of ways. One of the earliest widely adopted definitions was offered by the founder of cultural anthropology Edward Tylor, over a century ago. He defined culture as «that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and hab- its acquired by man as a member of society» (Tylor 1871, 1). It is important to focus attention on the last phrase of the definition - «as a member of society», since a culture is a culture only when it is shared by two or more people. To paraphrase it, there is no such thing as a culture of an anchorite. For anything to be considered cultural, it must be shared by a social group (Ferraro 2002, 19-20). Indeed, in Webster's Seventh New Collegiate Dictionary culture is defined as a
«behavior typical of a group or class» (Gove 1963, 202).
In the last century, Kroeber and Kluckhohn (1952) collected more than 160 different definitions of culture. Summarizing their analysis, the researchers stated that culture is a historical product of behavior intended for learning. Culture, supposedly, includes selective ideas, patterns, values and symbols (Kroeber & Kluckhohn 1952, 157). As a conclusion, the scholars formulated a broad definition of culture, collecting the central ideas of most social scientists of the time.
«Culture consists of patterns, explicit and implicit, of and for behavior acquired and transmitted by symbols, constituting the distinctive achievement of human groups, including their embod- iments in artifacts; the essential core of culture consists of traditional (i.e., historically derived and selected) ideas and especially their attached values» (Kroeber & Kluckhohn 1952, 181).
Herskovits (1955, 305) thought of culture as of «the man made part of the environment». Downs (1971, 35) viewed culture as being «a mental map which guides us in our relations to our sur- roundings and to other people». Broms and Gahmberg (1983, 482) define culture as «the col- lection of central values hidden in the shared myths and symbols». More recently, Maxwell (2001, 1-2) argues that culture represents the sum of all the stories people tell themselves and others around them. Human beings create narratives about who they are and whom they want to be. Ferraro (2002, 19) provides a concise explanation of the concept of culture.
«Culture is everything that people have, think, and do as members of their society» (Ferraro 2002, 19).
The author believes that this definition of culture is spot on, because combines all the notions that the other researchers noted above stressed in a simple, concise, practical and easily under- standable manner. Since the thesis is dealing, specifically, with the concept of organizational culture, it is time to shed light on the subject.
2.2.3. Organizational culture
A definable organization, conceptualized as a sum of people having interactions with each other in an attempt to reach an agreed upon goal in a definable environment, is a prerequisite for the existence of organizational culture (Schein 1995, 221). It is important, especially when one talks about such intangible concept as culture, to note that any organization can be perceived not as a concrete entity, but as «a process of organizing support sufficient to continue existence»
(Pfeffer & Salancik 1978, 24). Just like any kind of societies, tribes or communities, all business organizations also have culture, which is referred to as organizational culture (Harris 1984, 128;
Ferraro & Briody 2016, 24).
Schwartz and Davis (1981, 33), stressing the before-mentioned shared nature of culture, simply define organizational culture as «a pattern of beliefs and expectations shared by organization members». Marvin Bower, the father of modern management consulting (Harvard Business School 2015), once offered a concise and practical, albeit informal, definition, describing or- ganizational culture as «the way we do things around here» (see Deal & Kennedy 1982, 125).
Putnam (1982, 199), elaborating on the process of «doing things» in an organization, states that those may include events where organizational actors «assign symbolic meanings» to the «or- ganizational cultural inventory» through the process of telling stories, propagating organiza- tional myths, engaging in company's rituals and taking part in organizational ceremonies.
Jelinek et al. (1983, 337) put emphasis on the persisting nature of organizational culture and on the fact that it puts certain limitations on human behavior, defining it as «underlying structure of meaning that persists over time», constraining organizational members' «perception, inter- pretation, and behavior». Pettigrew (1979, 574), cautiously, earlier reminds of the finite nature of organizational culture, conceptualizing it as widely accepted meanings of a number of people
«operating for a given group at a given time». Harris (1984, 128) defines organizational culture as a company's «distinct identity» comprised of shared beliefs and values, various procedures
and activities that organizational members perform all the time or from time to time, and com- munication practices and behaviors accepted in an organization. Deshpande and Webster (1989, 4), accentuating the educational role of organizational culture, define it as the fabric of shared values and beliefs that helps organizational actors comprehend organizational functioning and educates them on the norms of behavior followed in the organization. Schein (1995, 221), ar- guing that there is a high level of confusion in terms of how to approach the concept of organ- izational culture, defines it as «the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and inter- nal integration». Schein (1995, 224) also argues that said pattern of basic assumptions should have worked well enough in order to be considered preferable and, consequently, being passed down to any new members of organization, teaching the latter how to view things, think and act in order to solve problems.
For the purposes of the thesis in question, organizational culture concept is synthesized from the definitions above and defined as a pattern of shared assumptions, values and symbols that both represents a distinct identity of an organization and supports, guides and stands for the way people behave and do things in an organization during a continuous time period.
Schein (1996, 231, 239) states that organizational culture is «one of the most powerful and stable forces» operating in an organization, even though it can be taken for granted and not actively noticed by individuals immersed in it. In the same vein, Gerstner (2003, 274) argues that «culture [of a company] isn't just one aspect of the game - it is the game». Organizational culture plays a leading role in family business (Hall & Nordqvist 2008, 55). Now that the con- cept of organizational culture is cleared up and its importance is highlighted, it is time to see if organizational culture and family business survival are somehow connected.
2.2.4. Organizational culture and family business survival
Extant research shows that organizational survival, in general, is connected to the notion of organizational effectiveness. While there are a number of ways to define organizational effec- tiveness, it can usually be addressed as the ability of an organization to manage and make pro- gress (Amah 2012, 212), which can be achieved by both economic and non-economic means.
In the middle of the last century, Alchian (1950, 213), using biological evolution and natural selection theories as background for his reasoning, argued that organizational survival is de- pendent on the company's economic performance: those companies that realize positive profits survive, while those who realize negative profits, in other words, losses, disappear. Friedman
(1953, 22) argued in a similar straightforward way, following the natural selection paradigm based on principle of maximizing returns as the main prerequisite for a company's survival.
Arguably representing the genesis of a new wave of research, Winter (1964, 268), while gen- erally agreeing to the above-mentioned reasoning, presented certain criticism of it, arguing that sometimes responses of surviving firms to the external environment cannot be boiled down just to profit maximization. Hannan and Freeman (1977, 960) further pushed the argument, noting that history shows even the largest and most powerful organizations, that managed to accumu- late huge financial resources, fail to survive over long periods, which can be caused, for exam- ple, by failure to adapt to external catastrophes; indeed, in the United States, during the Revo- lution, only 13 out of thousands of business ventures managed to survive as independent com- panies. Gimeno et al. (1997, 752, 774-775), while acknowledging that there is a casual link between company's economic performance and its consequent survival, also argue that organi- zational survival is not strictly tied to economic performance: while higher economic perfor- mance results in increasing likelihood of survival, there are other, less obvious things that in- fluence survival in a positive way, too, for example, managing director's human capital.
Meyer and Rowan (1977, 361) present a cultural argument that those business organizations that incorporate institutionalized myths in their organizational culture are «more legitimate, successful, and likely to survive». Denison (1984, 6) argues that «the cultural and behavioral aspects of organizations are intimately linked to both short-term performance and long-term survival». Denison and Mishra (1995, 220), moving towards a theory of organizational culture and effectiveness, show that culture has a considerable impact on organizational effectiveness.
In particular, researchers found that such organizational culture traits as involvement, con- sistency, adaptability and mission have «significant positive association with a wide range of both subjective and objective measures of organizational effectiveness». Glaister and Buckley (1998, 112) also show that organizational culture is one of the important factors affecting or- ganizational effectiveness. These implications present support for the importance of the role that organizational culture has in long-term business survival. Indeed, it is argued that culture, in form of shared beliefs, attitudes, customs, and values of people within an organization, plays a critical role in deciding whether an organization prospers and survive, or fails to do so (Jensen
& Meckling 1994, 16, 19).
Vallejo (2008, 271) finds that culture of family companies differs from culture of non-family firms. Indeed, in case of family companies, the argument that non-economic factors, with or-
ganizational culture among them, positively affect business survival, gains even stronger sci- entific support. Even though wealth creation, as a drive for organizational effectiveness, is usu- ally seen as the primary objective of any businesses and, consequently, one of the prime focus points of business researchers, it is not necessarily a main goal of a family businesses (Chrisman et al. 2003, 468). Such peculiarity, arguably, allows family companies to pursuit non-economic goals. Chrisman and Carroll (1984, 64) researched the case of Du Pont company, which is a hugely successful family business started in 1802, with family owners still owning a substantial part of its shares and a family member present on the company's board of directors to present day (Forbes 2015). The researchers concluded that companies that are pursuing not only eco- nomic, but also noneconomic goals, can in fact both achieve cost savings and prevent business failure, and as a result, increase both their economic effectiveness and chances of survival.
Kotter and Heskett (1992, 35-36), looking at the case study of Walmart, which is an American family-owned business established back in 1962, note that the organizational culture of Walmart in 1977-1988 had a strong influence on organizational effectiveness, influencing com- petitiveness, technological development, increasing market fit and, as can be seen today, lead- ing Walmart to becoming a strong successful company nowadays (Walmart 2016).
To sum it up, extant research proves that while there are many factors that affect business sur- vival, organizational culture has particularly strong influence on business survival, and family companies, due to their nature, have more opportunities to utilize organizational culture in order to achieve longevity. Therefore, organizational culture, for the purposes of the thesis, should be studied in greater detail. In order to understand the concept of organizational culture on a deeper level, the concept of culture should be dissected.
2.2.5. Three levels of culture
Schein (2004, 25-36), explaining his highly influential approach to culture analysis, which orig- inated in 1980s, argues that the confusion seemingly inherent to the culture research results from the lack of differentiation of the cultural levels. The concept of cultural level implies the degree to which a cultural phenomenon can be observed in a visible form to an outsider. There is the level of artifacts, the level of espoused beliefs and values and the level of basic underlying assumptions. Each level is deeper than the previous one: while the level of artifacts is very tangible and clearly observable by the naked eye, the level of basic underlying assumptions is deeply embedded and exists on unconscious level in the minds of cultural actors, and, therefore, requires a deep observation in order to be unearthed. The figure 1 illustrates said levels.
Figure 1: Levels of Culture.
Source: Schein 2004, 26.
In between of the levels, illustrated in the figure 1, multiple «espoused beliefs, values, norms and rules of behavior» are hidden. Members of a culture use them to portray their culture both to themselves and to other cultural actors (Schein 2004, 25). In order to understand the whole picture, one should have a sufficient understanding of the three cultural levels themselves.
The level of artifacts exists on the surface. This is the phenomena that one can see, hear and feel. Gagliardi (1999, 311) states that an artifact can be defined, firstly, as a product of human activity that has an existence independent of its creator; secondly, as something intentional, for example, something that is designed to solve a problem or satisfy a need; thirdly, as something that can be perceived by the human senses, something corporal, something physical. In practical terms, artifacts may include clearly visible products of a cultural group - for example, buildings, clothes, language, physically published mission statements, stories told about an organization, ceremonies, organizational charts, various documents and so on. While the level of artifacts is clearly seen, it would be misleading to imagine that it can be easily deciphered. For example, a long time ago, the Egyptians built big visible pyramids, but the debate about their meaning exists to these days (Schein 2004, 25-27).
The level of espoused beliefs and values is in the middle of the Schein's (2004, 26) view on culture. Kluckhohn (1951, 395) defined values as explicit or implicit conceptions of desirable, belonging to an individual or a group, which influence the selection from available means and ends of an action. The notion of values will be addressed later on in the literature review. For now, it is important to say that the level of espoused beliefs and values represents the shared knowledge of organizational group about what is right and what is wrong, what is desirable and what is undesirable. This particular level of culture is highly influenced by organizational founder or other leader. When an organizational group faces a new situation, someone has to
Artifacts
Espoused beliefs and values
Underlying assumptions
come up with a solution to deal with the situation. Such a solution may work or may not work.
If the solution proves to work, organizational founder or other leader who proposed it gains more credibility, and the solution becomes accepted by organizational members. If the solution proves to work several times, it becomes a universally shared belief, taking form as an organi- zational value (Schein 2004, 28). For example, if an organization is facing trouble with exces- sive internal paperwork that gets in the way of achieving organizational targets, founder or leader of the organization may propose to build a new system based on internal trust, encour- aging people to get rid of excessive document flow, trust their colleagues and concentrate on external tasks at hand. If such a solution works in the organization, a new espoused belief in organizational trust will be born, that will then be assumed as the organizational value «trust».
New group members who wish to join the organization in the future will be expected to embrace the value and conform to it. Schein (2004, 30) warns that while espoused beliefs and values can be deciphered by an observer not belonging to organizational group, sometimes espoused be- liefs and values leave areas of behavior unexplained. Some values can be seemingly contradic- tory. For example, an organization may place high value both on the high quality of its product and on its low cost. In order to decipher such scenarios, one has to go a level deeper - at the level of basic underlying assumptions.
The level of underlying assumptions is initially hidden from a casual observer. While espoused beliefs and values can be communicated, basic underlying assumptions are so taken for granted by a group that shares the same culture, that organizational members sometimes have hard time realizing that said assumptions exist. The thing is that basic underlying assumptions deal with basic and generally broad aspects of life - «the nature of time and space, human nature and human activities, the nature of truth ... the correct way for the individual and the group to relate to each other, the relative importance of work, family, and self-development» (Schein 2004, 30-35). Basic assumptions happen to be nondebatable and are hugely resistant to change. To put it in a practical sense and provide an example, it is unimaginable that there might be a successful company that consistently stays unprofitable in a capitalist country, and it is hard to imagine an engineer designing solutions that don't functionally work (Schein 2004, 31). Doug- las (1986, 63) argues that institutions, including organizations, are founded on analogy and bestow sameness. In this sense, Schein (2004, 32) argues that once human beings develop a set of assumptions that can be referred to as «mental map», said human beings become highly comfortable with other human beings who share the same set of assumptions and extremely uncomfortable with those who share different assumptions.
Presenting an alternative mix of cultural levels, Sackmann (1992, 142) argues that four elements form a cognitive culture map: dictionary, directory, recipe and axiomatic knowledge. Diction- ary knowledge refers to commonly held descriptions, referring to content of situations, answer- ing the question «what» is happening. Directory knowledge refers to commonly held organiza- tional practices, representing knowledge about things and events, answering the question
«how» is something done. Recipe knowledge refers to prescriptions of what «should» be done for organization to reach its goals. Finally, axiomatic knowledge refers to «reasons and expla- nations of the final causes perceived to underlie a particular event», answering the question
«why» something is happening. While Sackmann's (1992, 142) cognitive culture map model provides additional food for thought, it can be nonetheless reconfigured to fit in the Schein's (2004, 26) Three Levels of Culture model. In short, basic underlying assumptions relate to ax- iomatic knowledge, espoused beliefs and values relate to recipe knowledge, and artifacts relate to both directory and dictionary knowledge. It can be argued, then, that the Three Levels of Culture model is both simpler and deeper. The choice of the latter model is strengthened by the fact that to present day, the Three Levels of Culture model is actively used by researchers who study organizational culture. For example, Hogan and Coote (2014, 1610) study innovation as the key to organizational survival in law firms, while Astawa and Sudika (2014, 107) study the impact of local culture on financial performance of companies in Bali, while Loi and Di Guardo (2015, 5) investigate espoused values embedded within the statutes of Italian universities. Now that the concept of culture is addressed in fuller detail, the notion of strong organizational cul- ture can be addressed.
2.2.6. Strong organizational culture
Deal and Kennedy (1982, 13-15) note that there are five elements that define the basis of an organizational culture. The business environment is one of the greatest influences that shapes organizational culture. For example, firms that are oriented toward quick short-term customer service are culturally different from companies oriented towards long-term and costly research and development projects. The values are the cornerstone concepts and beliefs instilled in an organization. They form «the heart of the corporate culture». Values define success in concrete terms for organizational members, providing guidelines for what to do in order to achieve or- ganizational goals. The heroes play their part by personifying the values of the organizational culture, acting as role models for the corporate actors to follow. The rites and rituals are the systematic programming routines of everyday life in an organization. In their manifestations, they show organizational members just what kind of behavior is expected of them. Ceremonies,
which also are included in this basic organizational element, provide clearly visible visions of what a company stands for. The cultural network binds together and distributes the above-men- tioned organizational culture elements, acting as a «carrier» of organizational values and my- thology.
When these five elements that define organizational culture are done right, they provide a com- pany with a «strong» organizational culture. A «strong organizational culture» is a «system of informal rules that spells out how people are to behave most of the time» (Deal & Kennedy 1982, 15). Strong organizational culture not only guides organizational behavior, it also helps organizational members to do their jobs more efficiently by providing practical meaning to their tasks and making people feel better about what they do; in other words, strong culture provides strong interorganizational motivation (Deal & Kennedy 1982, 15-16; Sorensen 2002, 89).
Strong organizational culture also implies high group cohesion and low degree of formal bu- reaucracy (Kotter & Heskett 1992, 16). Summing it up, companies with strong cultures have «a high level of commitment to an established way of understanding the world» (Sorensen 2002, 88). Importantly, strong organizational culture is associated with excellent organizational ef- fectiveness that, in turn contributes to long-term organizational survival (Denison 1984, 6, 20;
Kotter & Heskett 1992, 15, 150). Sorensen (2002, 88-89) also argues that a company that can maintain its strong culture, while showing some degree of adaptation to changing environment that rewards exploration, finds itself in the best position.
While a weaker organizational culture provides only broad guidelines to organizational mem- bers (Lunenburg 2011, 4), strong organizational culture provides well-defined organizational values to its members, who unanimously express approval and follow the values (Searle et al.
2011, 173). Organizational values, in general, are argued to be the most important, key cultural elements of organizations (Kotter & Heskett 1992, 4; Begley & Boyd 2000, 8; Denison et al.
2004, 62; Michailova & Minbaeva 2012, 67). Therefore, the notion of values should be further addressed in the literature review, starting from individual level.
2.2.7. Individual values
Rokeach (1973, 5) defines values, in a broad sense, as basic convictions that represent a «spe- cific mode of conduct or end-state of existence» that is personally or socially preferable to an
«opposite or converse mode of conduct or end-state of existence». Koiranen (2002, 176) defines values as «moral principles, standards, ethical and behavioral norms». Values are part of daily lives of people (Agle & Caldwell 1999, 327). Values determine all varieties of social behavior
and social actions: attitudes, ideology, evaluations, justifications, judgements and so on - the list seems to be endless. Values determine how people present themselves and judge others, compare themselves to others, present themselves to others, influence others (Robbins & Judge 2013, 144). Values encourage people to do difficult things, giving them power to take appro- priate action (Dumas & Blodgett 1999, 210; Aronoff & Ward 2000, 1). An individual's personal values are influenced by both values inherent in a national culture and values which were so- cialized by parents, friends and personal life events (Amah 2012, 220). Containing an individ- ual's ideas about what is right and wrong, desirable and undesirable, good and bad, values have both a content attribute and an intensity attribute. The content attribute represents the notion that a specific mode of conduct or end-state of existence is important or unimportant. The in- tensity attribute provides specification about just how important a specific mode of conduct or end-state of existence is. If one ranks an individual's values using the intensity attribute, one gets the information about the individual's value system (Robbins & Judge 2013, 144).
One important thing to be cleared up about values is that they are not, in general sense, fluid or flexible. Values tend to be, to a relative degree, mostly stable and enduring (Rokeach & Ball- Rokeach 1989, 782). The fact that heavily contributes to this is that a big portion of the values an individual holds are created in his or her early years in an all-or-nothing manner (Rokeach 1973, 6). Parents, teachers and other people all take part in influencing an individual's values, as was noted before. In the beginning of an individual's life, there are very few gray areas in a person's value system: for example, parents can teach children that they should be «responsible»
and «not irresponsible», but, usually, not «responsible sometimes» or «irresponsible some- times». This contrasting, black and white contraposition is what makes values strong and stable.
Jones and Gerard (1967, 708) add to the argument of value stability by saying that in order for an individual to get values, he or she has to go through discomforting situations. Values are stable and enduring, because individuals become psychologically attached to the hard experi- ences they had, and in an effort to justify the effort required to deal with the experiences, de- velop values. If an individual questions his or her values and puts a considerable effort to mod- ify them, they may, of course, change. But most of the time values just get fully or partially reinforced. That is why it is so important to set values right in the first place (Robbins & Judge 2013, 144). Apart from affecting individuals, values influence, determine, regulate and explain attitudes, behaviors, relationships and perceptions in organizations (Agle & Caldwell 1999, 327; Robbins & Judge 2013, 154).
2.2.8. Organizational values and family business longevity
Organizational culture is academically recognized as being highly connected to values (Agle &
Caldwell 1999, 345) and, moreover, is sometimes described just as a sum of shared values
«underpinning a social system» (Liedtka 1989, 807; Bansal 2003, 519). Values, simply put, are the foundation of organizational culture (Kotter & Heskett 1992, 4; Begley & Boyd 2000, 8;
Denison et al. 2004, 62; Michailova & Minbaeva 2012, 67). Organizational values are condi- tions that define organizational culture, by being organizational «essential and enduring tenets»
(Collins & Porras 1998, 222). Organizational values serve as behavioral guidelines. By defining acceptable means of achieving desirable outcomes, values serve as important forces shaping organizational strategy and influencing a company's identity (Guth & Tagiuri 1965, 123; Bansal 2003, 520). Steve Phillips, the former CEO of Blue Star Group, which is one of the Australia's leading customer communications businesses nowadays (Blue Star Group 2016), said back in 2000 that «values are ... constant reference point for monitoring vision, strategy, performance, direction, and human well-being» in a successful company (see Schubert 2000, 32). To provide a few examples, «trust», «honesty», «openness», «collaborative partnering» and «taking re- sponsibility» can be viewed as organizational values that are «good for business» (Hultman 2005, 48).
Business organizations that achieve some sort of longevity often have a strong sense of values (De Geus 1997, 108). Family businesses, in particular, are value driven: «distinct, powerful, nurtured values define their ways and means» (Ward 2008, 2). Family business values can be defined as «explicit or implicit conceptions of the desirable in both family and business life»
(Koiranen 2002, 177). In order for a family business to achieve multigenerational survival and overall success, said business must have a unique mix of well-defined values that provides meaning to company operation beyond economic goals (Schein 1995, 238; Denison et al. 2004, 63-64; Aronoff 2004, 59; Vallejo-Martos 2011, 454, 467). Organizational values, as a «norma- tive glue», play key role in holding family business together, ensuring its longevity (Tichy 1982, 63; Tàpies & Moya 2012, 132-133), and organizational values of family businesses usually differ from the values of non-family businesses (Dyer 2003, 410). But who creates the family company organizational culture and shapes its values in the first place? This question leads us to the role of the family business founder.
2.3. Role of the family business founder
2.3.1. Role of the family business founder in creation of organizational culture
In an organization, a group of people has internal interactions in order to solve organizational problems and achieve organizational goals (Schein 1995, 221). Organizational culture, com- prised of customs, traditions, ways of doing things, values and beliefs is usually the result of the doings of the past and the level of success that these doings had (Robbins & Judge 2013, 25). These can include examples of past and current leadership, events of crisis and success, and history of a company as a whole (Amah 2012, 214). In the first place, any organization exists because someone once made a decision to establish it and realized this plan. Founder is such a person, acting as an «initial architect» of an organization, defining its strategy, structure and, most importantly, culture and values (Nelson 2003, 710).
The group's culture does not come into life until organization faces difficult situations and sur- vives those, achieving growth. The culture is influenced by the success of solutions offered for coping with both external world and internal tensions. An organizational founder plays the piv- otal role in this process, by assembling a group of people and by shaping the group's culture, utilizing his or her personality and creating solutions to organizational problems (Schein 1995, 221).
Kotter and Heskett (1992, 7) argue that in successful firms, the founders or other early leaders took situation in their hands from the beginning, providing vision, business strategy or a phi- losophy - or all of these things, or some combinations of them. It is often the case that organi- zational founders start with a theory in mind on how to succeed (Schein 1995, 221). Founders have a «cultural paradigm» in their heads, which is founded in their own experience. Organi- zational culture of a family company embodies the founder's «individual propensities, values, and operating rules», becoming a reflection of the founder (Hollander & Elman 1988, 149).
Schein (1995, 225) describes the process of culture formation in the organization in relation to the founder's role in four essential steps. First, a single person - a founder - gets an idea about a new organizational venture. Second, the founder assembles a founding group. Group members are selected on a basis of agreement to the founder's idea. Group members find the idea a worthy one and accept the risks associated with the idea's execution. Third, the founding group starts to execute the idea, acting in unity to achieve organizational goals. Fourth, other individuals are brought in as organizational members, if the founder finds it necessary. The organizational group starts to build its organizational history. Schein (1995, 235-236) also examines differ- ences between family business founders and «professional managers», implying by the latter people who were hired outside of pool of family owners to manage a company. In essence, founders, in comparison to external managers, are more self-oriented and more open to risk-
taking, being entrepreneurs by nature. Family business founders tend to be more intuitive and thorough in their thinking, and, very importantly, capable of thinking long-term instead of short- term, pursuing, if necessary, non-economic objectives that can influence things like business longevity down the line (Le Breton-Miller & Miller 2013, 1392). The extraordinary capabilities of founders are explained by the fact that founders are more connected to the newborn business venture than any external people are; a founder is building his or her own identity through their business organizations (Schein 1995, 236). Indeed, later in life a successful organizational founder feels that his or her company is an integral part of his or her identity as a human being (Kets de Vries 1993, 68).
Schein (1995, 236-237) underlines four unique functions of a founder, which he or she owns to his or her unique position. These functions shape early history of a company and propel it in the future - if the founder's actions were successful.
1). Founders contain and absorb anxiety and risk. Founders are more confident than any other organizational members. Articulating their vision and seeing into the future, they smooth out anxieties of group members and control inherent risks that are characteristic of newly estab- lished companies with developing organizational culture (Schein 1995, 236).
2). Founders implant non-economic assumptions and values. This is arguably one of the most important functions that founders serve in relation to the topic of the thesis. As was mentioned before, founders tend to think long-term. This enables them to implement practices that may be inefficient in short term, but may be very beneficial for their organizations in the future (Schein 1995, 236). Founders generally wish to see their organization to continue (Kets de Vries 1993, 69). Founders base their actions around their personal values, which are often connected to general desire to create an effective organization that will serve themselves and their families long-term. Values that are used as carriers for such concerns tend to be humanistic (Schein 1995, 236). For example, even inefficient members of an organization may be given an oppor- tunity to grow organically and show themselves as potent contributors for the company success in the future.
3). Founders stimulate innovation. Once again, from their unique position, they are willing to try new ways of getting things done, following their vision and intuition (Schein 1995, 236).
Founders are not constrained by the people above them, they are the self-made kings or their ventures, which allows them for more freedom for innovation. Founders are unconstrained by preceding ways of doing things (Nelson 2003, 707).
4). Founders manage evolution. Of course, it would be an overestimation to suppose that found- ers can be the only forces behind organizational success. To put it metaphorically, even though a founder is a king, he is not a god. Founder's ideas cannot always be the right ones, even if his or her organization prospers (Schein 1995, 237). The founders implant their assumptions, be- liefs and values in organizational members in the first place. Beckhard and Dyer (1983, 6) argue that when a founder is in charge, «everyone knows his or her place». Yet, the members, over time, get their own experiences and develop a number of new assumptions, beliefs and values.
Some of those may serve better than the original ones imposed by the founder. Then it is the job of the founder to identify and give incentives to the organizational actors who were able to come up with superior solutions.
In the whole process described above the founder has the central stage and makes major impact on how organization approaches both external and internal problems, whether it survives and prospers. In family business literature, there is high consensus concerning the influence of the founder on the organizational culture (Hall et al. 2001, 196). Schein (1995, 225) assures that founders have very strong assumptions about the world and their organization in it, along with the founder's place itself, along with assumptions about human nature and relationships, and so on. Therefore, personality traits of the founder have a serious impact on organizational culture.
Indeed, Kets de Vries (1993, 67) believes that family firms are disposed towards autocratic rule.
In the end, without dominance and persistence of the founder of the organization, the company would have hard time not only being born and showing consecutive signs of life, but also reach- ing success and long-term sustainability.
Since organizational values were identified earlier as the foundation of organizational culture (Kotter & Heskett 1992, 4; Begley & Boyd 2000, 8; Denison et al. 2004, 62; Michailova &
Minbaeva 2012, 67), the process of implantation of organizational values on part of the family business founder deserves a closer look.
2.3.2. Role of the family business founder in creation of organizational values
Organizational culture of a family business is, to a large extent, the result of values that a founder instilled in the business (Hall & Nordqvist 2008, 55). Perhaps one of the most compre- hensive descriptions of the value creation on organizational culture level executed by compa- ny's founder was given by Gagliardi (1986, 121-122), who identified the four phases in the genesis of organizational values.
