Abstract
This paper explores how a deeply embedded pre-existing informal control system, comprised of a strong control environment and the associated organizational identities and norms, impacts the introduction of formal management controls in a family firm dealing with tensions around succession and growth. The authors conduct a case study of a family firm whose control environment relies largely on social controls intensely rooted in Christian values and strategic controls entrenched in an entrepreneurial growth orientation. Data is collected using semi-structured interviews and subsequently examined to better understand how the deeply embedded pre-existing control environment (and its related organizational identities and norms) impact organizational members’ acceptance of a newly imposed formal control system.
The authors identified three overarching organizational identities that comprise the firm’s control system and environment. First, since the company’s inception, the firm’s Founder relied heavily on informal social controls establishing an organizational identity built on Christian values. Second, also since inception, the Founder encouraged an entrepreneurial orientation by relying on a growth-focused organizational strategy. Third, more recently, a “formal controls” orientated identity was introduced as the founder aged and succession became imminent; the reliance on formal controls was espoused by the accounting department and embraced by the second generation of the family, who viewed it as necessary to support the continuity and stability of the firm as the Founder’s involvement in day-to-day activities declined. The pre-existing informal control system (i.e., the control environment, and the related organizational identities) significantly framed how organizational members perceived and ultimately challenged the introduction of the new formal control system. The findings provide an example of how deeply embedded pre-existing informal control systems, such as strong Christian-based group identities and norms, within a family firm affect the emergence of formal management controls and create challenges for the implementation process during growth and succession.
Keywords Management control, Family firm, Performative perspective, Identity, Social controls, Formal controls
Full Details
