An assessment of selected family business values in small and medium-sized family businesses

Van Der Merwe, S. P.; Venter, E.; Farrington, S. M. Article An assessment of selected family business values in small and medium-sized family businesses South African Journal of Business Management Provided in Cooperation with: University of Stellenbosch Business School (USB), Bellville, South Africa Suggested Citation: Van Der Merwe, S. P.; Venter, E.; Farrington, S. M. (2012) : An assessment of selected family business values in small and medium-sized family businesses, South African Journal of Business Management, ISSN 2078-5976, African Online Scientific Information Systems (AOSIS), Cape Town, Vol. 43, Iss. 4, pp. 17-31, https://doi.org/10.4102/sajbm.v43i4.479 This Version is available at: https://hdl.handle.net/10419/218497 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ S.Afr.J.Bus.Manage.2012,43(4) 17 An assessment of selected family business values in small and mediumsized family businesses S.P. van der Merwe* Potchefstroom Business School, North-West University, Private Bag X6001, Potchefstroom 2520, Republic of South Africa [email protected] E. Venter and S.M. Farrington Department of Business Management, Nelson Mandela Metropolitan University, PO Box 77000, Port Elizabeth 60311, Republic of South Africa [email protected] [email protected] Received April 2011 This study highlights the influence of selected business family values on the success of small and medium-sized family businesses. Success, for the purpose of this study, is measured using two variables, namely Harmonious family relationships and Perceived future continuity. The primary objective of this study is twofold: firstly, to identify the potential influence of selected business family values on the success of family businesses and secondly, to make practical recommendations on actions that families in business can take to ensure harmonious family relationships and the future continuity of their family businesses. The target population of this study was small and medium-sized family businesses in South Africa, and a total of 931 individual questionnaires were returned from 173 family businesses. The data collected was subjected to various statistical analyses, including exploratory factor analysis, calculating Cronbach alpha coefficients, and multiple linear regression analysis. The findings of this study show that the more family members perceive fair treatment in the family business, the more harmonious family relationships and perceptions of business continuity will be. In addition, the perceived level of trust, commitment and effective communication has a positive influence on family harmony and business continuity. This study has added to the empirical body of family business research, and provides an important first step in gaining insights into selected family business values that influence the effective functioning of family businesses. *To whom all correspondence should be addressed. Introduction and problem statement Family businesses are unique in the sense that a single family has a significant influence on the business (Hall & Nordqvist, 2008: 51). Various authors highlight that the greatest threat to the growth, success and survival of a family business is related to family relationships (Goldberg, 1996; Venter, 2003; Ward, 1997; Ward, 2004). It is from conflict-laden family relationships that many family business issues emanate (Molly, Laveren & Deloof, 2010), and managing both family and business seems to be a constant challenge (Schuman, Stutz & Ward, 2010: 2). Running the family business is often more about managing family relationships than managing any other aspect of the business (Ward, 2004; Zbar, 2004). Interpersonal dynamics among family business members have been identified as a critical factor in the low number of successful multigenerational transfers among such businesses (Friedman, 1991; Kepner, 1991; Rodriguez, Hildreth & Mancuso, 1999: 454). The value of family interactions will determine the success of family enterprises as well as the success of the contingency process (Lansberg, 1999: 151). The family should be clear about the positive link between the longevity of the business and the well-being of the family (Ibrahim, McGuire & Soufani, 2009: 2-4; Venter & Boshoff, 2006: 29). Relationships are built on values such as fairness, trust, respect, honesty, integrity, commitment, openness, peace and harmony among family members. Consequently, this study highlights the influence of selected family business values on the success of small and medium-sized family businesses. Success, for the purpose of this study, is measured using two variables, namely Harmonious family relationships and Perceived future continuity. This article focuses on the following selected family business values: Fairness as perceived by the family members, Mutual trust and respect among family members, Effective communication among family members, Commitment by family members to ensure the future continuity of the family business, and Conflict management among family members. Small and medium-sized family businesses in South Africa will be the focus of this study for two reasons: firstly, the increasingly important role of the small business sector in 18 S.Afr.J.Bus.Manage.2012,43(4) creating jobs and distributing wealth, and secondly, the fact that most family businesses are found in this sector. The South African National Small Business Act (South Africa, 1996) and National Small Business Amendment Act (South Africa, 2004: 2) classify micro-, very small, small and medium-sized businesses as businesses that employ less than 200 full-time equivalent of paid employees. For the purpose of this study a small and medium-sized family business is a business where a single family owns at least 51% of the equity of the business; where a single family is able to exercise considerable influence in the business; where at least two family members are concerned with the senior management of the business; and where the business employs less than 200 full-time employees. The primary objectives of this study are: firstly, to identify the potential influence of selected family business values on the success of family businesses, and secondly, to make practical recommendations on actions that those families can take to ensure harmonious family relationships and the future continuity of the family business. Operationalisation of variables Family values form the foundation on which the family business is built and these values are critical for fostering family harmony and ensuring the future continuity of the business. In Figure 1 (the hypothesised model) the selected family business values influencing the dependent variables are depicted, namely Fairness, Mutual trust and respect, Effective communication, Conflict management and Commitment. The model proposes that the selected family business values impact on Harmonious family relationships among family members and the Perceived future continuity of the family business. The selected family business values included in this study (see Figure 1) are justified by a sufficiency of theory in the family business literature. Claims are not made that the model has an exhaustive coverage of every possible value influencing Harmonious family relationships and the Perceived future continuity of the family business. Dependent variables According to Zellweger and Nason (2009: 205), performance outcomes in family firms have broadly been categorised as financial and non-financial. Cater and Justis (2009: 111), as well as Short, Payne, Brigham, Lumpkin and Broberg (2009: 12) suggest that non-economic goals may even take precedence over goals such as growth and profitability. Non-economic goals include providing employment for family members (Cater & Justis, 2009: 111; Chrisman, Chua & Litz, 2004; Short et al., 2009: 12); family well-being (Chrisman et al., 2004; Distelberg & Sorenson 2009: 70) and transgenerational sustainability (i.e. wanting to preserve the business so that it can be passed on to the next generation (Cater & Justis, 2009: 120; Chrisman, Kellermanns, Chan & Liano, 2010: 14; Short et al., 2009: 21). Family firms are often more concerned with the longterm continuity of the business than non-family firms are (Miller, Le Brenton-Miller & Scholnick, 2008; Short et al., 2009: 21). They place great emphasis on survival (Distelberg & Sorenson, 2009:70; Short et al., 2009: 12) and view the business as a long-term resource base to be used by the family, potentially for multiple generations (Castillo & Wakefield, 2007; Distelberg & Sorenson, 2009: 75). As illustrated in Figure 1, the dependent variables used in this study are Harmonious family relationships among family members in the family business and the Perceived future continuity of the family business. Fairness Mutual trust and respect Effective communication Conflict management Perceived future continuity Harmonious family relationships H1a H1b H4a H4b H3b H3a H2b H2a Commitment H5a H5b Figure 1: The hypothesised model S.Afr.J.Bus.Manage.2012,43(4) 19 Hess (2006: x) states that a successful family business is one that does not destroy or weaken harmonious family relationships. Various authors (Flören, 2002, Sharma, 2004; Venter, 2003; Ward, 2004) suggest that harmonious family relationships between family members are important for successful succession as well as a successful family business, which ultimately ensures the future continuity of the business. Malone (1989: 249) found a positive relationship between perceived family harmony and continuity planning in family businesses. In another study, Slaughter (2008: 117) found that perceived future continuity has a strong linear relationship with family harmony in a family business. This implies that the greater the level of family harmony, the greater the possibility that business continuity will occur (Farrington, 2009: 271). In other words, to survive and to be successful, family members need to nurture their personal relationships with one another (Swart, 2005: 38). Astrachan and McMillan (2003: 52) argue that one of the reasons family members are in business together, is that they want to work together and want to enjoy the fruits of their labours as a family. However, according to Carlock and Ward (2001: 73), all families experience relationship problems. Family businesses, however, face even bigger problems because the family works so closely together. This proximity often means that family disputes overshadow work and business, even though the business often continues to function normally (Carlock & Ward, 2001: 73). In other words, family relationships affect the business, and business relationships in turn affect the family (Voeller, Fairburn & Thompson, 2002: 30). To survive and be successful, family members need to nurture their personal relationships with one another (Swart, 2005: 38). Pickard (1999: 5) claims that a family in harmony, i.e. working together in a healthy balance, will merge to create a work environment that is harmonious. By applying a few simple prerequisites for family harmony, the family could ensure the long-term sustainability of the family business, without even knowing it. Neubauer and Lank (1998: 136) state that if there is a fair amount of family harmony present, it is much easier to discuss succession planning and to implement the necessary systems that can ensure a successful transition of the business from one generation to the next (Astrachan & McMillan, 2003: 2). For the purpose of this study, the dependent variable Harmonious family relationships will be evaluated by using the following items: whether the family members prefer to cooperate with each other rather than to compete with one another; whether family members acknowledge each other’s achievements; whether they encourage each other to put in their best efforts; whether the family members are emotionally attached to one another; whether the family members support and appreciate each other; whether the family members care about each other’s wellbeing; and whether family members get along well both inside and outside the working environment (Farrington, 2009; Seymour, 1993; Van der Merwe & Ellis, 2007; Venter, 2003). Harmonious family relationships refer to relationships among family members characterised by support, appreciation, care, emotional attachment and cooperation. Commitment of the family to the future continuity of the business is a priority because it supports the development of the shared future vision and the family business continuity plan (Carlock & Ward, 2001: 54). The future component of continuity needs to include the family’s commitment to nurture the business and to support subsequent future generations with both employment opportunities and financial assistance (Miller & Le Breton-Miller, 2005: 38). This commitment therefore urges family members to conserve financial and other resources and to build for the years to come. Since the future continuity of a family business has distinct past and future components, family executives must ensure that a respected and established legacy is handed over from the previous generation to the next one (Miller & Le Breton-Miller, 2005: 37). The dependent variable Perceived future continuity, will be evaluated by the following: whether family members see the family business as a legacy to be handed over to future generations; whether continuing the business into the future will provide employment opportunities for future generations; whether continuing the business will give future generations the opportunity to be involved in the business; whether family members see the business continuing into the future and as a means to create wealth for future generations; and whether family members see the business as a means to sustain harmonious family relationships for future generations. Perceived future continuity refers to the family business providing future generations with employment, wealth, involvement and a legacy. Independent variables Various family business values impact on family harmony and ultimately the future continuity of family businesses (Eybers, 2010; Farrington, 2009; Venter, Farrington & Boshoff, 2009). Anecdotal and empirical evidence supporting the inclusion of selected family business values in the hypothesised model will now be discussed. Fairness Kets de Vries (1996: 264) points out that no family relationship will ever be perfect, because feelings of being treated unjustly will always be present among family members. It is a common assumption in most families that all children should be treated equally, and parents often work desperately to be even-handed with their children to avoid even the appearance of favouritism. However, when it comes to a family enterprise, treating the children equally becomes impossible owing to their different talents, strengths, ambitions, and life stages (Rivers, 2005: 93). A major issue regarding fairness in family businesses is that of achieving a balanced compensation system between family employees (Aronoff & Ward, 1993: 59; Spector, 2001: 9). Family business compensation practices often create problems when family members are compensated according to age and/or gender (Buchholz, Crane & Nager, 2000: 262) and not on merit (Jaffe, 1991: 199; Loeb, 2001: 59). Aronoff, Astrachan and Ward (2002: 425) believe that a compensation policy has no foundation unless job 20 S.Afr.J.Bus.Manage.2012,43(4) descriptions indicating the work roles and responsibilities have been prepared in sufficient detail to serve as a means of structuring wage classifications and rating performance. Rawls (1999: 57) and Voeller et al. (2002: 73) highlight the importance of all family businesses having a performance management system to ensure fair employment for all employees, and this includes the family members that are employees. All employees, including family members, should be paid a competitive market-related salary for their efforts (Barrett, 2001: 19). Farrington (2009) has reported a positive relationship between fairness and satisfaction with work and family relationships between sibling partnerships. The findings in her study are supported by a large volume of anecdotal evidence (Aronoff, Astrachan, Mendoza & Ward, 1997: 43; Gersick, Davis, McCollom Hampton & Lansberg, 1997: 67; Lansberg, 1999: 132; Ward, 2004: 67, 68, 96) that posits the importance of fairness among family members in family businesses. Danes, Zuiker, Kean and Arbuthnot (1999: 246) identified unfair workloads in family businesses as generating the highest level of tension in family relationships. Although Cowie (2007: 81, 83) reports a significant positive relationship between fairness in workload among management team members and perceived success, she finds no significant relationship between fairness and the willingness of team members to cooperate with and support each other. Against this background, family members will perceive fairness to exist in the family business when each family member does his or her fair share of work given their compensation; when compensation is perceived as fair for the work that the family member does; when family members are compensated according to their contribution to the family business and not according to age and/or gender; and when external stakeholders treat family members involved in the business equally. Therefore, the following hypotheses are subjected to further testing: H1a: There is a positive relationship between the perception of Fairness and Harmonious family relationships among family members in the participating family businesses. H1b: There is a positive relationship between the perception of Fairness among family members and the Perceived future continuity of the participating family businesses. Mutual trust and respect Several authors have described trust and relationship commitment as vital components for maintaining harmonious relationships. In family business relationships, where results depend on the behavioural intent of partners, trust is particularly crucial (Johnson & Cullen, 2002). Researchers and practitioners alike recognise that trust potentially contributes to more effective managerial coordination and collaboration within a firm (Steier, 2001: 353). Family relationships that are not built upon trust are risky, will harm relationships, and could even eventually destroy the family business (Haynes, 2005: 34). Mutual trust is the one thing that underlies the competitive advantage and distinctiveness of a family business (Carlock & Ward, 2001: 11). If family members trust one another and have the necessary respect for each other, this forms the foundation for long-term perspectives, loyalty, commitment and stewardship, which provide an enormous advantage to the family business and towards family harmony (Aronoff et al., 2002: 299; Cohn, 1992: 21-22; Shanker, 2000: 13). Family businesses have a competitive advantage over nonfamily businesses when it comes to mutual respect and trust in the business world. Very few owners or family members in the business have grounds to second-guess the motives of their partners or colleagues (Carlock & Ward, 2001: 11; Shanker, 2000: 13; Venter & Boshoff, 2006: 19). It is very seldom that any family member will run off to the opposition business. According to Venter and Boshoff (2006: 19), it has been found that trust has the potential to make family partners more secure, more open and more informed than any team of unrelated people. For the purpose of this study, the variable Mutual trust and respect will be measured by the following items: whether family members respect and trust each other; whether different opinions are encouraged by family members; whether family members trust each other’s ability to manage the family business and to make sound business decisions; whether family members have confidence in the integrity of other family members; and whether family members respect each other’s opinions. Sufficient anecdotal and empirical evidence is presented above to hypothesise that: H2a: There is a positive relationship between Mutual trust and respect and Harmonious family relationships among family members in the participating family businesses. H2b: There is a positive relationship between Mutual trust and respect among family members and the Perceived future continuity of the participating family businesses. Effective communication Poor communication is a common problem in family businesses (Ibrahim & Ellis, 2004: 164) and the absence of adequate channels of communication can be a profound source of family conflict (Friedman, 1998: 33). As a result, the family’s ability to resolve differences is obstructed by its conflict and communication patterns and poor communication skills (Bork, Jaffe, Lane, Dashew & Heisler, 1996: 52). Communication is a very effective way of understanding and perhaps even agreeing on issues that are normally very sensitive (Adendorff, Venter & Boshoff, 2008: 31). The sensitive and emotional issues are normally avoided. The more family members communicate and discuss their differences, the more likely it is that conflict will be minimised and agreements reached (Friedman, 1998: 33). Ward (2004: 115) points out that successful family businesses address communication by putting in place meetings, forums, systems or structures, to promote, S.Afr.J.Bus.Manage.2012,43(4) 21 facilitate and ensure effective, ongoing sharing of information, ideas, opinions, attitudes and feelings. Openness and inclusion create trust, and family trust creates family harmony (Aronoff et al., 2002: 299; Cohn, 1992: 21, 22; Leach & Bogod, 1999: 68). There is sufficient anecdotal and empirical evidence that effective communication provides the basis for sound family relationships as well as conflict resolution (Maas, Van der Merwe & Venter, 2005: 119; Van der Merwe & Ellis, 2007). For the purpose of this study Effective communication will be measured by the following items: whether family members communicate openly with each other; whether they freely express to each other their opinions about matters concerning the business; whether they discuss issues that may arise between them; whether they listen to each other’s opinions and share information with each other. Against this background, the following hypotheses are formulated: H3a: There is a positive relationship between Effective communication and Harmonious family relationships among family members in the participating family businesses. H3b: There is a positive relationship between Effective communication among family members and the Perceived future continuity of the participating family businesses. Conflict management Various authors have indicated that family conflict is one of the major causes of failure in a family business, and that conflict is one of the most destructive determinants impacting on family harmony (Upton, 2001; Sorenson, 2000; Van der Merwe & Ellis, 2007; Ward, 1997). People are under the mistaken perception that healthy and successful family businesses are free from conflict (Bork, 1993: 41). In fact, it is normal for families to have internal conflict (Pickard, 1999: 153). Kaye (2005: 106) emphasises that conflict is unavoidable and indicates that it is healthy for a family business. Avoiding conflict is, however, not the answer – it needs to be managed to ensure that one finds the solution in reducing the impact of conflict on family harmony (Upton, 2001: 4). Family businesses should strive towards a situation where serious conflict is prevented, and if it occurs, it is dealt with quickly before it has a negative impact on family harmony and ultimately the longevity of the family business. Family businesses should therefore strive towards a relatively peaceful environment. Sufficient anecdotal and empirical evidence exists to support the idea that the prevention and management of conflict can ensure a higher level of family harmony in family businesses (Van der Merwe & Ellis, 2007). For the purpose of this study, the independent variable Conflict management will be measured by the following items: whether family members rarely have serious differences of opinion; whether differences of opinion between family members rarely lead to serious conflict; whether conflict between family members is resolved quickly or dealt with immediately; and whether family members are able to constructively manage conflict between them. The following hypotheses are formulated in this regard: H4a: There is a positive relationship between Conflict management and Harmonious family relationships among family members in the participating family businesses. H4b: There is a positive relationship between Conflict management among family members and the Perceived future continuity of the participating family businesses. Commitment The commitment of family members to the business and to each other is really what makes a business a family business (Balshaw, 2003: 25). The issues of who is committed to keep the business in the family and who is willing to put in an extra effort to make the family business successful are probably some of the most important questions facing individual family members (Carlock & Ward, 2001: 51). Carlock and Ward (2001: 38) are also of the opinion that family commitment is the basis for creating unity of purpose and maintaining family harmony. Commitment of the family to business continuity is a priority for the family as it supports the development of the shared future vision and the family business continuity plan (Carlock & Ward, 2001: 54; Miller & Le Breton-Miller, 2005: 37, 38). The future component of continuity needs to include the family’s commitment to nurturing the business and to supporting subsequent future generations with both employment opportunities and financial assistance (Miller & Le BretonMiller, 2005: 38). This commitment therefore urges family members to conserve financial and other resources and to build them for the years to come. Family commitment is thus critical to the continuity and survival of the family business (Ibrahim et al., 2009: 9). The independent variable Commitment will be measured by the following items: whether family members involved in the family business are deeply committed to continuing the business; whether family members are dedicated to, and are and willing to make personal sacrifices to ensure the success of the family business; whether family members are willing to put in a great deal of effort beyond that which is normally expected of them in order to help the family business to be successful; whether family members are proud to tell others they work in the family business; and whether family members really care about the future of the family business. In this regard, the following hypotheses are formulated: H5a: There is a positive relationship between Commitment by family members and Harmonious family relationships among family members in the participating family businesses. H5b: There is a positive relationship between Commitment by family members and the Perceived future continuity of the participating family businesses. 22 S.Afr.J.Bus.Manage.2012,43(4) Research methodology Development of the measuring instrument A comprehensive measuring instrument was developed to measure the latent variables in this study. The measuring instrument consisted of variables and items whose reliability and validity have been confirmed in previous studies (Eybers, 2010; Farrington, 2009; File & Prince, 1996; Sharma, 1997; Venter, 2003). Where publicised items were not available, self-developed items were used. For the purpose of this study five latent variables were identified as influencing the dependent variables (Harmonious family relationships and Perceived future continuity), namely Fairness, Mutual trust and respect, Effective communication, Conflict management and Commitment. The measuring instrument assessed the independent and dependent variables with 31 and 14 statements respectively. This was done on the basis of a seven-point Likert-type scale ranging from Strongly disagree (1) to Strongly agree (7). Study population The target population of this study was small and mediumsized family businesses in South Africa. Numerous attempts were made to secure a database of family businesses in South Africa, but to no avail. Therefore it was decided to use a convenience sample, by means of the snowball sampling technique, to identify the family businesses that participated in this study. A list of 420 family businesses willing to participate in the study was compiled as a result of these efforts. The sampling technique and methodology are consistent with those of other family business researchers who have been constrained by the lack of a national database on family businesses (Adendorff, 2004; Eybers, 2010; Farrington, 2009; Sonfield & Lussier, 2004; Van der Merwe & Ellis, 2007; Venter, 2003). Data collection Family businesses listed on the database were contacted to identify the individual family members in the particular family, and questionnaires were then mailed to these family members. Each questionnaire was sent with a covering letter that guaranteed the confidentiality of the responses, as well as a return-paid envelope, in order to make it as easy as possible for respondents to take part in the research. A total of 931 questionnaires were returned from 173 family businesses. Statistical analysis The data collected was statistically analysed using STATISTICA (Statsoft, 2008) and SPSS (SPSS, 2008). The construct validity of the measuring instrument was assessed by means of an exploratory factor analysis, while the reliability of the measuring instrument was assessed by calculating Cronbach alpha coefficients. The relationships between the independent variables and the dependent variables were examined by means of multiple regression analysis. Empirical results Demographic information The majority of the 931 participating respondents were under the age of 40 years (50,81%), 20,41% between the ages of 40 and 49, with 28,78% over the age of 50 years. An approximately equal distribution between male and female respondents was evident (52,42% male; 47,58% female). All the businesses that participated in this study (n = 173) can be categorised as small and medium-sized family businesses (fewer than 200 employees). Construct validity and reliability results Before conducting a multiple regression analysis to determine the relationships between the variables, the number of factors and the items loading onto each factor must be known (Hair, Black, Babin, Anderson & Tatham, 2006). For this reason, an exploratory factor analysis was conducted to identify the unique factors present in the data before implementing multiple regression analysis. In order to conduct the exploratory factor analysis, the data was divided into two models. The first model related to the dependent variables, while the second related to the independent variables. In identifying the factors to extract for each model, the percentage of variance explained and the individual factor loadings were considered. The Kaiser-Meyer-Olkin measure of sampling adequacy of 0,944 indicates that patterns of correlations are compact and that factor analysis should yield reliable factors (Field, 2009: 647). Bartlett’s test of sphericity yielded a p-value of smaller than 0,001 indicating that the correlation between variables was sufficient for factor analysis. In this study, there was theoretical justification to believe that the factors measuring the dependent variables would correlate with each other, therefore a Principal Component Analysis with an Oblique (Oblimin with Kaiser normalisation) rotation was performed on the principal components of the exploratory factor analysis, as suggested by Field (2009: 643). The correlation matrix for the two dependent variables indicated a correlation of 0,585 between the two extracted factors, confirming that an oblique rotation should have been used (Ellis & Steyn, 2003: 53; Field, 2009: 643). Kaiser’s criterion was used to determine the number of factors to be extracted, namely to retain factors with eigenvalues greater than one (Field, 2009: 647). All the items demonstrated sufficient discriminant validity by loading to a sufficient extent and, therefore, no items were deleted. As recommended by Field (2009: 644), factor loadings greater than 0,40 were considered significant. The Oblimin rotated factor matrix of the dependent variables is presented in Table 1. S.Afr.J.Bus.Manage.2012,43(4) 23 Table 1: Oblimin rotated factor matrix: Dependent variables Items Factor 1: Harmonious family relationships Factor 2: Perceived future continuity HARM5 0,896 -0,050 HARM6 0,821 -0,006 HARM3 0,812 0,004 HARM7 0,793 0,020 HARM1 0,759 -0,018 HARM2 0,757 0,016 HARM8 0,728 0,095 HARM4 0,639 0,014 CONT2 -0,159 0,915 CONT6 -0,034 0,875 CONT5 0,084 0,815 CONT3 0,028 0,805 CONT1 0,173 0,633 CONT4 0,229 0,476 Cronbach alpha 0,909 0,872 In the model relating to the dependent variables, two factors with eigen-values greater than one, explaining 62,39% of the variance before rotation, were extracted in the exploratory factor analysis. After rotation, these factors could be identified as the theoretical dimensions of Harmonious family relationships and Perceived future continuity respectively. When factors are correlated, sums of squares of loadings cannot be added to obtain a percentage variance explained for each of the rotated factors as in the case of uncorrelated factors (SPSS, 2008). With regard to the dependent variables, the exploratory factor analysis confirmed all the latent variables and items as originally intended in the hypothesised model (Figure 1). The wording of the statements (items) measuring the dependent variables is provided in Appendix 1. For the independent variables it was also expected that the factors would be correlated; and consequently Principal Component Analysis with an Oblique (Oblimin with Kaiser Normalisation) rotation was also specified as the extraction and rotation method (Field, 2009: 643). The Kaiser-MeyerOlkin measure of sampling adequacy of 0,969 indicates that patterns of correlations are compact and that factor analysis should yield reliable factors (Field, 2009: 647). Bartlett’s test of sphericity yielded a p-value of smaller than 0,001 indicating that the correlation between variables is sufficient for factor analysis. The correlation matrix for these four variables indicates correlations of 0,384 to 0,567 between the variable combinations (Ellis & Steyn, 2003: 53), confirming that an oblique rotation should have been used (Field, 2009: 643). Four factors with eigen-values greater than one, explaining 61,50% of the variance before rotation, were extracted in the exploratory factor analysis. After rotation these factors could be identified as the theoretical dimensions of Trust and commitment, Peace, Fairness and Openness. A total of 27 of the 31 items demonstrated sufficient discriminant validity by loading to a sufficient extent and, therefore, four items were deleted. The Oblimin rotated factor matrix of the independent variables is presented in Table 2. The two latent variables Mutual trust and respect and Commitment originally included in the hypothesised model (Figure 1) combined to form one factor. The factor was renamed as Trust and commitment. A total of 12 items (Commit3; Commit4; Trust5; Commit2; Commit5; Commit1; Trust6; Commit6; Fair2; Trust3; Trust1; Trust4) loaded onto the new factor. Trust and commitment refers to the extent to which family members respect each other’s opinions, trust each other’s integrity and ability, and are personally commitment to the success and continuity of the family business. Refer to Appendix 1 for the wording of the statements (items) measuring the factors. Three of the six items originally intended to measure the latent variable Conflict management (Conf3; Conf1; Conf2) loaded onto factor 2. All three items refer to the lack of conflict in the family business and the factor was renamed as Peace. For the purpose of this study, Peace refers to family relationships characterised by a lack of serious conflict among family members in the family business. Four items originally measuring Fairness (Fair5; Fair6; Fair4; Fair3) and one item measuring Effective communication (Com4) loaded onto factor 3. The factor was labelled as Fairness and refers to family members being treated fairly in terms of promotion, compensation and workload. Several items originally developed to measure Effective communication (Com5; Com3; Com1) and Conflict management (Conf5; Conf4; Conf6) respectively combined and loaded onto factor 4. One Mutual and trust respect item (Trust7) also loaded onto the factor. The items related to effective and open communication in the family business and the factor was renamed Openness. Openness refers to the degree to which family members are able to openly communicate and share all information with each other. 24 S.Afr.J.Bus.Manage.2012,43(4) Table 2: Oblimin rotated factor matrix: Independent variables Items Factor 1: Mutual trust & commit. Factor 2: Peace Factor 3: Fairness Factor 4: Openness COMMIT3 0,774 0,164 -0,003 0,185 COMMIT4 0,747 -0,054 -0,179 -0,126 TRUST5 0,724 -0,009 -0,081 -0,184 COMMIT2 0,718 -0,029 0,076 -0,028 COMMIT5 0,714 -0,006 0,068 0,022 COMMIT1 0,681 -0,063 0,065 -0,091 TRUST6 0,661 -0,030 0,073 -0,110 COMMIT6 0,647 0,211 0,120 0,248 FAIR2 0,616 0,039 0,179 0,017 TRUST3 0,612 -0,038 0,131 -0,155 TRUST1 0,461 0,085 0,167 -0,256 TRUST4 0,431 -0,018 0,254 -0,203 CONF3 0,046 0,855 -0,050 0,030 CONF1 -0,063 0,806 0,090 -0,098 CONF2 -0,045 0,782 -0,011 -0,187 FAIR5 -0,053 0,043 0,810 0,050 FAIR6 -0,047 -0,033 0,794 -0,069 FAIR4 0,152 0,021 0,697 -0,016 FAIR3 0,231 0,083 0,539 -0,065 COM4 0,170 0,006 0,423 -0,328 CONF5 0,003 0,117 0,031 -0,744 COM5 0,061 0,096 0,093 -0,734 COM3 0,073 0,053 0,026 -0,656 CONF4 0,048 0,248 0,054 -0,652 TRUST7 0,316 0,104 0,119 -0,466 COM1 0,172 0,129 0,291 -0,416 CONF6 0,171 0,373 0,083 -0,402 Cronbach alpha 0,920 0,826 0,827 0,903 Items that loaded to a significant extent on one factor only, and reported a factor loading of ≥ 0,40 were considered significant and retained for further analysis (Hair et al., 2006). Factor loadings of ≥ 0,40 were reported for all factors. Consequently, evidence of construct and discriminant validity for the measuring instrument is provided. Cronbach alpha coefficients of greater than 0,70 were returned for all constructs. The Cronbach alpha coefficients suggest that reliable measuring scales were used to measure the constructs under investigation (Nunnally & Bernstein, 1994). Modified hypotheses As a result of the exploratory factor analysis, it was deemed necessary to reformulate the original hypotheses in the hypothesised model (Figure 1), which are summarised below: H1a: There is a positive relationship between Trust and commitment and Harmonious family relationships among family members in the participating family businesses. H1b: There is a positive relationship between Trust and commitment among family members and the Perceived future continuity of the participating family businesses. H2a: There is a positive relationship between Peace and Harmonious family relationships among family members in the participating family businesses. H2b: There is a positive relationship between Peace among family members and the Perceived future continuity of the participating family businesses. H3a: There is a positive relationship between the perception of Fairness and Harmonious family relationships among family members in the participating family businesses. H3b: There is a positive relationship between the perception of Fairness among family members and the Perceived future continuity of the participating family businesses. H4a: There is a positive relationship between Openness and Harmonious family relationships among family members in the participating family businesses. H4b: There is a positive relationship between Openness among family members and the Perceived future continuity of the participating family businesses. The modified hypothesised model is illustrated in Figure 2. S.Afr.J.Bus.Manage.2012,43(4) 31 Appendix A: Dependent variables PERCEIVED FUTURE CONTINUITY CONT2 I see our family business as a legacy to be handed over to future generations. CONT6 Continuing the business into the future will provide employment opportunities for future generations. CONT5 Continuing the business into the future will give future generations the opportunity to be involved in the family business. CONT3 I see our family business as a means to create wealth for future generations. CONT1 I see our family business as continuing into the future. CONT4 I see our family business as a means to sustain harmonious family relationships for future generations. HARMONIOUS FAMILY RELATIONSHIPS HARM5 Our family members support each other. HARM6 Our family members appreciate each other. HARM3 Our family members encourage each other to put in their best efforts. HARM7 Our family members care about each other’s wellbeing. HARM1 Our family members prefer to cooperate with each other rather than compete with one another. HARM2 Our family members acknowledge each other’s achievements. HARM8 Our family members get along well both inside and outside the working environment. HARM4 Our family members are emotionally attached to one another. Appendix A: Independent variables TRUST AND COMMITMENT COMMIT3 Family members involved in our family business are willing to make personal sacrifices to ensure the success of the business. COMMIT4 Family members involved in our family business are willing to put in a great deal of effort beyond that which is normally expected of them, in order to help the family business to be successful. TRUST5 I have confidence in the integrity of my family members. COMMIT2 Family members involved in our family business are dedicated to ensuring the success of the family business. COMMIT5 Family members involved in our family business are proud to tell others that they work for the family business. COMMIT1 Family members involved in our family business are deeply committed to continuing the business. TRUST6 I trust the judgement of my family members in making business decisions. COMMIT6 Family members involved in our family business really care about the future of the family business. FAIR2 In our family business each family member does his/her fair share of work. TRUST3 Our family members trust each other. TRUST1 Our family members respect each other. TRUST4 Our family members trust each other’s ability to manage our family business. PEACE CONF3 Differences of opinion between family members rarely lead to serious conflict. CONF1 Family members rarely have serious differences of opinion. CONF2 Conflict between family members is rare. FAIRNESS FAIR5 External stakeholders (customers, suppliers etc.) treat family members involved in our business equally. FAIR6 Family members are compensated according to their contribution to our business and not according to age and/or gender. FAIR4 In our family business each family member is compensated fairly for the work that he/she does. FAIR3 The working arrangement between family members in our business is equitable. COM4 Family members share information with each other. OPENNESS CONF5 When conflict arises between family members it is dealt with quickly/immediately. COM5 Family members have the ability to communicate effectively. COM3 Family members discuss all issues that may arise between them. CONF4 Conflict between family members is resolved effectively. TRUST7 Family members in our family business respect each other’s opinions. COM1 Family members communicate openly with each other. CONF6 Family members are able to constructively manage conflict between them.