Research Applied: FBR Précis for the Practitioner

Thanks to Ken McCracken for this précis on “Perceptions of Knowledge Sharing Among Small Firm Leaders: A Structural Equation Model,” which will be appearing in the June issue of FBR. Based on current research as published in FBR, the research applied précis provide analysis of academic articles and helpful suggestions for family enterprise practitioners.

Yours in Practice,

The Practitioner

Perceptions of Knowledge Sharing Among Small Firm Leaders: A Structural Equation Model

(Authors:   James Cunningham, Claire Seaman and David McGuire)

Research Applied précis prepared by Ken McCracken, KPMG LLP, London

Knowledge sharing does not just happen in business — it has to be led. The choice of leadership approach is crucial in determining a firm’s knowledge culture, and the choice will be affected by the leader’s perception of knowledge sharing. This paper (title linked to the article) looks at how leadership interacts with family to influence perceptions of knowledge sharing in family businesses.

Family businesses start with a potential competitive advantage in relation to knowledge sharing. Since it is easier to share knowledge with those you trust, family businesses in which there is a high level of trust should find knowledge transfer easier — unless family jealousies and conflict result in this innate advantage being sacrificed.

Participative leadership is considered more likely to stimulate knowledge sharing by encouraging those in the workplace to collaborate and pool their intellectual resources. Therefore, a participative style of leadership combined with a propensity to trust looks as if it could be the winning formula for family businesses that want to promote internal knowledge transfer.

Except this is not quite what was concluded after a survey of how the family owner managers/leaders of 110 micro to small firms based in Scotland managed internal knowledge transfer. These firms, with 0-50 employees, were involved in knowledge intensive sectors such as marketing, property, education, design, events, consulting and the legal or financial sectors.

The leadership style in these businesses is described as “Guidance,” being a combination of the styles that are called supportive and instructional. Guidance involves the family transferring knowledge to select individuals, including – very importantly – knowledge that relates to the family’s influence on the firm, such as the family’s values, aspirations and hopes for the future. Instruction is the means by which this support for knowledge transfer is provided.

Guidance, therefore, helps to sustain the family’s influence on the business. Participative leadership, on the other hand, could dilute this influence as the involvement of other world views gain influence through greater participation and less instruction from the family.

If a family welcomes this dilution of family influence and are prepared for their views to be remolded, participative leadership achieves the desired outcome in terms of knowledge transfer. But if the family want to sustain the family’s influence over the firm then Guidance is the better leadership style to help others learn about the family influence in the business.

Interestingly, the family whose style is best described as Guidance may perceive this as engendering a greater willingness to engage in collaborative behavior so that they think, or perceive, their leadership style to be participative, whereas it is better described as Guidance.

The authors suggest that the Guidance leadership style is bespoke to family businesses as there is no evidence of it in other types of organisation.  Practitioners will find the “Discussion and Contributions” section of the paper to be informative. The “Practical Implications” section of the paper contains ideas that can easily be used in advising family businesses who are trying to balance the need to increase knowledge sharing with the desire to retain family influence.

Read the FBR article here.

To watch a video with Rania Labaki of EDHEC on the outreach of FBR go here.

About the contributor

Ken McCracken
is head of Family Business Consulting at KPMG UK. He is an authority on generating, preserving and diversifying family wealth through business interests that often involve the establishment and maintenance of good family and business governance structures. An FFI Fellow, Ken is the recipient of the 2001 FFI Interdisciplinary Achievement Award. He can be reached at [email protected].