Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 The Culture of Small Business M. Gordon Hunter This article proposes the unique components of the culture of small business. Culture research is reviewed from a national, large corporation, and small business. An adapted framework is developed upon which the emerging themes of the current project are mapped. Qualitative interviews were conducted with representatives of eleven multigeneration small businesses. Common components are related to pragmatism and finances. However, differences are noted in relation to customers, community involvement, and family. Track: Management Introduction This article describes small business culture. There is a hierarchy of cultures that provide the context for the discussion in this manuscript. The most broad and comprehensive culture is that which is related to a nation or society. Throughout this document the term nation will be employed. Corporate culture, or organization culture, is employed to describe the environment of large business. The term used in this document is corporate culture. There is an interaction between national culture and corporate culture. That is, usually large businesses will carry out operations internationally. Thus, the employees will originate from different cultures. It is this interaction that will have an impact on the performance of a large business. At the most detailed level a small business will develop a unique culture. This situation is the main focus of this manuscript. Thus, the research question for the project reported on here is, “What are the components of small business culture?” The components and types of small business cultures are included here along with supporting descriptions from a multi-generation small business project (Hunter and Kazakoff, 2008). This document is organized as follows. First, an overview of national culture is presented. Second, corporate culture is described. Third, the specific aspects of small business culture lead to a discussion of multi-generation small business research participants’ comments about aspects on the own small business. Conclusions are presented about how a small business culture will contribute to positive performance and long term success. National Culture Hofstede (1997 and 1984; Hofstede et al, 2010; and Hofstede and Minkov, 2010) defined national culture as the “collective programming of the mind”. Individuals in a specific culture possess taken-for-granted assumptions about their behavior. These assumptions may only be questioned when contact is made with another dissimilar culture. _____________________________________________________________________ M. Gordon Hunter, Professor Information Systems, Faculty of Management, The University of Lethbridge Lethbridge, Alberta, T1K 3M4, Canada, E-mail: ghunter@uleth.ca Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Table 1: National Cultural Dimensions Dimension Description Individualism Individualistic cultures expect their Collectivism members to be independent and look after themselves. Power Distance Uncertainty Avoidance Masculinity Femininity Long-Term Orientation Short-Term Collectivist cultures have a tightly knit framework of mutual dependencies and obligations. High Power Distance cultures accept unequal distribution of power within its society. Low Power Distance cultures strive for equalization and participation. Strong Uncertainty Avoidance cultures attempt to control uncertainty by strict rules and codes of behavior. Weak Uncertainty Avoidance cultures are not as strictly controlled and deviation is more acceptable. Masculine cultures emphasize achievement, success, and assertiveness. Feminine cultures emphasize caring, close relationships, and harmony. Long-term oriented cultures promote the family, respect for older people, and virtuous behavior such as hard work and frugality. Short-term oriented cultures develop equal relationships, emphasize the individual, and promote creativity and self-actualization. Adapted from Hofstede (1997 and 1984; Hofstede et al, 2010; and Hofstede and Minkov, 2010) Table 1 presents an overview description of the five dimensions. These dimensions may be employed to develop a profile of the national culture of a country. These profiles then represent cultural variability across nations. Research regarding cultural variability suggests differing perspectives (Ronen, 1986; Webber, 1969; and Yang, 1986). The “convergence” perspective proposes there is less cultural variability resulting from globalization and the pervasive use of technology. The “divergence” perspective outlines efforts by cultures to retain their distinctive identity. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Corporate Culture Corporate culture is more related to a specific business than is national culture. However, most research related to corporate culture relates to large businesses because of their international, cross cultural presence. Employees represent different cultures and it is important that employees understand the perspectives taken by their colleagues from different cultures. Within the unique combination of national cultures a corporate culture will develop which will impinge, either positively or negatively, upon the corporation’s performance. Fayolle et al (2008) employed Hofstede’s (1997, and 1984) dimensions of national culture to investigate corporate culture. They determined that, “…corporate culture depends greatly on the deep values of the company’s founder-managers.” (Fayolle et al, 2008:227) Fayolle et al (2008) adopted a description of corporate culture originally adopted by Schein (1984) as follows: “…the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adoption and internal integration, and that have worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think, and feeling relation to those problems.” (Schein, 1984:3) Another definition of corporate culture describes the, “…shared philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes, and norms that knit a community together” (Kilmann et al, 1986; and Trice and Beyer, 1993). More recently, Yildiz (2014) employed Hofstede’s (1997, 1984) national culture to examine the effects of corporate culture on entrepreneurship. Corporate culture in this study was defined as,”…the set of values, attitudes, expressions, understandings, [and] norms shared by members of an organization…” (Yildiz, 2014:37). This investigation showed a relationship between societal culture and entrepreneurship. Two of Hofstede’s (1997, 1984) had a significant effect on entrepreneurship. Power distance was positive. That is the more equal managers and subordinates felt the more positive performance. Also, masculinity was negative. Thus, the more masculine the entrepreneur the higher the likelihood an aggressive entrepreneurial spirit would be adopted. Corporate culture provides a means for socializing employees to adopt an approach to thinking and behaving in a common way (Whiteley et al, 2013). It facilitates employees to identify with the values desired by management (Harris and Ogbonna, 2011). It represents an easily adopted control mechanism (Jackson and Parry, 2008). “Thus, corporate culture discourages dysfunctional work behaviours, as it commits members of the organization to do things for and with one another that are in the best interests of the organization.” (Ogbor, 2001:594). Mueller investigated the relationship between corporate culture and knowledge management (Mueller, 2012). Her conceptual document focuses on identifying research opportunities at the juncture of corporate culture and knowledge management. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 It is interesting at the outset that she presents three perspectives on corporate culture. First, the “functionalist perspective” (Golden, 1992; and Schultz and Hatch, 1996) suggests corporate culture is a manageable asset (Barney, 1986; Deal and Kennedy, 1982; Pascale and Athos, 1981; Peters and Waterman, 1982; and Wilkins and Ouchi, 1983). Second, the “metaphorical perspective” (Smircich, 1983) contends that companies are cultures rather than having a culture. Third, the “dynamic perspective” (Hatch, 1993; and Sackman, 1991) assumes corporate cultures have functions involving employees socially relating to each other and aligning their efforts. Lee and Yu (2004) investigated Corporate Culture and organizational performance. Chowdhury (2013) developed a framework, Three Pillars of Productivity, involving strategy, operations, and technology. This framework is based on Corporate Culture. The strategy, differentiation or low cost for example, must be set within the mission and vision of the company. Further, strategy must reflect changing market conditions. Operations, how business is conducted, must entail a well-defined plan which supports the strategy. Technology must support efficient operations and management decisions. All three pillars must be aligned. Small Business Culture Small businesses are unique. They are not little big businesses (Welsh and White, 1981). The concept of Resource Poverty (Thong et al, 1994) applies. This concept outlines the lack of resources associated with skills, time, and finances. A small business has few employees. So, not all of the necessary skills will be available. Also, with few employees time to manage may not be available. Further, access to financial resources will be limited because most small businesses are privately owned with a small asset base to support acquiring credit. There are two aspects of “Liability” (Liao et al, 2008/2009) which may negatively affect small business. The “Liability of Newness” describes internal issues related to a lack of business processes; and external experience relating to stakeholders, such as customers and suppliers (Mellahi and Wilkinson, 2004). The “Liability of Smallness” is similar to Resource Poverty (Thong et al, 1994) where access to necessary resources is limited (Mellahi and Wilkinson, 2004). The remainder of this section reviews literature related to investigations into small business culture. To begin the culture of family firms is analyzed within the context of general systems theory (Vallejo, 2011). It is noted that the focus of their investigation was on family firms which may be small or large. However, the aspect of family is an important aspect of small business. The remainder of the section reports on investigations that focused on small business including identifying processes to support efficient operations (Haugh and McKee, 2004; and Stoica et al, 2004); and the concept of “place” (Thomas et al, 2011). Vallejo (2011) proposed a theoretical model to analyze the culture of family firms. The framework is based upon general systems theory which proposes the interaction of a number of sub-systems. In this instance there are four interacting sub-systems. Within the firm there are the ownership sub-system and the business sub-system. These two sub-systems support the operation of the firm. There is also a third internal sub-system known as the family sub-system. This sub-system is the major contributor to the culture Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 of the firm. It also has an impact on the ownership and business sub-systems. These three sub-systems also interact with an external sub-system known as the community sub-system. Overall, there is a process of socialization, “…which the employees of the family firm learn the skills, attitudes, and behavior patterns of the owning-family culture.” (Vallejo, 2011: 49). Vallejo (2011) also suggests a phenomenon of “familiness”. This concept, “…is a result of the interaction of the family system with the firm and which leads to the firm possessing a unique bundle of resources…” (Vallejo, 2011:48). Thus, the familiness concept contributes to the potential for the firm to attain a competitive advantage because of its unique composition of resources. There are also four values which contribute to the culture of the family firm. They are as follows: 1. Commitment “…the extent to which an employee identifies with the firm…” (Vallejo, 2011:52). Loyalty is influenced by the internal sub-systems. 2. Harmony “…achieved by encouraging active participation in the decision-making process, such that employees become involved in the management and personally assume the objectives of the firm.” (Vallejo, 2011:53). 3. Long-term orientation “…the view of the firm as a legacy to pass down to future generations…” (Vallejo, 2011:54). 4. Customer service “…firms consider dedication and concern for customers to be one of the key elements in their competitive strategy.” (Vallejo, 2011:54). Haugh and McKee (2004) investigated the culture of small business. They determined that the culture of small business is composed of: Survival o The desire to continue to exist Independence o Retain decision making power and not be influenced by others Control o Regulate employees (internal) and suppliers (external) Pragmatism o Action and behavior towards a certain course of action which is successful Financial prudence o Conservative approach to expenditures These culture components promote the efficient operation of the small business. Methods of information processing by SMEs relates to effective overall performance (Stoica et al, 2004, and Stoica and Schindehutte, 1999). Four types of small business cultures are described in Table 2. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Table 2: Small Business Culture CULTURE DESCRIPTION Adhocracy “…centers on entrepreneurship, creativity and adaptability. Flexibility and tolerance are givens. New markets and new sources of growth are important.” (Stoica et al, 2004:253) Clan “…values cohesiveness, participation and teamwork. Employee commitment is achieved through participation. Cohesiveness and personal satisfaction are more important than financial goals.” (Stoica et al, 2004:254) Market “…focuses on competitiveness and goal achievement. Driven Emphasis in on productivity and responsiveness to market. Leadership is decisive and achievement oriented.” (Stoica et al, 2004:253-254) Hierarchy “…stresses order and regulations. Leadership style is administrative. Tracking and control are emphasized relative to clearly stated goals.” (Stoica et al, 2004:254) Adapted from Stoica et al (2004) The conclusion is that that Adhocracy and Clan cultures process information more effectively. These cultures seem to represent both a small business in its early stages (Adhocracy) and into maturity (Clan). Thomas et al (2011) investigated small business via the concept of “place”. They define the term suggesting, “…businesses build place in a variety of ways each according to their own culture and business model.” (Thomas et al, 2011: 286). Positivity is one aspect of small business culture (Caspersz and Thomas, 2015). The term “positivity”, “…represents an affirmative bias and orientation…” (Cameron et al, 2003:5). “…positivity [is] a crucial characteristic of leading and managing in the family business context…” (Caspersz and Thomas, 2015:60). It is important to align family values and norms with the goals and objectives of the small business (Olson et al, 2003). The culture involves the shared meanings of employees. The business model invokes an attitude towards involvement with the community. This community involvement was evident in Hunter and Kazakoff (2012a and 2008). They determined that multi-generation small business took a proactive approach to participating in the local community. They participated in local fund raising events and sponsored minor league teams in various sports. Project This exploratory investigation adopted a qualitative perspective employing Narrative Inquiry which is defined as, “…the symbolic presentation of a sequence of events connected by subject matter and related by time.” (Scholes, 1981:205). The subject matter is contextually rich which involves a research participant’s account of personal Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 experiences. The time aspect relates to temporally bound which means the account has a start and an end with an intervening sequence of events. McCracken’s (1988) Long Interview Technique supports the Narrative Inquiry approach. The technique allows the research participant to reflect upon the subject matter in a relatively unbiased and free flowing manner. An interview protocol is developed which serves as a guide for the discussion. The questions are general in nature and nondirective in manner. Based upon a number of interviews themes are identified which support the development of a framework to describe aspects of the subject under investigation. This project involved twenty research participants from eleven small businesses. Those who were interviewed for the investigation are active participants in their small businesses. They ranged from 2nd to 4th generations. They commented upon issues relating to their involvement in the business and their impressions of the business Founder, in all cases their Father or Grand-Father. The Founders or previous generation involved in the business were true entrepreneurs. Evidence of their entrepreneurial spirit was demonstrated by their keen eye for a business opportunity and their unique skill and desire to establish their own business. They not only worked hard but strived to provide quality products and services. The Founders became renowned by their customers (many of whom were repeat customers) and in the community in general. They may have been civic leaders or sports enthusiasts. Invariably in our interviews there was a positive and complimentary comment that started, “My Father …” For each Founder there comes a time when they realize it is time to move on. The process of coming to this realization is different for each individual Founder. The remainder of this discussion is organized based upon an amalgamation of two frameworks as shown in Table 3. The small business culture research conducted by Vallejo (2011) and Haugh and McKee (2004) identified a number of components. Table 3: Small Business Culture Components Adapted Vallejo (2011) Haugh and Component Component (2004) Component Employees Commitment Independence Harmony Control Long-term Long-term Survival Orientation Customers Customer Service Pragmatism Pragmatism Finances Financial Prudence Adapted from Vallejo (2011) and Haugh and McKee (2004) McKee The remainder of this section describes each adapted component in relation to the themes which emerged in the current project. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Employees Very early in their association with the business the research participants may have worked part time while attending school. This involvement provided an initial, and valuable, learning experience about the attitude, atmosphere, and work ethic of the small business. The participants all desired to be accepted by employees as competent contributors to the operations of the business and that they did not acquire their position simply because they were a family member. While there was a strong sense of family there was also a desire to prove, both to employees and themselves, that they held a specific position on merit and could perform it well. The research participants felt it was their responsibility to ensure appropriate and well trained employees. Long Term Orientation Issues were identified which relate to activities and tasks of organizing and acquiring infrastructure to support future operations. Thus, implementation projects for information technology are being carried out to support future more efficient operations. Further, while no specific plans exist the idea about expansion opportunities were being considered given the right set of circumstances. Stewardship relates to the feeling of responsibility for maintaining a family asset for future generations. A multi-generation small business will have existed for some time not only because of the astute management skills of the owners, but also because of the long term perspective taken by the owners to maintain the family asset. In order to maintain the family asset for other family members and for subsequent generations it may be necessary to make financial commitments that may not generate large immediate returns but which may contribute to the longevity of the family business. Thus, while a business may be operated more efficiently through say leasing the land for the business office in the long run it might be more effective to purchase the land. Customers The important aspect with respect to customers is providing a quality product or service. Beyond the quality consideration a decision must be made regarding a focus on a few customers or a larger market. Fewer customers facilitate the quality provision. However, a larger diversified market may assist in the response to economic down turns. For many research participants these was also a desire to establish and maintain a long term relationship with each customer. Pragmatism This issue involves a focus on what works for the small business. Internally there is a concentration on what product or service is being provided with a quality consideration as described above. Also, many of the research participants commented on the joy and challenge of their work. They like what they do. Externally the small business must be Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 able to respond to current market conditions. It is a matter of how the small business can respond to changes in the business environment. Finances The only comment here, but a very important one, relates to the small businesses’ conservative approach to finances. An established small business will be able to access financial resources through cash flow or borrowing. With a down turn in the economy cash flow may be eroded. In a subsequent investigation (Hunter and Kazakoff, 2012b) financial institutions responded positively to small business requests for further borrowing. When operating from a conservative financial position the financial institutions felt the small business represented low risk. The following two themes (Family and Community Involvement) emerged from this investigation. They are in addition to the adapted themes outlined in Table 3. Further, while the family theme does not relate to large corporations, community involvement is operationalized in a different manner by small business compared to large corporations. Family In a family owned and operated business the two, family and business, are inseparable. The theme that was mentioned the most often by the research participants was related to family. The relationship between family and business becomes more complex as the business progresses into subsequent generations. From the founding entrepreneur the small business may be passed on to a number of subsequent generation individuals. Some of these individuals may be siblings, or cousins, or related through marriage. These more extended relationships within the family create more complex situations within the business. These dynamics must be addressed and any issues resolved. The important aspect is that the family members, whatever their relationship to each other, are prepared to get along and they approach their involvement in the business from a common and agreed perspective. The generally used term “sibling accommodation” relates to dealing with nonparticipating family members who have the right to share in the financial assets of the small business as it passes from one generation to the next. During this time, there exists a high potential for sibling rivalry (Friedman, 1989; and Ward, 1987) regarding the intergenerational allocation of financial assets. A clear statement about sibling accommodation will reduce the potential for family conflict (Handler, 1991). The statement should document all of the stakeholders’ rights and an equitable method for disbursing each family member’s share. Again, as above, it is important to devise a disbursement plan that not only responds to each individual’s financial needs but also does not negatively affect the future operation of the business. The guiding principle of maintaining the family asset is reflected in an individual family member’s attitude that it is “our” business and not necessarily “my” business. Starting from the second generation, there is the necessity to have and maintain an attitude that the business is more than just a business. It is a valuable family resource which must be maintained for current non-participating family members as well as those Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 family members in future generations. The concepts of Stewardship Theory rise to paramount importance within the multi-generation family business. For a small business to continue successful operations over a number of generations, it is necessary for a steward to emerge who will make decisions within the business which will have implications beyond the business reflecting a desire to serve all the members of the family. A term which reflects the importance of this individual is “multi-generation hero”. This person steps forward and acts as a steward for both the business and the family (participating and non-participating members) and takes a multi-generation perspective. Community Involvement The research participants had a desire to participate in their community with initiatives beyond the product and service provided by their small business. Naturally, there was an advertising component to these initiatives. But, it was also interpreted as a way to give back or contribute to the broader community. The research participants viewed themselves as good corporate citizens desiring to make a contribution. They participated in volunteer events and charity organizations. The result was positive recognition for employees and the small business. Conclusion This manuscript reports on culture related themes identified by qualitative interviews with representatives of eleven multi-generation small businesses. No differences were determined for two of the five adapted small business culture components. With regards to pragmatism, most organizations, large or small, will focus on what they do best. Also, a conservative approach to managing financial resources will benefit any organization. The following comments represent the further contribution made by this investigation. They relate to family, community involvement, and customers. Stakeholders are associated with any business. Large corporations will include investors and the focus will be on immediate financial returns. The small business, however, will have stakeholders that are either family members or employees who are treated as family members. A long term orientation will be taken. Employees will be trained and encouraged to participate in decision making. Participating family members will make decisions about maintaining the family asset which may be passed on to subsequent generations. They will also be cognizant of non-participating family members and their issues related to the family asset. Community involvement will be approached in a specific manner. Any corporation, large or small, will tend to participate in community activities. The large corporation employees will participate as relative anonymous representatives of that corporation. However, small business employees will participate representing the name of the small business owner. This approach represents a more personal involvement of everyone associated with the small business. Customers are important to any organization. Because of access to a limited market, customers are even more important to a small business. Thus, small business adopt a Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 more personalized relationship with customers. 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