Leadership in Saudi Arabian Family Firms Thesis

Introduction

The purpose of this chapter is to help the reader comprehend how the study could fit into a broader context of the research field. In order to develop a strong conceptual positioning, different sources could be used to analyze the information from academic books, scholarly articles, websites, and official sites of the companies that could be related to the chosen topic. A review of relevant literature and past research creates the foundation for advancing knowledge (Webster & Watson 2002). In this literature review, a critical overview of past research in the fields of business and educations and available sources on action learning will be offered to explore the possible connection between leadership development and family firms. The literature review will appreciate the sequence and growth of knowledge of the chosen theme. The investigation of what has been already researched and written on the topic is the first step to justify the choice made. The literature review will be used to identify the main themes in the current study and examine different aspects of the topic.

In the context of the study leadership as an emergent practice, the role of critical action learning is offered as the main method for consideration. Leaders of family firms cannot ignore their functions and take steps to underline the importance of self-development and support by other members of a team they work at. Leadership has to be properly developed, and critical action learning is the chance for leaders to understand their weak and strong aspects and user them in their practice. The chapter is divided into several sections which seek to cover all aspects of the topic to illustrate and explore the connection between action learning and leadership development.

To combine these two topics, the development of a literature review and gathering as many different opinions and approaches as possible to prove the connection of these two terms and the possibility to develop research will be required. As soon as the background of leadership development and action learning is offered, the analysis of leadership styles and their peculiar features should be given. The investigation of the peculiar features of family business and its development in such country as Saudi Arabia is required. This approach will help to understand what leadership types are appropriate for Saudi Arabia firms and family firms, in particular. The evaluation of the methodologies used in the field of leadership development helps to clarify if leaders could use action learning as the way to improve the performances of their companies and promote personal development and skills’ improvement.

Action learning is one of the possible methods that could be offered to leaders to rely on and improve their skills. Taking into consideration the sections and themes that should be discussed, the literature review helps to cover the main issues of leadership in family firms in Saudi Arabia including its essence and types, practice-based perspectives and their peculiarities, action learning and its subtype, critical action learning. A number of sources could be found on the chosen topic. Research developed by Raelin is the central theme for consideration in the study. The articles on critical and action learning and collaborative leadership (Raelin 2006), peculiarities of leadership as practice (Raelin 2011a), reframing leadership as collaborative practice (Raelin, 2016), and action learning as an effective leadership practice (Raelin & Trehan 2015) will be used to clarify the ways of how action learning could improve leadership practice.

In addition to Raelin’s thoughts, the ideas developed by Ram and Trehan are taken into consideration. The authors explain that critical action learning helps to set the required boundaries and help people understand their strong and weak aspects (Ram & Trehan 2009). Besides, Ram and Trehan (2010) support the idea of critical action learning as a chance to use emotions and power in the relations and provide appropriate examinations of personal abilities. In addition, the analysis of the contributions of Edwards (1997, 2015) has to be mentioned because this researcher identified the main transformations in the workplace and leadership development. The investigations of such researchers as Edwards (2015) and Rigg and Trehan (2008) can also be used in the study.Finally, the relational theory of leadership developed by Uhl-Bien (2006) and the concept of continuity in leadership introduced by Konopaski, Jack, and Hamilton (2015) help to combine the ideas of leadership in family firms and its strong and weak aspects. Regarding all these approaches and theories, the importance of leadership and education cannot be neglected, and leaders of family firms have to understand their options and use the possibilities.

Family Business

There are no doubts that the current business environment develops rapidly and promotes a number of continual changes and challenges for certain organizations and people (Vallejo 2009). Family business is the area that raises interests among theorists, investors, researchers, and policymakers (Bhat, Shah & Baba 2013). With regards to the development of family business, it is necessary to say that this frequent activity shows how global hyper-competition promotes an increasing awareness of speed, sustainability, flexibility, quality, and satisfaction of employees and customers. Finally, family business is the type of business that is owned and usually managed by one or even several family members at the same time (Bhat, Shah & Baba 2013). Family leaders could influence the directions of business development and the distribution of management roles. Family business is usually based on family needs and abilities to work, develop, and support. A family turns out to be a supportive environment, and self-employed workers could influence the general situation in a company and prove that family business could be improved in a variety of ways.

Research on family business continues to grow and demonstrate new trends and achievements (Barbera, Bernhard, Nacht & McCann 2015). Policymakers underline that family business is a new way to create jobs and promote the economic development of local communities. Family business should have its boundaries and distinctive features. Effective leadership is one of the ways to promote family business and define its essence. However, not much attention is paid to the study of leadership, its new theories, and its possible impact on family firms. The investigations of Vallejo (2009) show that family firms gain certain benefits from the development of leadership skills and enjoy a strong sense of success because their leaders could develop the required competencies, establish goals and concentrate on their tasks. Leaders have to nurture firm’s vision, share purposes with stakeholders, and motivate people to cope with the challenges and tasks occur (Fiegener et al. 1994). Leaders understand that certain cultural, political, social, and religious aspects have to be taken into consideration when they lead family firms in order to avoid misunderstandings, meet the expectations of employees, and understand the peculiar feature of family business in the Arabian world.

Family business cultures are based on different types of leadership with each of them having a certain impact and outcome on the organization of business. However, leaders have to understand that a family has one important goal in the business development meaning the promotion of support, development, and nurturing of family members (Sorenson 2000). Family firms demonstrate new approaches to conflict resolution and explore the development of personal skills as the way business and self-improvement.

Family leaders have to understand that it is not necessary to develop their skills and improve their relations. It is more important to consider leadership as the activity that has to be developed within organizations but not by a certain person. Motivation, improvement, and self-development are the activities that have to be taken into consideration by the leaders, who want to achieve their goals and success (Cater & Justis 2009). Regardless the type of an organization, leadership consists of three main elements including a goal, a group of people, and influence (Cater & Justis 2009).

Besides, leaders have to understand that their activities are crucial for family firms because of the necessity to meet a number of goals and employ family members successfully. Leadership is also important because family business is characterized by a great potential for long-term conflicts and the necessity to find the solutions considering different aspects (Cater & Justis 2009). Finally, family business leadership helps to survive and save good relations between all members of a family. It cannot be neglected or misunderstood because leaders should consider the risks, evaluate the opportunities, and organize the work of people in a proper way.

The current investigation of Arab organizations and business achievements shows that this county succeeds in organizing people and making them work to promote the development of their country. Within a certain period of time, family business turned out to be a significant contributor to the regional economy. At the beginning of the 2010s, family business that was developed in the Middle East during the last decade contributed approximately 25% of its Gross Domestic Product (GDP) (that was approximately SR 350 billion) and was defined as the economic “backbone” in the Arab countries (Jassem 2012). People understood the worth of family business and their possibilities to be a part of it and to make the required contributions to their country and to their own families.

Some leaders take unnecessary steps and cannot understand what they do wrong because of poor background knowledge, inabilities to learn properly, or unwillingness to study. Leadership development is one of the frequently discussed topics among modern people. A number of books have been already written on how leaders could achieve benefits and succeed in organizing people. The existing variety of research and discussions could be explained by the fact that the topic of family business has been changed dramatically during the last two decades (Pounder 2015). The impact of family traditions and the legacy of personal ideas become important in family business.

Young family members are ready to ask their relatives for some pieces of advice in order to succeed in family business development. However, they cannot understand the worth of their leadership under such conditions and clarify the importance of their strategic and organizational dimensions and the possibility to involve family values in management of a company (Pounder 2015). Family firms’ leaders should meet a number of expectations and understand that it is not enough to live with those expectations, but it is important to retain the quality and maintain the balance between past experience, present needs, and future improvements (Nicholson & Bjornberg 2005). In addition to ordinary challenges non-family firms’ leaders could face, the leaders of family business should be ready to deal with the complexity based on the interactions between family members, the questions of ownership, and the management details (Nicholson & Bjornberg 2005).

Lojeski (2010) suggests considering leadership as the possibility of self-development Marquardt et al. (2009) explain leadership as the abilities of people to develop their traits and skills to promote the activities of other people. Raelin (2011a) offers not only to consider leadership as the list of traits and behaviors demonstrated by a certain group of people but also to accept leadership as the list of actions chosen by the participants regarding their own rules, expectations, and abilities.

Taking into consideration all those approaches and ideas of what leadership could be, the definition given by Raelin and Trehan (2015) that leadership is a practice but not an individual trait that could be discovered in the characteristics of certainly gifted people could be used. Leadership has to be the process that makes people work together and follow the requirements that cannot be neglected. However, all these explanations and definitions have to be analyzed and evaluated properly in regards to the idea of leadership in family firms. Barrett and Moores (2009) admit that the family business helps to create the required portion of diversity and promote the development of leadership skills. Besides, the role of women as leaders in the family business cannot be forgotten. Family firms could do business with women as leaders better than the organizations without any family connection. Barrett and Moores (2009) offer to investigate if the family business creates different conditions for a leadership journey that is available to women in comparison to the requirements that should be followed by men and conclude that every family firm has its own peculiar features that cannot be neglected. Therefore, the role of women in family business varies from a country to a country, from society to society.

Family Business Management

The investigations of Bhat, Shah and Baba (2013) could be used as the basis for current research because the authors underline the importance of changes in the field of family business and the necessity to consider the opinions of different theorists, investors, and policymakers. Today, family business has a number of characteristics including sustainability, flexibility, quality, brand, satisfaction, care, and speed (Bhat, Shah & Baba 2013). Leaders have to understand what differentiate the family business activities from non-family business activities. Besides, they have to clarify what could make people work in family firms, and what could attract family firms’ employees in non-family organizations. The analysis of the literature should begin with the definitions of family business and clarification of the main characteristics of family business and its leadership.

Family business is a type of business that is owned and managed by one or several family members, who could have an impact on the development of a company by defining management roles, exploring ownership and employees’ rights, identifying family needs, and considering family abilities (Bhat, Shah & Baba 2013). Due to the existing technological progress and cultural perspectives, this type of business develops fast and changes the way people could cooperate and develop trustful relations. Still, cultural changes and personal challenges are not the only aspects to be taken into consideration while the analysis of family business leadership.

The point is that family business is frequently compared with a parallel economy that could change the scope of economic activities and improve the economic value (Bhat, Shah & Baba 2013). Statistics could be used as evidence for such conclusion: more than 90% of American business is family-owned, and more than 60% of GDP comes from family firms. German business also consists of family firms: more than 75% of employees get their salaries from families, and approximately 65% of the GDP comes from family business (Bhat, Shah & Baba 2013). Australian and Mexico experiences prove the same success of family business and its connection to the economic stabilization of the countries. The studies show that family firms influence the level of investments and the allocation of resources. Family firms could make long-term investments and avoid short-term investments. Therefore, it is important to consider sociological and economic aspects of family business.

The studies show that many researchers focus on the differences that could occur between family firms and non-family business. Still, it is useless to ignore the fact that leaders face a number of challenges at the initial stages of family business development. Family firms’ leadership could be compared with the creation of a new family. Bhat, Shah and Baba (2013) mention that family business promotes a stable economy in the way families are used to create a stable society. Such problems as poor decision-making abilities, weak career choices, and family supervision could frustrate leaders and make them think about new ways to avoid challenges. However, as soon as a new business is introduced and proved as reliable, customers are involved with the services and ideas offered by family companies.

Family business studies are important because they reveal a portion of new knowledge, the conditions under which business could grow and be expanded, the abilities that could achieve perfection, and the qualities that could help to succeed in strategic management. Therefore, it is not enough to find several studies and prove their importance. It is more important to clarify the aspects that have to be covered to identify the challenges and problematic areas of leadership in family business.

The studies from the 1990s and the 2000s could be used to compare how different researchers defined leadership and what suggestions were offered to improve the chosen field. For example, Montwai et al. (2006) focus their study on the identification of family-owned small to medium size enterprises and the analysis of its employees. The findings show that the majority of employees in family firms had their own altruistic reasons for working at family firms. Regardless the size of the company, all family firms have to develop their formal plans, communication, and training programs in order to succeed. In other words, family firms’ leaders should not use the nature of their organizations as an excuse to avoid some steps.

The investigations of Sciascia and Mazzola (2008) prove that family business continues growing and developing its positive and negative aspects. For example, the regression analysis shows that the fact that firms are family-owned could neither influence the process of conflict resolution nor compensate company’s costs. Therefore, the conclusions made by Hall and Nordquist (2008) about the necessity to develop two competencies (formal and cultural) seem to be rational and clear. In case cultural competencies neglected in family firms, the formal (management) qualifications cannot work effectively even in family firms.

The analysis of different studies shows that family business may be improved in different ways. For example, the qualitative analysis of Mazzola et al. (2008) indicates that all family members have to be properly trained in order to improve their knowledge and skills, facilitate the conditions under which professional relations could be developed, and create the connection between current and next generations on the basis of cultural and social aspects. These researchers underline the importance of connection between generations. Still, not much attention is paid to the idea of family involvement. In comparison to these researchers, Kowalewski et al. (2010) explain family firms as the field where leaders could participate and interact in regards to the existing U-shaped relations between ownership and performance (Kowaleski et al. 2010).

However, there is no need to stop the development and accept the successful results as they are. The investigations of Collins and O’Regan (2011) are used as the possibility to make the improvements and offer the idea to go as far as possible from small- and medium-scale companies in order to study new trajectories, theoretical perspectives, and communities. Past family research was developed in the frames of certain companies and beliefs. It is high time to understand the worth of family business and expand the boundaries of family firms’ leaders. As soon as the improvements occur, the development of new relations between stakeholders of family business could be possible.

Finally, the investigations of Dawson in 2012 made the final contributions in family business studies. The author underlines the importance of human capital in the field of family business and the necessity to consider knowledge, skills, abilities, individual attitudes, and motivation at the same time (Dawson 2012). Besides, there are many conditions (static and dynamic) under which family firms’ leaders could achieve the required portion of managerial success. Finally, the success of family business could be predetermined by the attitudes of leaders to their duties. If they want to focus on the individual level, they have to understand what could motivate people individually. It is possible to say that if leaders use organizational-level constructs, they have to choose the style that could gather a number of people and provide them with one common goal that could help to discover their individual qualities.

Relational Leadership & Practice

Taking into consideration that leadership and family firms have to be improved regarding the experience and knowledge of past generations, there are many forms of leadership that could help to understand the relations that are developed between different people, who want to share their experience and knowledge (Uhl-Bien, Marion & McKelvey 2007). For a long period of time, relational leadership was used as the most frequently used type that aimed at defining the relations between people not only regarding the existing hierarchy but also considering the transformational phenomenon and social changes in a controlling process (Murrell 1997).

However, numerous ways could be offered to identify the nature of the relational processes that occur in organizations. Dachler (1988) suggests considering relational leadership as the necessity to construct some kind of social order and differentiate groups according to their qualifications. Hosking and Morley (1988) introduce leaders as a group of people who could contribute a leadership process in different ways. Leaders have certain responsibilities. It is not enough to be an individual leader, who could understand the needs of people and take steps to achieve the goals sets. Relational leaders are expected to be social or collective leaders, who realize the importance of their cooperation with ordinary managers and other employees.

Finally, the explanation of Hogg (2005) helps to understand that leadership has to be accepted as a relational term within the frames of which people are able to talk and convince each other to accept certain norms, values, and objectives. Therefore, it is possible to say that leadership is the process that could be generated in a certain social dynamics but not only focus on leading organizational processes (Uhl-Bien 2006). Relational leaders have a certain impact on people. Still, they have to develop social relations in order to make changes, understand the importance of transformation, and predict the outcomes (Bryman 1996). Considering all definition and explanations of relational leadership, it is possible to say that such type of leaders does not need to focus on personal needs only but consider personal skills in order to use the knowledge of a crowd and achieve the results influential for all stakeholders of a working process.

However, current social changes and the necessity to investigate the essence of individualistic paradigms prove that it is effective to separate the concepts of leadership and personality and make sure that leadership could improve interactions and behavioral changes among leaders and ordinary workers (Crevani, Lindgren & Packendorff 2010). One of the possible ways to investigate leadership and its relation to individualism and society is a leadership-as-practice perspective. The main idea of this approach is that leadership is a significant type of practice that includes moral, emotional, and relational changes (Carroll, Levy & Richmond 2008). There are certain advantages and disadvantages of this concept. For example, the leaders, who adopt this approach, believe that it is better and more effective to reflect on and change personal actions and “reconstruct their activity in light of their reflections and on behalf of their mutual interests” (Raelin 2011, p. 196).

It is suggested to reflect on leadership as the combination of personal traits and behaviors and leadership as practice where a practice is a social effort to identify, understand, and choose rules in order to achieve the required outcome. When people want to understand leadership as practice, they try to clarify the distinctions that could influence the development of their relations and choose the engagements that may help to improve the practice (Schatzki 2005). Taking into consideration such explanation, the chosen leadership-as-practice approach proves that it is not enough to understand what one person could think about other people and the portion of work performed but what people could do and achieve in case they are together. Therefore, personal skills and gaps in knowledge should neither determine the quality of the work done nor perform the function of the main attributes in leaders-employees relations. Leadership could be influenced by some social or material contingencies that cannot be controlled but stay effective for leaders and managers because they create the conditions under which the relations may be developed, promote changes that cannot be neglected, and offer the solutions that can be unexpected still helpful.

Grint (2010) is one of the supporters of the “leadership-as-practice” approach, who believes that every leader should have a follower in order to displace anxiety, encourage people, and make the correct decisions. Leaders try to establish trustful relations with their followers because they believe that the level of responsibility they put on their followers cannot be ignored or misunderstood. Leaders could face crisis, challenges, and threats while performing their functions. Their followers and other groups of people, who are related to leaders, have to think about the collective activities that are appropriate in particular situations.

The leadership-as-practice approach helps to understand the nature of interpersonal and even intercultural relations as well in the form of an observational practice or the exchange of artifacts and emotions. The leadership-as-practice method hides the gaps that exist in knowledge and traditions and believe that leaders and their followers could become the heroes, who promote the required portion of substantiality to personal experiences. The chosen approach, as well as the existing relational leadership theory, proves that the concepts of social interactions and the actual practice of leadership are closely connected and cannot be ignored by leaders, including the leaders of family firms.

Leadership in Family Firms

The analysis of family firm business shows that leadership is not a simple process that has its beginning and end. Family firm leadership includes the process of operating by means of organizational structures and a reflexive assess and complexity around them (Edwards 2015). It is wrong to believe that this type of leadership is just a new form of the relations where logical explanations and orders have certain powers (Delbridge & Edwards 2013). These relations are characterized by the actions and decisions with the help of which people could understand their place in organizations and in the world (Archer 2012).

Edwards (2015) suggests to consider family firm leadership as a relational type of leadership that includes all reflexive actors, organizational contexts, and social orders that could vary considerably. These relations are not perfect. Therefore, it is expected to develop new studies and investigations in order to explain how this type of relations could be improved or changed in regards to new demands and personal expectations. Besides, there are operational and governance complexities that could predetermine the ways of how leadership is organized in family firms.

Family firms are usually integrated with local communities (Thornton, Ocasio & Lounsbury 2012). People also try to develop supporting relations in organizations and make sure that employees, suppliers, customers, and leaders are able to cooperate and bring benefits to their organizations (Campbell 2011). They respect past experiences, underline the importance of historical development, and clarify the action features that could explain family firms behaviors.

Edwards (2015) also offers to define reflexivity as a crucial mechanism in family firm leadership because it helps to comprehend the impact of social complexity of the existing social structures and a family included. Reflexivity plays an important role because it promotes changes and explains the transformations of human behaviors. Social complexity and reflexivity are structural by their nature. Therefore, it is easier for family firm leaders to choose between the existing variety of ideas instead of investing new approaches. Family firm leaders use the available multiplicity and identify their opportunities and barriers in order to use or solve them collectively. However, the open society view could be changed because of the complexity of ideas and reflexivity of threats and doubts.

In general, the analysis of family firm literature shows how many opportunities are actually available to leaders. The idea of reflexivity aims at commenting the origins of the behaviors that are chosen by family firm leaders for their activities. At the same time, the success of family firm leadership could be predetermined by the ways of how leaders and their followers could share personal information and the historical experiences and discoveries. Social complexity that influences the outcomes of leadership depends on the quality of historical-biographical investigations of leadership that aim at explaining the connection between the existing social context and personal preferences. Therefore, it is correct to introduce family firm leadership as an action that should be taken by reflexive actors in a specific context where not all people could be equally reflexive. This fact explains the development of different leadership styles and results of family firm business.

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