Ownership and Control in Closely-held Family-owned Firms: An Exploration of Strategic and Operational Control

Purpose - To study the relationship between ownership and control in a family business. Design/methodology/approach - Defines a family firm as a business which is more than 50% owned by a single family, the family having the intention of transferring the business to the next generation, looks at opposing views on the strategic decision-making role of non-family managers in family firms, and focuses on one closely-held family firm, pointing out that closely-held may not mean control. Describes the firm as a medium-sized retailer of decorating goods, traces development of the firm from 1902 to a financial crisis in 1996 when a long-serving management employee was appointed General Manager, the firm since then performing above industry average, quotes family members who believe they still control the firm, the view of the General Manager who believes he runs the company, and employees who perceive that family control has diminished and that the General Manager has strategic control. Identifies four family-owner characteristics leading to de-facto management control of family firms, gives these as owners' objectives, past failures and lack of confidence, lack of entrepreneurial flair, and decision-making style, reports employee perceptions that third- and fourth-generation family members did not have the business acumen of their predecessors, attributes this to later generations having arts-oriented education rather than on-the-job training, and observes that the General Manager has the loyalty and appreciation of branch managers and employees. Originality/value - Demonstrates that ownership level cannot be used to indicate control level